Corporation in United Kingdom

Definition of Corporation

In accordance with the work A Dictionary of Law, this is a description of Corporation :

(corporation, body corporate) n. An entity that has legal personality, i.e. it is capable of enjoying and being subject to legal rights and duties (See juristic person) and possesses the capacity of succession. A corporation aggregate (e.g. a company registered under the Companies Acts) consists of a number of members who fluctuate from time to time. A corporation sole (e.g. the Crown) consists of one member only and his or her successors.

History

The legal origin of corporation is ascribed by J. Grant (Treatise on the Law of Corporations, 1850) to five sources, viz. common law, prescription, act of parliament, charter and implication. Prescription in legal theory implies a grant, so that corporations by prescription would be reducible to the class of chartered or statutory corporations. A corporation is said to exist by implication when the purposes of a legally constituted society cannot be carried out without corporate powers. Corporations are thus ultimately traceable to the authority of charters and acts of parliament. The power of creating corporations by charter is an important prerogative of the crown, but in the present state of the constitution, when all the powers of the crown are practically exercised by parliament, there is no room for any jealousy as to the manner in which it may be exercised. The power of chartering corporations belonged also to subjects who had jura regalia, e.g. the bishops of Durham granted a charter of incorporation to the city of Durham in 1565, 1602 and 1780. The charter of a corporation is regarded as being of the nature of a contract between the king and the corporation. It will be construed more favourably for the crown, and more strictly as against the grantee. It cannot alter the law of the land, and it may be surrendered, so that, if the surrender is accepted by the crown and enrolled in chancery, the corporation is thereby dissolved. Great use was made of this power of the crown in the reigns of Charles II. and James II.

Every corporation, it is said, must have a name, and it may have more names than one, but two corporations cannot have the same name. And corporations cannot change their name save by charter or some equivalent authority.

The possession of a common seal, though, as already stated, not conclusive of the corporate character, is an incident of every corporation aggregate. The inns of courts have common seals, but they are only voluntary societies, not corporations. Generally speaking, all corporate acts affecting strangers must be performed under the common seal; acts of internal administration affecting only the corporators, need not be under seal. The rule has been defended as following necessarily from the impersonal character of a corporation; either a seal or something equivalent must be fixed upon so that the act of the corporation may be recognized by all.

A corporation may be abolished by statute, but not by the mere authority of the crown. It may also become extinct by the disappearance of all its members or of any integral part, by surrender of charter if it is a chartered society, by process of law, or by forfeiture of privileges.

The power of the majority to bind the society is one of the first principles of corporation law, even in cases where the corporation has a head. It is even said that only by an act of parliament can this rule be avoided. The binding majority is that of the number present at a corporate meeting duly summoned.

In corporations which have a head (as colleges), although the head cannot veto the resolution of the majority, he is still considered an integral part of the society, and his death suspends its existence, so that a head cannot devise or bequeath to the corporation, nor can a grant be made to a corporation during vacancy of the headship.

A corporation has power to make such regulations (by-laws) as are necessary for carrying out its purposes, and these are binding on its members and on persons within its local jurisdiction if it has any.

The power to acquire and hold land was incident to a corporation at common law, but its restriction by the statutes of mortmain dates from a very early period. The English law against mortmain was dictated by the jealousy of the feudal lords, who lost the services they would otherwise have been entitled to, when their land passed into the hands of a perpetual corporation. The vast increase in the estates of ecclesiastical corporations constituted by itself a danger which might well justify the operation of the restricting statutes.

The Mortmain Acts applied only to cases of alienation inter vivos. There was no power to devise lands by will until 32 Henry VIII. c. 1 (1540), and when the power was granted corporations were expressly excluded from its benefits. No devise to a corporation, whether for its own use or in trust, was allowed to be good; land so devised went to the heir, either absolutely or charged with the trusts imposed upon it in the abortive devise. A modification, however, was gradually wrought by the judicial interpretations of the Charitable Trusts Act 1601, and it was held that a devise to a corporation for a charitable purpose might be a good devise, and would stand unless voided by the Mortmain Acts; so that no corporation could take land, without a licence, for any purpose or in any way; and no localised corporation could take lands by devise, save for charitable purposes. Then came the act of 1736, commonly but improperly called the Mortmain Act. Its effect was generally to make it impossible for land to be left by will for charitable uses, whether through a corporation or a natural person1. The Wills Act 1837 did not renew the old provision against devises to corporations, which therefore fell under the general law of mortmain. The law was consolidated by the Mortmain and Charitable Uses Act 1888, and the result is simply that corporations cannot take land for any purpose without a licence, and no licence in mortmain is granted by the crown, except in certain statutory cases in the interests of religion, charity or other definite public object.

