1945

General features of enterprise groups

Most jurisdictions recognize the legal concept of “corporation”, an entity that has a legal personality separate from that of the individuals it comprises, whether as owners, managers or employees. As a legal or juristic person, a corporation is capable of enjoying and being subject to certain legal rights, duties and liabilities, such as the capacity to sue and be sued, to hold and transfer property, to sign contracts and to pay taxes. The corporation also enjoys the characteristic of perpetuity, in the sense that its existence continues, independent of its members at any given time and over time, and shareholders can transfer their shares without affecting the entity’s corporate existence. Corporations may also have limited liability, whereby investors will be liable only for the amount they have intentionally put at risk in the enterprise, providing certainty and encouraging investment; without that limitation, investors would put their entire assets at risk for every business venture they entered into. A corporation depends on a legal process to obtain its legal personality and, once formed, will be subject to the regulatory regime applying to entities so formed. The law generally will determine not only the requirements for formation, but also the consequences of formation, such as the powers and capacities of the corporation, the rights and duties of its members and the extent to which members may be liable for its debts. The corporate form can thus be seen as promoting certainty in the ordering of business affairs, as those dealing with a corporation know that they can rely upon its legal personality and the rights, duties and obligations that attach to it.

Related Subject(s): International Law and Justice
Sustainable Development Goals:
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