“A corporation is a citizen, resident, or inhabitant of the state or country by or under the laws of which it was created, and of that state or country only.”
The word “corporation” derives from corpus, the Latin word for body, or a “body of people.” Entities which carried on business and were the subjects of legal rights were found in ancient Rome and the Maurya Empire in ancient India.
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 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 corporation is defined as a legal entity or structure created under the authority of the laws of a state, consisting of a person or group of persons who become shareholders. The entity’s existence is considered separate and distinct from that of its members.
The existence of a corporation is not dependent upon who the owners or investors are at any one time. Once formed, a corporation continues to exist as a separate entity, even when shareholders die or sell their shares. A corporation continues to exist until the shareholders decide to dissolve it or merge it with another business.
At common law, a “corporation” was an “artificial person endowed with the legal capacity of perpetual succession” consisting either of a single individual (termed a “corporation sole”) or of a collection of several individuals (a “corporation aggregate”). The sovereign was considered a corporation under the definitions supplied by contemporary law dictionaries, Territories would have been classified as “corporations” (and hence as “persons”) at the time that 1983 was enacted and the Dictionary Act recodified. ; 1 J. Bouvier, A Law Dictionary Adapted to the Constitution and Laws of the United States of America 318-319 (11th ed. 1866)
The word “company” or “corporation” is applied to various kinds of association in which a number of persons finance a business enterprise or joint undertaking. It has a perpetual existence and is a “separate” legal entity. It is separate from the persons who operate it, as well as its share holders, and is incorporated under “Corporations Act” in common law.
The concept of separate legal entity of a corporation is the fundamental characteristic of a company that makes it distinct from other trading entities and from which the other significant characteristics flow. It means the company the company has own legal existence and therefore rights and obligations completely separate and distinct from the people involved in it. Specific characteristics of a company that flow as a result of the concept of separate legal entity are:
Limited liability which means the shareholders’ liability for the debts of the company are limited to the amount uncalled for those shares.
Perpetual succession which means that regardless of who happens to be a share holder or officer of the company at any particular point of time the company continues to exist and retain own character, rights and obligations.
Right to sue and be sued which means that the company can institute and defend legal proceedings in its own shareholders and officers from being personally involved in the proceedings.
Right to hold property, thus avoiding problems that might arise in a partnership as to who owns specific assets as well as linking in with perpetual succession and being able to sue and be sued.
Lifting the veil of incorporation
The concept of separate legal entity is often referred as the “veil of corporation” that is, the share holders and the directors are completely separate and distinct from the company as though a veil hides and separates them. In a exceptional case the courts may lift this “veil of corporation” and give rights and obligations to parties who would not otherwise have those rights and obligations. An example is where the company has been created in order to facilitate a fraud. The veil of corporation may also be raised where the company is a party to a relationship of principal and agent; however the mere fact that a corporation is only one entity in a group of companies does not in itself mean the courts will lift the “veil of corporation”.
Companies limited by guarantee
The liability of the members is limited to the amount that each undertakes to pay to the company in the essence that the company is wound up, not upon their acquisition of membership. These types of companies are often formed by non-profit associations such as sporting clubs other association that use any profits they make for advancement of given associations’ objectives, An alternative to this type of company is incorporation under the associations incorporation legislation of the relevant state.
Unlimited liability companies
In this type of company the members have no limit on their liability to contribute to the assets of the company in order to discharge the company’s liabilities. Legal firms often use this type of company because professional association rules give members some of the advantages of incorporation. There is absolutely no limitation for contributing to the assets in the company.
A corporation obtains its capital from two sources. Share capital and loan capital. In share capital the shares are stated proportions into which the capital of a company is divided. They are the interest of the shareholder in a company measured in monetary terms. As such , they are chosen in action because they are personal property of an intangible nature. This means that the owner of the shares has certain recognizable rights that are enforceable by law.When a corporation wishes to raise capital by the issue of shares or securities, the normal rules of contract apply. The “offer” by the company is only an invitation to treat, and so it is the applicant who makes the offer upon sending in the completed application form plus payment to the company. Acceptance takes place when the directors decide to allot shares and the applicant is sent a notice allotment, A person generally becomes a member of a company when their name is entered in the register of members that the Corporations Act requires all companies to keep. Sometimes a corporation may issue different classes of shares, each of which may have different rights attached to them, such as, different voting rights, preference in payment dividends , dividends at a fixed rate and priority in return of capital or distribution of surplus assets on winding up.
