THE INFLUENCE OF TECHNOLOGY ON CORPORATE LAW: BLOCKCHAIN AND SMART CONTRACTS

Introduction

Corporate law, the body of law that governs the formation, operation, and dissolution of corporations, has long been rooted in traditional legal frameworks, emphasizing statutory regulations, judicial precedents, and established compliance mechanisms. The corporate world, historically rely on paper documentation, intermediaries, and centralized authorities, are now undergoing a profound transformation driven by rapid technological advancements. In particular, blockchain technology and smart contracts have emerged as disruptive innovations that hold the potential to revolutionize corporate legal processes and governance structures.

Blockchain technology, a decentralized and unchangeable ledger system, promises to enhance transparency, security, and efficiency in corporate transactions by eliminating the need for intermediaries and reducing the risk of fraud. Meanwhile, smart contracts—computer programs that automatically enforce contract terms—introduce automation and reliability to contractual relationships, streamlining execution and reducing costs associated with traditional contract enforcement. The intersection of these technologies with corporate law raises critical questions about legal recognition, enforceability, regulatory compliance, and dispute resolution. This article seeks to explore these dimensions by providing a comprehensive analysis of the influence of blockchain and smart contracts on corporate legal frameworks, examining their practical applications, associated challenges, and future prospects in reshaping corporate governance and operations.

Understanding Blockchain Technology

Blockchain is fundamentally a distributed ledger technology (DLT) that records transactions across multiple networked computers, ensuring data integrity through a consensus mechanism. Unlike traditional centralized databases, blockchain operates in a decentralized manner where every participant maintains a copy of the ledger, enhancing transparency and trust among stakeholders. The core attributes of blockchain are , decentralization, immutability, transparency, and cryptographic security, that make it particularly suitable for corporate applications where verification and record accuracy are paramount. With context to corporate law, blockchain can transform areas such as shareholder registries, financial reporting, supply chain management, and compliance auditing by providing real-time, tamper-resistant records accessible to authorized parties.[1]

Smart Contracts

Smart contracts are self-executing agreements encoded on a blockchain that automatically perform contractual obligations when predefined conditions are met. These contracts eliminate the need for intermediaries, reduce human error, and increase the speed of transactions by leveraging code to enforce terms precisely as written.

In corporate law, the smart contracts can enhance efficiency by automating routine tasks such as dividend payments, regulatory reporting, and contract fulfilment. For example, in mergers and acquisitions, smart contracts can be programmed to release funds upon the satisfaction of stipulated conditions such as regulatory approval or the transfer of assets, minimizing delays and ensuring adherence to the agreed terms. Despite all their advantages, smart contracts can also raise some complex legal issues including questions about their validity under traditional contract law, difficulties in interpreting contract terms encoded in software, and challenges in addressing coding errors that may lead to unintended consequences.[2]

Impact on Corporate Law

The advent impact of blockchain and smart contracts is reshaping the corporate law in multiple ways:

• Legal Recognition and Enforceability:

The enforceability of smart contracts and blockchain records presents a significant legal challenge. Earlier, the traditional contract law required documentation of offer, acceptance, and consideration, typically in written or verbal form. But now with the smart contracts, that is encoded in software, challenge to the traditional notions is emerging by replacing human-readable contracts with code. Legislative responses have begun to address these challenges. In the United States, the Uniform Electronic Transactions Act (UETA)[3] and the Electronic Signatures in Global and National Commerce Act (ESIGN)[4] provide a legal basis for recognizing electronic records and signatures, paving the way for the acceptance of smart contracts. However, the legal status varies internationally, with some jurisdictions still grappling with how to incorporate these technologies into their legal systems.

• Regulatory Compliance and Governance:

Blockchain’s inherent transparency offers a valuable tool for regulatory compliance by creating an immutable audit trail. However, the decentralized nature of blockchain complicates the traditional regulatory oversight, which relies on the identifiable intermediaries. The regulators are now exploring new frameworks to monitor decentralized networks without impeding innovation. From a corporate governance perspective, blockchain can enhance shareholder engagement through transparent voting systems and real-time ownership tracking. Despite these benefits, the immutability of blockchain data presents challenges for rectifying errors or reversing fraudulent transactions.[5]

• Contract Interpretation and Dispute Resolution:

The smart contracts execute exactly as programmed, which may lead to disputes if the code does not fully capture the parties’ intentions. The absence of human judgment in smart contract interpretation complicates the dispute resolution. Emerging solutions include hybrid dispute resolution mechanisms that combine automated contract execution with judicial review or arbitration, tailored to blockchain-related issues. These developments aim to balance the efficiency of automation with the flexibility of traditional legal processes.[6]

Case Studies and Real-World Applications

The corporate sector has witnessed pioneering implementations of blockchain and smart contracts that illustrate their transformative potential-

