1902 Encyclopedia > Corporation

Corporation




CORPORATION. A corporation is an association of persons which the law treats in many respects as if it were itself a person. It has rights and duties of its own which are not the rights and duties of the individual members thereof. Thus a corporation may own land, but the individual members of the corporation have" no rights therein. A corporation may owe money, but the corpora-tors as individuals are under no obligation to pay the debt. ( The rights and duties descend to the successive members cf the corporation. This capacity of perpetual succession is regarded as the distinguishing feature of corporations as compared with other societies. One of the phrases most commonly met with in law-books describes a corporation as a society with perpetual succession and a common seal. The latter point, however, is not conclusive of the corporate character.

The legal attributes of a corporation have been worked out with great fulness and ingenuity in English law, but the conception has been taken full-grown from the law of Rome. The technical term in Roman law corresponding to our corporation is collegium; a more general term is unwersitas. A collegium or corpus must have consisted of at least three persons, who were said to be corporati—habere corpus. They could hold property in common and had a common chest. They might sue and be sued by their agent (syndicus or actor). There was a complete separation in law between the rights of the collegium as a body and those of its individual members. The collegium remained in ex-istence although all its original members were changed. It was governed by its own by-laws, provided these were not contrary to the common law. The power of forming collegia was restrained, and societies pretending to act as corpora-tions were often suppressed. In all these points the collegia of Roman closely resemble the corporations of English law. There is a similar parallel between the purposes for which the formation of such societies is authorized in English and in Roman law. Thus among the Eoman collegia the following classes are distinguished:—(1) Public governing bodies, or municipalities, civitates ; (2) religious societies, such as the collegia of priests and Vestal Virgins ; (3) official societies, e.g., the scribce, employed in the administration of the state ; (4) trade societies, e.g., fabri, pictores, navicularii, &c. This class shades down into the societates not incorporated, just as our own trading corporations partake largely of the character of ordinary partnerships. In the later Roman law the distinction of corporations into civil and ecclesias-tical, into lay and eleemosynary, is recognized. The latter could not alienate without just cause, nor take land without a licence—a restriction which may be compared with our statutes of mortmain. All these privileged societies are what we should call corporations aggregate. The corpora-tion sole (i.e., consisting of only a single person) is a refine-ment of our own, for although Roman law held that the corporation subsisted in full force, notwithstanding that only one member survived, it did not impute to the succes-sive holders of a public office the character of a corporation. When a public officer in our law is said to be a corporation sole, the meaning is that the rights acquired by him in that capacity descend to his successor in office, and not (as the case is where a public officer is not a corporation) to his ordinary legal representative. The best known instances of corporation sole are the king and the parson of a parish. The conception of the king as a corporation is the key to many of his paradoxical attributes in constitutional theory— his invisibility, immortality, &c.

The Roman conception of a corporation was kept alive by ecclesiastical and municipal bodies. When English lawyers came to deal with such societies, the corporation law of Rome admitted of easy application. Accordingly, in no department of our law have we borrowed so copiously and so directly from the civil law. The corporations known to the earlier English law weremainly the municipal, the ecclesiastical, and the educational and eleemosynary. To all of these the same principles, borrowed from Roman jurisprudence, were applied. The different purposes of these institutions brought about in course of time differences in the rules of the law applicable to each. In particular, the great development of trading companies under special statutes has produced a new class of corpora-tions, differing widely from those formerly known to the law. The reform of municipal corporations effected by the Act of 1837 has also restricted the operation of the principles of the older corporation law. These principles, however, still apply when special statutes have not inter-vened. But the extent and importance of Parliamentary legislation on corporations have withdrawn the attention of writers from corporation law pure and simple, and there has been no book on that subject since Mr Grant's, pub-lished in 1850. Two earlier treatises by Mr Kyd and Mr Willcocks may be mentioned. American lawyers have dealt more satisfactorily with corporations, and special reference may be made to Abbott's Digest of Corporation. Law.
The legal origin of corporation is ascribed by Grant to five sources, viz., common law, prescription, Act of Parlia-ment, 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 corpora-tions. 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, and the last was the charter in operation up to the passing of the Municipal Corporations Act. 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 lavv 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. The use made of this power of the Crown in the reigns of Charles II. and James II. will be familiar to most readers. Chartered corporations were originally held to be ex necessitate immortal; only a statute could give a society corporate privileges to ensue for a limited time. But now, by 1 Vict. c. 77 § 29, the Crown may incorporate for any period.

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, has been held to be 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 by high judicial authority 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. In the matter of contracts, however, the strict rule of law has been found untenable. A large exception has long been recognized by the courts. In cases of " convenience almost amounting to necessity," the use of the seal will not be necessary in order to bind a corpora-tion. Examples given in the old cases of such convenience are the retainer of an inferior servant, authority to make a distress, or drive away cattle damage feasant, &c. This exception has been extended in different degrees in different classes of corporations. In trading corporations it has been lately held that it will include all contracts entered into for the purposes for which the society was incorporated, and will not be limited to matters of constant occurrence or small importance. In other corporations the same latitude does not appear to be encouraged by the decisions. Goods of a kind which must have been necessary from time to time, and actually supplied to a corporation under a contract not sealed, may be sued upon. But an engagement as clerk to a workhouse was held not binding on a board of guardians because not under their seal. And where a municipal corporation caused some tolls to be let by auction, they were not allowed to recover on the contract because it was not under their seal. And work done for local im-provements, under an unsealed contract, was held to give no claim against a corporation. In such cases the fact of the contract being executed makes no difference as against the corporation, but where the corporation has executed an unsealed contract, it may recover thereon.