The power of corporations at common law to alienate their property is usually restricted, as is their power to lease it for more than a certain number of years, except by sanction of a public authority. The more important classes of corporations, however, are now governed by special statutes which exclude or modify the operation of the common law principles. The most considerable class of societies still unaffected by such special legislation are the Livery Companies (q.v.). Under Company will be found an account of the important enactments regulating joint-stock companies.

The question to what extent the common law incidents of a corporation have been interfered with by special legislation has become one of much importance, especially under the acts relating to joint-stock companies. The most important case on this subject is that of Riche v. The Ashbury Railway Carriage Company, 1875 (L.R. 9 Ex. 224; L.R. 7 H.L. 653), in which, the judges of the exchequer chamber being equally divided, the decision of the court below was affirmed. The view taken by the affirming judges, viz. that the common law incidents of a corporation adhere unless expressly removed by the legislature, may be 192 illustrated by a short extract from the judgment of Mr Justice Blackburn:—

“If I thought it was at common law an incident to a corporation that its capacity should be limited by the instrument creating it, I should agree that the capacity of a company incorporated under the act of 1862 was limited to the object in the memorandum of association. But if I am right in the opinion which I have already expressed, that the general power of contracting is an incident to a corporation which it requires an indication of intention in the legislature to take away, I see no such indication here. If the question was whether the legislature had conferred on a corporation, created under this act, capacity to enter into contracts beyond the provisions of the deed, there could be only one answer. The legislature did not confer such capacity. But if the question be, as I apprehend it is, whether the legislature have indicated an intention to take away the power of contracting which at common law would be incident to a body corporate, and not merely to limit the authority of the managing body and the majority of the share-holders to bind the minority, but also to prohibit and make illegal contracts made by the body corporate, in such a manner that they would be binding on the body if incorporated at common law, I think the answer should be the other way.”

On the other hand, the House of Lords, agreeing with the three dissentient judges in the exchequer chamber, pronounced the effect of the Companies Act to be the opposite of that indicated by Mr Justice Blackburn, “It was the intention of the legislature, not implied, but actually expressed, that the corporations, should not enter, having regard to this memorandum of association, into a contract of this description. The contract in my judgment could not have been ratified by the unanimous assent of the whole corporation.” In such companies, therefore, objects beyond the scope of the memorandum of association are ultra vires of the corporation. The doctrine of ultra vires, as it is called, is almost wholly of modern and judicial creation. The first emphatic recognition of it appears to have been in the case of companies created for special purposes with extraordinary powers, by act of parliament, and, more particularly, railway companies. The funds of such companies, it was held, must be applied to the purposes for which they were created, and to no other. Whether this doctrine is applicable to the older or, as they are sometimes called, ordinary corporations, appears to be doubtful. S. Brice (Ultra Vires) writes:—

“Take, as a strong instance, a university or a London guild. Either can undoubtedly manage, invest, transform and expend the corporate property in almost any way it pleases, but if they proposed to exhaust the same on the private pleasures of existing members, or to abandon the promotion, the one of education, the other of their art and mystery, it is very probable, if not absolutely certain, that the court of chancery would restrain the same, as being ultra vires.”

