Is it possible for a corporation to be unowned?
For example, let’s say I create a company and incorporate it. It’s wholly owned by me. Can I emancipate it?
If unowned corporations are possible, what are the largest examples?
IANAL but it sounds like a bad idea if it is legal. Without someone accountable for the companys actions many bad things could happen. As we know corporations already sheild their employees from a certain amount of liability, but its not absolute (see Enron).
Since a corporation can own shares in another corporation, could you set it up so that Corporation A owned all the shares in Corporation B, and Corporation B owned all the shares in Corporation A?
I don’t see how you could stop owning your stake (100% in this case) in the corporation. You can abandon a piece of land, but you still own it until you transfer that ownership to someone else.
The company could in theory buy all its own stocks. I vaguely remember having been told once that the scenario proposed by the OP wasn’t legal under french law. Which implies that it could be done in practice, though I can’t see the point.
Say you invest $1000 to start a corporation. This represent your equity and on the corporate balance sheets, it’s on the side with liabilities (assets are on the other, and the sides should balance at all times). Say the corporation makes $1000 profit and you arrange to have yourself bought out. Now nobody owns it, right?
Well, not really since to keep the books balanced, the $1000 profit is entered on the asset side as cash, receivables, etc. and also added on the liabilities+equity side. Since it’s not a liability, it’s equity (specifically, equity from “retained earnings”), and your $1000 investment is now worth $2000. In order to totally divest yourself, you’d have to take the $1000 profit and liquidate all the other assets.
You could try having the corporation take on a debt and borrow $1000, which you use to retire equity, replacing it with liability. I’d guess that as soon as you try making the shareholders evaporate, the creditors will have no problem grabbing all the assets and the corporation disappears. I bet schemes like this have been tried in order to transfer a valuable asset to someone without having to pay sales taxes, and I’ll bet they’re severely frowned upon.
This question came up when discussing the disposal of property in a will. Could a person will everything to a corporation, including ownership of that corporation? How does a person’s estate function? Is it somewhat like an unowned company?
Corporation are legal entities, incorporated under state laws that specify the rules that exist under. All state laws that I am aware of require that a corporation have officers. They and the Board of Directors, if any, have legal responsibility for the conduct of the corporation. Corporations are not “persons” in their own right, even though they can own property and other assets in the way that individuals do.
So corporations cannot be unowned; they cannot be emancipated; they cannot evade legal control over their actions.
I’m not sure what evading consequences has to do with ownership. Stockholders are not liable for the actions of their corporation. The management is. An unowned corporation will still have managers, just no stockholders.
In the short-term, perhaps, but managers are hired by officers, who are appointed by board members, who are elected by shareholders. If the shareholders disappear, the mechanism will inevitably fall apart.
What about non-profit corporations? They don’t have owners.
I think you could “emancipate” your hypothetical corporation by turning it into a non-profit. You’d still be in control of it, just not as an “owner”.
Nonprofits have people who run them and are officers. They just aren’t allowed to keep the profits for themselves. They are just reinvested into the corporation.
So you agree that non-profits are in fact ownerless?
But aren’t there restrictions on what they can do with their revenue? (Some fraction must be used for charitable purposes, etc.)
No. There are plenty of non-profit organizations around that are not charities. MIT, for example, is a non-profit corporation.
Pleonast, you’re confusing several terms.
All corporations have owners. These are laid out in the terms of incorporation.
There is a distinction between private corporations and public corporations. Public corporations issue stock that may be bought and sold by the public. Private corporations do not. All ownership shares are internal. The shares of the corporation may be held by one individual, by the officers, or through private sales to others. No matter how the shares are split, someone must always own 100% of the corporation. The value of the corporation can go to zero, in which case the shares are worthless, but the ownership of them never goes away.
Incorporated non-profits may not sell stock publicly, but they have an ownership, in the sense of those who have a legal responsibility for the corporation, as laid out in the articles of incorporation.
Again, there is no such thing as an unowned corporation. At the very least you’re confusing value with legal possession. Once a firm is incorporated, it is a legal existence and ownership that lasts unless and until the corporation is dissolved.
What if those shares are held by the corporation itself? Or, if that’s not possible, how about Giles’ suggestion of two corporations owning 100% of the other.
I’m not talking about the value or management. I’m wondering only about ownership (i.e., legal possession). clairobscur has stated that French law does not allow a self-owning corporation. Are there any U.S. states that permit it?
I’ll try to be clear: a corporation is owned by its stockholders. A corporation can buy back outstanding stock. As it does so, the remaining stockholders each own a larger fraction of the company. Let’s say all but one share is bought back. That sole stockholder will now control 100% of the corporation. Can the corporation buy that last share? Can the stockholder just give it to the company? Is the company then emancipated if it receives that last share?
The corporation will still have a charter, still have officers to execute the charter. The corporation and the officers will still have legal liabilities. Etc.
From what other posters have said, it seems like non-profit organizations are very close to what I’m asking about. Is it possible to charter a corporation similar to a non-profit, except without the restrictions and advantages of being a non-profit?
Theoretically, a corporation could buy up all outstanding shares of stock and the board would control it. In practice, corps do own unissued shares of stock, but cannot vote with them: these shares allow it some future ability to raise money.
Ownership is a legal issue. Who is responsible for the property that is owned? Who owes the money if a loss is incurred? Who pays the penalty if a law is violated?
In no case is the answer to the question the stockholders. Pleonast is defining ownership incorrectly.
As long as the corporation exists, ownership is a legal obligation. Corporation do not have to issue stock. Public corporations do, but as stated earlier many other types of corporations exist and do not issue stock. They still have ownership, because someone must be legally liable for what the corporation does.
If a corporation buys back its stock it does not stop being owned. If all the stock is bought back, then it becomes a private corporation with the ownership divided among those who put up the money. A corporation cannot be “emancipated”. That is a meaningless word when applied to a corporation.
But what if the stocks are bought back by the corporation itself, hence nobody “put up the money”? Even if it’s not legal, nor practical, it’s conceivably possible.
If it’s not legal, then who gets prosecuted? The Corporation? I don’t think so.