The Washington herald., 1913-02-05
MIR. Wilson and the Trusts.


Wiseacres contend that the proposal
by Gov Wilson to repeal the law of
New Jersey which permits one corpora
ton to buy, hold, and vote the stock
of another, cannot be done. The State
has entered into a contract with the
trusts, they say; and no State can
make law impairing the obligation of
contracts" The theory that three or
four persons, availing themselves of
pernissive legislation, can enter into
articles of incorporation and thereby
perform an act which all the powers OF
the State can never undo is absurd.
The signing OF articles of incorporation
constitutes a contract between the in
corporators, just as partnership agree
ment is a contract between the part
ners; and the former is no more
contract with the State than the latter.
Either contract may be terminated by
the process of law Corporations have
been dissolved and their assets dis
tributed through receiverships ever
since there were courts of equity. No
statutory grant of this power has been
found necessary.
The same authority that enacted a
corporation law certainly has the power
to repeal the same in part or in toto.
Moreover, the New Jersey law of in
corporation reserves to the Legislature
the right to suspend or alter, in its
discretion, any charter at its pleasure.
If the Senate and Assembly at Trcn-
ton chose to do so they could put out
of business every New Jersey company
not incorporated by i special statute.
OF course. they would not do anything
so revolutionary. But that the forma-
ton of holding companies could be
forbidden goes without saying; and
that the privileges of existing COM
panicS to hold and vote the stock of
other corporations could be altered,
suspended or annullcd is clear.
The right TO hold stock in this man.
ncr is purely statutory, and not pro-
prictary. 1t is true, the stock so held
is property-and property cannot be
arbitrarily confscated. However, no.
body would be SO deprived, if company
owned stock were directed to be sold
or distributed pro rata among the
shareholders OF the holding companies
This has been done in the case OF the
Northern Securities, the Standard Oil.
the American Tobacco, and other trust
dissolution proceedings. The cNpedicncy
OF a wholesale dissolution OF New Jcr-
sey trusts would be questionable, but
as to the legislative power to compel
it, there can be little doubt.
Delaware shows no symptoms OF re-
forming her incorporation law. Several
years ago she undertook 10 get some
OF the business OF making corporations
away from New Jersey. The opportuni-
ties of initiating the capital were made
more ample II WdS llduC SdSlSl 4OI
the promoter to get his rake-off in
shares; the requirement of a home
Office" in the State was waived. This
would have been quite an inducement
to promoters, if a corporation located
in Jersey City had not made it so ex-
tremely easy to have home office"
in New Jersey that it was hardly worth
while to get a Delaware charter in
order to escape the obligation Della
ware got part OF the business. but Jer-
sey City is very handy to New York,
The New Jersey corporation law left
little to be desired by trust promoters,
and that State has held the bulk OF the
business of chartcring companies to
operate in all other parts OF the coun-
t-y. But when Gov Wilson's seven
bills shall become laws, Delaware will
have a monopoly of the foreign cor
oor,tior, business