Generally.

States may impose significant regulations on busi-nesses without violating due process. “The Constitution does not guarantee the unrestricted privilege to engage in a business or to conduct it as one pleases. Certain kinds of business may be prohibited; and the right to conduct a business, or to pursue a calling, may be conditioned. . . . Statutes prescribing the terms upon which those conducting certain businesses may contract, or imposing terms if they do enter into agreements, are within the State’s competency.”221 Still, the fact that the state reserves the power to amend or repeal corporate charters does not support the taking of corporate property without due process of law, as termination of the corporate structure merely results in turning over corporate property to the stockholders after liquidation.222

Foreign (out-of-state) corporations also enjoy protection under the Due Process Clauses, but this does not grant them an unconditional right to enter another state or to continue to do business in it. Language in some early cases suggested that states had plenary power to exclude or to expel a foreign corporation.223 This power is clearly limited by the modern doctrine of the “negative” commerce clause, which constrains states’ authority to discriminate against foreign corporations in favor of local commerce. Still, it has always been acknowledged that states may subject corporate entry or continued operation to reasonable, non-discriminatory conditions. Thus, for instance, a state law that requires the filing of articles with a local official as a prerequisite to the validity of conveyances of local realty to such corporations does not violate due process.224 In addition, statutes that require a foreign insurance company to maintain reserves computed by a specific percentage of premiums (including membership fees) received in all states,225 or to consent to direct actions filed against it by persons injured in the host state, are valid.226

Footnotes

221
Nebbia v. New York, 291 U.S. 502, 527–28 (1934). See also New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96, 106–08 (1978) (upholding regulation of franchise relationship). [Back to text]
222
New Orleans Debenture Redemption Co. v. Louisiana, 180 U.S. 320 (1901). [Back to text]
223
National Council U.A.M. v. State Council, 203 U.S. 151, 162–63 (1906). [Back to text]
224
Munday v. Wisconsin Trust Co., 252 U.S. 499 (1920). [Back to text]
225
State Farm Ins. Co. v. Duel, 324 U.S. 154 (1945). [Back to text]
226
Watson v. Employers Liability Assurance Corp., 348 U.S. 66 (1954). Similarly a statute requiring a foreign hospital corporation to dispose of farm land not necessary to the conduct of their business was invalid even though the hospital, because of changed economic conditions, was unable to recoup its original investment from the sale. New Orleans Debenture Redemption Co. v. Louisiana, 180 U.S. 320 (1901). [Back to text]