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Corporation in other legal encyclopedias

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Meaning of Corporation

The following is an old definition of Corporation [1]: A creature of the crown, created by letters-patent. An artificial being, indivisible, intangible, and existing only in contemplation of law. As all personal rights die with the person, and as the necessary forms of investing a series of individuals, one after the other, with the same identical right, would be inconvenient, if not impracticable, it has been found necessairy, when for the advantage of the public that particular rights should be continued, to constitute artificial persons who may maintain a perpetual succession. These artificial persons are called ” bodies politic,” ” bodies corporate,” or ” corporations.” The great object of a corporation is to bestow the character and properties of individuality on a collective and changing body of men. A private corporation is merely an association of individuals united for a special purpose, and permitted to do business under a particular name, and have a succession of members without dissolution. The privilege of exercising the particular right, by grant o? the sovereign, is a franchise. Compare CorporatLon Aggregate. The constitutions of several States provide that the term corporation ” shall be construed to include all associations and joint-stock companies having any of the powers and privileges of corporations not possessed by individuals or partnerships.” In England, the tendency seems to have been to confine the terra to its original sense as implying non-liability of members for corporate debts; and if this exemption is not to be accorded, to call the body a “public company.”‘ . The current of American decisions has been to the effect that the word embraces an association formed under general laws, with stock- holders, directors, a president, etc.; and that such a body is not a quasi corporation (see, in this resource, the term), nor a joint-stock company, nor a limited partnership. See Association; Company. If the essential franchises of a corporation are conferred upon a joint-stock company, it is none the less a corporation for being called something else. Being tjie mere creature of law, each possesses only those properties which the charter of its creation confers upon it, expressly or as incidental to its very existence. These are such as are supposed beet calculated to effect the object for which it was created.Among the most important are immortality and individuality: ” properties by which a perpetual succession of many members are considered as the same, and may act as a single individual.” The members and their successors are as one person in law, with one will – that of the majority; and with prescribed rules which take the place of natural laws. The sovereign’s consent is necessary to the erection of a corporation. With respect to corporations which exist by force of the common law, as, the king himself and bishops, this consent is implied; so, also, as to corporations, like the city of London, whose charter rests on prescription. His consent is expressly given by act of parliament or by charter. He may grant the power to a subject as his agent. The powers of a corporation aggregate are: to have perpetual succession; to sue and be sued; to hold lands; to have a common seal; to make by-laws; – with all the rights necessarily incident to these general powers. The duty of a corporation is to act up to the end or design for which it was created. To enforce this duty all corporations may be ” visited “-by the founder or his representative in the case of a lay corporation; by the endower, his heirs or assigns, in the case of an eleemosynary corporation. A corporation is dissolved by a statute assented to; by the natural death of all its members; by surrender of its franchises; by forfeiture of its charter, through negligence or abuse of its franchises. The objects for which corporations are created are such as the government wishes to promote. They are deemed beneficial to the coimtry; and it is this benefit that constitutes the consideration of the grant. The United States may be deemed a corporation; so may a State; and so, a county. All corporations were originally modeled upon a state or nation; whence (the word(s) which follow it are derivatives from the same root word) they are still called ” bodies politic.” 0 See Municipal and Public Corporation. The species of corporations are the following: Aggregate corporation. Consists of many persons united together into one society, and is kept up by a perpetual succession of members, so as to continue forever.Corporation sole. Consists of one person only and his successors, incorporated in order to give them legal capacities and advantages,particularly that of perpetuity, which in their natural persons they could not have had; as, the king, hy force of the common law, and a bishop or parson. A. ” corporation aggregate ” is a collection of individuals united into one collective body, under a special name, and possessing certain immunitiesv privileges, and capacities in its collective character which do not belong to the natural persons composing it. A “corporation aggregate” consists of many persons united together into one society, and kept up by a perpetual succession of members, so as to continue forever. A “corporation sole” consists of a single person who is made a body corporate and politic in order to give him some legal capacities and advantages, especially that of perpetuity; as, a minister seized of lands in right of the parish. A ” corporation aggregate” is a true corporation, but a ” corporation sole ” is one individual, being a member of a series of individuals, who is invested by a fiction with the qualities of a corporation. The capacity or ofidce is here considered apart from the