Time-Limited Corporations with Licenses To Operate
Discussion
Pat Conaty:
"A somewhat later idea to the License to Operate concept was developed in the early period of the USA. The colonies had thrown off the King and had to ask, if we set up a company, where does the Charter (the license to operate) now come from if not the Sovereign? They concluded that the People replace the Sovereign (good old Tom Paine here) under a radical republic. Thus and in fact in the early USA in all colonies as far as I am aware, companies were chartered for limited periods. Typically a few years up to 5 years. The renewal of the charter beyond that was based on company behaviour.
Indeed many charters were not renewed because of a lack of fair trade practices.
Also in this early period of US history, liability was not limited and Directors could be sued for damages and indeed jailed. This did happen. Bank charters were generally the shortest and as I recall it was in Illinois or Indiana that banks for many years could not be chartered because of bad behaviour.
The companies were known as ‘time limited companies.’ Richard Grossman and Frank Adams are the leading US advocates for their revival." (email, November 2016)
More Information
- Reclaiming Democracy, http://reclaimdemocracy.org/corporate-accountability-history-corporations-us/
- Richard Grossman, Ward Morehouse and POCLAD (Program on Corporations, Law and Democracy)