Corporation

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McDonald's Corporation is one of the most recognizable corporations in the world. New McDonald's restaurant in Mount Pleasant, Iowa.jpg
McDonald's Corporation is one of the most recognizable corporations in the world.

A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law 'born out of statute"; a legal person in legal context) and recognized as such in law for certain purposes. [1] :10 Early incorporated entities were established by charter (i.e. by an ad hoc act granted by a monarch or passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through registration. Corporations come in many different types but are usually divided by the law of the jurisdiction where they are chartered based on two aspects: by whether they can issue stock, or by whether they are formed to make a profit. [2] Depending on the number of owners, a corporation can be classified as aggregate (the subject of this article) or sole (a legal entity consisting of a single incorporated office occupied by a single natural person).

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One of the most attractive early advantages business corporations offered to their investors, compared to earlier business entities like sole proprietorships and general partnerships, was limited liability. Limited liability means that a passive shareholder in a corporation will not be personally liable either for contractually agreed obligations of the corporation, or for torts (involuntary harms) committed by the corporation against a third party. Limited liability in contract is uncontroversial because the parties to the contract could have agreed to it and could agree to waive it by contract. However, limited liability in tort remains controversial because third parties do not agree to waive the right to pursue shareholders. There is significant concern that limited liability in tort may lead to excessive corporate risk taking and more harm by corporations to third parties. [3] [4]

Where local law distinguishes corporations by their ability to issue stock, corporations allowed to do so are referred to as stock corporations; one type of investment in the corporation is through stock, and owners of stock are referred to as stockholders or shareholders . Corporations not allowed to issue stock are referred to as non-stock corporations; i.e. those who are considered the owners of a non-stock corporation are persons (or other entities) who have obtained membership in the corporation and are referred to as a member of the corporation. Corporations chartered in regions where they are distinguished by whether they are allowed to be for-profit are referred to as for-profit and not-for-profit corporations, respectively.

There is some overlap between stock/non-stock and for-profit/not-for-profit in that not-for-profit corporations are always non-stock as well. A for-profit corporation is almost always a stock corporation, but some for-profit corporations may choose to be non-stock. To simplify the explanation, whenever "stockholder" or "shareholder" is used in the rest of this article to refer to a stock corporation, it is presumed to mean the same as "member" for a non-profit corporation or for a profit, non-stock corporation. Registered corporations have legal personality and their shares are owned by shareholders [5] [6] whose liability is generally limited to their investment. Shareholders do not typically actively manage a corporation; shareholders instead elect or appoint a board of directors to control the corporation in a fiduciary capacity. In most circumstances, a shareholder may also serve as a director or officer of a corporation.

In American English, the word corporation is most often used to describe large business corporations. [7] In British English and in the Commonwealth countries, the term company is more widely used to describe the same sort of entity while the word corporation encompasses all incorporated entities. In American English, the word company can include entities such as partnerships that would not be referred to as companies in British English as they are not a separate legal entity. Late in the 19th century, a new form of the company having the limited liability protections of a corporation, and the more favorable tax treatment of either a sole proprietorship or partnership was developed. While not a corporation, this new type of entity became very attractive as an alternative for corporations not needing to issue stock. In Germany, the organization was referred to as Gesellschaft mit beschränkter Haftung or GmbH. In the last quarter of the 20th century, this new form of non-corporate organization became available in the United States and other countries, and was known as the limited liability company or LLC. Since the GmbH and LLC forms of organization are technically not corporations (even though they have many of the same features), they will not be discussed in this article.

History

1/8 share of the Stora Kopparberg mine, dated June 16, 1288. Stora Kopparberg 1288.jpg
1/8 share of the Stora Kopparberg mine, dated June 16, 1288.

The word "corporation" derives from corpus, the Latin word for body, or a "body of people". By the time of Justinian (reigned 527–565), Roman law recognized a range of corporate entities under the names Universitas, corpus or collegium. These included the state itself (the Populus Romanus), municipalities, and such private associations as sponsors of a religious cult, burial clubs, political groups, and guilds of craftsmen or traders. Such bodies commonly had the right to own property and make contracts, to receive gifts and legacies, to sue and be sued, and, in general, to perform legal acts through representatives. [8] Private associations were granted designated privileges and liberties by the emperor. [9]

Entities which carried on business and were the subjects of legal rights were found in ancient Rome, and the Maurya Empire in ancient India. [10] In medieval Europe, churches became incorporated, as did local governments, such as the Pope and the City of London Corporation. The point was that the incorporation would survive longer than the lives of any particular member, existing in perpetuity. The alleged oldest commercial corporation in the world, the Stora Kopparberg mining community in Falun, Sweden, obtained a charter from King Magnus Eriksson in 1347.

