Corporation
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A corporation is a legal entity separate from the persons that form it. In British tradition it is the term designating a body corporate, where it can be either a corporation sole (an office held by an individual natural person, which is a legal entity separate from that person) or a corporation aggregate (involving more persons). In American and, increasingly, international usage, the term denotes a body corporate formed to conduct business, and this meaning of corporation is discussed in the remaining part of this entry (the limited company in British usage).
Corporations exist as a product of corporate law, and their rules balance the interests of the shareholders that invest their capital and the employees who contribute their labor. People work together in corporations to produce value and generate income. In modern times, corporations have become an increasingly dominant part of economic life. People rely on corporations for employment, for their goods and services, for the value of the pensions, for economic growth and social development.
The defining feature of a corporation is its legal independence from the people who create it. If a corporation fails, shareholders normally only stand to lose their investment (and possibly, in the unusual case where the shares are not fully paid up, any amount outstanding on them - and not even that in the case of a No liability company), and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation's creditors unless they have separately varied this, e.g. with personal guarantees. This rule is called limited liability, and it is why the names of corporations in the UK end with "Ltd." (or some variant like "Inc." and "plc").
Despite not being natural persons, corporations are recognized by the law to have rights and responsibilities like actual people. Corporations can exercise human rights against real individuals and the state,[1] and they may be responsible for human rights violations.[2] Just as they are "born" into existence through its members obtaining a certificate of incorporation, they can "die" when they lose money into insolvency. Corporations can even be convicted of criminal offences, such as fraud and manslaughter.[3] Five common characteristics of the modern corporation, according to Harvard University Professors Hansmann and Kraakman are...
- delegated management, in other words, control of the company placed in the hands of a board of directors
- limited liability of the shareholders (so that when the company is insolvent, they only owe the money that they subscribed for in shares)
- investor ownership, which Hansmann and Kraakman take to mean, ownership by shareholders.[4]
- separate legal personality of the corporation (the right to sue and be sued in its own name)
- transferrable shares (usually on a listed exchange, such as the London Stock Exchange, New York Stock Exchange or Euronext in Paris)
Ownership of a corporation is complicated by increasing social and economic interdependence, as different stakeholders compete to have a say in corporate affairs. In most developed countries excluding the English speaking world, company boards have representatives of both shareholders and employees to "codetermine" company strategy. Calls for increasing corporate social responsibility are made by consumer, environmental and human rights activists, and this has led to larger corporations drawing up codes of conduct. In Australia, Canada, the United Kingdom and the United States, corporate law has not yet stepped into that field, and its building blocks remain the study of corporate governance and corporate finance.
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See also
Footnotes
- ↑ e.g. South African Constitution Art.8, especially Art.(4)
- ↑ Phillip I. Blumberg, The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality, (1993) has a very good discussion of the controversial nature of additional rights being granted to corporations.
- ↑ e.g. Corporate Manslaughter and Corporate Homicide Act 2007
- ↑ Hansmann et al, The Anatomy of Corporate Law (2004) Ch.1, p.2; See also, C. A. Cooke, Corporation, Trust and Company: A Legal History, (1950).
References
- A.B. DuBois, The English Business Company after the Bubble Act, , (1938)
- A Comparative Bibliography: Regulatory Competition on Corporate Law
- Bishop Hunt, The Development of the Business Corporation in England (1936)
- Blumberg, Phillip I., The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality, (1993)
- Bromberg, Alan R. Crane and Bromberg on Partnership. 1968.
- Bruce Brown, The History of the Corporation (2003)
- C. A. Cooke, Corporation, Trust and Company: A Legal History, (1950)
- Charles Freedman, Joint-stock Enterprise in France, : From Privileged Company to Modern Corporation (1979)
- Conard, Alfred F. Corporations in Perspective. 1976.
- Dignam, A and Lowry, J (2006) Company Law, Oxford University Press ISBN-13: 978-0-19-928936-3*Ernst Freund, The Legal Nature of the Corporation, (1897)
- Edwin Merrick Dodd, American Business Corporations until 1860, With Special Reference to Massachusetts, (1954)
- John Micklethwait and Adrian Wooldridge. The Company: a Short History of a Revolutionary Idea. New York: Modern Library. 2003.
- Frederick Hallis, Corporate Personality: A Study in Jurisprudence (1930)
- Hessen, Robert. In Defense of the Corporation. Hoover Institute. 1979. ISBN -X
- John P. Davis, Corporations (1904)
- John William Cadman, The Corporation in New Jersey: Business and Politics, , (1949)
- Joseph S. Davis, Essays in the Earlier History of American Corporations (1917)
- Klein and Coffee. Business Organization and Finance: Legal and Economic Principles. Foundation. 2002. ISBN -X
- Radhe Shyam Rungta, The Rise of the Business Corporation in India, 1851–1900, (1970)
- Ramesh Chandra Majumdar, Corporate Life in Ancient India, (1920)
- Robert Charles Means, Underdevelopment and the Development of Law: Corporations and Corporation Law in Nineteenth-century Colombia, (1980)
- Sobel, Robert. The Age of Giant Corporations: a Microeconomic History of American Business. (1984)
- Thomas Owen, The Corporation under Russian Law, : A Study in Tsarist Economic Policy (1991)
- W. R. Scott, Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720 (1912)
Further reading
- Low, Albert, 2008. "Conflict and Creativity at Work: Human Roots of Corporate Life, Sussex Academic Press. ISBN 9781845192723
