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The Columbia University Libraries reserve the right to refuse to accept a copying order if, in its judgement, fulfillment of the order would involve violation of the copyright law. Author: Conyngton, Thomas Title: A manual of corporate management Place: New York Date: 1911 %-B^oqi-({ MASTER NEGATIVE # COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS FILMED • EXISTING BIBLIOGRAPHIC RECORD J^ *r javtsfmmm 'miPT^TESS 224 C764 Conyng^on, Thomas. A manual of corporate management, containing forms, directions, and information for the use of lawyers and corporate officials, by Thomas Conyngton ... 3d ed. New York, The Ronald press co., 1911. xviii, 19-422 p. 231''". $3.00 1. Corporations — X^v-%. 2. Corporation law — U. S. Library of Congress Copy 2. Copyright A 289242 11-12075 RESTRICTIONS ON USE: TECHNICAL MICROFORM DATA FILM SIZE: iG^\T\ REDUCTION RATIO: ^3^( IMAGE PLACEMENT: lA rilA )IB IIB DATE FILMED: ^t^±BlL INITIALS: dLUb TRACKING # : M5N 0/IZl FILMED BY PRESERVATION RESOURCES. BETHLEHEM. PA, v. > DO O O m "n CD O o CO X -< 3 3 > CD 0,0 o m end ^ ^ o o CO >^ ^, -'C?' ,^^J ■v? **;> "<^.> . N X -< o 3 3 c.^ # t \v r^ .^/ > ^ ^^,?# o o 3 3 'S' ^ r^ & ^CP ¥* fp ^fo- O I .^^ raw 00 o 00 b N3 00 to 1.0 mm 1.5 mm 2.0 mm ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghi|klmnopqrstuvwxyz 1234567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 2.5 mm ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 ^o ^o fcP fp m o o ■O m T3 I 2 <- > c c*> I TJ ^ 0(/) 5 m O m 1— » N> ho CJl O en 1 3 3 3 r- «< :o OOM o O >> Is O i^ to 7 |o IS IM C/) ^— I oorsi O ^^^ '* ^^. CT r ci (^ < rs. I 1 !' i i I t) -, i I J'—V-*-* * - ^'1 ,:i 4 " ' * * 'iw rz:> 4- CL7644 Columbia ©niber^itp in rtje Citp of ^eto gork LIBRARY School of Business l! i ?i 'i.1 ! It> i^ome of ffje Xegal anb JBuiinti^ l^ubiitationi of (irtt ^onalb l^vtiii Companp. 198 Broadway, New York. CORPORATE ORGANIZATION. By Thomas Conyngton, of the New York Bar. 400 pp. 6x9 in. 1908. Buckram binding. CORPORATE MANAGEMENT. By Thomas Conyngton. Third Edition. 422 pp. 6x9 in. 1911. Buckram binding. THE MODERN CORPORATION. Fourth Edition. 304 pp. 5^x8^* in. 1910. Cloth. THE LAW OF REAL, ESTATE BROKERS. By Fred L. Gross, of the Brooklyn Bar. 473 pp. 6x9 in. 1910. Buckram binding. CONDITIONAL SALES. By Fred Benson Haring, of the Buffalo Bar. 370 pp. 6x9 in. Interleaved Edi- tion. 1910. Buckram binding. NEW YORK CORPORATIONS. By Richard C. Harrison, of the New York Bar. Second Edition. Revised and en- larged. 500 pp. 6x9 in. Interleaved. 1911. Buckram binding. FINANCING AN ENTERPRISE. By Francis Cooper. 543 pp. 5>^x8^ in. 1909. Second Edition. 2 vols. Buckram binding. INFLUENCING MEN IN BUSINESS. By Walter Dill Scott, Ph. D., Director of the Psychological Laboratory, Northwestern University. 166 pp. 12 mo. 1911. Cloth. SCIENCE OF ACCOUNTS. By H. C. BentlEy, C. P. A. 350 pp. 6x9 in. 1911. Buckram binding. CORPORATE FINANCE and ACCOUNTING. By H. C. Bentley, C. P. A. 500 pp. 6x9 in. 1911. Buckram binding. circulars or any op the above or full LIST op books on APPLICATION. A MANUAL OF Corporate Management CONTAINING FORMS. DIRECTIONS, AND INFORMATION FOR THE USE OF LAWYERS AND CORPORATE OFFICIALS ' * BY Thomas Conyngton of the New York Bar Author of "Corporate Organization," "Partnership Relations," dtc. THIRD EDITION iy New York THE RONALD PRESS CO. 191 1 t( ^ $,^ Copyright 1903 BY The Ronald Fkess Copyright 1904 BY The Ronald Press #/ Copyright 1908 BY The Ronald Press Company Copyright 1911 BY The Ronald Press Company irom tiie Libriry of ^yron B. Goldsmith NOV 1 1927 PREFACE. The purpose of the present volume is to furnish a com- pact, practical and conveniently-arranged v^ork on cor- porate management for the use of lawyers and corporation officials. The formation of corporations is discussed only so far as requisite for a clear presentation of the require- ments and practice of modern corporate procedure, the general subject having already been considered in the author's companion volume, "Corporate Organization." Any complete discussion of the local statutes that modify the general principles of corporation lav^ in the various states has been utterly precluded by the limits of the present volume. Therefore, w^hile frequent reference is made to these statutes, they must in each state be con- sulted for an accurate determination of local regulations and requirements. Wherever the term "statutes" is used in the present volume, reference is intended, unless other- wise specified, to the statutes enacted by the legislatures of the various states. The forms of the present volume' have been increased in number until they now cover practically the entire range of ordinary corporate procedure. The author believes that they will be found authoritative, convenient and of con- tinuing value. As in preceding editions, they are given as precedents and without the usual blanks for variable mat- ter. A better idea of the form as a whole is thereby con- veyed. Also, the changes necessary to adapt a form to any special need are more readily made from a completed 111 IV PREFACE. instrument than from one disjointed by frequent and some- times puzzling blanks. In conclusion, the author wishes to express his sincere appreciation of the very gratifying reception accorded the preceding editions of the present work. He can hardly hope for a more favorable reception for the present vol- ume, but he trusts that the additions that have been made, both in text and forms, and the changes of arrangement, have resulted in a more valuable work. The author has taken advantage of the present reprint of "Corporate Management" to make a few minor correc- tions in its text. Beyond this no change seemed necessary or desirable, the general principles laid down in the vol- ume being in accord with the present trend of legislation and adjudication. Thomas Conyngton. 198 Broadway, New York, March 25, 191 1. t^ 1 ) TABLE OF CONTENTS. PART I.— THE CORPORATE SYSTEM. Chapter I.— The Corporation. § 1. Forms of Business Association. 2. Joint-Stock Companies. 3. Corporations. 4. Stock Corporations. 5. Stock. 6. Corporate Regulation and Organization. 7. The Statutory Laws. 8. Charter and By-Laws. 9. Directors and Officers. 10. Advantages of Corporate Form. Chapter II.— The Charter. § IL The Charter. 12. Amendment of Charter. 13. Usual Charter Provisions. 14. Special Charter Provisions. 15. Incidental Corporate Powers. (1) To Sue or Be Sued. (2) To Use a Seal. (3) To Buy, Sell and Hold Property. (4) To Appoint Directors, Officers and Agents. (5) To Make By-laws. (6) To Dissolve the Corporation. (7) To Do All Things Necessary. 16. Things "Ultra Vires." Chapter III.— The By-Laws. § 17. Nature of By-laws. 18. Scope of By-laws. 19. Adoption of By-laws. IV PREFACE. instrument than from one disjointed by frequent and some- times puzzling blanks. In conclusion, the author wishes to express his sincere appreciation of the very gratifying reception accorded the preceding editions of the present work. He can hardly hope for a more favorable reception for the present vol- ume, but he trusts that the additions that have been made, both in text and forms, and the changes of arrangement, have resulted in a more valuable work. The author has taken advantage of the present reprint of "Corporate Management" to make a few minor correc- tions in its text. Beyond this no change seemed necessary or desirable, the general principles laid down in the vol- ume being in accord with the present trend of legislation and adjudication. Thomas Conyngton. 198 Broadway, New York, March 25, 191 1. i TABLE OF CONTENTS. 4, PART I.— THE CORPORATE SYSTEM. Chapter I.— The Corporation. 5 1. Forms of Business Association. 2. Joint- Stock Companies. 3. Corporations. 4. Stock Corporations. 5. Stock. 6. Corporate Regulation and Organization. 7. The Statutory Laws. 8. Charter and By-Laws. 9. Directors and Officers. 10. Advantages of Corporate Form. Chapter II.— The Charter. § IL The Charter. 12. Amendment of Charter. 13. Usual Charter Provisions. 14. Special Charter Provisions. 15. Incidental Corporate Powers. (1) To Sue or Be Sued. (2) To Use a Seal. (3) To Buy, Sell and Hold Property. (4) To Appoint Directors, Officers and Agents. (5) To Make By-laws. (6) To Dissolve the Corporation. (7) To Do All Things Necessary. 16. Things "Ultra Vires." Chapter III.— The By-Laws. § 17. Nature of By-laws. 18. Scope of By-laws. 19. Adoption of By-laws. VI TABLE OF CONTENTS. TABLE OF CONTENTS. VU 20. Arrangement of By-laws. 21. Usual Provisions. 22. Occasional Provisions. 23. Amendment of By-laws. 24. Observance of By-laws. 25. Enforcement of By-laws. 26. Record of By-laws. 52. Transfers to and by Trustees. 53. " " " " Minors. 54. " " " " Guardians. 55. " " " " Corporations. 56. " " " " Partnerships. 57. Summary of Rules Regulating Transfers. ^27. 28. 29. 30. 31. 32. PART II.— STOCK. Chapter IV.— The Stock System Capital Stock. Shares of Stock. Kinds of Stock. Subscriptions to Stock. Certificates of Stock. Issuance and Transfer of Stock. Chapter V.— The Stock Records. § ZZ. Transfer on Books of Corporation. 34. Stock Certificate Book. 35. Stock Ledger and Stock Book. 36. Transfer Book. Z7. Closing the Books. Chapter VI.— Transfer of Stock. § 3S. Procedure of Transfer. 39. Transfer of Treasury Stock. 40. Transfer Agent and Registrar. 41. Lost Certificates. 42. Pledges of Stock. 43. Restrictions on Transfers. Chapter VII.— Rules Regulating Transfers. § 44. Responsibility of Corporation as to Transfers. 45. Duties of Officers as to Transfers. 46. Who May Transfer Stock. 47. To Whom Stock May be Transferred. 48. Liability Involved in Transfers. 49. Form of Transfer. 50. Transfers to and by Agents. 51. " " " " Executors and Administrators. .■ \ PART III.— STOCKHOLDERS. Chapter VIII. — Rights and Powers of Stockholders. (a) Rights of Stockholders. I 58. Incorporators, Subscribers and Stockholders. 59. Rights of Stockholders. 60. (1) Voting. 61. (2) Dividends and Participation Rights. 62. (3) Distribution of Assets on Dissolution. 63. (4) Inspection of Books. 64. Special Charter Rights. 65. Statutory Rights. (b) Powers of Stockholders. § 66. Individual and Collective Powers. 67. (1) To Amend Charter. 68. (2) To Adopt, Repeal or Amend By-laws. 69. (3) To Elect Directors. 70. (4) To Sell Entire Assets. 71. (5) To Dissolve the Corporation. 72. (6) Special Powers. Chapter IX. — Liabilities of Stockholders. § 73. Liabilities of Subscribers to Stock. 74. " " Purchasers of Stock. 75. ** of Stockholders as Partners. 76. Assessment Liability. 77. Liability for Disbursements from Capital. Chapter X. — Annual Meeting of Stockholders. § 78. The Annual Meeting. 79. Closing Transfer Books. 80. Notice of Annual Meeting. Vlll TABLf: OF CONTENTS. 81. Preparations for Annual Meeting. (1) Order of Business. (2) List of Stockholders. (3) Outline Minutes. Officers of Meetings. Opening the Meeting. RoU-Call. Proxies. Quorum. Proof of Notice, Reading of Minutes. Annual Reports. Election of Directors. Voting at Elections. Other Business. Adjournment. Signing Minutes. Chapter XI. — Stockholders' Special Meetings. Special Meetings of Stockholders. Call for Meeting. Notice of Special Meeting. Consent Meetings. Opening FormaHties. Special Business. Adjournment. PART IV.— DIRECTORS AND OFFICERS. Chapter XII.— The Board and Its Meirbership. § 102. Functions and Action of the Board. 103. Action without Meeting. 104. Number. 105. Qualifications. 106. Residential Qualifications. 