A Guide to the GRE/Miscellaneous Passages
The GRE will also throw in more unusual topics on occasion.
By the late 1800s, the concept of a “corporation” - a legal entity separate and distinct from its stockholders - was firmly entrenched in Anglo-American law. 5 However, its use and creation had a remarkably different context. The first corporations had been royal “charters” of the British Crown, such as the British East India Company or the Hudson's Bay 10 Company, and were used to exploit exclusive territorial and trading rights secured through English global imperialism. This model, while highly effective for managing global trade, was far less 15 applicable in the United States, which for the brunt of the 1800s was focused on pushing westward within its own borders. Accordingly, the “charter” - which typically would require a 20 government enactment - was of little help. Instead, various states, beginning with New Jersey, began a new trend of the “enabling” corporate statute, under which any citizen could create a corporation to 25 manage private business affairs. By the 20th century, most states of the United States as well as nations worldwide had created some type of “enabling” statute, allowing private individuals to form 30 corporations to manage their mutual assets.
1. How did the corporation originate?
2. How was the corporation as allowed by law in the United States, beginning in New Jersey, different from the original corporation used by the British?
3. What differences between Britain and the United States prompted this difference and change in the nature of a corporation?
Answers to Practice Questions
1. According to the passage, corporations originated as royal charters by the British Crown to manage economic affairs in various parts of the world. This is explained on lines 6-12, which give examples of the Hudson's Bay Company and the British East India Company.
2. New Jersey's law allowed corporations to be created voluntarily by individuals, as opposed to formed by an act of the government. It thus differed from traditional English law in this regard.
3. As explained in lines 13-20, the economic expansion of the United States was primarily domestic, and thus the British model was of little use to Americans, who sought to have business entities to regulate things internally. Accordingly, the corporation which evolved under American law was one which private individuals could form to manage their affairs, with the permission and protection of the state.