In medieval times, traders would do business through common law constructs, such as partnerships. Whenever people acted together with a view to profit, the law deemed that a partnership arose. Early guilds and livery companies were also often involved in the regulation of competition between traders.

Mercantilism

Replica of an East Indiaman of the Dutch East India Company/United East Indies Company. The Dutch East India Company (VOC) is often considered by many to be the first historical model of the modern corporation. The VOC was also the first permanently organized limited-liability joint-stock corporation, with a permanent capital base. Vereenigde Oostindische Compagnie spiegelretourschip Amsterdam replica.jpg
Replica of an East Indiaman of the Dutch East India Company/United East Indies Company. The Dutch East India Company (VOC) is often considered by many to be the first historical model of the modern corporation. The VOC was also the first permanently organized limited-liability joint-stock corporation, with a permanent capital base.

Dutch and English chartered companies, such as the Dutch East India Company (VOC) and the Hudson's Bay Company, were created to lead the colonial ventures of European nations in the 17th century. Acting under a charter sanctioned by the Dutch government, the Dutch East India Company defeated Portuguese forces and established itself in the Moluccan Islands in order to profit from the European demand for spices. Investors in the VOC were issued paper certificates as proof of share ownership, and were able to trade their shares on the original Amsterdam Stock Exchange. Shareholders were also explicitly granted limited liability in the company's royal charter. [25]

A bond issued by the Dutch East India Company (VOC), dating from 1623, for the amount of 2,400 florins Vereinigte Ostindische Compagnie bond - Middelburg - Amsterdam - 1622.jpg
A bond issued by the Dutch East India Company (VOC), dating from 1623, for the amount of 2,400 florins

In England, the government created corporations under a royal charter or an Act of Parliament with the grant of a monopoly over a specified territory. The best-known example, established in 1600, was the East India Company of London. Queen Elizabeth I granted it the exclusive right to trade with all countries to the east of the Cape of Good Hope. Some corporations at this time would act on the government's behalf, bringing in revenue from its exploits abroad. Subsequently, the company became increasingly integrated with English and later British military and colonial policy, just as most corporations were essentially dependent on the Royal Navy's ability to control trade routes.

Labeled by both contemporaries and historians as "the grandest society of merchants in the universe", the English East India Company would come to symbolize the dazzlingly rich potential of the corporation, as well as new methods of business that could be both brutal and exploitative. [26] On 31 December 1600, Queen Elizabeth I granted the company a 15-year monopoly on trade to and from the East Indies and Africa. [27] By 1711, shareholders in the East India Company were earning a return on their investment of almost 150 per cent. Subsequent stock offerings demonstrated just how lucrative the Company had become. Its first stock offering in 1713–1716 raised £418,000, its second in 1717–1722 raised £1.6 million. [28]

A similar chartered company, the South Sea Company, was established in 1711 to trade in the Spanish South American colonies, but met with less success. The South Sea Company's monopoly rights were supposedly backed by the Treaty of Utrecht, signed in 1713 as a settlement following the War of the Spanish Succession, which gave Great Britain an asiento to trade in the region for thirty years. In fact, the Spanish remained hostile and let only one ship a year enter. Unaware of the problems, investors in Britain, enticed by extravagant promises of profit from company promoters bought thousands of shares. By 1717, the South Sea Company was so wealthy (still having done no real business) that it assumed the public debt of the British government. This accelerated the inflation of the share price further, as did the Bubble Act 1720, which (possibly with the motive of protecting the South Sea Company from competition) prohibited the establishment of any companies without a Royal Charter. The share price rose so rapidly that people began buying shares merely in order to sell them at a higher price, which in turn led to higher share prices. This was the first speculative bubble the country had seen, but by the end of 1720, the bubble had "burst", and the share price sank from £1000 to under £100. As bankruptcies and recriminations ricocheted through government and high society, the mood against corporations and errant directors was bitter.

Chart of the South Sea Company's stock prices. The rapid inflation of the stock value in the 1710s led to the Bubble Act 1720, which restricted the establishment of companies without a royal charter. South-sea-bubble-chart.png
Chart of the South Sea Company's stock prices. The rapid inflation of the stock value in the 1710s led to the Bubble Act 1720, which restricted the establishment of companies without a royal charter.

