Editing Corporation (section)

== History ==
{{see also|Collegium (ancient Rome)|List of oldest companies}}
[[File: Stora Kopparberg 1288.jpg|thumb|1/8 share of the [[Falun Mine|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 I|Justinian]] (reigned 527–565), [[Roman law]] recognized a range of corporate entities under the names ''Universitas'', ''corpus'' or ''collegium''. Following the passage of the ''[[Lex Julia]]'' during the reign of [[Julius Caesar]] as [[Roman consul|Consul]] and [[Roman dictator|Dictator]] of the [[Roman Republic]] (49–44 BC), and their reaffirmation during the reign of [[Augustus|Caesar Augustus]] as ''[[Princeps senatus]]'' and [[Imperator]] of the [[Roman army|Roman Army]] (27 BC–14 AD), ''collegia'' required the approval of the [[Roman Senate]] or the [[Roman emperor|Emperor]] in order to be [[Charter|authorized as legal bodies]].<ref name="de Ligt 2001">{{Cite journal|last=de Ligt|first=L.|date=2001|title=D. 47,22, 1, pr.-1 and the Formation of Semi-Public "Collegia"|url=https://www.jstor.org/stable/41539517|journal=Latomus|volume=60|issue=2|pages=346–349|jstor=41539517|issn=0023-8856|access-date=2021-06-18|archive-date=2020-11-12|archive-url=https://web.archive.org/web/20201112195606/https://www.jstor.org/stable/41539517|url-status=live}}</ref> These included the state itself (the ''Populus Romanus''), municipalities, and such private associations as sponsors of a [[Cult (religious practice)|religious cult]], [[Burial society|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.<ref>{{Cite book|last=Davenport|first=Caillan|url=https://books.google.com/books?id=JsyCDwAAQBAJ&q=roman+contract+feeding+of+the+sacred+geese&pg=PT82|title=A History of the Roman Equestrian Order|date=2018-12-31|publisher=Cambridge University Press|isbn=978-1-108-75017-2|language=en}}</ref> Private associations were granted designated privileges and liberties by the emperor.<ref>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}}</ref>

The concept of the corporation was revived in the [[Middle Ages]] with the recovery and annotation of Justinian's {{Lang|la|[[Corpus Juris Civilis]]}} by the [[glossator]]s and their successors the [[postglossators|commentators]] in the 11th–14th centuries. Particularly important in this respect were the Italian jurists [[Bartolus de Saxoferrato]] and [[Baldus de Ubaldis]], the latter of whom connected the corporation to the metaphor of the [[body politic]] to describe the [[state (polity)|state]].<ref>{{cite book|last=Canning|first=Joseph|year=1996|title=A History of Medieval Political Thought: 300–1450|place=Abingdon|publisher=Routledge|isbn=978-0-415-39415-4|url=https://books.google.com/books?id=jx_KAgAAQBAJ|page=172}}</ref><ref>{{cite book|last=Canning|first=Joseph|year=2011|title=Ideas of Power in the Late Middle Ages, 1296–1417|url=https://books.google.com/books?id=fpMdtNgggN8C|place=Cambridge|publisher=Cambridge University Press|isbn=978-1-107-01141-0|pages=145–46}}</ref>

Early entities which carried on business and were the subjects of legal rights included the [[collegium]] of [[ancient Rome]] and the ''[[sreni]]'' of the [[Maurya Empire]] in ancient India.<ref>Vikramaditya S. Khanna (2005). [https://ssrn.com/abstract= ''The Economic History of the Corporate Form in Ancient India.''] {{Webarchive|url=https://web.archive.org/web/20090327104142/http://ssrn.com/abstract= |date=2009-03-27 }} [[University of Michigan]].</ref> In medieval Europe, churches became incorporated, as did local governments, such as 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 [[Falun Mine|Stora Kopparberg]] mining community in [[Falun]], [[Sweden]], obtained a [[charter]] from King [[Magnus Eriksson]] in 1347.