107. Stockholding Qualifications. 108. Compensation of Directors. Chapter XIII.— Election and Removal of Directors. § 109. Appointment of Directors, 110. Classification of Directors. 111. Vacancies on the Board. 112. Directors Holding Over. 113. Resignation of Directors. 114. Removal of Directors. « 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. § 95. 96. 97. 98. 99. 100. 101. 0* TABLE OF CONTENTS. Chapter XIV.— Powers and Liabilities of Directors. § 115. Powers of Directors. 116. Duties of Directors. 117. Appointment and Removal of Officers and Agents. 118. " of Committees. 119. Adoption of By-laws. 120. Directors as Officers. 121. Directors Dealing with Corporation. 122. Common Law Liability of Directors. 123. Statutory Liabilities of Directors. Chapter XV.— Meetings of Directors. § 124. Time of Meetings. 125. Place of Meetings. 126. Purposes of Meetings. 127. Assembling Meetings. 128. Call for Special Meetings. 129. Notice of Special Meetings. 130. Call and Waiver of Notice. 131. Consent Meetings. 132. Opening Directors' Meetings. 133. Quorum. 134. Reading of Minutes. 135. Reports. 136. Unfinished and New Business. 137. Adjournment, Chapter XVI.— Standing Committees. § 138, General. 139. Appointment of Standing Committees. 140. Organization of Standing Committees. 141. Meetings of the Standing Committees. Chapter XVII.— The Corporate Officials. § 142. Officers. 143. Appointment of Officers. 144. Qualifications of Officers, 145. Compensation of Officers, 146. Powers and Duties of Officers, 147. Liabilities of Officers. 148. De Facto Officers. 149. Removals and Resignations. IX '> X TABLE OF CONTENTS. Chapter XVIII.— The Corporate Officials.— (Continued.) § 150. Executive Officers. 151. The President. 152. The Vice-President. 153. The Secretary. 154. The Treasurer. 155. Chairman of the Board. 156. Managing Director. 157. General Manager. 158. Counsel. 159. Auditor. PART v.— MISCELLANEOUS CORPORATE MATTERS. Chapter XIX.— Minutes and Other Corporate Records. The Corporate Books. (a) Minutes. The Minute Book. Contents of Minute Book. Form and Subject Matter of Minutes. Recording the Proceedings. Approval and Amendment of Minutes. "Cut and Dried Minutes." (b) Other Corporate Records. Subscription and Instalment Books. Dividend Book and Bond Register. § 160. 161. 162. 163. 164. 165. 166. m^ 167. 168. Chapter XX.— Dividends. § 169. 170. 171. 172. Declaration of Dividends. Form of Dividends. Payment of Dividends. Illegal Dividends. Chapter XXI.— Consolidation, Reorganization and Dissolution. § 173. 174. 175. 176. 177. 178. 179. Forms of Consolidation. Statutory Consolidation. Consolidation by Sale or Lease of Assets. " Purchase of Controlling Interest. Combinations. Reorganization. Dissolution. TABLE OF CONTENTS. PART VI.— FORMS RELATING TO INCORPORATION. Chapter XXII.— Subscription Lists and Receipts. (a) Subscription Lists. Form. 1. Subscription List. Simple Form. 2. " Agreement. Trustees'. ^ " " Conditional. Stock Bonus. 4. " Blank. Individual. 5- " " After Organization. 6. Application for Stock. Instalment Payments. (b) Receipts for Subscription Payments. 7. Trustee's Receipt. 8. Instalment Scrip. 9. Endorsement of Instalment Payments. 10. Instalment Certificate. 11. Interim Receipt. 12. Temporary Stock Certificate. (c) Assignment of Subscriptions. 13. Assignment of Subscription. No Payments 14. ;] " " Partly Paid. 15. " " Instalment Receipt. Chapter XXIIL— Forms of Stock Certificates. Form. 16. Stock Certificate with Stub. Common Stock. *'• ' " Stub. Common Form. 18. Preferred Stock Certificate. 19. Assignment of Stock Certificate. In Blank 20- " " " " Complete. 21. Secretary's Receipt for Stock Certificates. Chapter XXIV.— Charter Forms. Form. 22. New York Charter. 23. New Jersey Charter. Chapter XXV.— By-Law Forms, Form. 24. By-laws. 25. Certification of By-laws. XI xu Form. TABLE OF CONTENTS. Chapter XXVI. — Exchange of Property for Stock. 4 26. Proposition to Exchange Property for Stock. 27. Assignment of Incorporators' Subscriptions. 28. Stockholders' Resolution. Property for Stock. 29. Directors' 30. Assignment. Property for Stock. 31. Instructions for Issuance of Stock. Charter XXVII.— Forms for First Meetings. (a) Calls and Waivers. Form, 32. Call and Waiver. Stockholders'. Short Form. 33. " " " " Extended Form. 34. " " " Directors'. (b) Proxies. 35. Proxy. First Meeting of Stockholders. 36. Formal Proxy. First Meeting of Stockholders. (c) Minutes of First Meetings. 37. Minutes. Stockholders'. 38 " Directors'. PART VII.— FORMS RELATING TO MEETINGS. Chapter XXVIII.— Calls and Waivers. (a) Special Meetings of Stockholders. w^p Form. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. Call and Waiver. Special Meeting of Stockholders. President's Call. " « « « « « u u u Formal. Directors' Call. Special Meeting of Stockholders. " Instructions. Special Meeting of Stockholders. " Resolution. Special Meeting of Stockholders. Stockholders' Request for Special Meeting. President's Endorsement of Stockholders' Request. Stockholders' Call for Special Meeting. (b) Special Meetings of Directors. Call and Waiver. Special Meeting of Directors. Agreement. Consent Meeting of Directors. President's Call. Special Meeting of Directors. Directors' Call. Special Meeting of Directors. Form. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. Form. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72 73. TABLE OF CONTENTS. xiii Chapter XXIX.— Forms for Notices of Meetings. (a) Meetings of Stockholders. Notice. Special Meeting of Stockholders. Publication Notice. Special Meeting of Stockholders. (U. P. R. R. Co.) Notice. Annual Meeting. (U. S. Steel Corp.) Publication Notice. Annual Meeting. « « « II II (U. p. R. R. Co.) (b) Meetings of Directors. Notice. Special Meeting of Directors. " Regular « (I « Chapter XXX.— Forms of Proxies. Proxy. Simple Form. Unlimited. Tim.e Limited. Particular Meeting. Limited as to Stock. Annual Meeting. Formal. " ** Prescribed Action. Specific Action. Trustee's. Corporate Proxy. " " Directors* Resolution. Revocation of Proxy. (U. S. Steel Corp.) H Chapter XXXI. — Forms of Motions and Resolutions, (a) Motions. Form. 74. Motion. To Receive President's Report. 75. 76 77. 78. 79. •80. 81. 82. 83. (( ' 21 R.^£"*9"(?898t"'"'' ^- ^°-' '' ''• ^- ''' ^'^'^^' ^-^^"d V. Globe Milling Co.. 31 32 THE CORPORATE SYSTEM. Stockholders from parting with their stock be effective, as such by-laws are held to be against public policy. By-laws, so long as within the corporate powers, are effective and binding on both stockholders and officials of the corporation. They are not, however, effective as to third persons who have no connection with the company and have no knowledge of the by-law provisions. Ihus, if the corporate officials enter into contracts which are apparently within their own power, but are in fact ex- pressly forbidden by the by-laws, such contracts are bind- ing on the corporation if the other party is unaware of the by-law prohibition. The officials who have so wilfully dis- regarded the by-laws are responsible to the corporation, but the corporation cannot repudiate their contracts when made under such conditions. By-laws may ordinarily be repealed by proper pro- cedure but occasionally a by-law is passed as a considera- tion for subscriptions to stock or under other conditions that render it a contract obligation, not susceptible to re- peal as are other by-laws.^ Thus as a condition precedent to a large subscription to stock of the company, a by-law might be passed insuring to the minority stockholders cer- tain representation on the board of directors. This by- law could not thereafter be repealed against the objections of the parties whose subscriptions were conditioned upon its adoption. It has also been held that a by-law provid- ing for cumulative voting cannot be repealed in the face of objection.' § 1 8. Scope of By-Laws. The scope and detail of any set of by-laws will depend upon the size of the corporation, the rights of the minority. BY-LAWS. 33 and the relation of the officers and directors to the busi- ness. Thus if all or nearly all the stock is owned by a few men, who compose the board of directors and are themselves officers of the company and are devoting their entire time to its affairs, the by-laws might with safety be few and simple and general in their terms. On the other hand, if the stockholders are numerous and widely scat- tered, the board of directors large and unwieldly, the enter- prise important and its actual management in the hands of committees and officers, the by-laws should be full, explicit and carefully adapted to the circumstances of the particu- lar corporation. In brief, the scope and details of the by- laws will increase as the size, importance and liability of friction in the management of the corporation increase. §19. Adoption of By-Laws. The grant of a charter confers without specific men- tion the power to make by-laws. This power, unless otherwise provided by the statutes of the particular state or the charter of the corporation, belongs to the stock- holders alone.^ These may, if they desire, delegate the power to the directors. In some states the statutes confer more or less ex- tended powers to make by-laws upon the directors, the statute provisions varying in the different states. In some, as in New Jersey, North Dakota and Pennsylvania, the statutes merely provide that the directors may be given this power by charter provision or by action of the stock- holders. In other states, as in New York and Minnesota, they are given power to make by-laws in conformity with or subordinate to those made by the stockholders, but in some few instances, as in Illinois, Kentucky and the Dis- trict of Columbia, directors are given the sole and entire right to make by-laws. •Angel & Ames on Corp., § 327; Kyd on Corp.. § 98. 