Entity Type Definition Example Essay

For the Danish newspaper, see Dagbladet Information.

For the formal criminal charge, see Information (formal criminal charge).

Information is any entity or form that resolves uncertainty or provides the answer to a question of some kind. It is thus related to data and knowledge, as data represents values attributed to parameters, and knowledge signifies understanding of real things or abstract concepts.[1] As it regards data, the information's existence is not necessarily coupled to an observer (it exists beyond an event horizon, for example), while in the case of knowledge, the information requires a cognitive observer.[citation needed]

Information is conveyed either as the content of a message or through direct or indirect observation. That which is perceived can be construed as a message in its own right, and in that sense, information is always conveyed as the content of a message.

Information can be encoded into various forms for transmission and interpretation (for example, information may be encoded into a sequence of signs, or transmitted via a sequence of signals). It can also be encrypted for safe storage and communication.

Information reduces uncertainty. The uncertainty of an event is measured by its probability of occurrence and is inversely proportional to that. The more uncertain an event, the more information is required to resolve uncertainty of that event. The bit is a typical unit of information, but other units such as the nat may be used. For example, the information encoded in one "fair" coin flip is log2(2/1) = 1 bit, and in two fair coin flips is log2(4/1) = 2 bits.

The concept that information is the message has different meanings in different contexts.[2] Thus the concept of information becomes closely related to notions of constraint, communication, control, data, form, education, knowledge, meaning, understanding, mental stimuli, pattern, perception, representation, and entropy.


See also: History of the word and concept "information"

The English word apparently derives from the Latin stem (information-) of the nominative (informatio): this noun derives from the verb informare (to inform) in the sense of "to give form to the mind", "to discipline", "instruct", "teach". Inform itself comes (via French informer) from the Latin verb informare, which means to give form, or to form an idea of. Furthermore, Latin itself already contained the word informatio meaning concept or idea, but the extent to which this may have influenced the development of the word information in English is not clear.

The ancient Greek word for form was μορφή (morphe; cf. morph) and also εἶδος (eidos) "kind, idea, shape, set", the latter word was famously used in a technical philosophical sense by Plato (and later Aristotle) to denote the ideal identity or essence of something (see Theory of Forms). "Eidos" can also be associated with thought, proposition, or even concept.

The ancient Greek word for information is πληροφορία, which transliterates (plērophoria) from πλήρης (plērēs) "fully" and φέρω (phorein) frequentative of (pherein) to carry through. It literally means "bears fully" or "conveys fully". In modern Greek the word Πληροφορία is still in daily use and has the same meaning as the word information in English. In addition to its primary meaning, the word Πληροφορία as a symbol has deep roots in Aristotle's semiotic triangle. In this regard it can be interpreted to communicate information to the one decoding that specific type of sign. This is something that occurs frequently with the etymology of many words in ancient and modern Greek where there is a very strong denotative relationship between the signifier, e.g. the word symbol that conveys a specific encoded interpretation, and the signified, e.g. a concept whose meaning the interpreter attempts to decode.

In English, “information” is an uncountable mass noun.

Information theory approach[edit]

Main article: Information theory

From the stance of information theory, information is taken as an ordered sequence of symbols from an alphabet, say an input alphabet χ, and an output alphabet ϒ. Information processing consists of an input-output function that maps any input sequence from χ into an output sequence from ϒ. The mapping may be probabilistic or deterministic. It may have memory or be memoryless.[3]

As sensory input[edit]

Often information can be viewed as a type of input to an organism or system. Inputs are of two kinds; some inputs are important to the function of the organism (for example, food) or system (energy) by themselves. In his book Sensory Ecology[4] Dusenbery called these causal inputs. Other inputs (information) are important only because they are associated with causal inputs and can be used to predict the occurrence of a causal input at a later time (and perhaps another place). Some information is important because of association with other information but eventually there must be a connection to a causal input. In practice, information is usually carried by weak stimuli that must be detected by specialized sensory systems and amplified by energy inputs before they can be functional to the organism or system. For example, light is mainly (but not only, e.g. plants can grow in the direction of the lightsource) a causal input to plants but for animals it only provides information. The colored light reflected from a flower is too weak to do much photosynthetic work but the visual system of the bee detects it and the bee's nervous system uses the information to guide the bee to the flower, where the bee often finds nectar or pollen, which are causal inputs, serving a nutritional function.

As representation and complexity[edit]

The cognitive scientist and applied mathematician Ronaldo Vigo argues that information is a concept that requires at least two related entities to make quantitative sense. These are, any dimensionally defined category of objects S, and any of its subsets R. R, in essence, is a representation of S, or, in other words, conveys representational (and hence, conceptual) information about S. Vigo then defines the amount of information that R conveys about S as the rate of change in the complexity of S whenever the objects in R are removed from S. Under "Vigo information", pattern, invariance, complexity, representation, and information—five fundamental constructs of universal science—are unified under a novel mathematical framework.[5][6][7] Among other things, the framework aims to overcome the limitations of Shannon-Weaver information when attempting to characterize and measure subjective information.

As an influence that leads to transformation[edit]

Information is any type of pattern that influences the formation or transformation of other patterns.[8][9] In this sense, there is no need for a conscious mind to perceive, much less appreciate, the pattern.[citation needed] Consider, for example, DNA. The sequence of nucleotides is a pattern that influences the formation and development of an organism without any need for a conscious mind. One might argue though that for a human to consciously define a pattern, for example a nucleotide, naturally involves conscious information processing.

