Recapitalization or Reform? The Bankruptcy of the First Dutch West India Company and the Formation of the Second West India Company, 1674

Erik Odegard

doi:10.1017/s016511531900007x

Abstract

AbstractThe Dutch West India Company (WIC), founded in 1621, was, in the words of the States General, “disbanded and destroyed” in September 1674 due to bankruptcy. In its stead, a second West India Company was founded, with a charter largely taken over from the first. This article explores how the dissolution of the first company and the conflicting interests of stockholders, bondholders, and company directors were managed. As it turns out, the old company was not actually liquidated; instead, its assets were simply handed over to the successor company, while an intricate financial construction was devised to take care of the debt burden and to capitalize the new company. The reasons for this unusual arrangement must be sought in the company's great political, and particularly geopolitical, importance. Since the Dutch state was unwilling and unable to handle colonial governance and defence itself, it needed a placeholder in the form of a chartered company. However, the bankruptcy of the WIC, coming at the time it did, had major consequences for the shape of the Dutch Atlantic of the eighteenth century.

Highlights

On 20 September 1674, the States General of the Republic of the United Provinces of the (Northern) Netherlands voted to dismantle the West India Company (WIC), a joint-stock company that had enjoyed a monopoly in the Netherlands on Atlantic trade and colonization
The bankruptcy proceedings of the Dutch West India Company present a fascinating case study for researching the ways in which Early Modern joint-stock companies worked in practice. They highlight the crucial importance of politics in the management of the Dutch companies, making it impossible to study them from a business perspective alone
Internecine struggles between various interested parties made it difficult to find a satisfactory solution to the problem posed by the bankruptcy

Summary

Introduction

On 20 September 1674, the States General of the Republic of the United Provinces of the (Northern) Netherlands voted to dismantle the West India Company (WIC), a joint-stock company that had enjoyed a monopoly in the Netherlands on Atlantic trade and colonization. In its stead it was decided to establish a second WIC with the same privileges as the first company. The WIC was much more than merely a business; instead, it was envisaged as an organizationally distinct, self-financing organization for overseas warfare To back up these aims, the company received a number of important privileges in its charter. This article aims to understand the bankruptcy procedures of the WIC in both business and political terms, with potentially important ramifications to the ways in which the Dutch chartered companies are perceived. Within the literature on the WIC, research has traditionally tended to focus either on specific colonies, such as New Netherland or Suriname, or on specific trades, most notably the trans-Atlantic trade in enslaved

90 Erik Odegard

Findings

Conclusion