In the late 18th century, Stewart Kyd, the author of the first treatise on corporate law in English, defined a corporation as:

a collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form, and vested, by the policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation or at any subsequent period of its existence.

A Treatise on the Law of Corporations, Stewart Kyd (1793–1794)

Development of modern company law

Due to the late 18th century abandonment of mercantilist economic theory and the rise of classical liberalism and laissez-faire economic theory due to a revolution in economics led by Adam Smith and other economists, corporations transitioned from being government or guild affiliated entities to being public and private economic entities free of governmental directions. [29] Smith wrote in his 1776 work The Wealth of Nations that mass corporate activity could not match private entrepreneurship, because people in charge of others' money would not exercise as much care as they would with their own. [30]

Deregulation

"Jack and the Giant Joint-Stock", a cartoon in Town Talk (1858) satirizing the 'monster' joint-stock economy that came into being after the Joint Stock Companies Act 1844. Jack and the Giant Joint-Stock.jpg
"Jack and the Giant Joint-Stock", a cartoon in Town Talk (1858) satirizing the 'monster' joint-stock economy that came into being after the Joint Stock Companies Act 1844.

The British Bubble Act 1720's prohibition on establishing companies remained in force until its repeal in 1825. By this point, the Industrial Revolution had gathered pace, pressing for legal change to facilitate business activity. [31] The repeal was the beginning of a gradual lifting on restrictions, though business ventures (such as those chronicled by Charles Dickens in Martin Chuzzlewit ) under primitive companies legislation were often scams. Without cohesive regulation, proverbial operations like the "Anglo-Bengalee Disinterested Loan and Life Assurance Company" were undercapitalized ventures promising no hope of success except for richly paid promoters. [32]

The process of incorporation was possible only through a royal charter or a private act and was limited, owing to Parliament's jealous protection of the privileges and advantages thereby granted. As a result, many businesses came to be operated as unincorporated associations with possibly thousands of members. Any consequent litigation had to be carried out in the joint names of all the members and was almost impossibly cumbersome. Though Parliament would sometimes grant a private act to allow an individual to represent the whole in legal proceedings, this was a narrow and necessarily costly expedient, allowed only to established companies.

Then, in 1843, William Gladstone became the chairman of a Parliamentary Committee on Joint Stock Companies, which led to the Joint Stock Companies Act 1844, regarded as the first modern piece of company law. [33] The Act created the Registrar of Joint Stock Companies, empowered to register companies by a two-stage process. The first, provisional, stage cost £5 and did not confer corporate status, which arose after completing the second stage for another £5. For the first time in history, it was possible for ordinary people through a simple registration procedure to incorporate. [34] The advantage of establishing a company as a separate legal person was mainly administrative, as a unified entity under which the rights and duties of all investors and managers could be channeled.

Limited liability

However, there was still no limited liability and company members could still be held responsible for unlimited losses by the company. [35] The next, crucial development, then, was the Limited Liability Act 1855, passed at the behest of the then Vice President of the Board of Trade, Mr. Robert Lowe. This allowed investors to limit their liability in the event of business failure to the amount they invested in the company – shareholders were still liable directly to creditors, but just for the unpaid portion of their shares. (The principle that shareholders are liable to the corporation had been introduced in the Joint Stock Companies Act 1844).

The 1855 Act allowed limited liability to companies of more than 25 members (shareholders). Insurance companies were excluded from the act, though it was standard practice for insurance contracts to exclude action against individual members. Limited liability for insurance companies was allowed by the Companies Act 1862.

This prompted the English periodical The Economist to write in 1855 that "never, perhaps, was a change so vehemently and generally demanded, of which the importance was so much overrated." [36] The major error of this judgment was recognised by the same magazine more than 70 years later, when it claimed that, "[t]he economic historian of the future... may be inclined to assign to the nameless inventor of the principle of limited liability, as applied to trade corporations, a place of honour with Watt and Stephenson, and other pioneers of the Industrial Revolution. " [37]

These two features – a simple registration procedure and limited liability – were subsequently codified into the landmark 1856 Joint Stock Companies Act. This was subsequently consolidated with a number of other statutes in the Companies Act 1862, which remained in force for the rest of the century, up to and including the time of the decision in Salomon v A Salomon & Co Ltd . [38]

The legislation shortly gave way to a railway boom, and from then, the numbers of companies formed soared. In the later nineteenth century, depression took hold, and just as company numbers had boomed, many began to implode and fall into insolvency. Much strong academic, legislative and judicial opinion was opposed to the notion that businessmen could escape accountability for their role in the failing businesses.