Systems theory at times seems to refer to information in this sense, assuming information does not necessarily involve any conscious mind, and patterns circulating (due to feedback) in the system can be called information. In other words, it can be said that information in this sense is something potentially perceived as representation, though not created or presented for that purpose. For example, Gregory Bateson defines "information" as a "difference that makes a difference".[10]

If, however, the premise of "influence" implies that information has been perceived by a conscious mind and also interpreted by it, the specific context associated with this interpretation may cause the transformation of the information into knowledge. Complex definitions of both "information" and "knowledge" make such semantic and logical analysis difficult, but the condition of "transformation" is an important point in the study of information as it relates to knowledge, especially in the business discipline of knowledge management. In this practice, tools and processes are used to assist a knowledge worker in performing research and making decisions, including steps such as:

  • Review information to effectively derive value and meaning
  • Reference metadata if available
  • Establish relevantcontext, often from many possible contexts
  • Derive new knowledge from the information
  • Make decisions or recommendations from the resulting knowledge

Stewart (2001) argues that transformation of information into knowledge is critical, lying at the core of value creation and competitive advantage for the modern enterprise.

The Danish Dictionary of Information Terms[11] argues that information only provides an answer to a posed question. Whether the answer provides knowledge depends on the informed person. So a generalized definition of the concept should be: "Information" = An answer to a specific question".

When Marshall McLuhan speaks of media and their effects on human cultures, he refers to the structure of artifacts that in turn shape our behaviors and mindsets. Also, pheromones are often said to be "information" in this sense.

As a property in physics[edit]

Main article: Physical information

Information has a well-defined meaning in physics. In 2003 J. D. Bekenstein claimed that a growing trend in physics was to define the physical world as being made up of information itself (and thus information is defined in this way) (see Digital physics). Examples of this include the phenomenon of quantum entanglement, where particles can interact without reference to their separation or the speed of light. Material information itself cannot travel faster than light even if that information is transmitted indirectly. This could lead to all attempts at physically observing a particle with an "entangled" relationship to another being slowed down, even though the particles are not connected in any other way other than by the information they carry.

The mathematical universe hypothesis suggests a new paradigm, in which virtually everything, from particles and fields, through biological entities and consciousness, to the multiverse itself, could be described by mathematical patterns of information. By the same token, the cosmic void can be conceived of as the absence of material information in space (setting aside the virtual particles that pop in and out of existence due to quantum fluctuations, as well as the gravitational field and the dark energy). Nothingness can be understood then as that within which no matter, energy, space, time, or any other type of information could exist, which would be possible if symmetry and structure break within the manifold of the multiverse (i.e. the manifold would have tears or holes).

Another link is demonstrated by the Maxwell's demon thought experiment. In this experiment, a direct relationship between information and another physical property, entropy, is demonstrated. A consequence is that it is impossible to destroy information without increasing the entropy of a system; in practical terms this often means generating heat. Another more philosophical outcome is that information could be thought of as interchangeable with energy. Toyabe et al. experimentally showed in nature that information can be converted into work.[12] Thus, in the study of logic gates, the theoretical lower bound of thermal energy released by an AND gate is higher than for the NOT gate (because information is destroyed in an AND gate and simply converted in a NOT gate). Physical information is of particular importance in the theory of quantum computers.

In thermodynamics, information is any kind of event that affects the state of a dynamic system that can interpret the information.

The application of information study[edit]

The information cycle (addressed as a whole or in its distinct components) is of great concern to information technology, information systems, as well as information science. These fields deal with those processes and techniques pertaining to information capture (through sensors) and generation (through computation, formulation or composition), processing (including encoding, encryption, compression, packaging), transmission (including all telecommunication methods), presentation (including visualization / display methods), storage (such as magnetic or optical, including holographic methods), etc. Information does not cease to exist, it may only get scrambled beyond any possibility of retrieval (within information theory, see lossy compression; in physics, the black hole information paradox gets solved with the aid of the holographic principle).

Information visualization (shortened as InfoVis) depends on the computation and digital representation of data, and assists users in pattern recognition and anomaly detection.

  • Partial map of the Internet, with nodes representing IP addresses

  • Galactic (including dark) matter distribution in a cubic section of the Universe

  • Information embedded in an abstract mathematical object with symmetry breaking nucleus

  • Visual representation of a strange attractor, with converted data of its fractal structure

Information security (shortened as InfoSec) is the ongoing process of exercising due diligence to protect information, and information systems, from unauthorized access, use, disclosure, destruction, modification, disruption or distribution, through algorithms and procedures focused on monitoring and detection, as well as incident response and repair.

Information analysis is the process of inspecting, transforming, and modelling information, by converting raw data into actionable knowledge, in support of the decision-making process.

Information quality (shortened as InfoQ) is the potential of a dataset to achieve a specific (scientific or practical) goal using a given empirical analysis method.

Information communication represents the convergence of informatics, telecommunication and audio-visual media & content.

Technologically mediated information[edit]

It is estimated that the world's technological capacity to store information grew from 2.6 (optimally compressed) exabytes in 1986 – which is the informational equivalent to less than one 730-MB CD-ROM per person (539 MB per person) – to 295 (optimally compressed) exabytes in 2007.[13] This is the informational equivalent of almost 61 CD-ROM per person in 2007.[14]

The world’s combined technological capacity to receive information through one-way broadcast networks was the informational equivalent of 174 newspapers per person per day in 2007.[13]

The world's combined effective capacity to exchange information through two-way telecommunication networks was the informational equivalent of 6 newspapers per person per day in 2007.[14]

As of 2007, an estimated 90% of all new information is digital, mostly stored on hard drives.[15]

As records[edit]

Records are specialized forms of information. Essentially, records are information produced consciously or as by-products of business activities or transactions and retained because of their value. Primarily, their value is as evidence of the activities of the organization but they may also be retained for their informational value. Sound records management ensures that the integrity of records is preserved for as long as they are required.

