The terms “company” and “enterprise” are often used interchangeably, particularly in China, where it is common to refer to “joint venture enterprises” and “state-owned enterprises”. Would it be correct, in each case, to substitute the word “company” for “enterprise”? In this column, I will consider the origins of each word in English and Chinese, and the ways in which they are used. I will also consider the concept of limited liability and its exceptions.
The meaning of enterprise is broader than company, in both English and Chinese. The English word “enterprise” has its roots in the French verb entreprendre, which means “to undertake”. It was subsequently used in English to refer to an activity undertaken by two or more people, usually for profit, through a range of different vehicles, including an unincorporated joint venture or partnership.
In Chinese, the term “enterprise” is also used to refer to a profit-making entity through a range of different vehicles, including a “partnership enterprise” and a company. The former is referred to as a non-legal person enterprise; the latter is referred to as a legal person enterprise.
The origin of the term “enterprise” in Chinese is interesting. It belongs to that category of words that we describe as “loanwords” – namely, words that were borrowed from another language. The Chinese word for “enterprise” was borrowed from the Japanese, which itself was a loanword from the West when Japan first adopted a modern enterprise system during the Meiji Restoration, which began in 1868.
In jurisdictions such as England and Australia, the word “company” is generally used to refer to an incorporated entity (i.e. a “body corporate”) that is registered under the relevant companies legislation. It does not include an unincorporated entity such as a partnership or association.
In the US, on the other hand, the term “company” is often used to describe any profit-making business, including one undertaken in the form of an unincorporated entity such as a partnership or an association. In this sense, it is synonymous with the use of the term “enterprise”. In the US, the term that is commonly used to describe an incorporated entity is a “corporation”.
The English term “company” shares a common origin with the word “companion”. The words trace their roots to the Latin words com, meaning “with”, and panis, meaning “bread”. The Latin words were used to refer to “a person that one eats bread with” and ended up in the French word compagnie, from which the English word “company” is derived.
The Chinese term gongsi was traditionally used to refer to “clan halls”, which were organisations that were established by communities with the same surname for benevolent purposes, particularly amongst overseas Chinese. It was subsequently adopted as the modern term for “company” in China, a usage that was formalised in law when the PRC Company Law was promulgated in 1993.
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A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at law.asia.