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Once you destroyed all ship, pirates may buy a ship sometimes but nothing dangerous (AI companies pay a very small proportion amount of money that is share between company to help broke companies to survive).
However, a company is never removed from the diplomatie menu.
It might be cool if companies could surrender; they could remain existing but youd get all their profits and theyd declare war/peace always aligned with you.
By keeping alive small companies, it provided to player small companies to fight with in early game.
Is this "free" money? In other words, if we were to bankrupt ALL AI, would they still get a trickle of income?