A Shareholder Lawsuit in Fourteenth-Century Toulouse

The milling companies of medieval Toulouse provide an opportunity to examine how one early manifestation of the corporate form grew out of feudal precedent. The historical roots of business companies are typically traced back to business partnerships and the Roman trading societas. This lineage has posed problems for legal scholars because it does not account for one distinctive characteristic of the modern corporation: the tradability of shares. Henry Hansmann, Reinier Kraakman, and Richard Squire (2006) argue that a precondition to share tradability is the characteristic of entity-shielding—the protection of the firm from claims against one of the shareholders. In their view, entity-shielding eliminated the need to assess the liabilities of potential shareholders. This, in turn, enabled companies to raise capital from a large pool of anonymous investors and to allow transfer of shares without approval.1