The international standard on records management, ISO 15489, defines records as "information created, received, and maintained as evidence and information by an organization or person, in pursuance of legal obligations or in the transaction of business".[16] The International Committee on Archives (ICA) Committee on electronic records defined a record as, "a specific piece of recorded information generated, collected or received in the initiation, conduct or completion of an activity and that comprises sufficient content, context and structure to provide proof or evidence of that activity".[this quote needs a citation]

Records may be maintained to retain corporate memory of the organization or to meet legal, fiscal or accountability requirements imposed on the organization. Willis expressed the view that sound management of business records and information delivered "...six key requirements for good corporate governance...transparency; accountability; due process; compliance; meeting statutory and common law requirements; and security of personal and corporate information."[citation not found]


Michael Buckland has classified "information" in terms of its uses: "information as process", "information as knowledge", and "information as thing".[18]

Beynon-Davies[19][20] explains the multi-faceted concept of information in terms of signs and signal-sign systems. Signs themselves can be considered in terms of four inter-dependent levels, layers or branches of semiotics: pragmatics, semantics, syntax, and empirics. These four layers serve to connect the social world on the one hand with the physical or technical world on the other.

Pragmatics is concerned with the purpose of communication. Pragmatics links the issue of signs with the context within which signs are used. The focus of pragmatics is on the intentions of living agents underlying communicative behaviour. In other words, pragmatics link language to action.

Semantics is concerned with the meaning of a message conveyed in a communicative act. Semantics considers the content of communication. Semantics is the study of the meaning of signs - the association between signs and behaviour. Semantics can be considered as the study of the link between symbols and their referents or concepts – particularly the way that signs relate to human behavior.

Syntax is concerned with the formalism used to represent a message. Syntax as an area studies the form of communication in terms of the logic and grammar of sign systems. Syntax is devoted to the study of the form rather than the content of signs and sign-systems.

Nielsen (2008) discusses the relationship between semiotics and information in relation to dictionaries. He introduces the concept of lexicographic information costs and refers to the effort a user of a dictionary must make to first find, and then understand data so that they can generate information.

Communication normally exists within the context of some social situation. The social situation sets the context for the intentions conveyed (pragmatics) and the form of communication. In a communicative situation intentions are expressed through messages that comprise collections of inter-related signs taken from a language mutually understood by the agents involved in the communication. Mutual understanding implies that agents involved understand the chosen language in terms of its agreed syntax (syntactics) and semantics. The sender codes the message in the language and sends the message as signals along some communication channel (empirics). The chosen communication channel has inherent properties that determine outcomes such as the speed at which communication can take place, and over what distance.

See also[edit]


  1. ^"Information p Definition of Information by Merriam-Webster". Merriam-webster.com. Retrieved 2017-05-01. 
  2. ^A short overview is found in: Luciano Floridi (2010). Information - A Very Short Introduction. Oxford University Press. ISBN 0-19-160954-4.  
  3. ^Stephen B. Wicker, Saejoon Kim (2003). Fundamentals of Codes, Graphs, and Iterative Decoding. Springer. pp. 1 ff. ISBN 1-4020-7264-3. 
  4. ^Dusenbery, David B. (1992). Sensory Ecology. New York: W.H. Freeman. ISBN 0-7167-2333-6. 
  5. ^Vigo, R. (2011). "Representational information: a new general notion and measure of information". Information Sciences. 181 (21): 4847–59. doi:10.1016/j.ins.2011.05.020. 
  6. ^Vigo, R. (2013). "Complexity over Uncertainty in Generalized Representational Information Theory (GRIT): A Structure-Sensitive General Theory of Information". Information. 4 (1): 1–30. doi:10.3390/info4010001. 
  7. ^Vigo, R. (2014). Mathematical Principles of Human Conceptual Behavior: The Structural Nature of Conceptual Representation and Processing. New York and London: Scientific Psychology Series, Routledge. ISBN 0415714362. 
  8. ^Shannon, Claude E. (1949). The Mathematical Theory of Communication. 
  9. ^Casagrande, David (1999). "Information as verb: Re-conceptualizing information for cognitive and ecological models"(PDF). Journal of Ecological Anthropology. 3 (1): 4–13. doi:10.5038/2162-4593.3.1.1. 
  10. ^Bateson, Gregory (1972). Form, Substance, and Difference, in Steps to an Ecology of Mind. University of Chicago Press. pp. 448–66. 
  11. ^Simonsen, Bo Krantz. "Informationsordbogen - vis begreb". Informationsordbogen.dk. Retrieved 2017-05-01. 
  12. ^Merali, Zeeya. "Demonic device converts information to energy : Nature News". Nature.com. Retrieved 2017-05-01. 
  13. ^ abHilbert, Martin; López, Priscila (2011). "The World's Technological Capacity to Store, Communicate, and Compute Information". Science. 332 (6025): 60–65. doi:10.1126/science.1200970.  Free access to the article at martinhilbert.net/WorldInfoCapacity.html
  14. ^ ab"World_info_capacity_animation". YouTube. 2011-06-11. Retrieved 2017-05-01. 
  15. ^Failure Trends in a Large Disk Drive Population. Eduardo Pinheiro, Wolf-Dietrich Weber and Luiz Andre Barroso
  16. ^ISO 15489 
  17. ^Buckland, Michael K. (June 1991). "Information as thing". Journal of the American Society for Information Science. 42 (5): 351–360. doi:10.1002/(SICI)1097-4571(199106)42:5<351::AID-ASI5>3.0.CO;2-3. 
  18. ^Beynon-Davies, P. (2002). Information Systems: an introduction to informatics in Organisations. Basingstoke, UK: Palgrave. ISBN 0-333-96390-3. 
  19. ^Beynon-Davies, P. (2009). Business Information Systems. Basingstoke: Palgrave. ISBN 978-0-230-20368-6. 