Further developments

Lindley LJ was the leading expert on partnerships and company law in the Salomon v. Salomon & Co. case. The landmark case confirmed the distinct corporate identity of the company. LordLindley cropp.jpg
Lindley LJ was the leading expert on partnerships and company law in the Salomon v. Salomon & Co. case. The landmark case confirmed the distinct corporate identity of the company.

In 1892, Germany introduced the Gesellschaft mit beschränkter Haftung with a separate legal personality and limited liability even if all the shares of the company were held by only one person. This inspired other countries to introduce corporations of this kind.

The last significant development in the history of companies was the 1897 decision of the House of Lords in Salomon v. Salomon & Co. where the House of Lords confirmed the separate legal personality of the company, and that the liabilities of the company were separate and distinct from those of its owners.

In the United States, forming a corporation usually required an act of legislation until the late 19th century. Many private firms, such as Carnegie's steel company and Rockefeller's Standard Oil, avoided the corporate model for this reason (as a trust). State governments began to adopt more permissive corporate laws from the early 19th century, although these were all restrictive in design, often with the intention of preventing corporations from gaining too much wealth and power. [39]

New Jersey was the first state to adopt an "enabling" corporate law, with the goal of attracting more business to the state, [40] in 1896. In 1899, Delaware followed New Jersey's lead with the enactment of an enabling corporate statute, but Delaware only became the leading corporate state after the enabling provisions of the 1896 New Jersey corporate law were repealed in 1913. [39]

The end of the 19th century saw the emergence of holding companies and corporate mergers creating larger corporations with dispersed shareholders. Countries began enacting antitrust laws to prevent anti-competitive practices and corporations were granted more legal rights and protections. The 20th century saw a proliferation of laws allowing for the creation of corporations by registration across the world, which helped to drive economic booms in many countries before and after World War I. Another major post World War I shift was toward the development of conglomerates, in which large corporations purchased smaller corporations to expand their industrial base.

Starting in the 1980s, many countries with large state-owned corporations moved toward privatization, the selling of publicly owned (or 'nationalised') services and enterprises to corporations. Deregulation (reducing the regulation of corporate activity) often accompanied privatization as part of a laissez-faire policy.

Ownership and control

A corporation is, at least in theory, owned and controlled by its members. In a joint-stock company the members are known as shareholders and each of their shares in the ownership, control, and profits of the corporation is determined by the portion of shares in the company that they own. Thus a person who owns a quarter of the shares of a joint-stock company owns a quarter of the company, is entitled to a quarter of the profit (or at least a quarter of the profit given to shareholders as dividends) and has a quarter of the votes capable of being cast at general meetings.

In another kind of corporation, the legal document which established the corporation or which contains its current rules will determine the requirements for membership in the corporation. What these requirements are depends on the kind of corporation involved. In a worker cooperative, the members are people who work for the cooperative. In a credit union, the members are people who have accounts with the credit union. [41]

The day-to-day activities of a corporation are typically controlled by individuals appointed by the members. In some cases, this will be a single individual but more commonly corporations are controlled by a committee or by committees. Broadly speaking, there are two kinds of committee structure.

In countries with co-determination (such as Germany and Sweden), workers elect a fixed fraction of the corporation's board.

Formation

Historically, corporations were created by a charter granted by the government. Today, corporations are usually registered with the state, province, or national government and regulated by the laws enacted by that government. Registration is the main prerequisite to the corporation's assumption of limited liability. The law sometimes requires the corporation to designate its principal address, as well as a registered agent (a person or company designated to receive legal service of process). It may also be required to designate an agent or other legal representatives of the corporation.[ citation needed ]

Generally, a corporation files articles of incorporation with the government, laying out the general nature of the corporation, the amount of stock it is authorized to issue, and the names and addresses of directors. Once the articles are approved, the corporation's directors meet to create bylaws that govern the internal functions of the corporation, such as meeting procedures and officer positions.

The law of the jurisdiction in which a corporation operates will regulate most of its internal activities, as well as its finances. If a corporation operates outside its home state, it is often required to register with other governments as a foreign corporation, and is almost always subject to laws of its host state pertaining to employment, crimes, contracts, civil actions, and the like.[ citation needed ]

Naming

Corporations generally have a distinct name. Historically, some corporations were named after the members of their boards of directors: for example, the "President and Fellows of Harvard College" is the name of one of the two governing boards of Harvard University, but it is also the exact name under which Harvard was legally incorporated. [43] Nowadays, corporations in most jurisdictions may have a distinct name that does not need to make reference to the members of their boards. In Canada, this possibility is taken to its logical extreme: many smaller Canadian corporations have no names at all, merely numbers based on a registration number (for example, "12345678 Ontario Limited"), which is assigned by the provincial or territorial government where the corporation incorporates.

