Corporation
The Latin word corpus means body, and that single term anchors the entire history of corporate law. By the time Justinian reigned from 527 to 565, Roman law recognized groups as legal bodies under names like Universitas or collegium. Julius Caesar passed the Lex Julia during his consulship between 49 and 44 BC to regulate these associations. The Senate or Emperor had to approve any private group seeking legal status as a corporation. These approved bodies included religious cult sponsors, burial clubs, political factions, and guilds of craftsmen. They gained rights to own property, make contracts, receive gifts, sue others, and be sued themselves. Private associations received specific privileges and liberties directly from the emperor. Harold Joseph Berman documented this early formation in his 1983 book Law and Revolution.
A share certificate dated the 16th of June 1288 survives today as physical proof of the Stora Kopparberg mining community in Falun, Sweden. King Magnus Eriksson granted this Swedish mining group its charter in 1347, making it the oldest commercial corporation in recorded history. Medieval jurists Bartolus de Saxoferrato and Baldus de Ubaldis revived the concept of corporations during the 11th through 14th centuries. They connected the corporate body to the metaphor of the state itself, calling it the body politic. Churches became incorporated entities alongside local governments like the City of London Corporation. This incorporation allowed organizations to exist in perpetuity beyond the lifespan of any single member. Traders operated through common law partnerships whenever they acted together with profit in mind. Early guilds and livery companies regulated competition between merchants throughout medieval Europe.
Queen Elizabeth I signed a royal charter on the 31st of December 1600 granting the East India Company exclusive trade rights east of the Cape of Good Hope. Investors received paper certificates proving their share ownership and could trade these shares on the Amsterdam Stock Exchange. The Dutch East India Company defeated Portuguese forces to establish control over the Moluccan Islands for spice profits. Shareholders in that company enjoyed limited liability explicitly written into their royal charter. By 1711, shareholders earned returns on investment reaching nearly 150 percent annually from the English East India Company. A stock offering between 1713 and 1716 raised £418,000 while a second offering from 1717 to 1722 brought in £1.6 million. The South Sea Company formed in 1711 to trade Spanish colonies but faced hostility from Spain allowing only one ship entry per year. Promoters enticed British investors with extravagant profit promises despite the lack of actual business operations.
Share prices climbed so rapidly during 1717 that people bought shares simply to resell them at higher prices. This speculative frenzy caused the bubble to burst by the end of 1720 when values collapsed from £1,000 down to under £100. The Bubble Act passed in 1720 prohibited establishing any companies without a royal charter possibly to protect the South Sea Company from competition. Bankruptcies and recriminations spread through government officials and high society creating bitter public sentiment against corporations. Stewart Kyd wrote the first treatise on corporate law in England during the late 18th century defining what a corporation actually was. Adam Smith published The Wealth of Nations in 1776 arguing mass corporate activity could not match private entrepreneurship. He claimed people managing others money would exercise less care than they would with their own funds. The repeal of the Bubble Act occurred in 1825 after it had remained in force for over a hundred years.
William Gladstone chaired a Parliamentary Committee on Joint Stock Companies in 1843 leading directly to the Joint Stock Companies Act of 1844. That act created the Registrar of Joint Stock Companies empowered to register businesses through a two-stage process costing £5 per stage. Ordinary people gained the ability to incorporate through simple registration procedures for the first time in history. Charles Dickens chronicled primitive company legislation scams in his novel Martin Chuzzlewit published in 1843. Unincorporated associations often operated with thousands of members making litigation almost impossibly cumbersome when carried out jointly. The Limited Liability Act passed in 1855 at the behest of Vice President Robert Lowe allowed investors to cap losses at their investment amount. The Economist periodical wrote in 1855 that never before had such a change been so vehemently demanded yet generally overrated. Two features combined into the landmark 1856 Joint Stock Companies Act: simple registration and limited liability protection.
The House of Lords decided Salomon v A Salomon & Co Ltd in 1897 confirming separate legal personality distinct from owners. Lindley LJ served as the leading expert on partnerships during this case establishing corporate identity as independent from shareholders. Germany introduced its Aktiengesetz law in 1892 granting separate legal personality even when all shares held by one person. New Jersey became the first state to adopt enabling corporate laws in 1896 aiming to attract more business activity. Delaware followed suit in 1899 but only emerged as the leading corporate state after New Jersey repealed its provisions in 1913. Holding companies and mergers created larger corporations with dispersed shareholders by the end of the 19th century. Countries enacted antitrust laws preventing anti-competitive practices while granting corporations expanded legal rights and protections. Joel Bakan observed that business corporations possess what he called a psychopathic personality requiring them to elevate self-interest above public harm.
Shareholders own joint-stock companies through portions of stock determining their voting power and profit share entitlements. A single board of directors controls day-to-day activities in most common law countries including both executive and non-executive members. Civil law countries often employ two-tiered structures featuring supervisory boards alongside managing boards for oversight purposes. German workers elect fixed fractions of corporation boards under co-determination systems allowing employee representation at decision-making levels. Corporations file articles of incorporation laying out authorized stock amounts and director names before creating internal bylaws. Treasury stock represents shares bought back from shareholders reducing outstanding count without appearing as assets on balance sheets. The internal affairs doctrine ensures home jurisdiction governs conflicts between managers and shareholders regardless of where operations occur. Foreign corporations must register with host governments appointing registered agents to accept legal service within those jurisdictions.
Common questions
What is the origin of the word corporation?
The Latin word corpus means body, and that single term anchors the entire history of corporate law. Roman law recognized groups as legal bodies under names like Universitas or collegium by the time Justinian reigned from 527 to 565.
When was the oldest commercial corporation in recorded history granted its charter?
King Magnus Eriksson granted this Swedish mining group its charter in 1347, making it the oldest commercial corporation in recorded history. A share certificate dated the 16th of June 1288 survives today as physical proof of the Stora Kopparberg mining community in Falun, Sweden.
How did the South Sea Company bubble affect British investors in 1720?
This speculative frenzy caused the bubble to burst by the end of 1720 when values collapsed from £1,000 down to under £100. The Bubble Act passed in 1720 prohibited establishing any companies without a royal charter possibly to protect the South Sea Company from competition.
Which state became the leading corporate state after New Jersey repealed its provisions in 1913?
Delaware followed suit in 1899 but only emerged as the leading corporate state after New Jersey repealed its provisions in 1913. New Jersey became the first state to adopt enabling corporate laws in 1896 aiming to attract more business activity.
What legal principle was confirmed in Salomon v A Salomon & Co Ltd in 1897?
The House of Lords decided Salomon v A Salomon & Co Ltd in 1897 confirming separate legal personality distinct from owners. Lindley LJ served as the leading expert on partnerships during this case establishing corporate identity as independent from shareholders.