Virginia and the Birth of Corporate Law
I enjoy reading local history, and one of the great advantages of living a mile from Jamestown, Virginia is that lots of people have written about my local history. In addition to stories of starving colonists and massacred (and massacring) Indians, Jamestown is also a story of corporate law. The colonization of America was not a government funded operation. Rather, it was an exercise in high risk venture capital, funded by private investors in the hope of big profits. In the end, of course, the Virginia Company failed to pay big and the government ultimately bought the investors out, taking over the colony, somewhat like a bail-out of a hedge fund. Along the way, Virginia made some interesting corporate law.
The company’s third charter, in particular, is interesting. Virginia was organized by a royal charter that gave the company a corporate existence, set up its governing structure, and defined the scope of its business. Originally, the number of investors was sharply limited and the governing structure was largely independent of their control. The company found it necessary, however, to return to king and parliament to tinker with their charter. The third charter was provoked by the desire of the company to extend its jurisdiction to take in most of the western Atlantic. In particular, they wanted control of Bermuda, where a Virginia-bound ship had wrecked, living about 120 colonists to live on the island for nearly a year while they built a ship to take them to Virginia. (The incident served as the inspiration for Shakespeare’s play The Tempest.) The new charter, however, did several things beyond giving the company control over “The Devil’s Isles.”
First, it massively broadened the investor base of the company, essentially creating a market in Virginia Company shares where none had existed before. Second, it revamped the governance structure so that the board of governors was elected by the shareholders rather than being appointed by the crown. Thirdly, and most interestingly in my view, it dispensed with the oath of supremacy for investors. This meant that Catholics would be allowed to buy shares in good conscience. The last move is interesting because while the colony remained militantly Protestant and anti-Catholic (or at least anti-Spanish), the innovation does mark the beginning of a shift toward a view of commerce as a realm in which religious differences need not be an impediment to peaceful cooperation. A small move, to be sure, but done several decades before the Peace of Westphalia, it was a not insignificant innovation.