PRESIDENT'S ANNUAL ADDRESS.

A GLANCE AT THE METHODS OF FORMING CORPORATIONS IN MARYLAND FROM COLONIAL TIMES; SOME EVILS WHICH HAVE GROWN OUT OF THEM WITH SUGGESTIONS

FOR THEIR REMEDY.

BY STEVENSON A. WILLIAMS.

The growth of Corporations and the extent to which corporate management is deemed essential to business transactions of magnitude and desirable for many lesser ones was a very notable result in the commercial development of the last century.

Twenty-five years ago many thoughtful men were asking themselves and the public whether individual self-reliance and freedom could long endure such concentration of power as that which seemed to be massing in the hands of those who managed corporate interests. As a result of the discussion of that period, much legislation was directed against them and some of their methods, yet in spite of it all, they have attained proportions which indicate with unerring certainty that they fill a real need of the business world and have come to stay. If this is so, the only wise and prudent way to treat them is to recognize their necessity and value, and to apply, in our relations with them, such principles as are suggested by an intelligent and careful survey of their history and dealings.

It is undoubtedly essential that they be made and kept subservient to the public welfare, but apart from this, the growing tendency of those who study the subject from a con(14)

servative standpoint and that of the genernl good, is, that they should be allowed as large a freedom as possible, for only in this way can they be made to contribute most largely to the support of the government and the general welfare.

The business conditions of every community necessarily influence to a great degree its character and life, and at times it becomes very important and essential for good, that there should be a careful reckoning of those conditions, a taking of stock, as it were, with a balance sheet, so that there may be an easy discovery of their true value, their good or evil influences, with a view to encourage and promote the former and condemn and check the latter.

Holding these views it has frequently seemed to me that we Marylanders have in our methods of granting charters permitted the growth and continuance of serious evils, which, as thoughtful men, we should carefully examine and weigh. Having done so, and reached a conclusion that evils exist, no laissez faire policy should be pursued, but steps should be at once taken to apply a proper remedy.

In order to ascertain and intelligently characterize these methods, let us examine them from our earliest times as a Colony and a State, and see what influences have been at work to shape them, and the reasons which have operated to bring about whatever changes have taken place in them. To do this it will be convenient to divide this history into the four following periods:

1. Prior to our independence of Great Britain there were very few charters granted, and these were by Special Act of the Proprietary and General Assembly. The purposes of these Acts were the formation of municipal corporations for cities and towns, the erection of ports of entry, and occasionally an educational institution. There are so few of them that the

time and attention required of the Assembly in their enactment was inconsiderable.

2. From the date of our first Constitution in 1777 to and including the year 1825, a period of forty-eight years, the Legislature was frequently occupied with the consideration and granting of charters, and there was a steady increase of their number and importance. With the exception of the Vestry Act (1798, ch. 23), and the Religious Corporations Act (1802, ch. 111), they were all by Special Acts of Assembly. There were forty-three legislative sessions during these years, enacting four hundred and six charters and supplements, an average of nine and a fraction for each session. During the earlier years there was frequently but one Act during a session, occasionally there were two, three or four, but with the establishment of the Federal Government on a solid foundation, and the return of favorable business conditions, we find from 1812 and on as many as twenty and thirty were granted at a session.

A passing word may be permitted as to the character of the charters of this period. Prior to our Revolution the Proprietary and Assembly did not even grant charters for banks, insurance or turnpike companies, and with the return of peace and a stable government, it was but natural that the foundations for healthy business conditions and internal improvements should be laid, and so it was. Many of the most solid banks and insurance companies now doing business amongst us and nearly all our turnpike companies were chartered by Special Act of Assembly during this period.

Evidence of the growing interest in internal improvements during the earlier of these years and its continuance and growth towards their close is found in abundance. The charter of the Potomac Company (Act 1784, ch. 33), to make that river navigable to Cumberland and connect with a chain of improvements to the Ohio is an example. This work seems to have been a favorite idea of General Washington's; he secured its charter and became its first president, and when, after his death, its plans were found to be impracticable and

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abandoned, its rights were transferred to the Chesapeake and Ohio Canal, which was chartered at the close of the period by the Act of 1824, ch. 79.

3. The third period extends from 1825 to 1851, when our second Constitution was adopted, and covers twenty-six years. There were twenty-three legislative sessions and the work of granting charters appears to have grown very considerably, for we find eleven hundred and sixteen of them, including supplements, or an average of forty-eight and a fraction for each session. The increase in the number each session was considerable; from fifteen in 1826 to one hundred and twentytwo in 1849. It was the period of railway charters and railway building. Our most notable railways secured their charters during these years, beginning with the Baltimore and Ohio in 1826.

The idea of a general law for the formation of Corporations, which was developed during this period, had its suggestion in the Vestry Act previously mentioned. It became a law in January, 1799, and was followed by the Act of 1802, ch. 11, which is the frame work of our present plan for the formation of Religious Corporations generally. By this Act, the mere association of a class of persons in a prescribed way, and their election of a governing body, constituted them a body corporate; but in the extension of the same privileges to other religious corporations by the Act of 1802, ch. 11, we find for the first time a provision suggestive of the certificate required under our present general law.

These two Acts then were the forerunners of the general laws which, beginning in 1838, were extended in 1846 and 1847 and were made a permanent part of our policy by the Constitution of 1851. The volume of Corporation business which was being brought to the attention of the General Assembly had evidently become very noticeable prior to and during the session of 1838, when by chapter 264 an Act was passed providing for the incorporation by association (as in the Vestry Act) of all persons desirous of obtaining charters for manufacturing purposes. The Act of 1846, ch. 323, also

authorizes the incorporation in much the same way of those desirous of organizing lyceums, libraries, masonic or other lodges, fire companies and associations for literary, dramatic, moral, social, charitable and religious purposes, or those connected with the promotion of the arts and sciences, with the additional requirement as suggested by the Act of 1802, ch. 11, that before they may be entitled to the benefit of the Act, they shall lodge with the Clerk of the County a copy of their articles of association, signed by the members originating the same, and the Act of 1847, ch. 26, extends the same privilege to military associations. This period closes then with the conviction of the necessity for a general law fully developed, and it had taken such a hold upon the legislative mind, that it became a part of the organic law under the new Constitution, as exhibited by the following section:

"Corporations may be formed under general laws, but shall not be created by Special Acts except for municipal purposes and in cases where, in the judgment of the General Assembly, the object of the Corporation cannot be obtained under the general laws. All laws and Special Acts pursuant to this section may be altered from time to time or repealed; provided, nothing herein contained shall be construed to alter, change or amend in any manner the section in relation to banks."

4. The work of the fourth and last period covers fifty years and twenty-nine legislative sessions. Two thousand and forty-seven.charters and supplements were granted, an average of seventy-one per session; the number passed at each session varying from thirty-seven in 1852 to four in 1861 and one hundred and forty-four in 1900.

Besides these there were one hundred and forty-three measures enacting and amending the general law on the subject of Corporations. In estimating the work of these years it should be borne in mind, that the provision of the new Constitution just mentioned was intended for the relief of the General Assembly, already too much burdened with an unnec