A corporation is an institution that is granted a 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 its stakeholders: the management who operate the corporation; creditors who loan it goods, services or money; shareholders who invest their capital; the employees who contribute their labor; and the clients they serve. In modern times, corporations have become an increasingly dominant part of economic life.
An important feature of 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 actual people. Corporations can exercise human rights against real individuals and the state, and they may be 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 lose money into insolvency. Corporations can even be convicted of criminal offences, such as fraud and manslaughter.
Although corporate law varies in different jurisdictions, there are five core characteristics of the business corporation:
- Legal personality
- Limited liability
- Transferable shares
- Centralized management under a board structure
- Shared ownership by contributors of capital.
- Frank Easterbrook, Daniel R. Fischel. 'The Economic Structure of Corporate Law' (1996)
- e.g. South African Constitution Art.8, especially Art.(4)
- Phillip I. Blumberg, The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality, (1993) has a very good discussion of the controversial nature of additional rights being granted to corporations.
- e.g. Corporate Manslaughter and Corporate Homicide Act 2007
- Hansmann et al., The Anatomy of Corporate Law (2004) Ch.1, p.2; See also, C. A. Cooke, Corporation, Trust and Company: A Legal History, (1950).