Legal Quote of the Week: the First Corporation?

"At what time our merchants perceived the commodities and wares of England to be in small request with the countries and people about us, and near unto us, and that those merchandises which strangers in the time and memory of our ancestors did earnestly seek and desire were now neglected, and the price thereof abated, although by us carried to their own ports, and all foreign merchandises in great account, and their prices wonderfully raised; certain grave citizens of London, and men of great wisdom, and careful of the good of their country, began to think with themselves how this mischief might be remedied:  neither was a remedy (as it then appeared) wanting to their desires for the avoiding of so great an inconvenience:  for seeing that the wealth of the Spaniards and Portuguese, by the discovery and search of new trades and countries, was marvellously increased, supposing the same to be a course and means for them also to obtain the like, they thereupon resolved upon a new and strange navigation.  And whereas at the same time one Sebastian Cabot, a man in those days very renowned, happened to be in London, they began first of all to deal and consult diligently with him, and after much speech and conference together, it was at last concluded that three ships should be prepared and furnished out for the search and discovery of the Northern part of the world, to open a way and passage to our men for travel to new and unknown kingdoms.
And whereas many things seemed necessary to be regarded in this so hard and difficult a matter, they first made choice of certain grave and wise persons in manner of a senate or company which should lay their heads together and give their judgments and provide things requisite and profitable for all occasions; by this company it was thought expedient that a certain sum of money should publicly be collected to serve for the furnishing of so many ships.  And lest any private man should be too much oppressed and charged, a course was taken that every man willing to be of the society should disburse the portion of twenty and five pounds apiece, so that in a short time by this means the sum of six thousand pounds being gathered, the three ships were bought, the most part whereof they provided to be newly built and trimmed."

-Richard Hakluyt, "The Discovery of Muscovy"

In this passage, the English writer, priest, geographer, diplomat, and spy Richard Hakluyt (1552/3-1616) describes the formation of the Company of Merchant Adventurers to New Lands by by Richard Chancellor, Sebastian Cabot and Sir Hugh Willoughby in 1551. The Company was authorized by royal order to make contact and carry out trade with the kingdom of Muscovy (which, under its ruler Ivan the Terrible, was fast becoming the core of modern Russia).

What is fascinating about this excerpt is that the Company (later known as the Muscovy Company or the Russia Company, and still extant as a charitable institution today) was the earliest known chartered joint stock company. Hakluyt either describes or hints at, among other things: (1) the recognition of a new and unexploited market, (2) the development of a business plan, (3) pitches made to potential investors, culinating with (4) a public offering to raise capital from a variety of sources, none of whom would be able, by himself, to finance the expedition, and (5) division of equity among the stakeholders, and (6) the formation of a governing body, replete with powers, privileges and duties to the Company and its stakeholders.  Although business entities had long existed, (from trust-like arrangements such as the "use" of ancient Mesopotamian and Greek law to partnership and joint ventures such as the félag of Viking Age Scandinavia), the joint stock company was a new type of business entity that existed as a legal person separate from its stakeholders and directors.  As such, it was the direct ancestor of the modern corporation.

Though Willoughby's ships were caught in the Arctic winter (Russian fishermen discovered the boats full of frozen corpses), Chancellor successfully reached Moscow and entered into a trade agreement with Czar Ivan.  The Company was sanctioned by an Act of Parliament in 1556. It paved the way for the creation of other joint stock companies, including the Levant Company (1581), the Venice Company (1583), East India Company (1600), Virginia Company (1609), and the Hudson's Bay Company (1670).

For further information, see, e.g., John Micklethwait and Adrian Woolridge, The Company: A Short History of a Revolutionary Idea (Modern Library, 2003); Stephen Bown, Merchant Kings: When Companies Ruled the World (Thomas Dunne Books, 2010).