34 THE CORPORATE SYSTEM. Provisions giving the directors pov^er to make or amend by-laws, save under careful restrictions, are of doubtful wisdom. The whole procedure is an innovation, altering completely the original plan of corporate organi- zation under which the by-laws passed by the stockholders wxre designed for the express government, regulation and restraint of directors and officers. While the change may be advantageous or even necessary for the larger modern corporations, it is not, as a rule, a change to the advantage of the stockholders and is but rarely, if ever, advisable for the smaller corporations. The power to make by-laws, whether vested in stock- holders or directors, should be used with discretion. They are the working rules of the company and, if carelessly drawn, they may, on the one hand, seriously impede neces- sary business operations, or, on the other hand, fail to restrain reckless or improvident action of directors and officers. By-law^s are usually adopted at the first meeting of the stockholders or of the directors as the case may be, and other by-laws are added as the necessity arises. They should be carefully drawn, formally adopted and ac- curately recorded. By-laws are usually prepared in the first place by the counsel of the company and are presented to the first meeting of the stockholders, are read and passed upon section by section, and are then adopted as a whole, any needed changes being made as the reading progresses. Frequently, however, the reading is dis- pensed wnth, the by-laws being presented and adopted as a whole. The wisdom of this is more than doubtful, not only because every interested party should be familiar with the by-law provisions, but because the omission of the reading gives an opportunity — occasionally taken ad- vantage of by unscrupulous parties — to insert provisions in the by-laws which are adverse to the interests of the BY-LAWS. 35 corporation, but which are not discovered until after adop- tion, when repeal is difficult or perhaps impossible. § 20. Arrangement of By-Laws. By-laws should be so grouped that those relating to any matter may be readily found. A good arrangement is as follows: (I) Stock. (II) Stockholders. (Ill) Di- rectors. (IV) Officers. (V) Dividends and Finance. (VI) Sundry Provisions. This arrangement is that adopted by Boisoit in his very excellent work on by-laws, is logical and convenient, and is followed in the present volume. § 21. Usual Provisions. The usual provisions of the by-laws relate to the or- dinary conduct of the corporate affairs and provide in de- tail for the issuance and transfer of stock, for meetings of stockholders and directors, for elections of directors and officers; prescribe the powers and duties of directors and officers ; provide for the general care and management of the property and finances of the corporation and for the other details of corporate procedure. Provisions which may or must appear in the by-laws are in many states prescribed by statute. Some of these are privileges or regulations which would otherwise be be- yond the power of the corporation. Others merely reit- erate provisions which the corporation would have full power to include without statutory permission. In any case, the recital of optional or prescribed by-law provisions m the statutes does not prevent the inclusion of any other proper regulations in the by-laws that may be desired. In each state many matters directly relating to cor- porate procedure, such as notice of meetings, method of electmg directors, etc., etc., are regulated by statute. It 36 THE CORPORATE SYSTEM. BY-I,AWS. 37 is well to have the substance of these laws embodied in the by-laws, as they are then more accessible and are much less likely to be overlooked and disregarded than if their observance depended solely upon the secretary's knowl- edge of statute law. This is also true of the similar pro- visions occuring in the charter of the company, which should always be incorporated in the by-laws. § 22. Occasional Provisions. Certain routine matters are provided for in every set of by-laws as a matter of course. In addition, any other matters desired by the stockholders, or directors, if direc- tors are empowered to make by-laws, may be introduced if not m conflict with the law of the state or with the pro- visions of the company's charter. This gives wide oppor- tunity for the introduction of provisions to meet special conditions, particularly where special provisions are not permitted in the charter. Thus the by-laws will some- times prescribe a maximum limit for salaries, or will im- pose a debt limit upon the corporation, or will give some one officer unusual powers, or, where permissible, will pro- vide for cumulative voting or for classification of stock, each class electing some specified proportion of the direc- tors, etc., etc. The number of these occasional or special provisions that may be brought in the by-laws is practically un- limited, and they are legally effective so long as they do not transcend the limitations imposed by equity, or by the constitutional, statute or common law and the charter of the corporation. § 23. Amendment of By-Laws. Procedure for their repeal or amendment is usually prescribed in the by-laws. When not otherwise provided %4 by the statutes, the charter or the by-laws themselves, they may always be amended by the vote of a majority of the stockholders at any regular meeting, or at any special meeting duly called for that purpose. Directors have no power to alter, amend or repeal by-laws passed by the stockholders, save when the power is in some way ex- pressly given them. Under the usual by-law provisions for amendments, a majority of the outstanding stock constitutes a quorum, and a majority of this quorum may at any duly constituted meeting amend the by-laws, It is obvious that the actual amendment under these provisions may be effected by a comparatively small proportion of the outstanding stock. Thus, if there are two hundred shares outstanding and one hundred and one shares are represented at a meeting, such meeting is duly constituted^ and fifty-one shares, or but little over twenty-five per cent, of the entire outstand- ing stock, may then amend the by-laws. Where greater stability is desired — generally in protection of minority interests — a special provision is frequently incorporated in the by-laws requiring that a majority of the entire stock or perhaps two-thirds in interest, or even a larger propor- tion, must vote in favor of any amendment to secure its adoption. Such provisions are entirely legitimate but to be effec- tive must usually be incorporated in the charter. In some states the statutes support such by-law provisions, even prescribing the majority necessary to amend or repeal by- laws, but otherwise they are of little avail. A majority of the stockholders at any duly constituted meeting have the common law right to amend and repeal by-laws, and this right cannot be taken from them by mere unsupported by-law inhibition.^ A restriction on this general right to amend by-laws 'Smith V. Nelson, 18 Vt. 511 (1846). 38 THE CORPORATE SYSTEM. BY-I*AWS. 39 is occasionally imposed by the doctrine of vested rights. "A private corporation cannot repeal a by-law so as to im- pair rights which have been given and become vested by virtue of the by-law; and this although the power is re- served by its charter to alter, amend or repeal its by- laws."^ Restrictions of this nature have already been re- ferred to in § 17 of the present chapter. It is to be noted that in Pennsylvania it has been de- cided that the by-laws cannot be amended in any impor- tant particular, such as an increase of directors, at an an- nual meeting unless the notices of that meeting informed all the stockholders that such action was contemplated.^ This doctrine is unusual and does not obtain in a majority of the states.^*^ If by-laws are to be amended, it is desirable that the call and notice for such meeting, as well as the resolution by which the change is made, should set forth both the ex- isting by-law and the proposed amendment. (See Ch. XXIX, "Forms for Notices of Meetings.") § 24. Observance of By-Laws. As a rule, the requirements of the by-laws should be strictly and formally observed. Every stockholder, and, in many cases, every creditor of a corporation, has the right to demand that its operations be conducted in ac- cordance with the laws of the state and with the pro- visions of the charter and by-laws of the corporation. Hence any irregularities may lead to legal interference and in some cases to the personal liability of the offending officer or director.^^ For instance, failure to give due •Kent V. Quicksilver Mining Co., 78 N. Y. 159 (1879). "Bagley v. Reno, etc. 201 Pa. St. 78 (1902). "Chicago, etc. Ry. v. Union Pac. Ry., 47 Fed. Rep. 15 (1891); Warner v Mower. 11 Vt. 385 (1839). ^, xr c p t n ^z "Briggs V. opaulding, 141 U. S. 132 (1890); Bloom v. Nat. bav. & Loan Co., 15-i N. Y. 114 (1897); Williams v. McKay, 46 N. J. Eq. 25 (1889); Cit. Bldg. Assn. v. Coriell, 34 N. J. Eg. 383 (1881); Stockholders of Shelby R. R. Co. v. L. C. & L. R- R. Co., 12 Bush (Ky.) 62 (1876); see also note 16, 8 25, post. notice of a special meeting of the stockholders may later cause the entire proceedings to be declared invalid.^^ Or an officer acting in excess of the authority conferred upon him by the by-laws may render himself personally liable for any resulting loss.^^ When, however, a corporation is prosperous and free from debt, and there are no objecting stockholders, and the officers possess the entire confidence of stockholders and directors, such accurate and formal compliance with all the by law requirements is not so essential. Under such circumstances the formal regulations of the by-laws may be waived at convenience and the corporation con- ducted with the same simplicity and informality as a part- nership.^"^ It must be emphasized, however, that this is irregular and never safe unless acquiesced in by every in- terested party. If a stockholder objects to violations or disregard of the by-laws, his objection must be promptly voiced or otherwise he will be deemed to have acquiesced and be estopped from subsequent interference. He must also be prepared to follow up his objection with proof that the irregularities have been committed. The law presumes that all proceedings have been regular and he who charges irregularity must do so without delay and must thereafter prove his allegation. ^^ § 25. Enforcement of By-Laws. The most potent factor in securing the observance of by-laws is found in the legal liabilities and entanglements that may result from violation. As already stated, cor- porate action taken in disregard of by-law requirements is "Bagley v. Reno Oil Co., 201 Pa. St. 78 (1902); Tuttle v. Michigan A. L. R. R. Co., 35 Mich. 247 (1877); Jones v. Railroad, 67 N. H. 234 (1892). "Van Dyck v. McQuade, 86 N. Y. 38 (1881); Scott v. Eagle Fire Co., 7 Paige (N Y) 198 (1838) ■ "Little V. Garaijrant, 90 Hun (N. Y.) 404 (1895); Aff'd, 153 N. Y. 661 (1897). "Sargent v. Webster, 13 Metcalf (Mass.) 497 (1847); Heintzelman v. Druids, etc. Assoc, 38 Minn. 138 (1888). ^^ THE CORPORATE SYSTEM. frequently illegal and liable to be restrained or set aside at the suit of any stockholder or creditor. Also the direc- tors and officers guilty of such irregularities may render themselves personally liable for damages.^^ Direct penalties for violation of by-law provisions are unsatisfactory and very difficult of enforcement,^^ ^^^ ^^^ considerations mentioned are generally relied upon to se- cure observance of the by-laws in all important matters. The smaller omissions and negligences on the part of di- rectors and officials are usually passed over and disre- garded, or their recurrence prevented by the election of more careful officials. Cases may arise where penalties for violation of the by-law provisions may be profitably employed. Where the power of removal is given by the by-laws or statutes, disregard of the by-laws by officials of the corporation would undoubtedly be proper grounds for its exercise. Where such express power is not given, official disregard of the by-laws, when wilful, would probably be sufficient reason for removal under the common law. In a number of states the statutes expressly permit the imposition of penalties for any breach of by-law provisions. These penalties uniformly take the form of fines. Thus in New Jersey, Wisconsin, Maine, Michigan, Pennsyl- vania, New Mexico, North Carolina and Rhode Island a penalty of twenty dollars may be imposed; in Florida a penalty of twenty-five dollars, while in California, North Dakota, South Dakota, Oklahoma and the Philippines, the penalty may be one hundred dollars. Where the statutes authorize such penalties, they may be enforced by action at law or by charging the amount against the offender and deducting it from any dividends or salary thereafter due him. Kay'V^N^TVa* 2!; M R^l vV ^''p^V^ "'^a ^^^ ^ ^ 333 (1893). Williams v Mc- r/e'^klso note 11!