Further reading[edit]

  • Liu, Alan (2004). The Laws of Cool: Knowledge Work and the Culture of Information. University of Chicago Press. 
  • Bekenstein, Jacob D. (August 2003). "holographic universe". Scientific American. 
  • Gleick, James (2011). The Information: A History, a Theory, a Flood. New York, NY: Pantheon. 
  • Lin, Shu-Kun (2008). "Gibbs Paradox and the Concepts of Information, Symmetry, Similarity and Their Relationship". Entropy. 10 (1): 1–5. 
  • Floridi, Luciano (2005). "Is Information Meaningful Data?"(PDF). Philosophy and Phenomenological Research. 70 (2): 351–70. doi:10.1111/j.1933-1592.2005.tb00531.x. 
  • Floridi, Luciano (2005). "Semantic Conceptions of Information". In Zalta, Edward N. The Stanford Encyclopedia of Philosophy (Winter 2005 ed.). 
  • Floridi, Luciano (2010). Information: A Very Short Introduction. Oxford: Oxford University Press. 
  • Logan, Robert K.What is Information? - Propagating Organization in the Biosphere, the Symbolosphere, the Technosphere and the Econosphere. Toronto: DEMO Publishing. 
  • Nielsen, Sandro (2008). "The Effect of Lexicographical Information Costs on Dictionary Making and Use". Lexikos. 18: 170–89. 
  • Stewart, Thomas (2001). Wealth of Knowledge. New York, NY: Doubleday. 
  • Young, Paul (1987). The Nature of Information. Westport, Ct: Greenwood Publishing Group. ISBN 0-275-92698-2. 

External links[edit]

Look up information in Wiktionary, the free dictionary.
The ASCII codes for the word "Wikipedia" represented in binary, the numeral system most commonly used for encoding textual computer information

For other uses, see Corporation (disambiguation).

"Corporate" redirects here. For other uses, see Corporate (disambiguation).

A corporation is a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law. Early incorporated entities were established by charter (i.e. by an ad hoc act granted by a monarch or passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through registration. Corporations enjoy limited liability for their investors, which can lead to losses being externalized from investors to the government or general public.[1]

Corporations come in many different types but are usually divided by the law of the jurisdiction where they are chartered into two kinds: by whether they can issue stock or not, or by whether they are formed to make a profit or not.[2]

Where local law distinguishes corporations by the ability to issue stock, corporations allowed to do so are referred to as "stock corporations", ownership of the corporation is through stock, and owners of stock are referred to as "stockholders" or "shareholders". Corporations not allowed to issue stock are referred to as "non-stock" corporations; those who are considered the owners of a non-stock corporation are persons (or other entities) who have obtained membership in the corporation and are referred to as a "member" of the corporation.

Corporations chartered in regions where they are distinguished by whether they are allowed to be for profit or not are referred to as "for profit" and "not-for-profit" corporations, respectively.

There is some overlap between stock/non-stock and for-profit/not-for-profit in that not-for-profit corporations are always non-stock as well. A for-profit corporation is almost always a stock corporation, but some for-profit corporations may choose to be non-stock. To simplify the explanation, whenever "Stockholder" or "shareholder" is used in the rest of this article to refer to a stock corporation, it is presumed to mean the same as "member" for a non-profit corporation or for a profit, non-stock corporation.

Registered corporations have legal personality and are owned by shareholders[3][4] whose liability is generally limited to their investment. Shareholders do not typically actively manage a corporation; shareholders instead elect or appoint a board of directors to control the corporation in a fiduciary capacity. In most circumstances, a shareholder may also serve as a director or officer of a corporation.

In American English, the word corporation is most often used to describe large business corporations.[5] In British English and in the Commonwealth countries, the term company is more widely used to describe the same sort of entity while the word corporation encompasses all incorporated entities. In American English, the word company can include entities such as partnerships that would not be referred to as companies in British English as they are not a separate legal entity.

Despite not being individual human beings, corporations, as far as US law is concerned, are legal persons, and have many of the same rights and responsibilities as natural persons do. For example, a corporation can own property, and can sue or be sued. Corporations can exercise human rights against real individuals and the state,[6][7] and they can themselves be responsible for human rights violations.[8] Corporations can be "dissolved" either by statutory operation, order of court, or voluntary action on the part of shareholders. Insolvency may result in a form of corporate failure, when creditors force the liquidation and dissolution of the corporation under court order,[9] but it most often results in a restructuring of corporate holdings. Corporations can even be convicted of criminal offenses, such as fraud and manslaughter. However, corporations are not considered living entities in the way that humans are.[10]

Late in the 19th century, a new form of company having the limited liability protections of a corporation, and the more favorable tax treatment of either a sole proprietorship or partnership was developed. While not a corporation, this new type of entity became very attractive as an alternative for corporations not needing to issue stock. In Germany, the organization was referred to as Gesellschaft mit beschränkter Haftung or GmbH. In the last quarter of the 20th Century this new form of non-corporate organization became available in the United States and other countries, and was known as the limited liability company or LLC. Since the GmbH and LLC forms of organization are technically not corporations (even though they have many of the same features), they will not be discussed in this article.


