Company


Company

A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be made to exist in law and then a company is itself considered a "legal person". The name company arose because, at least originally, it represented or was owned by more than one real or legal person.

In the United States, a company is a corporation—or, less commonly, an association, partnership, or union—to carry out an enterprise.[1] Generally, a company may be a "corporation, partnership, association, joint-stock company, trust, fund, or organized group of persons, whether incorporated or not, and (in an official capacity) any receiver, trustee in bankruptcy, or similar official, or liquidating agent, for any of the foregoing."[1]

In English law and in the Commonwealth realms a company is a body corporate or corporation company registered under the Companies Acts or similar legislation.[2] It does not include a partnership or any other unincorporated group of persons, although such an entity may be loosely described as a company.

Contents

Meaning and definition

A company can be defined as an "artificial person", invisible, intangible, created by Law, with a discrete legal entity, perpetual succession and a common seal. It is not affected by the death, insanity or insolvency of an individual member.

The English word has its origins in the Old French military term compaignie (first recorded in 1150), meaning a "body of soldiers",[3] originally taken from the Late Latin word companio "companion, one who eats bread with you", first attested in the Lex Salica as a calque of the Germanic expression *gahlaibo (literally, "with bread"), related to Old High German galeipo "companion" and Gothic gahlaiba "messmate". By 1303, the word referred to trade guilds. Usage of company to mean "business association" was first recorded in 1553 and the abbreviation "co." dates from 1769.

History

According to one source, "it may be formed by Act of Parliament, by Royal Charter, or by registration under company law (referred to as a limited liability or joint-stock company)."[4] In the United Kingdom, the main regulating laws are the Companies Act 1985 and the Companies Act 2006.[4] Reportedly, "a company registered under this Act has limited liability: its owners (the shareholders) have no financial liability in the event of winding up the affairs of the company, but they might lose the money already invested in it".[4] In the USA, companies are registered in a particular state—Delaware being especially favoured—and become Incorporated (Inc).[4]

In North America, two of the earliest companies were The London Company (also called the Charter of the Virginia Company of London)—an English joint stock company established by royal charter by James I of England on April 10, 1606 with the purpose of establishing colonial settlements in North America—and Plymouth Company that was granted an identical charter as part of the Virginia Company. The London Company was responsible for establishing the Jamestown Settlement, the first permanent English settlement in the present United States in 1607, and in the process of sending additional supplies, inadvertently settled the Somers Isles, alias Bermuda, the oldest-remaining English colony, in 1609.

Types

For a country-by-country listing, see Types of business entity.

There are various types of company that can be formed in different jurisdictions, but the most common forms of company (generally formed by registration under applicable companies legislation) are:

  • A company limited by guarantee. Commonly used where companies are formed for non-commercial purposes, such as clubs or charities. The members guarantee the payment of certain (usually nominal) amounts if the company goes into insolvent liquidation, but otherwise they have no economic rights in relation to the company. This type of company is common in England.
  • A company limited by shares. The most common form of company used for business ventures. Specifically, a limited company is a "company in which the liability of each shareholder is limited to the amount individually invested" with corporations being "the most common example of a limited company."[1] This type of company is common in England.
  • A company limited by guarantee with a share capital. A hybrid entity, usually used where the company is formed for non-commercial purposes, but the activities of the company are partly funded by investors who expect a return. This type of company may no longer be formed in the UK, although provisions still exist in law for them to exist.[5]
  • A limited-liability company. "A company—statutorily authorized in certain states—that is characterized by limited liability, management by members or managers, and limitations on ownership transfer", i.e., L.L.C.[1]
  • An unlimited company with or without a share capital. A hybrid entity, a company where the liability of members or shareholders for the debts (if any) of the company are not limited.

Less commonly seen types of companies are:

  • Companies formed by letters patent. Most corporations by letters patent are corporations sole and not companies as the term is commonly understood today.
  • charter corporations. Before the passing of modern companies legislation, these were the only types of companies. Now they are relatively rare, except for very old companies that still survive (of which there are still many, particularly many British banks), or modern societies that fulfil a quasi regulatory function (for example, the Bank of England is a corporation formed by a modern charter).
  • Statutory Companies. Relatively rare today, certain companies have been formed by a private statute passed in the relevant jurisdiction.

Note that "Ltd after the company's name signifies limited company, and PLC (public limited company) indicates that its shares are widely held."[4]

In legal parlance, the owners of a company are normally referred to as the "members". In a company limited or unlimited by shares (formed or incorporated with a share capital), this will be the shareholders. In a company limited by guarantee, this will be the guarantors. Some offshore jurisdictions have created special forms of offshore company in a bid to attract business for their jurisdictions. Examples include "segregated portfolio companies" and restricted purpose companies.

There are however, many, many sub-categories of types of company that can be formed in various jurisdictions in the world.

Companies are also sometimes distinguished for legal and regulatory purposes between public companies and private companies. Public companies are companies whose shares can be publicly traded, often (although not always) on a regulated stock exchange. Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions, private companies have maximum numbers of shareholders.

References

  1. ^ a b c d Black's Law and lee Dictionary. Second Pocket Edition. Bryan A. Garner, editor. West. 2001.
  2. ^ Companies Act 2006, Section 1
  3. ^ Harper, Douglas. "company". Online Etymology Dictionary. http://www.etymonline.com/index.php?term=company. 
  4. ^ a b c d e "Company." Crystal Reference Encyclopedia. Crystal Reference Systems Limited. 27 Nov. 2007. Reference.com
  5. ^ Companies Act 2006

Further reading


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