Private Corporation Charters

Private Corporation Charters A corporate charter, issued by a state or the federal government, authorizes a group of persons to be treated as a single entity for the purpose of operating a business, church, school, hospital, or municipality. In the nineteenth century, some charters also granted tax exemptions, the power of eminent domain, limited liability for stockholders, public land, or other assistance.

During the nineteenth century, the authority of state legislatures to regulate corporations was much debated. In Dartmouth College v. Woodward (1819), the Supreme Court declared that the charter of a private corporation was protected by the Contracts Clause of the Constitution (Art. I, sec. 10, cl. 1) from arbitrary state legislative amendment or repeal. The Dartmouth College doctrine limited state legislative control of both business and private nonprofit corporations.10

The protection afforded private corporations by the Dartmouth College doctrine was never complete. In Charles River Bridge v. Warren Bridge (1837), the Court held that the charter of a private corporation should be construed strictly against the corporation. The Court further declared that states retained substantial authority to protect the public health, safety, and welfare (see Police Power). Finally, some states expressly reserved power to alter or repeal corporate charters, although the scope of the reserved power was never fully decided.

In the twentieth century, the charter has not been central to the constitutional law of private corporations. Rather, the Supreme Court has addressed issues of state governmental control of private institutions principally through substantive due process doctrines under the Fourteenth Amendment.

See also Capitalism; Corporations.

Bruce A. Campbell