In most countries, corporate names include a term or an abbreviation that denotes the corporate status of the entity (for example, "Incorporated" or "Inc." in the United States) or the limited liability of its members (for example, "Limited" or "Ltd."). [44] These terms vary by jurisdiction and language. In some jurisdictions, they are mandatory, and in others, such as California, they are not. [45] Their use puts everybody on constructive notice that they are dealing with an entity whose liability is limited: one can only collect from whatever assets the entity still controls when one obtains a judgment against it.

Some jurisdictions do not allow the use of the word "company" alone to denote corporate status, since the word "company" may refer to a partnership or some other form of collective ownership (in the United States it can be used by a sole proprietorship but this is not generally the case elsewhere).[ citation needed ]

Personhood

Despite not being individual human beings, corporations are legal persons, and have many of the same rights and responsibilities as natural persons do. For example, a corporation can own property, and can sue or be sued. Corporations can exercise human rights against real individuals and the state, [46] [47] and they can themselves be responsible for human rights violations. [48] Corporations can be "dissolved" either by statutory operation, the order of the court, or voluntary action on the part of shareholders. Insolvency may result in a form of corporate failure, when creditors force the liquidation and dissolution of the corporation under court order, [49] but it most often results in a restructuring of corporate holdings. Corporations can even be convicted of criminal offenses, such as fraud and manslaughter. However, corporations are not considered living entities in the way that humans are. [50]