particular person who frbm time to time may occupy it. Ecclesiastical corporation. When the members composing the corporation are entirely spiritual persons, as, a bishop, a parson, and the like; for the furtherance of religion and perpetuating the rights of the church. Lay corporation. A corporation composed of secular persons; and in nature either civil or eleemosynary. Civil corporation. Such corporation as is erected for a temporal purpose. Eleemosynary corporation. Such -corporation as is constituted for the perpetual distribution of the free alms or bounty of the founder to such persons as he has directed. Of the “civil ” sort are: those erected for the good government of a town or district; those for the advancement and regulation of manufacturers and commerce; those for special purposes – as for medical science, natural history, etc. See Municipal and Private Corporation. Of the ” eleemosynary ” kind are hospitals for the relief of the poor, the sick, the impotent; and colleges for the promotion of piety and learning. ” Eleemosynary corporations ” are incorporated for perpetuating the application of the bounty of the donor to the specified objects of that bounty -the distribution of the free alms and boiraty of the founder as he has directed. An ” eleemosynary corporation ” is a private charity, constituted for the perpetual distribution of the alms and bounty of the founder. A corporation for religious and charitable purposes, endowed solely by private benefactions, is a ” private eleemosynary” corporation, although created by a charter from the government. Close corporation. In this the majority of the persons to whom the corporate powers have been granted, on the happening of vacancies among them, have the right of themselves to appoint others to fill such vacancies, without allowing the corporators in general any choice in the selection of such new officers. Open corporation. In which all the corporators have a vote in the election of officers. Commercial corporation. See Business, Corporation. Foreign corporation. A corporation created by or under the laws of another State, government, or country. Domestic or home corporation. A corporation created under the law of the place where it exists or exercises its powers. A corporation exists only by force of law, and can have no legal existence beyond the bounds of the sovereignty by which it is created. It dwells in the place of its creation. It is not a ” citizen,” within the meaning of the Constitution, and cannot maintain a suit in a Federal court against a citizen of a different State from that by which it was created, unless the persons who compose the corporate body are all citizens of that State. The legal presumption is that its members are citizens of the State in which alone the body has a legal existence. By comity, if not forbidden by its charter, nor by the laws of that State, a corporation may exercise its powers in another State. No State need allow the corporations of another State to do biisiness within its jurisdiction unless it chooses, with perhaps the exception of commercial corporations; but if it does, without limitation, the corporation comes in as it has been created. The State which recognizes foreign corporations can impose such conditions on its recognition as it chooses, not inconsistent with the Constitution and laws of the United States. If it permits them to do business without limitation, express or implied, they carry with them all their chartered rights, and may claim all their chartered privileges which can be used away from their legal home. By doing business away from home they do not change their citizenship; they simply extend their field of operations. But a State may not impose a limitation upon the power of a foreign corporation to make contracts within the State for carrying on commerce between the States. Doing a single act of business in a State, with no purpose of doing other acts there, does not bring a corporation within a statute requiring a foreign corporation, before it can carry on business in the State, to iile a certificate showing places of business, agents, etc. Undoubtedly a corporation of one State, employed in the business of the general government, may do such business in other States without obtaining a license from them. . It is not every corporation, lawful in the State of its creation, that other States may be willing to admit within their jurisdiction; such, for example, as a corporation for lotteries. And even when the business is not unlawful the State may wish to limit the number of corporations belonging to its class, or to subject their business to such contract as would be in accordance with the policy governing domestic corporations of a similar character. The States may, therefore, require for the admission within their limits of the corporations of other States such conditions as they may choose. . The only limitation, upon such power arises where the corporation is in the employ of the Federal government, or where its business is strictly commerce, inter-State or foreign. Moneyed corporation. Any corporation with banking powers, or power to make loans on pledges or deposits, or to make contracts of insurance. Quasi corporation. A phrase applied to a body which exercises certain functions of a corporate character, but which has not been created a corporation by any statute, general or special. Such auxiliaries of the State as a county, school-district, township, and other like involuntary corporations with liabilities not as great as those of municipal corporations. Of such are the inhabitants of a school district; commissioners of schools, and boards of education; overeeers of the poor: the commissioners or supervisors of a county, q.v.; commissioners of roads; the governor of Tennessee; a levee district organized by statute to reclaim land; 0-any body invested with corporate powers sub modo, for a few specified purposes only, and which may sue and be sued.1 See under Public Corporation, Quasi, etc. Municipal corporation. A public corporation (see, in this resource, the term) created by the government for political purposes and having subordinate and local powers of legislation; an incorporation of persons inhabitants of a particular place, or connected with a particular district, enabling them to conduct its local civil government. Merely an agency instituted by the sovereign for the purpose of carrying out in detail the objects of government. 