• De Beers Group: As one of the largest diamond producers globally, De Beers has implemented blockchain technology to track the provenance of diamonds from mine to retail. This initiative enhances transparency and combats the trade in conflict diamonds by providing an immutable record of each stone’s journey, ensuring ethical sourcing and consumer trust. The blockchain platform allows stakeholders to verify the authenticity and ethical standards of diamonds in real-time, thereby strengthening corporate social responsibility and compliance with international norms[7].
• JP Morgan Chase: The global financial institution developed “Quorum,” an enterprise-focused blockchain platform designed to facilitate secure and efficient interbank transactions. Quorum leverages blockchain’s cryptography and decentralization to reduce settlement times, minimize operational risks, and enhance privacy while maintaining compliance with regulatory requirements. The adoption of Quorum exemplifies how the blockchain can streamline complex financial processes, reduce costs, and improve transparency within corporate finance[8].
• Nasdaq: Nasdaq has embraced blockchain by launching a proxy voting system that utilizes distributed ledger technology to increase transparency, security, and efficiency in shareholder voting processes. This system reduces the risk of voter fraud, expedites vote tallying, and enhances shareholder participation by providing a real-time, verifiable record of votes. The implementation serves as a benchmark for how blockchain can improve corporate governance and regulatory compliance in publicly traded companies.[9]

Legal disputes involving blockchain technology have also begun to shape the regulatory landscape. The U.S. Securities and Exchange Commission’s (SEC) investigation into The DAO (Decentralized Autonomous Organization), a blockchain-based investment fund, highlighted the need for clear regulatory guidance on securities laws as applied to blockchain assets. This case set a precedent that certain blockchain tokens may be classified as securities, subjecting them to existing regulations and enforcement actions.[10]

Future Prospects and Recommendations

The integration of blockchain and smart contracts into corporate law is still in its nascent stages, but the course points toward increasingly sophisticated applications and legal frameworks. To harness the benefits while mitigating risks, the following recommendations are essential:

• Legislators should develop adaptable legal definitions and frameworks that recognize the unique characteristics of blockchain and smart contracts, ensuring clarity and enforceability.
• International cooperation is crucial to establish harmonized standards and regulatory approaches, facilitating cross-border corporate transactions and reducing legal uncertainty.
• Legal professionals and corporate executives should be educated on the technological and legal implications of blockchain to make informed decisions and draft effective agreements.
• Specialized dispute resolution mechanisms, including blockchain arbitration and mediation, should be developed to address the unique challenges posed by automated contracts.

Conclusion

Blockchain technology and smart contracts represent a paradigm shift in corporate law, offering unprecedented opportunities to enhance transparency, efficiency, and security in corporate transactions and governance. Their decentralized and automated nature challenges traditional legal doctrines and regulatory frameworks, necessitating thoughtful adaptation and innovation in legal practice and policymaking. The real-world applications by major corporations demonstrate the transformative potential of these technologies to streamline processes, improve compliance, and foster greater stakeholder trust. As the technology matures, legal systems worldwide must evolve to provide clear guidance on the recognition, enforceability, and dispute resolution of blockchain-based contracts. Ultimately, the dynamic interplay between technology and corporate law will define the future of corporate governance and transactional law, balancing innovation with the protection of rights and interests. Embracing this change proactively will enable corporations and legal systems to harness the full potential of blockchain and smart contracts in shaping a more transparent and efficient corporate world.

References

[1] Melanie Swan, Blockchain: Blueprint for a New Economy (O’Reilly Media 2015) 22-35.

[2] Primavera De Filippi and Aaron Wright, Blockchain and the Law: The Rule of Code (Harvard University Press 2018) 45–60

[3] Uniform Electronic Transactions Act (UETA) 1999.

[4] Electronic Signatures in Global and National Commerce Act (ESIGN), 15 U.S.C. §§ 7001–7031 (2000).

[5] Kevin Werbach, The Blockchain and the New Architecture of Trust (MIT Press 2018) https://www.researchgate.net/publication/332087139_The_Blockchain_and_the_New_Architecture_of_Trust accessed 18 September 2025

[6] Cary Coglianese and David Lehr, ‘Regulating by Robot: Administrative Decision Making in the Machine-Learning Era’ (2017) 105 Georgetown Law Journal 1147, 1170–75

[7] De Beers Group, ‘Blockchain Technology to Track Diamonds’ (2018) https://www.debeersgroup.com/~/media/Files/D/De-Beers-Group/documents/company-news/2018/media-releases-de-beers-group-successfully-tracks-first-diamonds-from-mine.pdf 17 September 2025

[8] JP Morgan, ‘Introducing Quorum’ https://www.jpmorgan.com/kinexys/about accessed 21 September 2025

[9] Nasdaq, ‘Nasdaq Uses Blockchain for Proxy Voting’ (2019) https://www.nasdaq.com/articles/its-time-fix-proxy-process-2019-03-13 accessed 17 September 2025

[10] SEC, ‘Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO’ (2017) https://www.sec.gov/litigation/investreport/34-81207.pdf accessed 17 September 2025