See also

Law

Other

Notes

  1. Hirst, Scott (2018-07-01). "The Case for Investor Ordering". The Harvard Law School Program on Corporate Governance Discussion Paper. No. 2017-13.
  2. "Types Of Corporations | Incorporate A Business". www.corpnet.com. Archived from the original on 2017-10-15. Retrieved 2017-06-10.
  3. Sim, Michael (2018). "Limited Liability and the Known Unknown". Duke Law Journal. 68: 275–332. doi:10.2139/ssrn.3121519. ISSN   1556-5068. S2CID   44186028 via SSRN.
  4. Hansmann, Henry; Kraakman, Reinier (May 1991). "Toward Unlimited Shareholder Liability for Corporate Torts". The Yale Law Journal. 100 (7): 1879. doi:10.2307/796812. ISSN   0044-0094. JSTOR   796812.
  5. Pettet, B. G. (2005). Company Law. Pearson Education. p. 151. Reading the above, makes it possible to forget that the shareholders are the owners of the company.
  6. Courtney, Thomas B. (2002). The Law of Private Companies (2nd ed.). Bloomsbury Professional. 4.001.
  7. corporation. CollinsDictionary.com. Collins English Dictionary – Complete & Unabridged 11th Edition. Retrieved December 07, 2012.
  8. Davenport, Caillan (2018-12-31). A History of the Roman Equestrian Order. Cambridge University Press. ISBN   978-1-108-75017-2.
  9. Harold Joseph Berman, Law and Revolution (vol. 1): The Formation of the Western Legal Tradition, Cambridge: Harvard University Press, 1983, pp. 215–216. ISBN   0-674-51776-8
  10. Vikramaditya S. Khanna (2005). The Economic History of the Corporate Form in Ancient India. University of Michigan.
  11. Gepken-Jager, Ella; van Solinge, Gerard; Timmermann, Levinus, eds. (2005). VOC 1602–2002: 400 Years of Company Law. Law of Business and Finance. 6. Deventer: Kluwer Legal Publishers. ISBN   90-13-01915-3.
  12. Sayle, Murray (5 April 2001). "Japan goes Dutch". London Review of Books. London Review of Books, Vol. 23 No. 7. pp. 3–7. Retrieved 23 March 2018.
  13. Brook, Timothy (2008). Vermeer's Hat: The Seventeenth Century and the Dawn of the Global World. Profile Books. ISBN   978-1-84668-120-2.
  14. Wilson, Eric Michael (2008). The Savage Republic: De Indis of Hugo Grotius, Republicanism and Dutch Hegemony within the Early Modern World-System (c. 1600–1619). Martinus Nijhoff. pp. 215–217. ISBN   978-90-04-16788-9.
  15. Jonker, Joost; Gelderblom, Oscar; de Jong, Abe (December 2013). "The Formative Years of the Modern Corporation: The Dutch East India Company VOC, 1602–1623". The Journal of Economic History. 73 (4): 1050–1076. doi:10.1017/S0022050713000879. hdl:1874/347909. S2CID   154592596.
  16. Tarrant, Nicholas (29 Apr 2014). "The VOC: The Birth of the Modern Corporation". The Economics Student Society of Australia. Archived from the original on 14 August 2018. Retrieved 23 March 2018.
  17. Phelan, Ben (7 January 2013). "Dutch East India Company: The World's First Multinational". PBS Online. PBS . Retrieved 13 March 2018.
  18. Taylor, Bryan (6 November 2013). "The Rise and Fall of the Largest Corporation in History". Business Insider . Retrieved 13 March 2018.
  19. Picard, Caroline (2 August 2016). "In The Late Afternoon of Modernism: An Interview with Graham Harman". Bad at Sports. Retrieved 23 March 2018.
  20. Steensgaard, Niels (1982). "The Dutch East India Company as an Institutional Innovation", in Maurice Aymard (ed.), Dutch Capitalism and World Capitalism / Capitalisme hollandais et capitalisme mondial (Studies in Modern Capitalism / Etudes sur le capitalisme moderne), pp. 235–257
  21. Ferguson, Niall (2002). Empire: The Rise and Demise of the British World Order and the Lessons for Global Power, p. 15.
  22. Smith, B. Mark (2003). A History of the Global Stock Market: From Ancient Rome to Silicon Valley. University of Chicago Press. p. 17. ISBN   978-0-226-76404-7.
  23. Von Nordenflycht, Andrew (2011). "The Great Expropriation: Interpreting the Innovation of "Permanent Capital" at the Dutch East India Company". In Koppell, Jonathan G. S. (ed.). Origins of Shareholder Advocacy. Palgrave Macmillan. pp. 89–98.
  24. Clarke, Thomas; Branson, Douglas (2012). The Sage Handbook of Corporate Governance. Sage Handbooks. Sage Publications. p. 431. ISBN   978-1-4129-2980-6. The EIC first issued permanent shares in 1657.
  25. Prakash, Om (1998). European Commercial Enterprise in Pre-Colonial India. Cambridge: Cambridge University Press.
  26. Keay, John (1991). The Honorable Company: A History of the English East India Company. New York: MacMillan.
  27. Cohen-Vrignaud, Gerard; Metz, Stephanie; Dunville, Jody; Heath, Shannon; McLeod, Julia P.; Powell, Kat; Robida, Brent; Stromski, John; Haynes, Brandon. "British East India Company". Archived from the original on 20 December 2016. Retrieved 19 January 2017.
  28. Ibid. at p. 113[ full citation needed ]
  29. "Adam Smith Laissez-Faire". political-economy.com. Retrieved 2017-06-10.
  30. A Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), Book V, ch 1, para 107.
  31. See Bubble Companies, etc. Act 1825, 6 Geo 4, c 91
  32. See C Dickens, Martin Chuzzlewit (1843) ch 27
  33. Report of the Parliamentary Committee on Joint Stock Companies (1844) in British Parliamentary Papers, vol. VII
  34. Paul Lyndon Davies (2010). Introduction to Company Law. Oxford University Press. p. 1. ISBN   978-0-19-960132-5.
  35. Re Sea Fire and Life Assurance Co., Greenwood's Case (1854) 3 De GM&G 459
  36. Graeme G. Acheson & John D. Turner, The Impact of Limited Liability on Ownership and Control: Irish Banking, 1877–1914, School of Management and Economics, Queen's University of Belfast, available at "Archived copy" (PDF). Archived from the original (PDF) on 2012-01-13. Retrieved 2011-11-16.CS1 maint: archived copy as title (link) and "Archived copy" (PDF). Archived from the original (PDF) on 2012-01-11. Retrieved 2011-11-16.CS1 maint: archived copy as title (link).
  37. Economist, December 18, 1926, at 1053, as quoted in Mahoney, supra, at 875.
  38. Salomon v A Salomon & Co Ltd [1897] AC 22
  39. 1 2 Smiddy, Linda O.; Cunningham, Lawrence A. (2010), Corporations and Other Business Organizations: Cases, Materials, Problems (Seventh ed.), LexisNexis, pp. 228–231, 241, ISBN   978-1-4224-7659-8
  40. The Law of Business Organizations, Cengage Learning
  41. Besley, Scott; Brigham, Eugene (2008). Principles of Finance (4th ed.). Cengage Learning. p.  105. ISBN   978-0-324-65588-9.
  42. "Company & Commercial – Netherlands: In a nutshell – one-tier boards". International Law Office. 10 April 2012.
  43. Chait, Richard P.; Daniel, D. Ronald; Lorsch, Jay W.; Rosovsky, Henry (May–June 2006). "Governing Harvard: A Harvard Magazine Roundtable". Harvard Magazine.CS1 maint: date format (link)
  44. Bartlett, Joseph W. (1995). Equity Finance: Venture Capital, Buyouts, Restructurings and Reorganizations (2nd ed.). New York: Aspen Publishers. p. 54. ISBN   978-07355-7077-1 . Retrieved 22 October 2020.
  45. California does not require corporations to indicate corporate status in their names, except for close corporations. The drafters of the 1977 revision of the California General Corporation Law considered the possibility of forcing all California corporations to have a name indicating corporate status, but decided against it because of the huge number of corporations that would have had to change their names, and the lack of any evidence that anyone had been harmed in California by entities whose corporate status was not immediately apparent from their names. However, the 1977 drafters were able to impose the current disclosure requirement for close corporations. See Harold Marsh, Jr., R. Roy Finkle, Larry W. Sonsini, and Ann Yvonne Walker, Marsh's California Corporation Law, 4th ed., vol. 1 (New York: Aspen Publishers, 2004), 5–15 — 5–16.
  46. Emberland, Marius (2006). The Human Rights of Companies: Exploring the Structure of ECHR Protection (PDF). Oxford University Press. p. 1. ISBN   978-0-19-928983-7. Archived from the original (PDF) on 17 June 2012. Retrieved 2 June 2012.
  47. e.g. South African Constitution Sect.8, especially Art.(4)
  48. Phillip I. Blumberg, The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality, (1993) discusses the controversial nature of additional rights being granted to corporations.
  49. See, for example, the Business Corporations Act (B.C.) [SBC 2002] chapter 57, Part 10
  50. e.g. Corporate Manslaughter and Corporate Homicide Act 2007

