A corporation is a formal business association with a publicly registered charter recognizing it as a separate legal entity having its own privileges, and liabilities distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business.
Corporations exist as a product of corporate law, and their rules balance the interests of the management who operate the corporation, creditors, shareholders, and employees who contribute their labor.
An important (but not universal) feature of a corporation is limited liability. If a corporation fails, shareholders normally only stand to lose their investment, and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation's creditors.
Despite not being natural persons, corporations are recognized by the law to have rights and responsibilities like natural persons ("people"). Corporations can exercise human rights against real individuals and the state, and they are often responsible for human rights violations. Just as they are "born" into existence through its members obtaining a certificate of incorporation, they can "die" when they are "dissolved" either by statutory operation, order of court, or voluntary action on the part of shareholders. Insolvency may result in a form of corporate 'death', when creditors force the liquidation and dissolution of the corporation under court order, but it most often results in a restructuring of corporate holdings. Corporations can even be convicted of criminal offenses, such as fraud and manslaughter.
Although corporate law varies in different jurisdictions, there are four core characteristics of the business corporation:
Legal personality
Limited liability
Transferable shares
Centralized management under a board structure
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 medieval Europe, churches became incorporated, as did local governments, such as the Pope and 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 Stora Kopparberg mining community in Falun, Sweden, obtained a charter from King Magnus Eriksson in 1347. Many European nations chartered corporations to lead colonial ventures, such as the Dutch East India Company or the Hudson's Bay Company, and these corporations came to play a large part in the history of corporate colonialism.
During the period of colonial expansion in the 17th century, the true progenitors of the modern Corporation emerged as the "chartered company". Acting under a charter sanctioned by the Dutch monarch, the Dutch East India Company (VOC), defeated Portuguese forces and established itself in the Moluccan Islands in order to profit from the European demand for spices. 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 are also explicitly granted limited liability in the company's royal charter. 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.
The existence of a corporation requires a special legal framework and body of law that specifically grants the corporation legal personality, and typically views a corporation as a fictional person, a legal person, or a moral person (as opposed to a natural person). Corporate statutes typically empower corporations to own property, sign binding contracts, and pay taxes in a capacity separate from that of its shareholders (who are sometimes referred to as "members"). According to Lord Chancellor Haldane,
...a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation.
The legal personality has two economic implications. First it grants creditors (as opposed to shareholders or employees) priority over the corporate assets upon liquidation. Second, corporate assets cannot be withdrawn by its shareholders, nor can the assets of the firm be taken by personal creditors of its shareholders. The second feature requires special legislation and a special legal framework, as it cannot be reproduced via standard contract law.
Ownership and control
Persons and other legal entities composed of persons (such as trusts and other corporations) can have the right to vote or receive dividends once declared by the Board. In the case of for-profit corporations, these voters hold shares of stock and are thus called shareholders or stockholders. When no stockholders exist, a corporation may exist as a non-stock corporation (in the United Kingdom, a "company limited by guarantee") and instead of having stockholders, the corporation has members who have the right to vote on its operations. Voting members are not the only members of a "Corporation". The members of a non-stock corporation are identified in the Articles of Incorporation (UK equivalent: Articles of Association) and the titles of the member classes may include "Trustee," "Active," "Associate," and/or "Honorary." However, each of these listed in the Articles of Incorporation are members of the Corporation. The Articles of Incorporation may define the "Corporation" by another name, such as "The ABC Club, Inc." and, in which case, the "Corporation" and "The ABC Club, Inc." or just "The Club" are considered synonymous and interchangeable as they may appear elsewhere in the Articles of Incorporation or the By-Laws. If the non-stock corporation is not operated for profit, it is called a not-for-profit corporation. In either category, the corporation comprises a collective of individuals with a distinct legal status and with special privileges not provided to ordinary unincorporated businesses, to voluntary associations, or to groups of individuals.
There are two broad classes of corporate governance forms in the world. In most of the world, control of the corporation is determined by a board of directors which is elected by the shareholders. In some jurisdictions, such as Germany, the control of the corporation is divided into two tiers with a supervisory board which elects a managing board. Germany is also unique in having a system known as co-determination in which half of the supervisory board consists of representatives of the employees. The CEO, president, treasurer, and other titled officers are usually chosen by the board to manage the affairs of the corporation.