^'^ 11 ame^ ' ^''- ^'^^^ ^''"- ^- ^°"^"' ^' ^' '■ ^Q- 383 (1881); BY-LAWS. 41 #f i;!: It should be noted that no stock corporation has the right to expel a stockholder, or deprive him under any circumstances of his rights of membership in the corpora- tion. Such penalties, if imposed, could not be enforced.^* In a membership or non-stock corporation the rule is dif- ferent.^^ § 26. Record of By-Laws. As by-laws are adopted, it is the duty of the secretary to properly record them. The usual and preferable method is to enter them in the minute book immediately following the charter. Space may be left between the different articles of the by-laws for the insertion of any new sections, and sufficient space be left between the sec- tions for the insertion of any annotations or amendments. When by-laws are repealed, they are preferably crossed out with red ink, the date and any material circumstances of their repeal being endorsed on the margin. Amend- ments are entered in the same way, the portion of the by- law amended being ruled out and the amendment inter- polated. New sections may be entered in the same style as the original sections, the date of adoption being noted, but are sometimes entered in red ink. In some few states, viz., North and South Dakota. Idaho, Nevada, Montana and California, the by-laws must be entered in a ''Book of By-laws," and, save as to Nevada, must be properly certified by the officers of the corpora- tion before they are legally effective. A still more formal certification and filing is required in the Philippines. " See 2 Cook on Corp., § 710. Union 7rCaV308^V]«R8f • pT' ^^'^ i^\ Y' ^^ ^^^^O^' ^tto v. Tailors P. & B. 401 (1896) (i888); People ex rel Johnson v. N. Y. Produce Ex.. 149 N. Y. > PART II.— STOCK. CHAPTER IV. THE STOCK SYSTEM. §27. Capital Stock. The capital stock or capitalization of a corporation is the maximum amount of stock which it may issue under the provisions of its charter. This capitalization is fixed in the first place by the incorporators. Varying condi- tions influence its amount. Sometimes the incorporators decide that a certain capital is necessary for the opera- tions of the company, and use this as a basis for deter- mining its capital stock. Or it may be estimated that the enterprise will pay adequate dividends on a certain amount, and the capitalization be reached in this way. The organization tax imposed by the state sometimes in- fluences its amount. Many other considerations may enter in and the determination of the most advantageous capital- ization is frequently one of much difficulty.^ Whatever the amount decided upon, it is stated in and made part of the charter application, and, if this application is allowed, the corporation comes into being with full authority to issue stock up too, but not above, the amount so fixed by its charter. § 28. Shares of Stock. For the sake of accuracy and convenience in repre- * A fuller discussion of this subject will be found in Conyngton on Corporate Organization, Ch. VI. 42 THE STOCK SYSTEM. 43 senting the interests of the various stockholders of the corporation, its capital stock is divided into shares. These are almost invariably of equal value and together make up the whole capitalization. Each of these shares ordinarily represents not only a unit of value, but also a unit of vot- ing right, of interest in the profits when dividends are de- clared and of interest in the net assets when the corpora- tion is liquidated. Those who invest the money or prop- •erty with which the corporation does business, receive these shares in return for and as the evidence of their in- vestment. Those who hold shares are termed stockhold- ers or shareholders, and the interest of each is measured by the number of shares he holds. The "face" or ''par" value of shares of stock is their nominal value, as distinguished from their actual or selling value. This par value is usually decided upon in the firsr place by the incorporators and is then included in and fixed by the charter. In some few states this value is restricted by statute within certain limits, as in New York where shares may not be less than $5 nor more than $100; Minnesota where they may not be less than $1 nor more than $100, or New Hampshire where the minimum face value is $25 and the maximum $500. The usual and most convenient par value of shares is $100. They are rarely of greater par value but are frequently less. Ten dollar shares are some times issued, and one dollar shares are common, particularly in mining corporations. (See § 5.) § 29, Kinds of Stock. Unissued Stock. Before issue, the stock of a corpora- tion is said to be unissued. As a corporation is empow- ered to issue stock up to the full amount authorized by its -charter, but is not compelled to issue more of this than is actually necessary for its operations, it very frequently 44 STOCK. THE STOCK SYSTEM. 45 K III happens that part of its stock is issued while part remains unissued. Stock once issued cannot again become un- issued stock, even though it comes back into the posses- sion of the corporation. Unissued stock, no matter whether it be the whole capital stock or only a portion thereof reserved, represents nothing whatever beyond the potential right of issue. It has no intrinsic value. It is in itself a nullity. It is mere- ly the right — granted by the state — to issue stock up to the prescribed amount. It is not an asset of the corpora- tion any more than an unissued promissory note is an as- set of an individual or firm.^ Unissued stock is at times somewhat vaguely desig- nated as "treasury stock." This term is better reserved for stock of the corporation which has been issued but has afterwards returned by donation, purchase, or otherwise, to the treasury of the company. Issued Stock. Issued stock is that which has, by dul/ accepted subscription, or by payment in cash, property or services, or other values, passed from the company to others. (See § 32.) Stock which has been issued and is in the hands of stockholders is said to be ''issued and out- standing. For bookkeeping purposes, issued stock is regarded as a liability of the company, and the cash or property or other values received therefor should be an equivalent asset. Full-paid Stock. When the corporation issues stock and receives in exchange therefor not less than its full face or par value in money or property or other valuable con- siderations, without fraud and in good faith, such stock is "full-paid." If issued for less than its full face value or if payment in full has not yet been received, the stock is not full-paid stock, and the holder of such stock is liable to the 'Brewster v. Hartley, 37 Gal. 15 (1869). corporation or its creditors for the difference between the amount actually paid on the stock and its par value. (See §§ 48, 73, 74') The holders of full-paid stock are not liable to creditors of the company in case of insolvency,^ nor, save in a few states, subject to assessment on their stock. Common Stock. The general or ordinary stock of the company, with neither special privileges nor restrictions, is termed "common stock." Unless preferred or other special stock is issued by the company, all its stock is com mon stock. Preferred Stock. Stock which by proper statutory pro- cedure has been given special rights as to dividends or as- sets or some other privilege not enjoyed by the remaining stock of the same corporation, is termed "preferred stock. ""^ (See Form i8.) Subject to any statutory regulations, the privileges of preferred stock are purely a matter of agreement among the incorporators, or, if created later, among the stock- holders of the corporation. Preferred stock is therefore issued in many diflferent forms. Thus different classes of preferred stock may be created, the first receiving its divi- dends before the second and the second before the third, and so on, all of the preferred stocks' receiving their divi- dends in any year before the common stock may receive any dividend at all. Also these different classes may re- ceive dividends at different rates, the first receiving per- haps five per cent., the second six per cent., and the third seven per cent. Or sometimes the amount of a preferred dividend will be made contingent upon the amount of cor- porate profits earned, or the corporate income from par- ticular sources may be designated for payment of pre- ferred dividends. Or again it is sometimes provided that « Sprague v. Nat. Bk. of America, 172 111. 149 (1898); Coleman v. Howe, 154 111. 458 (1895); Berry v. Rood et al. 168 Mo. 316 (1902). * Boardman v. Lake Shore & Mich. So. Ry. Co., 84 N. Y. 157 (1881). I ' f 46 STOCK. THK STOCK SYSTEM. 47 the preferred dividends shall first be paid and the preferred Stock then participate equally with the common stock of the company in all further dividends for that year. Or the dividends on preferred stock may be made cumulative, in which case the stock has a continuing claim against the profits of the corporation for its preferred dividends or any portion thereof not paid in any particular year. Such de- ferred dividends accumulate from year to year and must be settled in full before any dividend may be paid the com- mon stock. Preferred stock votes as does common stock unless the privilege is expressly denied. Preferred stock may or may not have preference in the final distribution of assets, according to the terms of the provisions by which it is created. It may be stated generally that preferred stock has every right enjoyed by common stock unless other- wise expressly provided. Guaranteed Stock. When dividends on the stock of one corporation are guaranteed by another corporation, the stock is said to be guaranteed. The arrangement is com- mon among railroad companies and is occasionally entered into by individual corporations. The term is also some- times applied to preferred stock when its dividends are cumulative.^ Treasury Stock. Unissued stock is frequently but loose- ly designated "treasury stock." As already stated, the term is better reserved for stock that has once been issued and has come back into the possession of the company. Such stock is not cancelled but is held subject to issue, usually at the discretion of the board of directors. Treasury stock is regarded as an asset of the com- pany and may be sold by the board of directors as any other property may be sold. If it was "full-paid" before •Green Bay, etc. R. R. Co. v. Union, etc. Co., 107 U. S. 98 (1882); Marbury V. Kentucky Union Land Co., 62 Fed. Rep. 335 (1894); Boardman v. Lake Sh. & M. S. Ry. Co., 84 N. Y. 157 (1881). it returned to the company, it retains that character and may be sold below par without on that account involving the purchaser in any liability. (See §§ 48, 74.) While the company holds treasury stock, such stock is inert and can neither be voted nor participate in divi- dends.^ Such stock is not, however, cancelled but is held subject to such sale or other disposition as the directors may determine upon, and is therefore still "issued" though not "outstanding."