2 Essentially a revocable agency – having no vested right to any of its powers or franchises – the charter or act of erection being in no sense a contract with the State – and therefore fully subject to the control of the legislature, which may enlarge or diminish its territorial extent or its functions, change or modify its internal arrangement, or destroy its very existence, with the mere breath of arbitrary discretion. While it thus exists in subjection to the will of the sovereign, it enjoys the rights and is subject to the liabilities of any other corporation, public or private. This is the very object of making it a body politic, giving it a legal entity and name, a seal by which to act in solemn form, a capacity to contract and be contracted with, to sue and be sued, a persona standi in Judicio, to hold and dispose of property, and thereby to acquire rights and incur responsibilities. These franchises were conferred upon it for the purpose of enabling it the better to effect the design of its institution, the exercise of certain of the powers of government, subordinate to the legislature, over a part of the territory of the State. But all this affects its relations to other persons, natural or artificial: it doesnot touch its relation to the State, its creator. In the exercise of its duties, including those most strictly local or internal, a municipal corporation is but a department of the State. The legislature may give it all the po wers such a being is capable of receiving, making it a miniature State vithin its locality; or it may strip it of every power, leaving it a corporation in name only. . . The municipality may act through its mayor, its common coxmcil or legislative department, its supervisor of streets, commissioner of high-ways, board of public works, etc., provided it acts within the province committed to its charge. Whether its agents be appointed or elected is immaterial. What portions of a State shall be within the limits of a city is a proper subject of legislation – however thick or sparse the settlement. Property held for public uses – such as public buildings, streets, squares, parks, wharves, fire-engines, engineering ,instruments: whatever is held for governmental purposes – cannot be subjected to the payment of the debts of the city. Its public character forbids such an appropriation. The obligation of its contracts survives dissolution. Equity will apply its property to the payment of its debts; after which, surplus realty may revert to the grantor, and personalty vest in the State. The private property of individuals cannot be taken for its debts, except through taxation. The doctrine of some States, thalt such can be reached directly on an execution against the municipality, has not been generally accepted. The general doctrine that, being the creature of the law, a municipal corporation can only act as provided by its organic law, and that if its agents fail to observe the forms and methods prescribed by that law, in any substantial particular, their acts are not the acts of the corporation, – has been greatly modified, by the , decisions of the Supreme Court, in its application to bonds issued by agents when the rights of bona fide purchasers are involved. A municipal corporation can exercise such powers only as are granted in express words or are necessarily or fairly implied in or incident to those powers, and such as are essential to the declared objects of the corporation. The earliest form of corporation was, probably, the municipality or city, which necessity exacted for the control or local police of the marts or crowded places of the empire. These cities became a bulwark against despotism. See City; Ordinance, 1; Riot. National corporation. A corporation created by Congress to assist in “carrying into execution ” one or more of the powers vested by the Constitution in the government of the United States. Of such are the national banking associations. See Grant, 3; Land, Public. Political corporation. See Public Corporation, Private corporation. An association of individuals united for some common purpose, and permitted by the law to use a common name, and to change its members without a dissolution of the association. Its powers are such as are conferred by statute; and its charter is the measure thereof. The enumeration of these powers excludes all others. Its charter is a contract, not to be ” impaired.” see, in this resource, the term Public corporation. Such corporation as exists for political purposes only; as, a town, a city, a county. But, strictly speaking, public corporations are such only as are founded by the government for public purposes, where the whole interests belong also to the government. If, therefore, the foundation be “private,” though under the charter of the government, the corporation is private, however extensive the uses to which it is devoted. . . A hospital or a college founded by a private benefactor is a private corporation, although dedicated by its charter to general charity. In popular meaning nearly every corporation is ” public ” inasmuch as they are created for the public benefit. Yet if the whole interest does not belong to the government, or if the corporation is not created for the administration of political or municipal power, it is a ” private ” corporation. Thus, all bank, bridge, turnpike, railroad, and