Last March, I wrote about the difficulty of identifying company start dates. Discovering corporate birth dates can be important to scripophily collectors, especially when they realize that small name differences on certificates often signal different incorporations. I tried to warn collectors that it is often difficult to determine those dates from published literature with any dependable degree of accuracy. In this article, I warn that finding death dates of companies is substantially more difficult.
The vast majority of companies formed in North America exist to create profit. As long as they operate legally, most go out of business because they fail to realize that goal. In today’s world, micro-enterprises comprise roughly 75% of all businesses in the United States, 82% in Canada and 94% in Mexico. Those kinds of businesses usually employ fewer than ten people and they disappear constantly. In addition to the simple inability to make sufficient profit, they can be forced out of business by deaths of principals, changes in buying patterns and neighborhood demographics and even natural events such as fires, floods and storms. Even shifts in traffic patterns can drive micro-businesses into oblivion.
Most of us collect certificates from radically larger companies so we rarely need to agonize over how micro businesses die. Their constant turnover has little effect on our hobby.
Obviously, the lack of profit drives even the largest businesses into dissolution, but their deaths tend to be drawn out of extended periods. It does not take deep research to conclude that the larger the company, the less likely it will dissolve voluntarily. Involuntary dissolutions usually leave mounds of documentary debris in their wakes and that is what we look for when we research corporate deaths.
Most American companies of the 1800s were chartered with specific lifespans and a moderate percentage expired on those pre-determined dates. It appears that many of those charters expired because companies were unable to secure sufficient funds to grow and thrive. A certain percentage, possibly larger than we may appreciate, also expired because businesses were “ahead of their time,” both technologically and because of sluggishness of societal change.
On the other hand, just because we cannot find evidence of business growth does not mean that unused charters always expired automatically. Some charters were extended beyond their finite lifespans in order to hold onto patents, processes, contracts, rights of way or for purely political purposes. Finding information about charter extensions depends on state records and the quality of those records can range from poor to abysmal. I have found that confirming corporate wrap-up upon charter expiration is much more a matter of luck than tenacious research.
The larger the company, the more likely and more heavily it depended on debt financing. Whenever a company failed to meet its interest obligations, it immediately opened itself up to foreclosure by its bondholders. Immediate foreclosure was more likely for companies that showed little evidence of profitability.
In those cases, if courts were unconvinced that businesses could repay investors over time, they ordered liquidation. That was generally accomplished by directing county sheriffs to auction corporate assets some numbers of days after decision, often on the steps outside court houses. While evidence of foreclosures is usually discoverable, there is near-universal confusion about official corporate death dates. Did the company die on the day the judge issued his ruling? The day paperwork was filed? The day of the sale? The day that payment was made?
Confusion over ending dates increases with companies that were not immediately liquidated upon foreclosure. In cases where profitability had been interrupted by external forces such as fires, floods, Wall Street panics and deaths of executives, courts often placed companies into receivership to allow restructuring of debt and negotiating with creditors. Many receiverships lasted ten or more years. Whether or not companies left receivership and resumed business as normal was often affected by motivations and skills of receivers.
Receiverships often prolonged corporate death and many companies ended up being auctioned after all. Because they were relieved of the burden of old debt, buyers of bankrupted companies often continued business much as before. Many of those successor companies used names highly similar to older names in order to take advantage of pre-existing relationships with suppliers, customers and the public. Many even operated at the same addresses. From a research standpoint, there can be great confusion over when an early company ended and its successor began, especially when names are similar. It is normal for there to have been a gap of days or weeks but it is equally possible there were overlaps or operation. Consequently, collectors will encounter near-certain confusion among published references.
Mergers and consolidations were highly common results of foreclosures and this is where research gets even more clouded. Even references of equal reputation for accuracy confuse the dates of takeover and consolidation. Which dates should we consider most accurate? Date of merger intent? Date of document signing? Date of payment? Date of new company incorporation? Date of official registration with states? If incorporated in multiple states on different dates, which prevails?
No small challenge for researchers is the fact that just because companies ceased doing business does not mean they ceased to exist. Many companies continued to exist for years in a state of corporate life support for the purposes of holding valuable leases, agreements, properties, patents or debts. It was not uncommon for such companies to consolidate with others and cease doing business under their original names. Nonetheless, many defunct companies existed for years “on paper.”
The company that baffles me most is Credit Mobilier of America. That company formed in 1863 to build the Union Pacific Railroad and bilk the U.S. government out of millions of dollars. The behavior of the company tarnished the reputations of executives, the railroad and almost everyone who owned a share of stock. It drove one politician from the Senate and others into hiding. It last did business in 1873 and there were efforts to dissolve the company at that time. It nonetheless stayed alive for another decade as a principal in a $2,000,000 lawsuit with the Union Pacific. The Massachusetts Supreme Court dismissed that case on September 5, 1883 and theoretically removed its reason for being. Nonetheless, Jay Gould signed a Credit Mobilier certificate as late as 1889 (see photo in The Railroaders, Time-Life Books, 1973, page 55.) I genuinely do not know when Credit Mobilier went out of business if, in fact, it ever did!
The point of all this is to stress to collectors that if you need to know precise dates of corporate births and deaths, be prepared for ambiguity. This is not an endeavor that will satisfy anyone’s needs for precision.