The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality

By Phillip I. Blumberg | Go to book overview

3
The Emergence of Corporate Groups

Limited liability triumphed in the United States at a time when corporations lacked the power to acquire and hold shares of other corporations unless expressly granted by special statute or charter provision. Corporate groups were virtually unknown. It was not until 1889- 1893, about sixty years after Massachusetts had provided the climax to American acceptance of limited liability, when states, starting with New Jersey, began enacting statutes granting such powers to corporations generally. Thereafter, corporate groups of great size speedily emerged. The holding company and the corporate group replaced trusts as the favored structure for the expanding industrial concentration characterizing this rampant period of American capitalism. This chronology had great implications for the development of American corporation law.


Corporate Power to Acquire and Hold Stock of Another Corporation

In the nineteenth century, American law was settled that in the absence of an express grant in the statute or its charter a corporation had no power to purchase the stock of another corporation. 1 Such acquisition of stock of another corporation was prohibited without regard to whether the other company was conducting a similar business or was in an entirely different one. 2

This was common law doctrine reflecting several powerful pres-

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