See also: List of oldest companies

The word "corporation" derives from corpus, the Latin word for body, or a "body of people". By the time of Justinian (reigned 527–565), Roman law recognized a range of corporate entities under the names universitas, corpus or collegium. These included the state itself (the Populus Romanus), municipalities, and such private associations as sponsors of a religious cult, burial clubs, political groups, and guilds of craftsmen or traders. Such bodies commonly had the right to own property and make contracts, to receive gifts and legacies, to sue and be sued, and, in general, to perform legal acts through representatives. Private associations were granted designated privileges and liberties by the emperor.[11]

Entities which carried on business and were the subjects of legal rights were found in ancient Rome, and the Maurya Empire in ancient India.[12] In medieval Europe, churches became incorporated, as did local governments, such as the Pope and the City of London Corporation. The point was that the incorporation would survive longer than the lives of any particular member, existing in perpetuity. The alleged oldest commercial corporation in the world, the Stora Kopparberg mining community in Falun, Sweden, obtained a charter from King Magnus Eriksson in 1347.

In medieval times, traders would do business through common law constructs, such as partnerships. Whenever people acted together with a view to profit, the law deemed that a partnership arose. Early guilds and livery companies were also often involved in the regulation of competition between traders.


See also: Mercantilism

The progenitors of the modern corporation were the chartered companies, such as the Dutch East India Company (VOC) and the Hudson's Bay Company, which were created to lead the colonial ventures of European nations in the 17th century. Acting under a charter sanctioned by the Dutch government, the Dutch East India Company defeated Portuguese forces and established itself in the Moluccan Islands in order to profit from the European demand for spices. Investors in the VOC have issued paper certificates as proof of share ownership, and were able to trade their shares on the original Amsterdam Stock Exchange. Shareholders are also explicitly granted limited liability in the company's royal charter.[13]

In England, the government created corporations under a royal charter or an Act of Parliament with the grant of a monopoly over a specified territory. The best-known example, established in 1600, was the East India Company of London. Queen Elizabeth I granted it the exclusive right to trade with all countries to the east of the Cape of Good Hope. Some corporations at this time would act on the government's behalf, bringing in revenue from its exploits abroad. Subsequently, the Company became increasingly integrated with English and later British military and colonial policy, just as most corporations were essentially dependent on the Royal Navy's ability to control trade routes.

Labeled by both contemporaries and historians as "the grandest society of merchants in the universe", the English East India Company would come to symbolize the dazzlingly rich potential of the corporation, as well as new methods of business that could be both brutal and exploitative.[14] On 31 December 1600, Queen Elizabeth I granted the company a 15-year monopoly on trade to and from the East Indies and Africa.[15] By 1711, shareholders in the East India Company were earning a return on their investment of almost 150 per cent. Subsequent stock offerings demonstrated just how lucrative the Company had become. Its first stock offering in 1713–1716 raised £418,000, its second in 1717–1722 raised £1.6 million.[16]

A similar chartered company, the South Sea Company, was established in 1711 to trade in the Spanish South American colonies, but met with less success. The South Sea Company's monopoly rights were supposedly backed by the Treaty of Utrecht, signed in 1713 as a settlement following the War of the Spanish Succession, which gave Great Britain an asiento to trade in the region for thirty years. In fact the Spanish remained hostile and let only one ship a year enter. Unaware of the problems, investors in Britain, enticed by extravagant promises of profit from company promoters bought thousands of shares. By 1717, the South Sea Company was so wealthy (still having done no real business) that it assumed the public debt of the British government. This accelerated the inflation of the share price further, as did the Bubble Act 1720, which (possibly with the motive of protecting the South Sea Company from competition) prohibited the establishment of any companies without a Royal Charter. The share price rose so rapidly that people began buying shares merely in order to sell them at a higher price, which in turn led to higher share prices. This was the first speculative bubble the country had seen, but by the end of 1720, the bubble had "burst", and the share price sank from £1000 to under £100. As bankruptcies and recriminations ricocheted through government and high society, the mood against corporations, and errant directors was bitter.

In the late 18th century, Stewart Kyd, the author of the first treatise on corporate law in English, defined a corporation as:

a collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form, and vested, by policy of the law, with the capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, and of suing and being sued, of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of its institution, or the powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence.

— A Treatise on the Law of Corporations, Stewart Kyd (1793–1794)

Modern company law[edit]

Due to the late 18th century abandonment of mercantilist economic theory and the rise of classical liberalism and laissez-faire economic theory due to a revolution in economics led by Adam Smith and other economists, corporations transitioned from being government or guild affiliated entities to being public and private economic entities free of governmental directions.[17]

Adam Smith wrote in his 1776 work The Wealth of Nations that mass corporate activity could not match private entrepreneurship, because people in charge of others' money would not exercise as much care as they would with their own.[18]


The British Bubble Act 1720's prohibition on establishing companies remained in force until its repeal in 1825. By this point, the Industrial Revolution had gathered pace, pressing for legal change to facilitate business activity.[19] The repeal was the beginning of a gradual lifting on restrictions, though business ventures (such as those chronicled by Charles Dickens in Martin Chuzzlewit) under primitive companies legislation were often scams. Without cohesive regulation, proverbial operations like the "Anglo-Bengalee Disinterested Loan and Life Assurance Company" were undercapitalised ventures promising no hope of success except for richly paid promoters.[20]

The process of incorporation was possible only through a royal charter or a private act and was limited, owing to Parliament's jealous protection of the privileges and advantages thereby granted. As a result, many businesses came to be operated as unincorporated associations with possibly thousands of members. Any consequent litigation had to be carried out in the joint names of all the members and was almost impossibly cumbersome. Though Parliament would sometimes grant a private act to allow an individual to represent the whole in legal proceedings, this was a narrow and necessarily costly expedient, allowed only to established companies.