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Business is the activity of making one's living or making money by producing or buying and selling products. Simply put, it is "any activity or enterprise entered into for profit. It does not mean it is a company, a corporation, partnership, or have any such formal organization, but it can range from a street peddler to General Motors."

Dutch East India Company 17th-century Dutch trading company

The Dutch East India Company, officially the United East India Company, was a megacorporation founded by a government-directed amalgamation of several rival Dutch trading companies (voorcompagnieën) in the early 17th century. It was established on 20 March 1602, as a chartered company to trade with Mughal India during the period of proto-industrialization, from which 50% of textiles and 80% of silks were imported, chiefly from its most developed region known as Bengal Subah. In addition, the company traded with Indianised Southeast Asian countries when the Dutch government granted it a 21-year monopoly on the Dutch spice trade. It has been often labelled a trading company or sometimes a shipping company. However, the VOC was in fact a proto-conglomerate, diversifying into multiple commercial and industrial activities such as international trade, shipbuilding, and both production and trade of East Indian spices, Indonesian coffee, Formosan sugarcane, and South African wine. The company was a transcontinental employer and a corporate pioneer of outward foreign direct investment at the dawn of modern capitalism. In the early 1600s, by widely issuing bonds and shares of stock to the general public, VOC became the world's first formally listed public company.

Limited liability company US-specific form of a private limited company

A limited liability company (LLC) is the US-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. An LLC is not a corporation under state law; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. LLCs are well known for the flexibility that they provide to business owners; depending on the situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership, and, under certain circumstances, LLCs may be organized as not-for-profit. In certain U.S. states, businesses that provide professional services requiring a state professional license, such as legal or medical services, may not be allowed to form an LLC but may be required to form a similar entity called a professional limited liability company (PLLC).

Joint-stock company Business entity which is owned by shareholders

A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.

Incorporation (business) Legal process to create a new corporation

Incorporation is the formation of a new corporation. The corporation may be a business, a nonprofit organization, sports club, or a government of a new city or town.

Limited liability partnership Partnership in which some or all partners (depending on the jurisdiction) have limited liabilities

A limited liability partnership (LLP) is a partnership in which some or all partners have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from the traditional partnership under the UK Partnership Act 1890, in which each partner has joint liability. In an LLP, some or all partners have a form of limited liability similar to that of the shareholders of a corporation. Unlike corporate shareholders, the partners have the right to manage the business directly. In contrast, corporate shareholders must elect a board of directors under the laws of various state charters. The board organizes itself and hires corporate officers who then have as "corporate" individuals the legal responsibility to manage the corporation in the corporation's best interest. An LLP also contains a different level of tax liability from that of a corporation.