In addition to the limited influence of shareholders, corporations can be controlled (in part) by creditors such as banks. In return for lending money to the corporation, creditors can demand a controlling interest analogous to that of a member, including one or more seats on the board of directors. In some jurisdictions, such as Germany and Japan, it is standard for banks to own shares in corporations whereas in other jurisdictions such as the United States, under the Glass-Steagall Act of 1933, and the United Kingdom, under the Bank of England, banks are prohibited from owning shares in external corporations. However, since 1999 in the U. S., commercial banks have been allowed to enter into investment banking through separate subsidiaries thanks to the Financial Services Modernization Act or Gramm-Leach-Bliley Act. Since 1997, banks in the U. K. are supervised by the Financial Services Authority; its rules are non-restrictive allowing both foreign and domestic capital to operate all financial institutions, including insurance, commercial and financial banking.[26]
Upon the Board's decision to dissolve a for-profit corporation, shareholders receive the leftovers, following creditors and others with interests in the corporation. However shareholders receive the benefit of limited liability, so they are liable only for the amount they contributed.
[edit] Formation
Historically, corporations were created by a charter granted by government. Today, corporations are usually registered with the state, province, or national government and regulated by the laws enacted by that government. Registration is the main prerequisite to the corporation's assumption of limited liability. The law sometimes requires the corporation to designate its principal address, as well as a registered agent (a person or company designated to receive legal service of process). It may also be required to designate an agent or other legal representative of the corporation.
Generally, a corporation files articles of incorporation with the government, laying out the general nature of the corporation, the amount of stock it is authorized to issue, and the names and addresses of directors. Once the articles are approved, the corporation's directors meet to create bylaws that govern the internal functions of the corporation, such as meeting procedures and officer positions.
The law of the jurisdiction in which a corporation operates will regulate most of its internal activities, as well as its finances. If a corporation operates outside its home state, it is often required to register with other governments as a foreign corporation, and is almost always subject to laws of its host state pertaining to employment, crimes, contracts, civil actions, and the like.
[edit] Naming
Corporations generally have a distinct name. Historically, some corporations were named after their membership: for instance, "The President and Fellows of Harvard College." Nowadays, corporations in most jurisdictions have a distinct name that does not need to make reference to their membership. In Canada, this possibility is taken to its logical extreme: many smaller Canadian corporations have no names at all, merely numbers based on their Provincial Sales Tax registration number (e.g., "12345678 Ontario Limited").
In most countries, corporate names include the term "Corporation", or an abbreviation that denotes the corporate status of the entity (e.g. "Incorporated" or "Inc." in the United States), or the limited liability of its members (e.g. "Limited" or "Ltd."). These terms vary by jurisdiction and language. In some jurisdictions they are mandatory, and in others they are not.[27] Their use puts everybody on constructive notice that they are dealing with an entity whose liability is limited, and does not reach back to the persons who own the entity: one can only collect from whatever assets the entity still controls when one obtains a judgment against it.
Certain jurisdictions do not allow the use of the word "company" alone to denote corporate status, since the word "company" may refer to a partnership or to a sole proprietorship (in United States usage, but not generally in British usage), or even, archaically, to a group of not necessarily related people (for example, those staying in a tavern).
[edit] Financial disclosure
In many jurisdictions, corporations whose shareholders benefit from limited liability are required to publish annual financial statements and other data, so that creditors who do business with the corporation are able to assess the creditworthiness of the corporation and cannot enforce claims against shareholders.[28] Shareholders therefore sacrifice some loss of privacy in return for limited liability. This requirement generally applies in Europe, but not in the United States, except for publicly traded corporations, where financial disclosure is required for investor protection.
[edit] Unresolved issues
The nature of the corporation continues to evolve in response to new situations as existing corporations promote new ideas and structures, the courts respond, and governments issue new regulations. A question of long standing is that of diffused responsibility. For example, if a corporation is found liable for a death, how should culpability and punishment for it be allocated among shareholders, directors, management and staff, and the corporation itself? See corporate liability, and specifically, corporate manslaughter.