Then, in 1843, William Gladstone became the chairman of a Parliamentary Committee on Joint Stock Companies, which led to the Joint Stock Companies Act 1844, regarded as the first modern piece of company law.[21] The Act created the Registrar of Joint Stock Companies, empowered to register companies by a two-stage process. The first, provisional, stage cost £5 and did not confer corporate status, which arose after completing the second stage for another £5. For the first time in history, it was possible for ordinary people through a simple registration procedure to incorporate.[22] The advantage of establishing a company as a separate legal person was mainly administrative, as a unified entity under which the rights and duties of all investors and managers could be channeled.

Limited liability[edit]

However, there was still no limited liability and company members could still be held responsible for unlimited losses by the company.[23] The next, crucial development, then, was the Limited Liability Act 1855, passed at the behest of the then Vice President of the Board of Trade, Mr. Robert Lowe. This allowed investors to limit their liability in the event of business failure to the amount they invested in the company – shareholders were still liable directly to creditors, but just for the unpaid portion of their shares. (The principle that shareholders are liable to the corporation had been introduced in the Joint Stock Companies Act 1844).

The 1855 Act allowed limited liability to companies of more than 25 members (shareholders). Insurance companies were excluded from the act, though it was standard practice for insurance contracts to exclude action against individual members. Limited liability for insurance companies was allowed by the Companies Act 1862.

This prompted the English periodical The Economist to write in 1855 that "never, perhaps, was a change so vehemently and generally demanded, of which the importance was so much overrated. "[24] The major error of this judgment was recognised by the same magazine more than 70 years later, when it claimed that, "[t]he economic historian of the future. . . may be inclined to assign to the nameless inventor of the principle of limited liability, as applied to trading corporations, a place of honour with Watt and Stephenson, and other pioneers of the Industrial Revolution. "[25]

These two features – a simple registration procedure and limited liability – were subsequently codified into the landmark 1856 Joint Stock Companies Act. This was subsequently consolidated with a number of other statutes in the Companies Act 1862, which remained in force for the rest of the century, up to and including the time of the decision in Salomon v A Salomon & Co Ltd.[26]

The legislation shortly gave way to a railway boom, and from then, the numbers of companies formed soared. In the later nineteenth century, depression took hold, and just as company numbers had boomed, many began to implode and fall into insolvency. Much strong academic, legislative and judicial opinion was opposed to the notion that businessmen could escape accountability for their role in the failing businesses.

Further developments[edit]

In 1892, Germany introduced the Gesellschaft mit beschränkter Haftung with a separate legal personality and limited liability even if all the shares of the company were held by only one person. This inspired other countries to introduce corporations of this kind.

The last significant development in the history of companies was the 1897 decision of the House of Lords in Salomon v. Salomon & Co. where the House of Lords confirmed the separate legal personality of the company, and that the liabilities of the company were separate and distinct from those of its owners.

In the United States, forming a corporation usually required an act of legislation until the late 19th century. Many private firms, such as Carnegie's steel company and Rockefeller's Standard Oil, avoided the corporate model for this reason (as a trust). State governments began to adopt more permissive corporate laws from the early 19th century, although these were all restrictive in design, often with the intention of preventing corporations for gaining too much wealth and power.[27]

New Jersey was the first state to adopt an "enabling" corporate law, with the goal of attracting more business to the state,[28] in 1896. In 1899, Delaware followed New Jersey's lead with the enactment of an enabling corporate statute, but Delaware only became the leading corporate state after the enabling provisions of the 1896 New Jersey corporate law were repealed in 1913.[27]

The end of the 19th century saw the emergence of holding companies and corporate mergers creating larger corporations with dispersed shareholders. Countries began enacting anti-trust laws to prevent anti-competitive practices and corporations were granted more legal rights and protections. The 20th century saw a proliferation of laws allowing for the creation of corporations by registration across the world, which helped to drive economic booms in many countries before and after World War I. Another major post World War I shift was toward the development of conglomerates, in which large corporations purchased smaller corporations to expand their industrial base.

Starting in the 1980s, many countries with large state-owned corporations moved toward privatization, the selling of publicly owned (or 'nationalised') services and enterprises to corporations. Deregulation (reducing the regulation of corporate activity) often accompanied privatization as part of a laissez-faire policy.

Ownership and control[edit]

A corporation is, at least in theory, owned and controlled by its members. In a joint-stock company the members are known as shareholders and each of their shares in the ownership, control, and profits of the corporation is determined by the portion of shares in the company that they own. Thus a person who owns a quarter of the shares of a joint-stock company owns a quarter of the company, is entitled to a quarter of the profit (or at least a quarter of the profit given to shareholders as dividends) and has a quarter of the votes capable of being cast at general meetings.