^ Its character as full-paid stock and as issued stock has not been changed by its acquisition by the corporation. Watered Stock. Stock issued as full-paid when the cor- poration has received no equivalent therefor or but a por- tion of its par value, is commonly termed "watered" stock. ^ Watered stock may be created by the issue of stock as a stock dividend without sufficient increase of the corporate property to support it, or by its issuance as a bonus with preferred stock or bonds, or, as is the method in the great majority of cases, by its issuance for property or services at an overvaluation. In many states such issues of "ficti- tiously paid-up" stock are prohibited. The issuance of watered stock is usually objectionable. It not only creates a fictitious obligation of the company which may lead to failure and insolvency, but it also creates a presumption of values which do not exist, and which is not uncommonly carried so far as to become a fraud upon the investing public. § 30. Subscriptions to Stock. Subscriptions to stock are made both before and after organization of the corporation. A subscription before organization is in the nature of a continuing proposition nr. ^^J**".^^" "^- Copper Works, 8 Fed. Rep. 66 (1881); Brewster v. Hartley, 27 Cal. IS (1869); O'Connor v. Int. Silver Co., 68 N. J. Eq. 680 (1905). ^Knickerbocker, etc. Co. v. State Board of Assessors, 62 Atl. Rep. (N. T.) 266 (1906); Reversed, 74 N. J. L. 583 (1907); Pabst v. Goodrich, 133 Wis. 43 (1907). 'Cook on Corp., Ch. IIL; 2 Clark & Marshall on Corp., §§ 389-401 inclusive: Conyngton on Corp. Organization, §§ 60, 61. 48 STOCK. >i from the subscriber to a non-existent corporation, and in its usual form (See Ch. XXII, ''Subscription Lists and Re- ceipts") is revocable by the subscriber at any time prior to the organization of the corporation. In some states the mere organization of the corporation is held to make the subscription binding on the subscriber.^ In other J states it is not held to be binding until the corporation is organized and has accepted the subscription.^^ (See § 58.) A subscription after organization is binding on the sub- scriber as soon as accepted,^^ and the corporation may usu- ally accept or reject such a subscription at its option. If, however, it has opened subscription books, or has sent out subscription blanks, or has in some other way made a continuing offer, any person subscribing thereunder is held to accept the offer of the corporation and the contract is complete as soon as the subscription is made and both paities are then bound.^^ (See Forms 5, 6.) An unconditional subscription once legally effective, constitutes the subscriber a stockholder of the corporation and his subscription cannot be withdrawn, cancelled, re- leased or rejected unless with the consent of all the other subscribers or stockholders and creditors of the corpora- tion. The directors have no discretion in the matter.^^ If, however, a subscriber becomes insolvent, or his ability to pay is doubtful, the directors may effect any fair com- promise if made in good faith.^^ Also the corporation may, when a subscription is partly paid, agree to recognize the payment, if sufficient, as in full for a portion of the stock. This portion then becomes full-paid and the lia- bility of unpaid stock attaches only to the balance." The •Hudson R. E. Co. v. Tower, 156 Mass. 82 (1892); Muncy, etc. Co. v. De La ^'""Vonke^t-G^V'cl^rTaylor. 30 App. Div. 334 (1898), Buffalo etc R. R. v. Gifford, 87 N, Y. 294 (1882); Athol. etc. Co. v. Carey, 116 Mass. 471 (1875). "Doherty v. Ark. & O. R. Co.. 142 Fed. Rep. 104 (1905). , . ,. mlt a "Greer v. Chartiers Ry., 96 Pa. St. 391 (1880); Spear v. Crawford, 14 Wend. »» Winston v. Dorsett, etc. Co.. 129 111. 64 (1889). "10 Cyc, p. 459. " t Cook on Corp., § 168. THE STOCK SYSTEM. 49 fact that the corporation has become insolvent, or is un- successful, is no defense against payment of a duly made subscription. Material misrepresentations are, however, a good defense as are also any material changes in the con- ditions set out in the subscription agreement. In New York and a few other states the statutes pro- vide that subscriptions after organization shall not be ac- cepted unless accompanied by payment of a prescribed percentage. Under such conditions, a subscription is ab- solutely ineffective until such payment has been made and prior thereto may be withdrawn at the will of the maker. (See Ch. IX, "Liabilities of Stockholders ") § 31. Certificates of Stock. Every stockholder whose stock has been paid in fully is entitled to a certificate or certificates, signed by desig- nated officers and usually bearing the corporate seal, show- ing the number of full-paid shares of stock owned by him.^^ In a number of states the issuance of certificates when stock is full-paid is prescribed by statute. In all cases it is advisable that the by-laws should provide specifically for the issuance of stock certificates and the manner of their execution. The certificate of stock is merely a convenient evidence of the ownership of corporate shares. It occupies much the same relation to stock that the deed does to land. A stockholder can vote, receive dividends, hold office and en- joy all the rights of a stockholder before he receives the certificate or after he has lost it.^^ He is also liable as a stockholder without regard to whether or no he has re- ceived his certificate.^^ The certificate does not make him "National Bank v. Watsontown Bank, 105 U. S. 217 (1881); Birmingham Na- tional Bank v. Roden, 97 Ala. 404 (1892). "Wheeler v. Millar, 90 N. Y. 353 (1882); National Bank v. Watsontown Bank, IDS U. S. 217 (1881); Brigham v. Mead, 92 Mass. 245 (1865). "Mitchell V. Beckman, 64 Cal. 117 (1883). 50 STOCK. a stockholder, but he is entitled to a certificate because he is a stockholder. (See §§ 32, 33- 38. 4h 58-) In many states the statutes prohibit the issuance of a stock certificate before payment for the stock has been re- Sed by the corporation. Elsewhere the charter or by laws should contain a similar prohibition. The object m relerving the certificate until payment has been made is to prevent fhe transfer of the unpaid stock with the possib e rlXg complications in the collection of the amount. still due. (See § 48.) . • If a stockholder has paid in part for his stock, he is en titled to a receipt evidencing such payment but not ordi- n r ly to a stock certificate. If, however, the by-law o nrovL or if the corporation has made a practice of is- :r^c;rtificates for partly paid stock with the amount of payments endorsed thereon, he may demand such certif- icate as soon as his first instalment is paid. Whenever a duly assigned certificate of ^tock ■ u - rendered to the corporation, a ne^ «^f ^^^^.^y "/gj, icates must be issued to the holder if - demand d. (^ e &AA) If the right is likely to be abused, a small fee niay 8 44-; ^' '■"^ s J^^2o rSee SS '^4, "^8; also Ch. be charged for each transfer. (.bee ss J4. i > XXIII, "Forms of Stock Certificates.") § 32. Issuance and Transfer of Stock. When stock of a corporation is subscribed fo^ an^ the subscriptions are accepted by the company, - when pay ment for stock is properly made in cash, P-P^^^ J^'^^^; services or other values, the parties making such subscrip on or payments become stockholders of the company entitled to all the usual rights of stockholders. ' Whethe their stock is technically issued then, or at the time the «Bi™in..a™ Na.o„a, B.„. v KMen, 97 Ala. 404 (.S«,; NaUona, Ban. v. Watsontown Bank, 105 U^' i^L ^Cn 102 Fed Rep. 584 (1900). „ n, Ala 'oGiesen v. L. & N. Mortgage Co. 7/027. nVi son et al Ex'rs v. Owen 113 Ala. « Wheeler v. MiUar^ 90 N- J. ^53 (^882) Nels ^^ ^ ^ 33^ ^^^^,^^ 372 (1896); Buffalo & N. Y. ^"Y ^- ^- •^ THE STOCK SYSTEM. 51 proper entries are made on the books of the corporation, is an open question. It is, however, definitely decided that the issue of stock is entirely independent of the issue of stock certificates. (See §§ 31, 33, 38, 41.) When stock is originally issued it cannot be considered a transfer.^^ The certificates for such an issue are merely evidence of value received by the corporation, but there is no transfer of anything of value from the corporation to the individual. The issue itself is entered in any stock book or stock ledger kept by the company as an original issue but as it is not a transfer, is not entered on the trans- fer book. The directors usually have power to determine when an issue of stock is necessary and to direct such issue. Any holder of full-paid stock is free to transfer it at will. In the absence of statutory or corporate prohibition, stock may be likewise transferred before it is full-paid. This transfer is usually effected by the assignment of the stock certificates which represent the stock transferred, but if certificates are not issued, stock may still be trans- ferred by due written assignment or by transfer on the books of the corporation. (See Ch. VI, "Issue and Trans- fer of Stock.") « Burr V. Wilcox, 22 N. Y. 551 (I860). THE STOCK RECORDS. 53 II CHAPTER V. THE STOCK RECORDS. § 33. Transfer on Books of Corporation. As a rule, the issue of stock is evidenced by the issue of stock certificates, and transfers of stock are effected by assignment of these certificates. The due possession of a properly issued stock certificate, or of such a stock certif- icate duly assigned, is therefore sufficient evidence of the ownership of stock for all ordinary business purposes. For all corporate purposes, however, stock certificates are merely secondary evidence of stock ownership, the stock books of the corporation affording the highest evi- dence of title.^ In many states this is a matter of statutory regulation: elsewhere of charter or by-law provision (See § 35), such statutory or corporate regulations ordinarily prescribing that transfers of stock shall be made only upon the stock books of the corporation and that "stockholders of record," i. e., those whose names appear upon the stock books of the corporation, are alone entitled to exercise the usual rights of stockholders. Thus it will be seen that while the duly assigned stock certificate is good evidence of the ownership of stock, such ownership is not effective for corporate purposes until the transfer has been recorded upon the stock books of the corporation. The holder of such a certificate may force the proper entries upon the corporate books but he cannot ^Cleveland, etc. R. R. v. Robbins. 35 O. St. 483 (1880); Brisbane v. Del., etc. R. R., 94 N. Y. 204 (1883). 52 % exercise the rights of a stockholder until such record has been made. (See § 38.) A practical application of this rule is found in the usual provision that the transfer books of the corporation shall be closed a specified number of days before elections or dividend days. This absolutely prevents any change of ownership for corporate purposes during the closed period and avoids the confusion that would otherwise exist when preparing for payment of dividends, sending out notices of meetings and determining who is entitled to vote at elec- tions. Stock may be sold without restriction during this closed period, transfers being evidenced by assigned cer- tificates, but the record of these transfers on the corporate books cannot be effected until the stock books are again opened. (See § 37.) If no stock certificates were issued, the interests of the stockholders of a corporation might still be assigned very simply, either by transfer on the books of the corporation by the parties in person in the presence of a corporate of- ficial, or by the execution of formal instruments of assign- ment so attested as to satisfy the corporate transfer officer of their validity.