Special Message

To the Senate and House of Representatives:

I have been informed that the attention of Congress has been drawn to the defects of the law authorizing the formation of corporations in the District of Columbia. The evils growing out of the existing law were brought to my notice by a member of the bar of the District, and I directed the Attorney-General to make me a report upon the subject. From that report it appears that in the past two years there have been incorporated under the law of the District 2,211 companies, with a total authorized capital of nearly $4,000,000,000. Many of the companies thus incorporated represent no actual investment and may be used by unscrupulous persons to perpetrate fraud upon the public and upon those who may be deluded into investing in their stock. The increase of these corporations is going on with alarming rapidity. On one day of last week one person presented for filing articles for the incorporation of fourteen companies; another person presented for filing articles of incorporation for thirty-eight companies. In each of these the same persons were named as trustees. The aggregate authorized capital proposed for these thirty-eight companies amounted to $43,000,000. On one day of this week one person presented for filing articles of incorporation for fifty-four companies, in each of which the same three persons were named as trustees. The authorized capital proposed for these companies was over $200,000,000. The Attorney-General closes his report with the statement that--

"The law governing the formation and control of corporations in the District of Columbia is not, as it should be, a model of its kind, but, on the other hand, is hopelessly vicious."

The evil growing out of these laws is of such magnitude and the necessity for action is so urgent that I recommend to Congress the immediate consideration of the subject. The case calls for the most radical remedy. The right of incorporation ought to be suspended at once until Congress can devise proper legislation for guarding its exercise. Moreover, measures ought to be taken to annul the charters which have already been issued, either by their direct repeal, if that be possible under the Constitution, or by what other legislative action may be deemed necessary. I doubt not that Congress has already seen the necessity of replacing these vicious incorporation laws by those which are governed by sounder principles, which will forbid the issuance of stock or bonds in excess of the actual investment and permit a proper public supervision. When such a law shall have been enacted, all legitimate corporations which have been formed under the existing law may readily be reincorporated.

THEODORE ROOSEVELT.