The somewhat unsatisfactory principles as to the dissolution of corporations are not now of much practical importance. A corporation may of course be abolished by statute, but not by the mere authority of the Crown. It is held that a corporation may become extinct by the dis-appearance of all its members or of any integral part, or by surrender of charter if it is a chartered society, or by process of law for abuse of powers. In such cases, the real property of the corporation will go to the heir of the founder, and the personal property as bona vacantia to the Crown. Corporations created by statute cannot surrender, nor will they be suffered to avoid elections so as to become extinct for want of members.

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 meet-ing duly summoned. Votes given for an illegal purpose or a disqualified person are considered as thrown away, and in an election votes must be given for some particular candidate,—if they are merely against a candidate, they are void.

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 (bylaws) 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. Such by-laws must not be at variance with the law of the land, nor retrospective in their operation, nor unreasonable. They must further be in harmony with the objects of the society, and must not infringe or limit the powers and duties of its officers. A bylaw to compel the giving of a dinner was held to be invalid unless it could be shown that the interest of the corpora-tion was to be promoted thereby.

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. Accordingly, in Magna Charta (9 Hen. III. c. 36) there is a clause against the granting of land to religious houses. The statute 7 Edward I. st. 2, c. 1 {Be Religiosis), and the Statute of Westminster the Second extended by 15 Bichard II. c. 5, prohibited corporations from buying land in mortmain under penalty of forfeiture. The next lord might enter within a year, and each succeeding lord had half a year, and for default of intermediate lord the king should have the lands for ever. If the king and the lords waived their rights, the corporation could hold the land without question. Hence a practice grew up for the king to grant to a corporation a licence to hold the lands given to it; and this, although, strictly speaking, a waiving of the king's rights, was in course of time held sufficient to bar the mesne lord's right also. Its power to do so was expressly confirmed by 7 and 8 Will. III. c. 37, —not that there was any doubt about it in practice, but to avoid the hateful example of anything like a power in the Crown to suspend the laws. A licensed corporation can hold lands to the extent of its licence.

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 (explained by 34 and 35 Henry VIII. c. 5), 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 43 Elizabeth c. 4, 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 licensed corporation could take lands by devise, save for charitable purposes. Then came the 9 George II. c. 36, commonly but improperly called the Mortmain Act. Its effect is generally to make it impossible for land to be left by will for charitable uses, whether through a corporation or a natural person. The new Wills Act does not renew the old provision against devises to corporations, which therefore fall under the general law of mortmain. The result is simply that corporations cannot take land for any purpose without a licence, and that neither corporations nor natural persons can take land by devise for charitable uses (see CHARITIES). The policy of the law of mortmain may be compared with the rule against perpetuities—a rule which forbids the operation of settlements purporting to regulate the devolution of land for ever. The longest period for which the law will allow the future disposition of land to be tied up is a life or lives in being, and twenty-one years thereafter.

The power of corporations at common law to alienate their property is a question of much greater difficulty, and no satisfactory solution of it is to be found in the cases or text-books. Coke is understood to say in his report of Sutton's Hospital case that they have the power to alienate, but later authorities are sometimes quoted on the other side. " All civil corporations, " says Kyd, " such as the corpora-tions of mayor and commonalty, bailiffs and burgesses of a town, or the corporate companies of trades in cities and towns, &c, have and always have had an unlimited control over their respective properties, and may alienate in fee, or make what estates they please for years, for life, or in tail, as fully as any individual may do in respect of his own property." And he makes the same assertion as to the common law right of colleges and ecclesiastical corporations. Grant, however, argues that no civil corporation can be supposed to hold land otherwise than as " clothed with a public purpose, " and that, therefore, there is no right of alienation. Recent judicial decisions, however, seem to favour it. In a case before the late master of the rolls (Evan v. Corporation of Avon, 29 Beavan 144), it was held that a municipal corporation, apart from the Municipal Corporations Act, has full power to dispose of all its property like a private individual, and in the more recent case of Riche v. Ashbury Company (Law Reports, 9 Exchequer, 224) Mr Justice Blackburn, quoting the opinion of Coke in Sutton's Hospital case, lays it down that at com-mon law a corporation might bind itself to anything to which a natural person could bind himself, and deal with its property as a natural person might, and that an attempt to forbid this by the king, even by express negative words, does not bind the law. When land is held by a corpora-tion for charitable or other fiduciary purposes the Court of Chancery will interfere to prevent any improper alienation.





In the case of ecclesiastical and college property, the dangers incident to unlimited power of alienation produced what are known as the restraining statutes in the reign of Elizabeth. The first of these, 1 Elizabeth c. 19, applies only to bishops, and forbids alienations whereby an estate should pass other than for the term of twenty-one years or three lives, with accustomed yearly rent or more reserved.

