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

Abstract

The 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.