[LMB] Corporations as People OT: (was: Thor Power Tools, yet again)

[dreitman at spiritone.com]

James Nicoll <jdnicoll at panix.com> wrote:

> On Mon, 3 Dec 2007, Margaret Dean wrote:

> > From what I understand, the original reason for the legal fiction
> > of a corporation-as-person was so that if the corporation went
> > bust, the flesh-and-blood people who owned parts of it could not
> > be forced to pay the corporation's debts out of their own
> > personal funds.  In an era when people were imprisoned for debt,
> > this was no light matter.

The limitation of liability in corporations was a statutory creation in the 19th century.  Most states adopted the rule in order to promote business.  The concept of the corporation as a separate legal entity probably predates limitation of liability, as there were specially created road and bridge companies and the like before general corporate statutes were created.  The oldest business corporations in existence probably date to the 16th and 17th century, with Hudson's Bay Company (1693) probably being the oldest surviving.

>  	There are still large businesses where stock holders are 
> responsible for the company's debts. Lloyd's of London would be one 
> example. Back in the 1990s, there were news articles that reported on 
> investors liabilities with Shock and Horror, since the people recruiting 
> new investors were not esp open about the tsunami of debt LoL was stuck 
> with and targeted relative innocents to dilute the company debt.

Lloyd's is a special case.  It was set up as an indemnity market, so the names (as underwriters were called) were not actually buying stock.  

Dan, ad nauseam