In another kind of corporation, the legal document which established the corporation or which contains its current rules will determine who the corporation's members are. Who a member is depends on what kind of corporation is involved. In a worker cooperative, the members are people who work for the cooperative. In a credit union, the members are people who have accounts with the credit union.[29]

The day-to-day activities of a corporation are typically controlled by individuals appointed by the members. In some cases, this will be a single individual but more commonly corporations are controlled by a committee or by committees. Broadly speaking, there are two kinds of committee structure.

  • A single committee known as a board of directors is the method favored in most common law countries. Under this model, the board of directors is composed of both executive and non-executive directors, the latter being meant to supervise the former's management of the company.
  • A two-tiered committee structure with a supervisory board and a managing board is common in civil law countries.[30]


Historically, corporations were created by a charter granted by government. Today, corporations are usually registered with the state, province, or national government and regulated by the laws enacted by that government. Registration is the main prerequisite to the corporation's assumption of limited liability. The law sometimes requires the corporation to designate its principal address, as well as a registered agent (a person or company designated to receive legal service of process). It may also be required to designate an agent or other legal representative of the corporation.[citation needed]

Generally, a corporation files articles of incorporation with the government, laying out the general nature of the corporation, the amount of stock it is authorized to issue, and the names and addresses of directors. Once the articles are approved, the corporation's directors meet to create bylaws that govern the internal functions of the corporation, such as meeting procedures and officer positions.[citation needed]

The law of the jurisdiction in which a corporation operates will regulate most of its internal activities, as well as its finances. If a corporation operates outside its home state, it is often required to register with other governments as a foreign corporation, and is almost always subject to laws of its host state pertaining to employment, crimes, contracts, civil actions, and the like.[citation needed]


Corporations generally have a distinct name. Historically, some corporations were named after their membership: for instance, "The President and Fellows of Harvard College". Nowadays, corporations in most jurisdictions have a distinct name that does not need to make reference to their membership. In Canada, this possibility is taken to its logical extreme: many smaller Canadian corporations have no names at all, merely numbers based on a registration number (for example, "12345678 Ontario Limited"), which is assigned by the provincial or territorial government where the corporation incorporates.

In most countries, corporate names include a term or an abbreviation that denotes the corporate status of the entity (for example, "Incorporated" or "Inc." in the United States) or the limited liability of its members (for example, "Limited" or "Ltd."). These terms vary by jurisdiction and language. In some jurisdictions, they are mandatory, and in others they are not.[31] Their use puts everybody on constructive notice that they are dealing with an entity whose liability is limited: one can only collect from whatever assets the entity still controls when one obtains a judgment against it.

Some jurisdictions do not allow the use of the word "company" alone to denote corporate status, since the word "company" may refer to a partnership or some other form of collective ownership (in the United States it can be used by a sole proprietorship but this is not generally the case elsewhere).[citation needed]

See also[edit]


  1. ^"Limited Liability and the Known Unknown". Social Science Research Network. 2018. 
  2. ^"Types Of Corporations | Incorporate A Business". www.corpnet.com. Retrieved 2017-06-10. 
  3. ^Pettet, B. G. (2005). Company Law. Pearson Education. p. 151.  
  4. ^Courtney, Thomas B. (2002). The Law of Private Companies (2nd ed.). Bloomsbury Professional. 4.001.  
  5. ^corporation. CollinsDictionary.com. Collins English Dictionary – Complete & Unabridged 11th Edition. Retrieved December 07, 2012.
  6. ^Emberland, Marius (2006). The Human Rights of Companies: Exploring the Structure of ECHR Protection(PDF). Oxford University Press. p. 1. ISBN 978-0-19-928983-7. Retrieved 2 June 2012. 
  7. ^e.g. South African Constitution Sect.8, especially Art.(4)
  8. ^Phillip I. Blumberg, The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality, (1993) discusses the controversial nature of additional rights being granted to corporations.
  9. ^See, for example, the Business Corporations Act (B.C.) [SBC 2002] CHAPTER 57, Part 10
  10. ^e.g. Corporate Manslaughter and Corporate Homicide Act 2007
  11. ^Harold Joseph Berman, Law and Revolution (vol. 1): The Formation of the Western Legal Tradition, Cambridge: Harvard University Press, 1983, pp. 215–16. ISBN 0674517768
  12. ^Vikramaditya S. Khanna (2005). The Economic History of the Corporate Form in Ancient India.University of Michigan.
  13. ^Om Prakash, European Commercial Enterprise in Pre-Colonial India (Cambridge University Press, Cambridge 1998).
  14. ^John Keay, The Honorable Company: A History of the English East India Company (MacMillan, New York 1991).
  15. ^Haynes, Gerard Cohen-Vrignaud, Stephanie Metz, Jody Dunville, Shannon Heath, Julia P. McLeod, Kat Powell, Brent Robida, John Stromski, Brandon. "British East India Company". Retrieved 19 January 2017. 
  16. ^Ibid. at p. 113
  17. ^"Adam Smith Laissez-Faire". political-economy.com. Retrieved 2017-06-10. 
  18. ^A Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776) Book V, ch 1, para 107
  19. ^See Bubble Companies, etc. Act 1825, 6 Geo 4, c 91
  20. ^See C Dickens, Martin Chuzzlewit (1843) ch 27
  21. ^Report of the Parliamentary Committee on Joint Stock Companies (1844) in British Parliamentary Papers, vol. VII
  22. ^Paul Lyndon Davies (2010). Introduction to Company Law. Oxford University Press. p. 1. 
  23. ^Re Sea Fire and Life Assurance Co., Greenwood's Case (1854) 3 De GM&G 459
  24. ^Graeme G. Acheson & John D. Turner, The Impact of Limited Liability on Ownership and Control: Irish Banking, 1877–1914, School of Management and Economics, Queen's University of Belfast, available at "Archived copy"(PDF). Archived from the original(PDF) on 2012-01-13. Retrieved 2011-11-16.  and "Archived copy"(PDF). Archived from the original(PDF) on 2012-01-11. Retrieved 2011-11-16. .
  25. ^Economist, December 18, 1926, at 1053, as quoted in Mahoney, supra, at 875.
  26. ^Salomon v A Salomon & Co Ltd [1897] AC 22
  27. ^ abSmiddy, Linda O.; Cunningham, Lawrence A. (2010), Corporations and Other Business Organizations: Cases, Materials, Problems (Seventh ed.), LexisNexis, pp. 228–31, 241, ISBN 978-1-4224-7659-8 
  28. ^The Law of Business Organizations, Cengage Learning
  29. ^Besley, Scott; Brigham, Eugene (2008). Principles of Finance (4th ed.). Cengage Learning. p. 105. ISBN 9780324655889.  
  30. ^"Company & Commercial – Netherlands: In a nutshell – one-tier boards". International Law Office. 10 April 2012. 
  31. ^The U.S. state of California is an example of a jurisdiction that does not require corporations to indicate corporate status in their names, except for close corporations. The drafters of the 1977 revision of the California General Corporation Law considered the possibility of forcing all California corporations to have a name indicating corporate status, but decided against it because of the huge number of corporations that would have had to change their names, and the lack of any evidence that anyone had been harmed in California by entities whose corporate status was not immediately apparent from their names. However, the 1977 drafters were able to impose the current disclosure requirement for close corporations. See Harold Marsh, Jr., R. Roy Finkle, Larry W. Sonsini, and Ann Yvonne Walker, Marsh's California Corporation Law, 4th ed., vol. 1 (New York: Aspen Publishers, 2004), 5–15 — 5–16.

