A Guide to the GRE/Miscellaneous Passages

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.