canal companies are private corporations. In these and similar cases, in a certain sense, the uses may be called public, but the corporations are private, as much so as if the franchises were vested in a single person. The delegation of the right of eminent domain, to be used for private emolument as well as for public benefit, does not clothe a coi^pora- tion with the inviolability or immunity of public officers performing public functions. Public corporations are so called because they are but parts of the machinery employed in carrying on the affairs of the State; – auxiliaries of the State in the business of municipal rule; – political divisions of State, originating in the necessities and conveniences of the people. Their officers are local agents of the State. A public corporation is a mere instrumentality of the State for the better administration of the government in matters of local concern. It is a local agency of the government creating it; its powere are such as belong to sovereignty. Property and revenue necessary for the exercise of these powere become part of the machinery of government. To permit a creditor to seize and sell these, in order to collect a debt, would be to permit him in a degree to destroy the government itself. A public corporation can exercise no power not given by its charter or some other statute of the State. It is now well settled that the charter of a public corporation may be changed, modified, or repealed, as the exigencies of the public service or the public welfare may demand; unless the organic law other-wise provides. Public and other municipal corporations represent the people, and are to be protected against the un-authorized acts of their offtcers and agents, when this can be done without injury to third parties. This is necessary in order to guard against fraud and peculation. Persons dealing with such officers or agents are chargeable with notice of the power the corporation possesses. Quasi public corporations: corporations technically private, but yet of a quasi public character having in view some general public enterprise, in which the public interests are directly involved to such an extent as to Justify conferring upon them important governmental powers, such as an exercise of the right of eminent domain. Of this class are railroad, turnpike , and canal companies; and corporations strictly private, the direct object of which is to promote public interests, and in which the public have no concern, except the indirect benefits resulting from the promotion of trade, and the development of the resources of the country. It is a misnomer to attach the name ” quasi public corporation ” to a railroad company, for it has none of the features of such corporations, if we except its qualified right of eminent domain, which it has because of the right reserved to the public to use its way for travel and transportation. Its road may be a quasi public highway, but the company itself is a private corporation, and nothing more. Corporate. Relating to a corporation. Corporate authorities. In the constitution of Illinois, Art. 9, § 5, municipal officers who are either directly elected by the people or are appointed in some mode to which they have given their assent. Corporate existence. Dates from the time when full authority to transact business is possessed by a corporation, as from the filing of articles with the secretary of State. Corporate purpose. In some States, as in Illinois, taxation by public corporations must be for corporate purposes. This means such purposes as are germane to the objects of the welfare of the municipality or at least have a legitimate connection with those objects and a manifest relation thereto. The reference is to a tax which is to be expended in a manner promoting the general prosperity and welfare of the munioipality which levied it. The purpose must be germane to the general scope of the object for which the corporation was created. The expression will include money expended for a court-house, jail, poor-house; the opening and keeping of a common highway; the erection and maintenance of a bridge; a donation to secure the location of a school; and, perhaps, also, money expended in developing the natural resources for manufacturing purposes. Compare Puapose, Public. Corporate rights. “Franchises or peculiar privileged grants ” of the nature of corporeal property.0 Corporator. Usually, a member of a corporation, in which sense it includes a stock-holder; also, one of the persons who are the original organizers or promoters of a new corporation. The corporators are not the corporation, for either may sue the other. Incorporate, v. To form into an artificial body; to create a corporation out of natural persons. Incorporate, adj. The same as corporate, see, in this resource, the term Incorporated. United into one body; constituted a legal entity or person. Unin-corporated: not existing as a corporation. Incorporation. The act of uniting natural persons into a creature of the law; also, a body incorporated, that is, a corporation – a use not favored. ” Incorporation ” is the act by which the political institution called a corporation is created. See further Agent; Amotion; Bank, 2 (2);. Bony, 2; Bond; By-law, 2; Capital, 2; Charity, 2; Charter, 2; Consolidation; Director; Dissolve, 2; Distringas; Dividend, 3; Domain, 1, Eminent; Find, 2; Franchise, 1; Inspection, 2; Legislature; Manager; Meetings; Minutes, 2; Mortmain; Organize; Perpetual; Person; Police, 2; Property; Prospectus; Proxy; Railroad; Receiver; Residence; Seal, 1, . Common; Soul; Stock, 3; Succession; Take, 8; Tax, 2; Tort, 2; Ultra Vires; Visit, 2; Voting, Cumulative; Warrantum.

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Notes and References

1. Concept of Corporation provided by the Anderson Dictionary of Law (1889)

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See also

Incorporation