In [[Middle Ages|medieval times]], traders would do business through [[common law]] constructs, such as [[partnership]]s. Whenever people acted together with a view to profit, the law deemed that a partnership arose. Early [[guild]]s and [[Livery company|livery companies]] were also often involved in the [[restraint of trade|regulation of competition]] between traders.{{Citation needed|date=September 2024}}

=== Mercantilism ===
{{See also|Mercantilism}}
Dutch and English chartered companies, such as the [[Dutch East India Company]] (also known by its Dutch initials: 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 [[Portugal|Portuguese]] forces and established itself in the [[Maluku Islands|Moluccan Islands]] in order to profit from the [[Europe]]an demand for [[spice]]s. 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.<ref>{{cite book |first=Om |last=Prakash |title=European Commercial Enterprise in Pre-Colonial India |publisher=Cambridge University Press |location=Cambridge |date=1998}}</ref>

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]]. [[Elizabeth I of England|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 [[company rule in India|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.<ref>{{cite book |first=John |last=Keay |title=The Honorable Company: A History of the English East India Company |publisher=MacMillan |location=New York |date=1991}}</ref> On 31 December 1600, Queen Elizabeth I granted the company a 15-year monopoly on trade to and from the [[East Indies]] and [[Africa]].<ref>{{cite web|url=http://web.utk.edu/~gerard/romanticpolitics/britisheastindia.html |title=British East India Company |first1=Gerard |last1=Cohen-Vrignaud |first2=Stephanie |last2=Metz |first3=Jody |last3=Dunville |first4=Shannon |last4=Heath |first5=Julia P. |last5=McLeod |first6=Kat |last6=Powell |first7=Brent |last7=Robida |first8=John |last8=Stromski |first9=Brandon |last9=Haynes|access-date=19 January 2017 |archive-url=https://web.archive.org/web/20161220082932/http://web.utk.edu/~gerard/romanticpolitics/britisheastindia.html |archive-date=20 December 2016 |url-status=dead}}</ref> By 1711, shareholders in the East India Company were earning a [[return on investment|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&nbsp;million.<ref>''Ibid.'' at p. 113{{Full citation needed|date=August 2020}}</ref>

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 [[Kingdom of Great Britain|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 [[Corporate promoter|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 [[government debt|public debt]] of the British government. This accelerated the inflation of the share price further, as did the [[Bubble Act|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 [[economic bubble|speculative bubble]] the country had seen, but by the end of 1720, the bubble had "burst", and the share price sank from £1,000 to under £100. As bankruptcies and recriminations ricocheted through government and high society, the mood against corporations and errant directors was bitter.

[[File:South-sea-bubble-chart.png|thumb|right|Chart of the [[South Sea Company]]'s stock prices. The rapid inflation of the stock value in the 1710s led to the [[Bubble Act|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:

{{blockquote|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 [[Mercantilism|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.<ref>{{Cite web|url=http://political-economy.com/adam-smith-laissez-faire/|title=Adam Smith Laissez-Faire|website=political-economy.com|date=24 July 2010 |language=en-US|access-date=2017-06-10|archive-date=2010-07-31|archive-url=https://web.archive.org/web/20100731092626/http://political-economy.com/adam-smith-laissez-faire/|url-status=live}}</ref> 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.<ref>A Smith, ''[[An Inquiry into the Nature and Causes of the Wealth of Nations]]'' (1776), Book V, ch 1, para 107.</ref>

==== Deregulation ====
[[File: Jack and the Giant Joint-Stock.jpg|thumb|"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.<ref>See [[Bubble Companies, etc. Act 1825]], 6 Geo 4, c 91</ref> 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.<ref>See [[C Dickens]], ''[[Martin Chuzzlewit]]'' (1843) [[s:Martin Chuzzlewit/Chapter 27|ch 27]]</ref>