The law differs among jurisdictions, and is in a state of flux. Some argue that shareholders should be ultimately responsible in such circumstances, forcing them to consider issues other than profit when investing, but a corporation may have millions of small shareholders who know nothing about its business activities. Moreover, traders — especially hedge funds — may turn over shares in corporations many times a day.[29] The issue of corporate repeat offenders (see H. Glasbeak, "Wealth by Stealth: Corporate Crime, Corporate Law, and the Perversion of Democracy" (Between the Lines Press: Toronto 2002) raises the question of the so-called "death penalty for corporations
The institution most often referenced by the word "corporation" is a publicly traded corporation, the shares of which are traded on a public stock exchange (e.g., the New York Stock Exchange or Nasdaq in the United States) where shares of stock of corporations are bought and sold by and to the general public. Most of the largest businesses in the world are publicly traded corporations. However, the majority of corporations are said to be closely held, privately held or close corporations, meaning that no ready market exists for the trading of shares. Many such corporations are owned and managed by a small group of businesspeople or companies, although the size of such a corporation can be as vast as the largest public corporations.
Closely held corporations do have some advantages over publicly traded corporations. A small, closely held company can often make company-changing decisions much more rapidly than a publicly traded company. A publicly traded company is also at the mercy of the market, having capital flow in and out based not only on what the company is doing but the market and even what the competitors are doing. Publicly traded companies also have advantages over their closely held counterparts. Publicly traded companies often have more working capital and can delegate debt throughout all shareholders. This means that people invested in a publicly traded company will each take a much smaller hit to their own capital as opposed to those involved with a closely held corporation. Publicly traded companies though suffer from this exact advantage. A closely held corporation can often voluntarily take a hit to profit with little to no repercussions (as long as it is not a sustained loss). A publicly traded company though often comes under extreme scrutiny if profit and growth are not evident to stock holders, thus stock holders may sell, further damaging the company. Often this blow is enough to make a small public company fail.
Often communities benefit from a closely held company more so than from a public company. A closely held company is far more likely to stay in a single place that has treated them well, even if going through hard times. The shareholders can incur some of the damage the company may receive from a bad year or slow period in the company profits. Closely held companies often have a better relationship with workers. In larger, publicly traded companies, often when a year has gone badly the first area to feel the effects are the work force with lay offs or worker hours, wages or benefits being cut. Again, in a closely held business the shareholders can incur this profit damage rather than passing it to the workers.
The affairs of publicly traded and closely held corporations are similar in many respects. The main difference in most countries is that publicly traded corporations have the burden of complying with additional securities laws, which (especially in the U.S.) may require additional periodic disclosure (with more stringent requirements), stricter corporate governance standards, and additional procedural obligations in connection with major corporate transactions (e.g. mergers) or events (e.g. elections of directors).
A closely held corporation may be a subsidiary of another corporation (its parent company), which may itself be either a closely held or a public corporation.
Most United States businesses are closely held corporations. Ninety-five percent are family owned, and provide employment for approximately fifty percent of the nation's population. However, largely because of shareholder dissension, just twenty percent of family-owned businesses survive longer than a generation. Closely held corporations also have greater potential for shareholder oppression since minority shareholders cannot escape mistreatment by selling their stock on a public market and exiting the corporation.
Following on the success of the corporate model at a national level, many corporations have become transnational or multinational corporations: growing beyond national boundaries to attain sometimes remarkable positions of power and influence in the process of globalizing.
The typical "transnational" or "multinational" may fit into a web of overlapping shareholders and directorships, with multiple branches and lines in different regions, many such sub-groupings comprising corporations in their own right. Growth by expansion may favor national or regional branches; growth by acquisition or merger can result in a plethora of groupings scattered around and/or spanning the globe, with structures and names which do not always make clear the structures of shareholder ownership and interaction.
PENULIS : SEDIKIT SEBANYAK TENTANG CORPORATION.Korporat (Inggeris: corporate) adalah perkara berkaitan dengan syarikat atau perbadanan tertentu atau perbadanan pada umumnya. Korporat merujuk kepada syarikat-syarikat dan firma-firma besar seperti Lembaga Tabung Haji (TH), Perbadanan Usahawan Nasional (PUNB).Pengkorporatan organisasi kerajaan bermaksud menukarkan sesebuah organisasi kerajaan menjadi perbadanan atau syarikat. Dalam era Dasar Ekonomi Baru terdapat beberapa organisasi, institusi dan agensi kerajaan telah dikorporatkan.Pengkorporatan perniagaan Bumiputera di Malaysia dilaksanakan mengikut Dasar Pembangunan Nasional.
:: SULUKEN CORPORATION ::
