Thursday, December 8, 2011
Although often vilified in the current “Occupy Wall Street” environment, the corporation is a tool of long vintage created to solve a particular problem, namely the ownership of property for longer than the lifetime of a particular person. While limited liability, the principle that the owners of the venture are not, beyond their investments made, liability for the debts and obligations of the venture, is oft cited as the raison d’être of the corporation, such was a much later development.
Property jointly held underwent, especially upon the death of a co-owner, a disruption in its ownership and the risk that at least a portion of the corpus would be alienated from the venture. That risk was addressed by the creation of an artificial being, the corporation, it holding title independently of its constituent owners. As described in a venerable treatise, namely James Grant, A Practical Treatise on the Law of Corporations in General as well Aggregate as Sole 16 (T & J.W. Johnson 1854):
“A corporation is an institution calculated for and capable of duration as long as the world lasts, though it may be brought to a termination by certain accidents or by certain defaults of duty on the part of its members at any period; but however long its duration, the corporation continues the same; and the same rights, privileges, duties and liabilities attach to is as it had at the first moment of its creation; precisely as though it were an individual. Personae vice fungitar.
This unbroken personality, this beautiful combination of the legal characters of the finite being with the essentials of infinity appears to have been the primary object of the invention of incorporations, - an invention which, perhaps more than any other human device, has contributed to the civilization of Europe, and the freedom of its states.”
You must appreciate the quality of the language, one of the reasons I enjoy the treatises of this era.