Classification of the Colonies

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The First Thirteen Colonies
Classification of the Colonies

Classification of the Colonies
The classifications of the colonies the British established in the New World consisted of 3 types, proprietary, charter and crown colonies.
Proprietary Colonies
Most of the colonies began life as a proprietary colony. Theoretically, the Crown owned all the land in the colony. Under the proprietary system, the monarch granted a man, or group of men via a charter, the rights to manage a defined region of land. The man, or group, were known as proprietors and the group was called a corporation. He/they had the right to appoint governors, set up courts, organize assemblies and otherwise manage the colony. This was the earliest type of colony. Many of the proprietors did not live in, or even visit, the colony they managed. This type of colony proved inefficient, and most were later converted to royal colonies.
Charter Colonies
In a charter colony the king issued a charter that contained the rules under which the government of the colony operated. Virginia, Rhode Island, Connecticut, and Massachusetts Bay were all charter colonies. Rhode Island and Connecticut used their charters as governing documents after the American Revolutions.
Crown, or Royal Colony
The king, under the advisement of Parliament, appointed the governor that would govern a crown colony. Some would have a limited council, or assembly, to aid in governing. Some of these councils had 2 chambers, one of which was an executive council whose members were appointed by the king. A lower house offered limited representation to the colony’s citizens.
Corporations
The colony was basically a money-making venture that required huge amounts of money to establish, something that only the landed class of aristocrats could afford. To accomplish this the men involved would form “corporations,” or companies, in which they would invest money to launch the venture. Basically, a corporation is a legal entity to which the government grants a charter which is a document that governs the activities of the corporation. Private citizens invest capital, usually cash money, in the corporation in hopes that the activities of the corporation will turn a profit. The corporation allows individuals to invest capital to accomplish a goal while granting limited risk to the investor, who cannot lose more than he invested. This concept is called limited liability and allows investors to undertake risks that otherwise would have been impossible. The corporation has many of the same rights as an individual. It, or the officers that lead it, can sign contracts, sue or be sued, take out loans and own assets. Profits of the corporation are paid out as dividends to the investors.
History of the Corporation
The earliest known type of corporation was known as the commenda system in the Eleventh Century. In this system an investor, typically a merchant, invested capital with another person, typically a sea captain. The captain would undertake a trading mission and return to home port. If successful, the investor received 3/4 of the profit and the captain 1/4. The investor undertook the financial risk and the captain the physical risk. The system could be applied to other ventures; however, the sea trading mission was the most common. This system arose in Twelfth Century Italy. As the advantages of this system became apparent, multiple investors would add capital to a venture, thus limiting their risk even more. Another form of corporation developed in Toulouse, France along the Garonne River. The section of this river in the city is quite swift, falling 39 feet on its course through the city. The power of this river provided an ideal situation to build gristmills, however the task of building them took a significant amount of capital. A system called the pariage developed in the Fourteenth Century in which several investors would pool resources to build the mill and operate it. The system allowed the arrangement to survive the death of investors, as the shares could be transferred or sold. Several mills were built along the river using this system of management. At the beginning of the Seventeenth Century the first true multinational companies began to emerge. A monarch would issue a charter to a group of investors that would then form a corporation to accomplish a specific task, usually to establish a colony in Asia, Africa or the Americas. These corporations acted as agents of the monarch and were subject to the laws of the chartering company. They could build a military force, mint coins and govern the colony, all in the name of the monarch. Examples of this type of company include the British East India Company, Dutch East India Company and the Hudson’s Bay Company. There were others.
Royal Charters
In Britain, the royal charter is the oldest form of incorporation. It is a formal grant by the monarch, under the advisement of the privy council, to an individual or group of individuals as letters patent that confers rights, or powers, to the corporation it governs. Their first use was to establish laws, such as the Magna Carta, but by the 14th Century came to be used to create corporations or public organizations like universities, municipalities or societies. The charter not only created the institution, it also defined its privileges and purposes. The institution created enjoys the same rights and powers as an individual.
Charter colonies were essentially colonies run by corporations.
Privy Council
The Privy Council was the private council to the monarch. The word “privy” derives from the words “private” or “secret.” Thus, a privy council was composed originally of a monarch’s closest and most trusted advisors. Privy councils still exist in many countries and perform several functions.

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