^ The books of the corporation used in connection with the issue and transfer of stock are the stock certificate book, the stock ledger and the stock transfer book. § 34. Stock Certificate Book. The stock certificate book consists of blank stock cer- tificates which, numbered and in serial order and each with its corresponding stub, are bound up in book form. When a certificate is to be issued its blanks are properly filled, and all the important data relating to its issue are entered on its stub. The certificate is then detached from the stub for delivery, leaving this latter in the stock certificate book * Manchester Street Railway v. Williams, 71 N. H. 312 (1902); May v. Mc- Quillan, 129 Mich. 392 (1902). 1 "' I' 54 STOCK. THE STOCK RECORDS. 55 as the secretary's memorandum of the issued certificate. The board of directors have power to prescribe the form of stock certificates and to direct their issue. (See Ch. XXIII, ''Forms of Stock Certificates.") The stock certificate book is usually prepared at the time the company is organized or sometimes even before, so that certificates may be issued as soon as the corporate otlicials have been authorized thereto. In this case the form of stock certificate is approved and the issue of cer- tificates authorized at the first meeting of the board. On the other hand, the issue of permanent certificates is some- times deferred for a considerable period on account of the time required for their preparation, or to temporarily save expense, or for some other reason. Under such circum- stances, temporary receipts or certificates (See Forms lo, II) are issued, exchangeable for the permanent certificates as soon as these latter are ready for delivery. When an issue of stock is directed, the secretary fills out and seals in numerical order the proper certificates. At the same time he enters on the stub of each certificate the name of the party to whom it is to be issued, the num- ber of shares represented by the certificate, the date of issue and, if it is an original issue, that fact is noted on the stub; if a reissue, the number of the certificate surrendered is entered. The stub also usually includes a receipt to be signed by the party to whom the certificate is issued and a blank in which, when the certificate is surrendered for cancellation and reissue, is entered the number of the certificate issued in its stead. The stub when filled out thus contains a complete record of its particular certificate. When stock is to be transferred, a new certificate should never be issued until the old certificate, properly endorsed, has been surrendered. This surrendered certif- icate should, as soon as received, be cancelled by cutting, punching or crossing out the signatures and by wTiting or rfl stamping across the certificate the word ''Cancelled." This is done to prevent the certificate from being reissued or from being used for fraudulent purposes in case it were stolen or came otherwise into the hands of improper par- ties. After cancellation the certificate is gummed to the stub from which it was originally taken, the proper entries are made upon the stub (See Form 13) and, as far as the particular certificate is concerned, the matter is closed. A surrendered certificate should never be reissued or again put in circulation under any circumstances. Every precaution should be taken to avoid mistakes in issuing certificates. The entries on the stub should be made before the certificate is separated from it. Certif- icates with space for the name left blank to be filled in later, should never be issued. Such a practice prevents absolutely the accurate record of the stockholders of the corporation, which is legally essential. A corporation is responsible for any fraud or error committed by its agents in the issuance of stock.^ The secretary usually has charge of the stock certif- icate book and prepares the certificates for issue. Where the secretary receives no regular salary or in cases where there are numerous small transfers of stock, he is some- times authorized by the by-laws or by resolution of the board of directors to charge a small fee for transfers — usually varying from ten to twenty-five cents for each certificate issued. This is occasionally a very convenient regulation, compensating the secretary for the time and labor involved in the issue of new certificates and also tend- ing to restrain unnecessary transfers,"* In the smaller corporations the stock certificate book is frequently the only "stock book" maintained. This practice is informal and does not keep the record of stock- holders in convenient shape for reference, but — in the ab- •N. Y. & N. H. R. R. Co. v. Schuyler, 34 N. Y. 30 (1865). * Giesen v. London, etc. Mortgage Co., 102 Fed. Rep. 584 (1900). 56 STOCK. f I :MM sence of statutes requiring other stock books to be kept — is not legally objectionable. The stock certificate book then affords the sole record of those who are stockholders and entitled to vote and receive dividends.^ (See § 36.) § 35. Stock Ledger and Stock Book. In almost every state in the Union some form of stock record is prescribed by statute, variously termed a ''stock book,'' ''stock ledger," "transfer book" or "stock and trans- fer book." In some states, both "stock books" and "trans- fer books" are required. The intent in all these states is to preserve an accurate record of the stockholders and the stock held by them. The stock ledger and the stock book are practically and should be one and the same book, ordinarily kept under the title "stock ledger" or such other title as may be pre- scribed by the statutes. This stock ledger must show in alphabetical order the names and addresses of the stock- holders of record, the amount of stock held and from whom and when this stock was acquired, and, if any of their stock has been disposed of, to whom and when it was transferred. It must also show the balance of stock at any time to the credit of any stockholder. This balance gives the number of shares upon which such stockholder is en- titled to vote and draw dividends. (See Forms 192, 193.) In some states additional data must be entered. Thus, in New York the amount received by the corporation on any stock acquired by a stockholder must be recorded; in California and Texas the corporate assets and liabilities and addresses of corporate officers must be included; in North and South Dakota instalments paid and unpaid, and any assessments levied and paid or unpaid must be re- corded; in Alaska all pledges must be shown by the stock • '^^^"V^^^ ^**- ^^"^ ^- Colwell, 132 N. Y. 250 (1892); Plumb v. Bank of En*o-- THE STOCK RECORDS. 57 book, and in Vermont the articles of association must ap- pear therein. The statutes in many states are very peremptory in regard to the keeping of stock books, providing severe penalties for failure. Thus in New York the statutes not only prescribe heavy penalties for failure to keep stock books but provide that no transfer of stock shall be valid as against the corporation, its stockholders and creditors — save to render the transferee subject to liability as a stock- holder — until the record thereof has been duly entered in the stock book.^ In most of the states the stock book must be kept open for inspection of stockholders or creditors of the corpora- tion, and the provisions relating to the stock books apply both to domestic corporations and also to foreign corpora- tions doing business in the particular state. The stock ledger is usually posted from the transfer book and its balances may be checked from time to time by comparison with the number of shares outstanding as shown by the open stubs of the stock certificate book. (See Forms i6, 17, 192, 193.) § 36. Transfer Book. The transfer book contains not only a record of trans- fers of stock of the particular corporation but also the ac- tual instruments of assignment by which these transfers were effected. It is the book referred to by the usual form of stock certificate in the clause reading "transferable only on the books of the company, etc." (See Form 16.) In some of the states a transfer book is a statutory require- ment. The transfer book is found in two general forms. As usually kept by the smaller corporations (See Form 190) it consists of a series of blank transfers or assignments •N. Y. Stock Corp. Law, § 29; Fenal Code, § 611. 58 STOCK. bound in book form. These are filled out and signed by the owner of stock or his duly authorized attorney when the actual transfer of stock disposed of by him is made upon the books of the company. They are primarily de- signed to be formal evidence of the transfer of stock. They are also the secretary's authority for the issuance of new certificates of stock to the assignee in place of the old certificates surrendered. The second form of transfer book (See Form 191) is used by the larger corporations where the number of trans- fers is too great to permit of the convenient use of the form already described. But one line is required for each transfer of stock, the transferee or his duly authorized at- torney signing in the right-hand column. By reference to the assignment on the back of the stock certificate (See Forms 19 and 20), it will be seen that the assignment of the transfer book is practically a duplication of that on the back of the stock certificate, save that the power of attorney to transfer the stock on the books of the corporation is omitted from the transfer book. As the duly executed assignment on the back of a surrendered stock certificate is a full and sufficient transfer of the ac- tual ownership of the stock and justifies the secretary in issuing another certificate in the name of the assignee, many of the smaller corporations never keep a stock trans- fer book, relying entirely upon the stock certificate book with its stubs and duly assigned and cancelled certificates for the record and evidence of authorization of transfers. (See § 34.) When the transfer book is used, its assignment forms are signed either by the party making the transfer or by his duly authorized agent. Should the transferrer come in person— as he has the right to do— and sign a transfer on the stock transfer book, there is no legal necessity for his signature to the assignment on the back of the stock cer- ^ THE STOCK RECORDS. 59 tificate. It is, however, always customary for him to ex- ecute the assignment on the back of the surrendered stock certificate as well. It is but seldom that the transferrer makes the transfer on the books of the corporation in person. In perhaps ninety-nine cases out of a hundred he merely signs in blank the assignment on the back of the certificate and turns it over to the purchaser. The name of the attorney to make the transfer is then inserted at the time the certificate is presented for transfer, either by the party by whom the certificate is surrendered or by the secretary of the com- pany who, as a matter of convenience, usually inserts his own name. The attorney so designated signs the trans- fer on the transfer book. (See § 38.) § 37. Closing the Books. In all the larger corporations it is customary to close the stock books to transfers prior both to elections of di- rectors and the payment of dividends,^ for a period of from two to forty days. This is done to enable the corporate officers to make an accurate list of those entitled to receive notice of meetings and to vote thereat or to receive divi- dends. (See § 33.) In a number of states the statutes expressly authorize the stock books to be so closed to transfers. Where this is not the case, it may be provided for in the charter or by- laws. The precise number of days for which the transfer books are closed is usually fixed by the by-laws. The reso- lution declaring dividends usually fixes the number of days for which the books shall be closed before the dividend day, if this is not prescribed by the by-laws. In some cases the statutes or b3^-laws merely provide that stock shall be voted by the owner of record, as shown by the books of the company, ten, twenty, thirty or forty 'Jones V. Terre Haute, etc. R. R. Co., 57 N. Y. 196 (1874). 