Private limited company Type of company used in many jurisdictions

A private limited company is a type of business entity in "private" ownership used in many jurisdictions, in contrast to "public" ownership, with some differences from country to country. Examples include LLC in the United States, private company limited by shares in the United Kingdom, GmbH in Germany, société à responsabilité limitée in France or sociedad de responsabilidad limitada in the Spanish-speaking world. The benefit of having a private limited company is that there is limited liabilities and depending on each one’s point of view this next point could either be a benefit or a disadvantage. Shares can only be sold to shareholders in the business that means that it can be difficult to liquidate them.

Corporate law

Corporate law is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corporations, or to the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation.

Limited liability Business structure where shareholders cannot owe more than their stake in a venture

Limited liability is a legal status where a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a corporation, company or partnership. If a company that provides limited liability to its investors is sued, then the claimants are generally entitled to collect only against the assets of the company, not the assets of its shareholders or other investors. A shareholder in a corporation or limited liability company is not personally liable for any of the debts of the company, other than for the amount already invested in the company and for any unpaid amount on the shares in the company, if any, except under special and rare circumstances permitting "piercing the corporate veil." The same is true for the members of a limited liability partnership and the limited partners in a limited partnership. By contrast, sole proprietors and partners in general partnerships are each liable for all the debts of the business.

Privately held company Business company owned either by non-governmental organizations or by a relatively small number of shareholders or company members, and the companys capital stock is offered, owned and traded or exchanged privately

A privately held company, private company, or close corporation is a corporation that is not owned by the government, non-governmental organizations or by a relatively small number of shareholders or company members which does not offer or trade its company stock (shares) to the general public on the stock market exchanges, but rather the company's stock is offered, owned and traded or exchanged privately or over-the-counter. More ambiguous terms for a privately held company are closely held corporation, unquoted company, and unlisted company.

Limited partnership Form of partnership

A limited partnership (LP) is a form of partnership similar to a general partnership except that while a general partnership must have at least two general partners (GPs), a limited partnership must have at least one GP and at least one limited partner. Limited partnerships are distinct from limited liability partnerships, in which all partners have limited liability.

<i>Salomon v A Salomon & Co Ltd</i>

Salomon v A Salomon & Co Ltd[1896] UKHL 1, [1897] AC 22 is a landmark UK company law case. The effect of the House of Lords' unanimous ruling was to uphold firmly the doctrine of corporate personality, as set out in the Companies Act 1862, so that creditors of an insolvent company could not sue the company's shareholders for payment of outstanding debts.

Company Association or collection of individuals

A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared goals. Companies take various forms, such as:

A statutory corporation is a corporation created by the state. Their precise nature varies by jurisdiction, thus, they might be ordinary companies/corporations owned by a government with or without other shareholders, or they might be a body without shareholders that is controlled by national or sub-national government to the extent provided for in the creating legislation.

United Kingdom company law

The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal vehicle to organise and run business. Tracing their modern history to the late Industrial Revolution, public companies now employ more people and generate more of wealth in the United Kingdom economy than any other form of organisation. The United Kingdom was the first country to draft modern corporation statutes, where through a simple registration procedure any investors could incorporate, limit liability to their commercial creditors in the event of business insolvency, and where management was delegated to a centralised board of directors. An influential model within Europe, the Commonwealth and as an international standard setter, UK law has always given people broad freedom to design the internal company rules, so long as the mandatory minimum rights of investors under its legislation are complied with.

The notion of a legally sanctioned corporation remains controversial for several reasons, most of which stem from the granting of corporations both limited liability on the part of its members and the status and rights of a legal person. Some opponents to this granting of "personhood" to an organization with no personal liability contend that it creates a legal entity with the extensive financial resources to co-opt public policy and exploit resources and populations without any moral or legal responsibility to encourage restraint.

History of company law in the United Kingdom

The history of company law in the United Kingdom concerns the change and development in UK company law within the context of the history of companies, deriving from its predecessors in Roman and English law. Company law in its current form dates from the mid-nineteenth century, however other forms of business association developed long before.

There are three types of business entity in Russia: private limited companies, joint-stock companies, which may either be public, open (OJSC) or private, closed (PJSC), and partnerships (товарищество).

South African company law

South African company law is that body of rules which regulates corporations formed under the Companies Act. A company is a business organisation which earns income by the production or sale of goods or services. This entry also covers rules by which partnerships and trusts are governed in South Africa, together with cooperatives and sole proprietorships.