Nature of corporations
To incorporate or not to incorporate is a difficult question for many businesses. The advantages of a corporation are that it’s a separate legal entity from shareholders or members as well as those who control its operations. It has limited liability and perpetual succession. It can sue and be sued. It has the advantage of transferability of shares and taxation benefits. On the other hand the disadvantages of a corporation are the cost of establishment and ongoing fees are expensive, onerous administrative duties required by law, limited management role for shareholders, possible loss of control to shareholders, onerous legal responsibilities imposed on company officers and directors and can be onerous reporting requirements.
However under the corporations act , with the notable exception of professional partnerships, firms are prohibited from carrying on business for gain once they grow beyond 20 persons unless they form themselves into a corporations. A corporation must employ real people to carry out its activities. Buying, selling, engaging staff, paying debts and so on are tasks performed on behalf of the corporation by its agents, directors and managers. These persons (if authorized) can delegate authority to others to bind the company but do not become personally liable for contracts made by themselves and those other persons unless a contracting party willing to accept the company as a creditor. It is not unusual nowadays for financial bodies, traders and manufacturing dealing with companies to insist that a director or other member of the company give a personal guarantee for payment of money owed, particularly loan payments.
Public and proprietary corporations:
This form of classification is done to separate those companies in which public invested money from those in which it has not been, Proprietary companies are relieved of many of the statutory duties and obligations that confront public companies.
Proprietary companies: The vast majority of registered companies are proprietary companies. They are generally relatively small in size – well suited for small to medium sized business, although some are subsidiaries of large public companies, controlling sizable assets. According to the corporation act in order to be considered as large corporation it has to have gross operating revenue of $10m million for the financial year, gross assets of more than $5 million at the end of the financial year, fifty or more full time employees at the end of financial year.A public company is any company other than proprietary company. A public company may or may not be listed. Where it is listed on a stock exchange, marketability of its shares will normally be better because of the information that a company that a company must provide before listing will be allowed. Listing also facilitates valuation of that security and determination of its value for stock option and debt financing purposes.
Functions of Modern Corporation:
Presently, from a functional point of view , there are five distinct types of company:
Companies formed for reasons other than profits other than the profits of their members. Examples are companies formed for charitable or quasi-charitable purposes.
Companies that enable a single trader or a small body of partners to carry on a business. Incorporation is a device for obtaining legal personality for the business and divorcing its liability from that of its members, despite the fact that the members retain control and share profits. The “one person” company is frequent source of danger to creditors and is formed mainly for taxation purposes.
Companies formed to enable the investing public to share in profits of the enterprise without actually taking part in its management. These are economically the most important registered corporations.
So in the end we can say, a corporation is defined as a legal entity or structure created under the authority of the laws of a state, consisting of a person or group of persons who become shareholders. Like a real person, a corporation can enter into contracts, sue and be sued, pay taxes separately from its owners, and do the other things necessary to conduct business. Since a corporation is an entity in its own right, it is liable for its own debts and obligations. As a result, providing that corporate formalities are followed, the corporation’s owners (the shareholders) enjoy limited liability, and are legally shielded from the corporation’s liabilities and debts.
2. Cassidy,Julie, Concise corporations law, (Federation press 2006)
3. Gibson and fraser, Business law, (Pearson,2009)
4. Harrison, Jason R, Corporations law, (LexisNexis Butterworths,2010)
5. Smith,Jerald R and Golden,Peggy A, Corporations: a global business simulation,(prentice hall 1999)
6. Davis,John P, The corporate governance debate,(Thoemmes,1914)
7. Berle ,Adolf Augustus and Means, Gardiner, The modern corporation and private property (William Hein and company)
8. Anderson,Colin, Corporation law,(Oxford university press 2009)
9. Moye, John E, The law of business organizations, (Thompsons 2006)
 The Maurya Empire was a geographically extensive and powerful empire in ancient India, ruled by the Mauryan dynasty from 321 to 185 BC.
 In company law, perpetual succession is the continuation of a corporation’s or other organization’s existence despite the death, bankruptcy, insanity, change in membership or an exit from the business of any owner or member, or any transfer of stock, etc.
 See id., at 170; see also 1 W. Blackstone, Commentaries *467.
 See W. Anderson, A Dictionary of Law 261 (1893) (“All corporations were originally modeled upon a state or nation”)
 Gibson and Fraser, Business law , (Pearson,2009), 574
 It is mostly used by Legal firms because professional association rules give members some of the advantages of incorporation.
 See, Gibson and Fraser, Business law, (Pearson,2009),pg-580
 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 corporations.
 See, Cassidy, Julie, Concise corporations law, (Federation press 2006)
 See, Harrison, Jason R, Corporations law, (LexisNexis Butterworths,2010) page 246
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