A multinational corporation or a worldwide enterprise is a corporation that owns and controls production of goods or services in at least one country besides the country where it is incorporated. A multinational corporation can also be referred to as a multinational enterprise, a transnational enterprise, a transnational corporation, or an international corporation. Most of the largest and most influential companies today are publicly traded multinational corporations.
International corporate law is the field of law that deals with multinational corporations that are incorporated in one country and sell goods or services in other countries. Generally, there is a national large company as the main body, and through foreign direct investment acquires local enterprises, established subsidiaries or branches in many countries. It usually has a complete decision-making system and is the highest decision-making center; each subsidiary or branch has its own decision-making body, according to their different features and operations to make decisions, but its decision must be subordinated to the highest decision-making center, which most of the times is the parent corporation. Moreover, due to strong economic and technical strength, with fast information transmission, as well as funding for rapid cross-border transfers, the multinational has stronger competitiveness in the world.
International corporations can make a selection from a variety of jurisdictions for their subsidiaries. However, the ultimate parent company can select a single legal domicile. Corporations can legally engage in tax avoidance through their choice of jurisdiction but must be careful to avoid illegal tax evasion.
The history of the multinational corporations is connected to colonialism. Many of the first multinational corporations were commissioned at the behest of European monarchs in order to conduct expeditions. Many of the colonies not held by Spain or Portugal were under the administration of some of the world’s earliest multinationals. One of the first appeared in 1600s, the Dutch East India Company, officially known as the United East India Company. It was established in 1602 as a chartered company to trade with Mughal India. It was an early megacorporation founded by a government directed amalgamation of several Dutch trading companies. Also, in 1600 the English created the English East India Company as a joint stock company. Its headquarters were established in London, and took part in international trade and exploration, with trading posts in India. Other examples include the Swedish Africa Company, founded in 1649, and the Hudson’s Bay Company, which was incorporated in the 17th century.
One can enumerate 4 types of multinational corporations:
- A decentralized corporation with a strong presence in the home country
- A global, centralized corporation that acquires cost advantage where the cheap resources are
- A global company that continues the parent corporation
- A transnational enterprise that uses all the three categories
According to the Fortune Global 500 List, the 10 largest multinational corporations in the world as of mid-2018 in terms of consolidated revenue were Walmart ($500.34 billion), State Grid ($348.90 billion), Sinopec Group ($326.95 billion), China National Petroleum ($326.01 billion), Royal Dutch Shell ($311.87 billion), Toyota Motor ($265.17 billion), Volkswagen ($260.03 billion), BP ($244.58 billion), ExxonMobil ($244.36 billion), and Berkshire Hathaway ($242.14 billion).
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