History of British companies : How it basically started

At first, the organizations which had corporate personalities were basically based on a charter from the crown. At the same time in the commercial sphere the principle associations were the guilds of merchants. These were the organizations which had resemblances to modern companies, but actually they were trade protection associations.

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Trading on joint account was subject to the rules of guild which was carried on through partnership. They were of two types namely the 'Commenda' and the 'Societas'

First type of English organizations to which the name company was applied was merchant adventures for trading overseas. Royal charters would confer power upon them since 14th centuries but it was not untill 16th century when they became common as there was a great expansion of foreign trade.

The earliest types were called regulated company which were actually expansion of the guild principles. Each member traded with his own stock and his own account but subject to obeying the rules of the company. Incorporation was not that important as trading liability of each member would be entirely separate from that of the company.

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Later on they started to operate on joint account and with a joint stock. This process can be traced from the development of the famous East India company which received its first charter in 1600, which granted the company a monopoly of trade with the indies.

At that time there was no limit of partners, but in fact they were generally small in number and additional capital was raised by calls on the existing members rather than invitation to the public.

Thanks for reading. In my next blog I will discuss about the famous South Sea Bubble Act, 1720 and the spurious companies of England 😊

Book References-

1. Fundamentals of Company Law with Law of Partnership- By A.I Khan

2. Company Law - Zahir

3. Other sources.