Document Type


Publication Date

Winter 2016


Limited Liability, Ultra Vires Doctrine, Veil-Piercing


Banking and Finance Law | Business Organizations Law


A remarkable yet seldom noted set of parallels exists between modern U.S. bank regulation, on the one hand, and what used to be garden-variety American corporate law, on the other hand. For example, just as bank charters are matters not of right but of conditional privilege even today, so were all corporate charters not long ago. Just as chartered banks are authorized to engage only in limited, enumerated activities even to- day, so were all corporations restricted not long ago. And just as banks are subject to strict capital regulation even today, so were all corporations not long ago.

In this Symposium Article, we argue that these parallels are not merely curious accidents but a reflection of certain foundational dynamics embedded in, and constitutive of, the corporate form itself. Tracing the history of the incorporated American firm, we argue that the corporation is an inherently hybrid public–private entity — an institutionalized and conditional outsourcing to private parties of certain essentially public powers and functions. In effect, it is a form of public–private “franchise” arrangement in which the public is the franchisor and private parties collectively serve as the franchisees.

We examine the reasons both for the gradual weakening of this original franchise arrangement as a matter of American corporate law and policy, and for its continuing presence as a matter of bank regulation. We suggest that the “special” salience of banks’ role as public franchisees helps to account for the resilience of the original corporate settlement in U.S. bank regulation. Finally, we consider the normative and practical implications of reviving the “forgotten” franchise view of the corporation more generally and, in the spirit of intellectual experiment, tentatively outline some possibilities for reintroducing public interest- driven conditions in state grants of corporate privilege.