I’m not sure how it’s relevant. Whoever organized this scheme (the company’s officers, in all likehood) could be prosecuted, even if they didn’t hold any share at any point, but it still doesn’t mean it’s not possible in theory.
Non-profit corporations do have owners. The assets had to come from somewhere. The revenue from a non-profit corporation has to be plowed back as operating expenses (such as salaries for the people who run it) or kept as a surplus or reserve fund on the books. What a non-profit cannot do is pay out a dividend.
Also if a nonprofit (I don’t think it needs a hyphen after all) has 501(c)(3) tax-exempt status from the IRS and it dissolves, all of its assets have to be turned over to another nonprofit that has the same status.
Almost everything is possible in theory, if you allow illegal activities. However, I’d like you to produce a cite that says that a corporation can buy back all of its shares with no human ownership.
I’m not arguing it’s legal, or even that it’s done. But you seemed to imply it was impossible.
As I understand it, the CO-OP owns itself, or rather is owned by a parent company that owns itself.
Assets for a non-profit can come purely from donations, loans, etc. I was involved in a non-profit start-up (a preschool) that used (tax-free) donations and loans, with no investment from any “owners”. It was a corporation, whose officers were elected by the parents each year. As far as I’m aware, no single person or group of people “owned” it, although the board officers were responsible for the corporation’s actions.
I’d argue that all corporations are ownerless, in that the realtionship that a corporation has to the people who are involved with it are all substantially different than the relationship that a non-incorporated entity (whether a business or a piece of property) has to its owner, especially in the case of publically held corporations.
Basically, what you’re talking about when you discuss ownership are control, legal liability, and benefit. In a non-incorporated entity, all three are vested entirely in the owner or owners. If I own something other than a corporation, be it a store, a car, a piece of land, or a pit bull, I have complete legal control over it (within the aplicable laws of the jurisdiction)–I can decide what to do with it, where to locate it (except for land, obviously), who to give (temporary) control of it to, etc. I am also legally liable for anything it does; if should it run somebody over, bite them, cause them to fall in a pit, or sell them a defective item, I must pay all of the damages. If it produces something of value, such as a litter of puppies, income from sales, or a crop of vegetables, I am, as a general rule, entitled to what it produces. (Mineral rights are a special case.)
Incorporation is designed specifically to sever or transfer some or all of those elements of ownership. Liability is the big one–in any corporation, the corporation can run up huge debts or cause enormous damages, and barring cases of fraud or other criminal misconduct, only the corporation itself is liable. Even if I have sole ownership of a private corporation, I’m shielded from any financial risk beyond whatever I choose to invest in the corporation. I still maintain complete control (and the legal responsabilities thereof) and I get any profit I choose not to plow back into the corporation, so we still usually refer to “ownership” in this case. Additionally, private corporations sometimes disolve while holding assets greater than their debts, in which case the assets are transfered to the former owner(s) of the corporation. Nevertheless, it is an attenuated form of ownership, in that one of the three elements of ownership has been severed.
In publically held corporations (and some privately held ones) the relationship of “owner” and “property” is even more attenuated, because control and benefit are separated. Shareholders purchase the right to benefit from the profits of a corporation, but they have at most indirect control (and in some cases no control) over the corporation and are not legally responsable for the actions of the corporation. Publically held companies almost never disolve outside of bankrupcy, so there is no indirect ownership of assets as with a private corporation. We often say that shareholders “own” a corporation, but in fact, almost all of the elements of the relationship we usually refer to by the word “ownership” have been severed or transfered to others. It’s more common, and more accurate, IMO, to simply say that shareholds are invested in a corporation.
Control of (and legal responsability for) a public corporation are vested in the Directors and upper management of a corporation. These are the people who hold most of what we think of as “ownership,” but we almost never refer to them as owners because they have no right to the assets of the corporation, including profit, except insofar as they are also shareholders.
As has been pointed out, it is entirely possible to have a corporation in which no one has a legal right to benefit from the corporation’s assets. All nonprofits are such, and there may be others in some jurisdictions (depending on the laws of incorporation). Control and legal responsability still reside with a Board of Directors or similar and the management, but again we don’t usually refer to these as “owners.” Of course, lawyers have their own language, and some jurisdictions may refer to the relationship between Directors and a corporation or to something similar as “ownership,” but most of us don’t.
It seems strange to think of a corporation as unowned (or self-owned), until one realizes that most of what we think of as “ownership” doesn’t really apply to the “owners” of a corporation anyway. In any case, someone is still responsible, even if they don’t “own” anything.
I can’t substantiate this with a cite, but I swear that I saw a TV documentary that said the DeBeers group used to be locked into a revolving ownership situation.
IE Corp A owned Debeers and DeBeers owned Corp A.
Don’t know if it was a corporate title on these businesses or privately held…
Corporations are artificial entities, created entirely by law. Their corporate powers depend entirely on the law of the jurisdiction in which they are incorporated.
As well, it is a basic principle of corporate structure that someone else holds the shares in a particular corporation. It would be contrary to this basic principle to allow a corporation to own all of its own shares. I doubt very much that you would ever find a corporate law that allows a corporation to own itself, since then there would not be anyone who is ultimately responsible for the conduct of this artificial entity.
For example, at the federal level in Canada, the Canada Business Corporation Act prohibits a corporation from owning its own shares, and in answer to Giles’ question, prohibits subsidiaries from holding shares in the parent corporation:
There are exceptions to this principle, but they are closely defined in the following sections: the corporation can hold shares in itself on behalf of someone else, or as part of a specific financing agreeement, and so on.
And, even when the corporation is allowed to own shares in itself under those exceptions, it is generally barred from voting those shares:
I’m giving this as an example of the Canadian corporate law on this point. However, I would be very surprised if the law differed for other jurisdictions.
Corporations can buy their own shares for the purpose of redeeming them, but that’s a different proposition - it usually occurs when the corporation is engaged in some sort of re-structuring, such as taking it private, or eliminating a certain class of shares.