The process of [[incorporation (business)|incorporation]] was possible only through a [[royal charter]] or a [[local and personal Acts of Parliament in the United Kingdom|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 [[Voluntary association|unincorporated associations]] with possibly thousands of members. Any consequent [[Lawsuit|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 Ewart Gladstone|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.<ref>''Report of the Parliamentary Committee on Joint Stock Companies'' (1844) in ''British Parliamentary Papers'', vol. VII</ref> The Act created the [[Registrar of Companies|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.<ref>{{cite book|url=https://books.google.com/books?id=LQflMqcZyOoC|title=Introduction to Company Law|author=Paul Lyndon Davies|year=2010|publisher=Oxford University Press|page=1|isbn=978-0-19-960132-5}}</ref> The advantage of establishing a company as a [[Legal personality|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.<ref>''Re Sea Fire and Life Assurance Co., Greenwood's Case'' (1854) 3 De GM&G 459</ref> 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, [[Robert Lowe]]. This allowed investors to limit their liability in the event of business failure to the amount they invested in the company – [[shareholder]]s were still liable directly to [[creditor]]s, but just for the unpaid portion of their [[share (finance)|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|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."<ref>{{cite web|url=http://www.ehs.org.uk/ehs/conference2004/assets/AchesonTurnerPaper.pdf |title=The Impact of Limited Liability on Ownership and Control: Irish Banking, 1877–1914 |first1=Graeme G. |last1=Acheson |first2=John D. |last2=Turner |publisher=School of Management and Economics, Queen's University of Belfast |access-date=2011-11-16 |url-status=dead |archive-url=https://web.archive.org/web/20120113082939/http://www.ehs.org.uk/ehs/conference2004/assets/AchesonTurnerPaper.pdf |archive-date=2012-01-13 }} and {{cite web|url=http://www1.fee.uva.nl/fm/conference/legal/ehr_2006_%20Acheson%20and%20Turner.pdf |title=The Impact of Limited Liability on Ownership and Control: Irish Banking, 1877–1914 |first1=Graeme G. |last1=Acheson |first2=John D. |last2=Turner |work=Economic History Review |date=2006 |access-date=2011-11-16 |url-status=dead |archive-url=https://web.archive.org/web/20120111172110/http://www1.fee.uva.nl/fm/conference/legal/ehr_2006_%20Acheson%20and%20Turner.pdf |archive-date=2012-01-11 }}.</ref> 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 [[James Watt|Watt]] and [[George Stephenson|Stephenson]], and other pioneers of the Industrial Revolution. "<ref>''Economist'', December 18, 1926, at 1053, as quoted in Mahoney, ''supra'', at 875.</ref>

These two features – a simple registration procedure and limited liability – were subsequently codified into the landmark 1856 [[Joint Stock Companies Act 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]]''.<ref>''[[Salomon v A Salomon & Co Ltd]]'' [1897] AC 22</ref>

The legislation quickly led to a railway boom, resulting in a surge in the formation of companies. However, in the later nineteenth century, a period of depression set in, causing many of these companies to collapse and become insolvent. Strong academic, legislative, and judicial opinions emerged, opposing the notion that businessmen could escape accountability for their role in the failing businesses.

==== Further developments ====
[[File:LordLindley cropp.jpg|thumb|right|[[Nathaniel Lindley, Baron Lindley|Lindley LJ]] was the leading expert on partnerships and company law in the ''[[Salomon v A Salomon & Co Ltd|Salomon v. Salomon & Co.]]'' case. The landmark case confirmed the [[corporate identity|distinct corporate identity]] of the company.]]
In 1892, [[Germany]] introduced the {{Lang|de|[[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 A Salomon & Co Ltd|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 [[Andrew Carnegie|Carnegie]]'s steel company and [[John D. Rockefeller|Rockefeller]]'s [[Standard Oil]], avoided the corporate model for this reason (as a [[Trust law|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.<ref name="Corporate Law textbook">{{Citation|last1=Smiddy|first1=Linda O.|last2=Cunningham|first2=Lawrence A.|title=Corporations and Other Business Organizations: Cases, Materials, Problems|publisher=LexisNexis|year=2010|edition=Seventh|pages=228–231, 241|isbn=978-1-4224-7659-8}}</ref>

In 1896, [[New Jersey]] was the first state to adopt an "enabling" corporate law, with the goal of attracting more business to the state.<ref>[https://books.google.com/books?id=ftzqaBv7X_sC&pg=PA159 The Law of Business Organizations] {{Webarchive|url=https://web.archive.org/web/20230105140507/https://books.google.com/books?id=ftzqaBv7X_sC&pg=PA159 |date=2023-01-05 }}, Cengage Learning</ref> In 1899, Delaware followed New Jersey's lead by enacting an enabling corporate statute. However, Delaware only emerged as the leading corporate state after the enabling provisions of the 1896 New Jersey corporate law were repealed in 1913.<ref name = "Corporate Law textbook"/>

The end of the 19th century saw the emergence of [[Holding company|holding companies]] and corporate [[Mergers and acquisitions|mergers]] creating larger corporations with dispersed shareholders. Countries began enacting [[Competition law|antitrust]] laws to prevent anti-competitive practices and corporations were granted more legal rights and protections. The 20th century witnessed a proliferation of laws allowing for the creation of corporations through registration worldwide. These laws played a significant role in driving economic booms in many countries both before and after World War I. Another major post World War I shift was toward the development of [[Conglomerate (company)|conglomerates]], in which large corporations purchased smaller corporations to expand their industrial base.

Starting in the 1980s, many countries with large state-owned corporations began moving toward [[privatization]], which involved selling publicly owned (or 'nationalized') services and enterprises to corporations. [[Deregulation]] aimed at reducing the regulation of corporate activity, often accompanied privatization as part of a laissez-faire policy.