Quickie on Corporations

“That corporations are the creatures of the Crown must be universally
admitted.”
- Lord Kenyon, C.J., King v. Ginever_(1796), 6 T. R. 735.

5 Responses to Quickie on Corporations

  1. Pingback: Because our blog-style is so stark, and regarding the existence of corporations. | The Libertarian Alliance: BLOG

  2. Ian B | 9 January, 2012 at 4:57 pm |

    Are they?

    Wouldn’t corporations exist in a hypothetical anarchy? I think they would. Not with the same requirements and privileges of course, because nobody could require anything of them, nor grant them any privileges. But surely the basic structure would exist.

    It’s like marriage. That has State granted requirements and privileges. But that doesn’t make marriage as a general arrangement a “creature of the Crown”.

    Or have I got the wrong end of the stick?

  3. Thomas L. Knapp | 26 January, 2012 at 5:20 pm |

    Ian,

    A joint stock company is just a large partnership structured to make it easy for partners to enter into and leave the partnership through the use of tradeable shares.

    A corporation is, as Lord Kenyon avers, “a creature of the Crown.” Its distinguishing feature is not its joint stock aspect, but rather whatever bundle of privileges it receives by virtue of state recognition. That bundle of privileges might include anything from a monopoly on trade between England and India, to preferential tax treatment, to limitation of its owners’ liabilities by state fiat.

    In a stateless society, organizations whose essential characteristic is state privilege couldn’t exist. That doesn’t mean organizations that look like those organizations in certain ways couldn’t exist, of course. “Limited liability,” for example, could probably be imitated with private sector portfolio insurance.

  4. Victor R. | 26 January, 2012 at 5:22 pm |

    Are you talking about granting corporations personhood? If so then agreement amongst the affected persons is enough. Don’t see why this is moot. Of course responsability questions would have to be answered in said agreement.

  5. Justin Jefferson | 27 January, 2012 at 10:13 am |

    Modern commercial corporations have evolved from a combination: an association of private origin – joint stock companies – and an association of government monopoly origin – the corporation.

    The joint stock company was basically a big partnership. The problem with small traditional partnerships was that it was difficult and cumbersome to buy and sell shares. The joint stock companies were designed to make it easy to buy and sell shares to as to attract larger amounts of capital. It had unlimited liability and no separate legal personality – i.e. the shareholders were fully personally liable for the liabilities of the JSC, apart from what they could limit by contract.

    The corporation originated with the dean and chapter (of monks). It was a government grant of legal personality. The purpose was to enable the association (the monastery) to hold land in perpetuity. Without this, legal title would have to be vested in someone, e.g. the abbot, and when he died, there would be a need to re-convey the land to the next legal title holder.

    During the pre-modern period (c. pre-1700), the Crown’s main source of cash revenues was from the sale or lease of monopolies. The Crown often granted the privileges of incorporation to whoever had the monopoly. They got to exclude competition, the Crown got a cut of the loot. This privilege was also granted to town corporations, enabling them to stitch up trade within their boundaries.

    It was only later that the ability to access this privilege of incorporation was made generally available, so that anyone could apply to incorporate. Even then the corporation was limited by whatever objectives were specified in its charter. It was only relatively late, (150 years ago) that anyone could incorporate for purpose of any legal objectives.

    In a free market, the following could be retained:
    - joint stock company, i.e. big associations attracting shareholders who have votes in proportion to capital risked; with the shares designed to be easily bought and sold, as on the modern stock market
    - limitation of liability by contract.

    The following could not, it seems, be justified on free market principles:
    - limitation of liability otherwise than by contract – i.e. no limitation in tort eg Union Carbide and Bhopal – shareholders liable in full
    - and therefore, separate legal personality would go also.

    It might be said that such limitations would restrict the raising of capital. And no doubt they would. But that is precisely the point at which profits are privatised and losses socialised.

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