Corporate Law - Limiting Corp Activities
Here are some of the regulations that limited the activities of corporations in the U.S. prior to 1887. I’ve never seen you so passionate about freedom as to when you are defending the rights of a sheaf of papers – or maybe it’s the irresponsible people who hide behind the sheaf:
- “Limited Duration: Charters were granted only for a period of 10, 20, or 30 years after which the corporation had to be liquidated with the proceeds distributed among the shareholders.
- Limited Land Holdings: Many states imposed limitations on the amount of land a corporation could own. Most often the amount of land was limited to that required for the factory or mill site.
- Limited Capital Holdings: Once again many states limited the amount of money or financial assets a corporation could own. Some states banned corporations from owning other corporations or stock in them. Once a corporation exceeded the limit, it had to be either dissolved or split.
- Specific Purpose Charters: This was perhaps the most common of all restrictions in the early years of this country. Corporations were chartered only for a specific purpose such as the building of a canal or road. Once the stated purpose was completed the corporation was dissolved. Now charters were issued that enabled a corporation to engage in any type of business.
- No Limitations on Liability: Directors, managers, and shareholders were held to be fully liable for any debts or damages. In some cases, the lender or injured party was entitled to double or triple the damages. Other states imposed extremely high-interest rates until the debt was fully paid.
- Restrictive Shareholder Rights: The internal governance of corporations was much more restrictive than today. Shareholders had more rights. In the case of mergers, some states required a unanimous vote of shareholders.
- Restrictions on Pricing: Some states maintained the right to set prices on corporate products. Wisconsin for one gave the state legislature the power to set prices on products after reviewing the corporation's expenses.
- Revocable Charters: States maintained the right to revoke or change a charter at the will of its legislature. Almost all of the states adopted this clause after 1820.”