The 13 Elizabeth c. 10 extends this principle to other ecclesiastical persons and to colleges. The alienation of college and church property is now permitted by modern statutes, under the supervision of commissioners. The Municipal Corporations Act, 1835, deals with the alienation of municipal property in a similar spirit.

As already indicated, the more important classes of corporations are now governed by special statutes which ex-clude 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; for an account of which see COMPANIES. Under the same head-ing 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 legis-lation 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 before mentioned, 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 illustrated by a short ex-tract 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 corpora-tion, 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, ana 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, \ii 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. Its first emphatic recognition of it appears to have been in the case of companies created for special pur-poses 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 pur-poses 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. A recent author (Brice on 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."

Municipal Corporations.—The introduction of corpora-tions into cities and towns does not appear to date farther back than the reign of Henry VI, although they had long possessed what may be called a quasi-corporate character. By that time the corporate character of ecclesiastical and educational societies and even of guilds had been recog-nized, and the great convenience of corporate powers was, no doubt, the reason why they were demanded by the com-monalties of towns. The inhabitants of Plymouth appear to have petitioned for a corporation in 13 Henry IV., and the charter of Kingston-on-Hull in 18 Henry VI. is said to be the first charter of municipal incorporation in England. The ultimate effect of these charters was in general to re-duce the boroughs into close corporations, the members of which engrossed the municipal and political powers to the exclusion of the general body of the inhabitants. The legal dependence of such corporations on the charter of the king suggested the measures above referred to by which the Crown attempted to get the control of the corpora-tions. The reversal of the judgments obtained in the pro-ceedings against corporations formed one of the first acts of the people after the Bevolution of 1688, and thereafter corporations shared with private persons the advantages of freedom from arbitrary interference on the part of the Crown. Freedom from state control, however, means in the case of corporations the growth of abuses. The Cor-porations Act of the reign of Charles IL, one of the measures forced on the king by the jealousy of his Parlia-ment for the rights of the church, provided that no person should be elected to office in any corporate town, who should not within one year previously have taken the sacrament of the Lord's Supper according to the rites of the church, and this enactment, although after a time sus-pended by temporary statutes, was not finally abolished till 9 Geo. IV. c. 17, which substituted for the test a declara-tion not to injure or weaken the Church of England. The important powers, municipal, political, and judicial, possessed by town corporations, the large ascertained amount of property in their hands, their exclusiveness, secrecy, and almost total freedom from responsibility,—all these abuses were acquiesced in till the reform of the House of Commons in 1832 enabled Parliament to turn its atten-tion to the reform of other public institutions. The royal commissioners appointed in 1834 reported that " there prevails among the inhabitants of a great majority of the incorporated towns a general and in our opinion a just dis-satisfaction with the municipal institutions—a distrust of the self-elected municipal councils, whose powers are subject to no popular control, and whose acts and proceedings, being secret, are not checked by the influence of public opinion ; a distrust of the municipal magistracy, tainting with sus-picion the local administration of justice ; a discontent under the burthen of local taxation, while revenues are diverted from their legitimate use." The publication of this report was followed by the Municipal Corporations Act, 5 and 6 Will. IV. c. 26, by which, in all the boroughs named in the schedules to the Act, the laws, customs, charters, thereto-fore in force, are repealed where inconsistent with the pro-visions of the Act. Section 2 reserves all rights of property and beneficial exemptions to freemen, their wives and children ; but freedom is not in future to be acquired by gift or purchase. The body corporate in such borough shall be called the mayor, aldermen, and burgesses of such borough, and by that name shall have perpetual succession, and shall be capable in law by the council hereinafter mentioned to-do and suffer all things which now lawfully they and their successors respectively may do and suffer by any name or title of incorporation. It has been held that this Act does not create new corporations, although it alters the name, title, and constitution of the governing body. All corporate funds, after payment of debts, salaries, <fcc., as specified in the Act, are expressly appro-priated to public purposes. Advowsons in the possession of the body corporate are to be sold under the direction of the ecclesiastical commissioners, and the proceeds invested in securities for the use of the corporation. The general regulations of municipalities under this and subsequent Acts not affecting them in their character as corporations, belong to the subject of Municipal Government.

This beneficial Act was unfortunately limited in its operation. London and all its corporations were left out, and the municipal government of the metropolis is at this moment a medley of independent jurisdictions in striking contrast with the orderly corporations of other large towns. And on the other hand, many small boroughs were omitted in the original Act, which still exhibit in the mismanagement of their property and powers the abuses against which that Act was directed. In 1875 and 1876 resolutions on the subject were laid before the Parliament, and from a return procured by Government, it appeared that the number of unreformed corporations was 102. Many of these were places of some importance, and in possession of considerable property. Government yielded to the general feeling that inquiry was desirable, and a royal commission was appointed to consider the subject. (E. E.)


Footnote

Devises to colleges are excepted from the operation of the Act, but such devises must be for purposes identical with or closely resembling the original purposes of the college ; and the exception fiom this Act does not supersede the necessity for a licence in mortmain.




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