Abstract: The company is merely a form of organization; it is not necessarily a for-profit legal entity, nor does it invariably imply limited liability for its investors. China could draw upon UK legislative experience to diversify its corporate forms by permitting the establishment of charitable companies, community interest companies, and other varieties. From an economic perspective, a company is“a nexus of contracts”composed of express and implied contracts that define rights and obligations among various participants, with the aim of internalizing transaction costs. However, the separation of ownership and control generates agency costs. To address the problem, the institutional design of corporate law and the establishment of mandatory rules should be benchmarked against the necessity of reducing these agency costs. There is no necessity to constrict the scope of authority delegated by the shareholders’meeting, nor is it appropriate to transform the enabling rules regarding the appointment of directors into mandatory legal norms. Common law jurisdictions, adapting to the evolution of commercial activities, have refrained from providing a precise definition of“the company”to avoid self-imposed limitations that might shackle the development of commercial organizations. Similarly, China’s Company Law only delineates the scope of its application without strictly defining the concept of the company itself, a stance that serves as a strong embodiment of scientific legislation. Limited liability, acting as the cornerstone of the modern corporation, has had its utility specifically demonstrated within economic theory.  

Key words: corporate forms, a nexus of contracts, agency costs, limited liability