Further reading[edit]

  • A Comparative Bibliography: Regulatory Competition on Corporate Law
  • Blumberg, Phillip I., The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality, (1993)
  • Bromberg, Alan R. Crane and Bromberg on Partnership. 1968.
  • Brown, Bruce. The History of the Corporation (2003)
  • Cadman, John William. The Corporation in New Jersey: Business and Politics, , (1949)
  • Conard, Alfred F. Corporations in Perspective. 1976.
  • Cooke, C. A., Corporation, Trust and Company: A Legal History, (1950)
  • Davis, John P. Corporations (1904)
  • Davis, Joseph S. Essays in the Earlier History of American Corporations (1917)
  • Dignam, A and Lowry, J (2006) Company Law, Oxford University PressISBN 978-0-19-928936-3
  • Dodd, Edwin Merrick. American Business Corporations until 1860, With Special Reference to Massachusetts, (1954)
  • DuBois, A.B. The English Business Company after the Bubble Act, , (1938)\
  • Freedman, Charles. Joint-stock Enterprise in France, : From Privileged Company to Modern Corporation (1979)
  • Freund, Ernst. MCMaster.ca, The Legal Nature of the Corporation (1897)
  • Hallis, Frederick. Corporate Personality: A Study in Jurisprudence (1930)
  • Hessen, Robert. In Defense of the Corporation. Hoover Institute. 1979.
  • Hunt, Bishop. The Development of the Business Corporation in England (1936)
  • Klein and Coffee. Business Organization and Finance: Legal and Economic Principles. Foundation. 2002.
  • Majumdar, Ramesh Chandra. Corporate Life in Ancient India, (1920)
  • Means, Robert Charles. Underdevelopment and the Development of Law: Corporations and Corporation Law in Nineteenth-century Colombia, (1980)
  • Micklethwait, John and Wooldridge, Adrian. The Company: a Short History of a Revolutionary Idea. New York: Modern Library. 2003.
  • Owen, Thomas. The Corporation under Russian Law, : A Study in Tsarist Economic Policy (1991)
  • Rungta, Radhe Shyam. The Rise of the Business Corporation in India, 1851–1900, (1970)
  • Scott, W. R. Constitution and Finance of English, Scottish and Irish Joint-Stock Companies to 1720 (1912)
  • Sobel, Robert. The Age of Giant Corporations: a Microeconomic History of American Business. (1984)
  • Barnet, Richard; Muller, Ronald E. (1974). Global Reach: The Power of the Multinational Corporation. New York: Simon & Schuster. 
  • PG Mahoney, 'Contract or Concession? An Essay on the History of Corporate Law' (2000) 34 Ga. Law Review 873
  • PI Blumberg, The Multinational Challenge to Corporation Law (1993)
  • PL Davies and LCB Gower, Principles of Modern Company Law (6th edn Sweet and Maxwell 1997) chapters 2-4
  • RR Formoy, The Historical Foundations of Company Law (Sweet and Maxwell 1923) 21
  • P Frentrop, A History of Corporate Governance 1602–2002 (Brussels et al., 2003)
  • S Kyd, A Treatise on the Law of Corporations (1793–1794)
  • J Micklethwait and A Wooldridge, The company: A short history of a revolutionary idea (Modern Library 2003)
  • W Blackstone, Commentaries on the Laws of England (1765) 455–73

External links[edit]

"Jack and the Giant Joint-Stock", a cartoon in Town Talk (1858) satirizing the 'monster' joint-stock economy that came into being after the Joint Stock Companies Act 1844.
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