Equitable Doctrines in Business Associations

The conjunction of the equity and business activity can be a sensitive one. A business must be able to derive a sufficient margin of profit from its commercial activities to be a sustainable organisation. The allocation of power among the parties to the organisation must be stable and clear. And the organisation must be adaptable to commercial conditions that often quickly change. Flexibility and certainty are necessary. All these things can be hampered by equitable doctrines and remedies. Yet the system of judge-made equity has made extensive contributions to the nature and operation of business associations – especially limited liability companies and “common law” partnerships, as this paper shows. When misapplied, equity can hamper business activity – as can the misapplication of any law. But in the creation and working of business associations, the predominant character of equity is facilitative. Equitable doctrines and remedies have been, and are, strongly effective means of achieving desired ends through the operation of business associations.