Corporation

What is a Corporation?

A corporation is an individual or group that has been authorized by the state to act as a single entity and recognized as such in law for certain purposes. Early incorporated entities were established by charter, but most jurisdictions now allow their creation through registration.

Why Does This Matter?

Imagine a corporation as a giant ship sailing on the vast ocean of commerce. Just like how a ship needs a captain to navigate its course, corporations require boards of directors to steer them towards success. These individuals are elected or appointed by shareholders who own shares in the company.

The Types of Corporations

Corporations come in different types, including stock and non-stock corporations, which are distinguished by their ability to issue stock or not. Shareholders do not typically actively manage a corporation; instead, they elect or appoint a board of directors to control the corporation in a fiduciary capacity.

How Do They Differ?

Think of it like this: A stock corporation is like a bustling city with many residents (shareholders) who can buy and sell homes (stocks), while non-stock corporations are more akin to a small village where everyone shares the same land.

The Evolution of Corporations

Historically, corporations were granted privileges and liberties by emperors in ancient Rome and later in medieval Europe. In some cases, these entities have survived longer than their individual members. The oldest commercial corporation is believed to be the Stora Kopparberg mining community in Sweden, which obtained a charter from King Magnus Eriksson in 1347.

From Ancient Times to Modern Day

Just as ancient Rome saw the rise of powerful empires, so too did medieval Europe witness the birth of corporations. Early chartered companies like the Dutch East India Company and the Hudson’s Bay Company emerged in the 17th century to lead colonial ventures of European nations. The English East India Company was granted a monopoly on trade with all countries east of the Cape of Good Hope by Queen Elizabeth I in 1600, becoming incredibly successful.

Legal Personality and Limited Liability

The word ‘corporation’ derives from Latin for body, and the concept was revived in the Middle Ages with the recovery of Justinian’s Corpus Juris Civilis. Historically, corporations were granted privileges and liberties by emperors in ancient Rome and later in medieval Europe, including churches and local governments.

What Does This Mean?

Imagine a corporation as a living entity with its own legal rights and responsibilities. Just like how you can sue someone for damages or be sued if you break the law, corporations can also sue and be sued in their own right. They have distinct names, which do not need to reference board members in most jurisdictions.

Regulation and Formation

Corporations are formed by registering with the state or government and regulated by laws enacted by that government. Registration is required to assume limited liability, and corporations typically file articles of incorporation outlining their general nature, authorized stock, and directors.

The Importance of Compliance

Just as a ship must follow maritime laws to avoid penalties, corporations must comply with state regulations to operate legally. This includes registering as foreign corporations when operating outside their home state and appointing registered agents to accept service of process.

Corporate Names and Uniqueness

A corporation cannot own its own stock except in cases of treasury stock. The internal affairs doctrine governs a corporation’s internal activities, with the law of the jurisdiction of incorporation governing internal conflicts. Corporations must register as foreign corporations when operating outside their home state and appoint registered agents to accept service of process.

Unique Identifiers

Imagine each corporation having its own unique name, much like how you have a distinct identity. In Canada, some corporations have no names at all, using registration numbers instead. Corporate names typically include terms denoting corporate status or limited liability, vary by jurisdiction, and are unique to the state of incorporation.

Legal Rights and Responsibilities

Corporations have distinct names, which do not need to reference board members in most jurisdictions. In Canada, some corporations have no names at all, using registration numbers instead. Corporate names typically include terms denoting corporate status or limited liability, vary by jurisdiction, and are unique to the state of incorporation.

Living Entities?

While corporations can own property, sue and be sued, and have human rights against individuals and the state, they are not considered living entities. Critics argue that corporate personhood can result in psychopathic behavior due to its focus on profits over others.

The Future of Corporations

Corporations are owned and controlled by their members (shareholders), who have varying levels of control depending on the type of corporation. A two-tiered committee structure with a supervisory board and managing board is common in civil law countries.

What Lies Ahead?

The 20th century saw the proliferation of registration-based laws for corporation creation worldwide. Post-World War I, conglomerates formed through acquisitions expanded industrial bases. In the 1980s, countries with state-owned corporations began privatizing them.

Conclusion

The evolution of corporations has been a fascinating journey from ancient Rome to modern times. As we continue to navigate this complex landscape, it’s clear that understanding and adapting to the changing dynamics of corporate law is crucial for success in today’s business world.