60 STOCK. days before an election. This wording does not justify closing the stock books and refusing to make transfers. In such case transfers are made without interruption but the secretary, in making up his lists of stockholders for the election, ignores transfers made after the fixed date. No formality attends the closing of the stock books and usually no entry thereof is made upon the books, the secre- tary merely refusing to transfer certificates presented to him for that purpose during the prescribed period. The notice of the annual meeting or of dividends usually sets forth the days for the closing and reopening of the trans- fer books. CHAPTER VI. TRANSFER OF STOCK. § 38. Procedure of Transfer. When stock is to be transferred, one of the following courses is ordinarily pursued: (i) The certificate is as- signed in blank (See Form 19) and delivered to the trans- feree, in which case the assignment is absolute^ and the certificate may then be passed from hand to hand and the ownership of the stock it represents be thereby transferred any desired number of times without change of or addition to the assignment. (2) The assignment on the back of the certificate is completed by the insertion of the name of the transferee (See Form 20), in which case the certificate must be surrendered and a new certificate taken out by the transferee before it can be again transferred. (3) The as- signor completes the assignment form on the back of the ■certificate, surrenders the certificate to the secretary of the company, and secures and makes delivery of a new certificate in the name of the transferee. ^ When transfer is made by delivery of the certificate with the name of the transferee inserted in the assign- ment, the transfer is not made on the books of the cor- poration until the assigned certificate is surrendered. In the meantime the original owner is still the owner of record (See § 33) and will therefore be held should any stockholders' liabilities arise. (See § 48.) This objec- tion, when the stock transferred is full-paid, is not in most 61 62 STOCK. TRANSFER OF STOCK. 63 J states material in the case of ordinary business corpora- tions but when stock of banks, trust companies or other financial corporations is transferred, or when stock is not full-paid, may be material and even vital. (See § 73.) When transfer is made by assignment in blank, the certificate so assigned is semi-negotiable and therefore its negotiation is comparatively easy in case the certificate is lost or stolen. (See § 41.) Also, as in the case of the completed assignment, the transfer on the books of the corporation is not made until the transferee surrenders the assigned certificate. An objection to the assignment and surrender of the old certificate by the transferrer with issue to him of a new certificate in the name of the transferee is sometimes found in the fact that the proposed sale or other arrange- ment for the transfer of the stock may fail. The trans- ferrer in such case naturally retains the new certificate but finds himself in the very awkward position of owning stock which stands on the books of the corporation in an- other's name. In practice the assignment in blank, on account of its convenience, is employed in the great majority of stock transfers. When the holder of a certificate assigned in blank wishes to perfect his title and make himself a holder of record, he fills in his own name as assignee and surrenders the certificate to the secretary or transfer agent for trans- fer. He may also, if he sees fit, fill in the name of the party who is to make the transfer upon the books of the corporation, though this is usually left blank. If the sig- nature to the assignment is genuine and there are na reasons for suspecting any irregularity, the transfer is made as a matter of course and a new certificate is issued in the name of the assignee. If the name of the attorney to make the transfer is left blank in the assignment of the i surrendered certificate, the secretary of the corporation usually fills in his own name and then completes the trans- fer, thereby avoiding the delay that might result if some outside party were designated, who must come in and sign the transfer book before the transfer could be duly recorded. When the assignment on the back of the certificate has been completed by the insertion of the assignee's name, the certificate is not readily negotiable and is al- most invariably turned in and a new certificate taken out. If, however, conditions made it necessary for the assignee to transfer the certificate originally assigned to him, he might effect the transfer by means of a second assignment — in blank if desired — written on the back of the cer- tificate, or written on a separate sheet and attached to the certificate. As already stated, stock assigned by endorsement of the certificate, whether in blank or complete, still stands on the books of the corporation in the original owner's name until the certificate is surrendered and the proper entries are made on the stock books of the corporation. Until this is done the original owner is still the stock- holder of record and, while subject to any stockholders' liabilities accruing meanwhile (See §§ 48, 73) has, on the other hand, a legal right to vote and to receive payment of any dividends declared even though the actual sale of his stock was consummated months before.^ His right to vote is absolute, and after its exercise cannot in any way be overturned or questioned. His right to dividends is qualified, as the dividends belong to the actual owner of the stock, i. e. the person possessing the duly assigned stock certificate, to whom the holder of record must ac- count. (See § 171.) His responsibility as to any stock- 2 Brisbane y. Delaware, etc. R. R. Co., 94 N. Y. 204 (1883); Cleveland, etc. R. c: Sn" 7- bobbins, Admr., 35 O. St. 483 (1880); Bank of Commerce's Appeal, 73 Pa. St. 59 (1873); Robinson v. National Bank of New Berne, 95 N. Y. 637 (1884). 54 STOCK. holders' liability is, as to the corporation, absolute, but he has recourse on his assignee for any payments he may be compelled to make on this account. Before delivering the new certificate, the secretary should, when possible, require the party who presented the old certificate for transfer— who may or may not be the assignee— to sign a receipt therefor on the stub. If the new certificate is delivered by mail, it may be regis- tered, in which case the stub in the stock certificate book, the office copy of the letter accompanying the certificate, and the returned registry receipt, which should be at- tached to the stub, make a sufficient record of the transac- tion. Blank receipts are sometimes sent with the cer- tificates in such cases, to be signed by the recipient and returned, and these receipts when received by the secre- tary are pasted on the proper certificate stubs. Frequently the owner of stock wishes to sell or trans- fer but a portion of the stock represented by a certificate, and in such case the assignment on the back of the cer- tificate may be filled out according to the facts. For in- stance, if Howard Fielding owned one hundred shares of stock, all included in a single certificate, and wished to sell twenty shares to James Wilton, he might fill out the assignment as follows: "unto James Wilton twenty shares and Howard Fielding eighty shares," or if the sec- retary will accept the somewhat informal assignment, It might be merely filled out "unto James Wilton twenty shares," it following as a matter of course that if but twenty shares are assigned, the balance of the stock re- mains with the assignee. The owner of the hundred shares then brings or sends in his certificate to the secretary and instructs him to make out two new certificates— the one for twenty shares in the name of the new owner, the other for eighty shares in his own name. The secretary makes the proper entries TRANSFER OF STOCK. 65 on the stock book, cancels the old certificates, issues the two new certificates in accordance with his instructions, and delivers bothy unless he has express instructions from the original owner to the contrary, to this original ozvner, who then makes delivery of the twenty-share certificate at his convenience. The secretary must be governed en- tirely by the instructions of the assignee in delivering new certificates, no matter in whose name these certificates may be issued, as they are still in fact the property of the original owner. Another and usually preferable method when but a portion of the stock represented by a certificate is to be transferred, is for the original owner to have the new cer- tificates issued to himself. When this is to be done, he fills in his own name as assignee, instructing the secretary to issue new certificates for the proper number of shares. In the case instanced he would have two certificates is- sued — one for twenty shares and the other for eighty shares — in his own name. He would then assign the twenty-share certificate in blank, or in the name of the new owner, and deliver it, if the transaction is concluded. The new owner may then bring in and surrender this as- signed certificate and take out a new certificate in his own name at his convenience. When this plan is followed, even should the sale fail after new certificates were issued, the original owner still has the stock standing on the book; of the corporation in his own name and both certificates made out to him; whereas if the first plan had been followed, one of the certificates being made out to the proposed purchaser, part of his stock would stand on the books in the trans- feree's name, and the real owner must either secure the assignment of this other party as a matter of courtesy, or otherwise be put to much trouble to get the certificate back into his own name. 66 STOCK. When a certificate is surrendered for reissue in one or more certificates in the original owner's name, the trans- fer may be entered on the transfer book as a matter of record, but as the owner's stock account is not affected one way or the other by the transaction, should not be posted therefrom to the stock book. A memorandum of the facts should be made in the transfer book and on the stubs of the certificates involved in the reissue and the certificate numbers in the stock book must be corrected. When a certificate is lost and by due procedure the owner has secured an order from the board of directors for its reissue, the secretary's best plan is to treat the transaction just as he would if the owner brought in a certificate with a request for a reissue, save that he must of necessity omit the usual formality of the cancellation of the old certificate. The owner should be required to sign the transfer on the transfer book, his name being also entered as the transferee, and the facts of the case shouM be noted on the transfer book and on the stubs of the old and new certificates. The transfer is not, however, posted from the transfer book to the stock ledger, though the changed certificate numbers should be noted in this latter book. The secretary or officers of the corporation may refuse a transfer or reissue of stock until the old certificate has been surrendered or until any other proper requirements have been complied with. When, however, this has been done, they must make the desired transfer or reissue.