The use of the term "home guard", as well as the period of time we're talking about, makes me think that R. Murphy's company was part of the overall Federal policy of authorizing home guard companies for the areas under their control. I posted some documents on this below.
One thing I haven't been able to determine is whether the citizens themselves requested the authority to form home guard companies, or if it was 7th Army Corps' policy to instigate the formation of these companies -- not only to counter the "depredations of guerrillas and rebels", as they put it, but also to consolidate their control over the citizens.