^ The authenticity of the signature to an assignment of a stock certificate must be satisfactorily established when necessary. In the smaller corporations the secretary is usually familiar with the signatures of the stockholders. The larger corporations sometimes require the signatures to be witnessed or guaranteed by some person known to •Jones V. Terre Haute, etc. R. R. Co., 57 N. Y. 196 (1874); Robinson v. Na- tional Bank of New Berne, 95 N. Y. 637 (1884). ^ I TRANSFER OF STOCK. 67 the transfer agent, or otherwise that they shall be for- mally acknowledged before a notary public. (See §§44, 45' 57-) If there is any doubt as to the authenticity or correctness of the assignment or as to the title of the party presenting the certificate, or as to any other material matter, the secretary has the right to delay the transfer for a reasonable time in order to communicate with the former holder or take such other steps as he may deem expedient. If after due investigation, there still remains doubt as to the propriety of the transfer or the owner- ship of the certificate, or if there be conflicting claims, the secretary may properly decline to act until instructed by the board of directors, and the board, if in doubt, may decline to take action in the matter until ordered thereto by some court of competent jurisdiction. (See § 41.) § 39. Transfer of Treasury Stock. When treasury stock is donated to or otherwise ac- quired by a corporation,"* the assignment may run to the corporation direct, as "John Marshall Company," to its treasurer, as 'Treasurer of John Marshall Company," or to a trustee, as "John H. McGowan, Trustee for John. Marshall Company." The certificates so assigned are cancelled when received and the proper entries are made on the transfer book and stock ledger. When such stock is held in the name of the company or even by the treas- urer of the company, no new certificates need be issued until the stock is sold, the fact that certificates are not issued being noted on the stock books. When a sale of such stock is made, the new certificates are made out di- rect to the purchaser. Certificates might properly be is- sued meanwhile in the name of the com.pany or to the treasurer if desired, but such issue is unnecessary as the data of the transfer book, the entry on the stock ledger See Conyngton on Corp. Organization, Ch. X. 68 STOCK. and the cancelled certificates are quite sufficient to evi- dence the transaction. It is obvious that the reasons that make the certificate desirable when stock is held by an individual, do not apply v^hen a corporation holds its own stock. When treasury stock is sold, the secretary is authorized by due resolution of the board of directors to issue the proper certificates. Such transfers are entered on the stock books of the corporation as in case of any other transfer of stock. If certificates are not issued for the stock while held by the corporation, this fact should be noted on the stock books. § 40. Transfer Agent and Registrar. A transfer agent in the modern acceptation of the term, is one who supervises and certifies transfers of cor- porate stock. The extent of his supervision depends upon custom or upon the particular agreement. A transfer agent usually keeps the stock certificate book in his custody. When a transfer is to be made, the certificate of stock duly assigned is surrendered to the transfer agent, who thereupon cancels the surrendered certificate, attaches it to its proper stub and issues a new certificate in the name of the transferee. This certificate is then sent to the proper corporate officials who affix their signatures and the corporate seal— unless the seal is also entrusted to the transfer agent — make the proper records in the transfer and stock books and return the signed, or signed and sealed certificate to the transfer agent. The transfer agent thereupon seals the certificate if not already sealed, endorses it in evidence of its due issue, delivers it to the transferee, and the transaction is closed. Occasionally when a transfer agent is employed, the stock certificate book is retained in the custody of the TRANSFER OF STOCK. 69 .., corporation. In such case when a certificate is presented for transfer, it is cancelled by the transfer agent and turned over to the corporation in exchange for a new cer- tificate issued in the name of the transferee. This cer- tificate is endorsed by the transfer agent and delivered to its owner. When the stock certificate book is kept by the corporation, the transfer agent keeps an independent record of stock certificates issued and surrendered, in order that the regularity of any particular transfer or is- sue may be readily and definitely ascertained. A registrar is a corporate appointee who also super- vises the transfer of corporate stock but does not usuallv carry his supervision to the same extent as does the trans- fer agent, his function being merely to register stock as issued. He maintains a record of all stock certificates is- sued and of the surrender and reissue of any new cer- tificates with the names of the parties to the transfer. If an issue or transfer is to be made, the registrar passes upon the certificates and countersigns them if they are correctly issued. It will be seen that the duties of the transfer agent and registrar are distinct, and should not be performed by a single person or institution. The function of the trans^ fer agent is to ensure the proper issue of stock. The function of the registrar is to ensure the regularity of is- sue and to prevent overissues. The functions of the two somewhat overlap, as the transfer agent would not per- mit an overissue of stock nor would the registrar sign stock improperly issued. It is obvious that the work of a transfer agent and registrar to be effective must be discharged by persons or institutions of the highest character and unquestioned standing. For this reason trust companies are usually appointed. Speaking generally, the employment of transfer agents 70 STOCK. TRANSi^ER OF STOCK. 71 and registrars is advisable whenever transfers of stock are likely to be numerous. The procedure involved is simple in theory but in practice involves much detailed work. Also it is usually desirable that transfers be effected rapidly and accurately. The employment of the proper transfer agent and registrar, or transfer agent alone, re- lieves the corporate officials from the detailed work and responsibility involved, reduces the possibility of fraud or error in the issuance of stock to a minimum, and affords a general safety and convenience not otherwise secured. Stock exchanges require that the securities listed by them shall be issued through suitable transfer agents and regis- trars. § 41. Lost Certificates. A stockholder, so shown by the books of his company, is entitled to every right and privilege of a stockholder without regard to the whereabouts of his certificate.^ When certificates are lost, the owner usually desires to have new certificates issued, not in order to secure any corporate rights but merely to have his interest in such shape that he may readily sell, pledge, or otherwise use his stock. Stockholders have a general right to certif- icates^ and, if their certificates are lost, to have them re- placed, but, before it reissues any such certificates, the corporation on its part has the right to require reasonable safeguards for its own protection.^ The by-laws should outline the proper procedure,^ which must conform to any statutory requirements. A bond of indemnity is usually and properly required before a lost certificate is replaced, as it is always possible •National Bank v. Watsontown Bank, 105 U. S. 217 (1881); Birmingham Na- tional Bank V. Roden, 97 Ala. 404 (1892); Wheeler v. Millar, 90 N. Y. 353 (1882). tin T^j"^?i°r* ^}^n^- ^- '*'• Dudley, 14 N. Y. 336 (347) (1856); Fletcher v. McGill, 110 Ind. 395 (1887), Ti^r '^"*^^?«^Ty- W U. Tel. Co., 43 Minn. 434 (1890); Butler v. Glen Cove Starch Mfg. Co., 18 Hun 47 (1879). 8 The usual procedure is set forth in the by-laws found in Conyngton's "Corporate Organization," Form 9, Article I, § 2. ♦ that the missing certificate may turn up in the hands of an innocent purchaser for value, who might have cause for damages against the corporation if it refused to recog- nize his rights. It is but seldom wise to reissue lost cer- tificates unless such bond is given. Only the absolute and irrecoverable loss of a certificate, as in case of its un- questioned destruction by fire, would justify an unpro- tected reissue. When the value of missing certificates is considerable and the circumstances are doubtful it is sometimes best for the directors to refuse absolutely to replace the cer- tificates until the owner secures an order from some court of competent jurisdiction. When this is done the direc- tors are relieved from all responsibility in the matter. The officers of the company should never take the re- sponsibility of reissuing a lost or stolen certificate of stock without express authorization from the board of direc- tors. Should they do so and the missing certificate turn up in such a way that loss is involved, they would be re- sponsible to the corporation. In case certificates are lost or stolen, the secretary of the company or its transfer agent should be immediately notified, and such other steps be taken as may be neces- sary to prevent the negotiation of the missing certificates. When lost certificates are endorsed in blank and are pre- sented to the transfer of^cers of the corporation before these of^cials have been notified of the loss, they may make the transfer, and the corporation will not be liable to the owner if the circumstances were such as to justify the belief that such transfer was regular and in good faith. If, however, the proper officials have been warned of the loss, or the circumstances were such as to put them on notice, they could not make such transfer without lia- bility. A stock certificate is not perfectly negotiable as are 72 STOCK. notes, drafts and other forms of negotiable paper, but is quasi-negotiable, and usually an innocent purchaser for value of a properly endorsed certificate is protected.^ "Excepting in cases of certificates transferred in blank and lost or stolen without negligence on the part of the owner, a bona Me purchaser is protected now in almost every instance where he would be protected if he were purchasing a promissory note or other negotiable instru- ment."^° Thus a party finding or stealing certificates of stock even though these certificates are endorsed in blank, takes no title nor does any one who buys the lost or stolen certificates from him, the title remaining in the original owner. If, however, a lost or stolen certificate is sur- rendered to the corporation and a new certificate received in its place— as might readily be the case if the corporate officials were not promptly notified of the loss — any pur- chaser in good faith of this new certificate takes a clear title. The original owner has then lost all rights in the matter save that of bringing suit against those through whose hands the certificate passed before its reissue by the corporation. In case of any doubt or any dispute as to ownership of a certificate, no transfer should be made by the corpora- tion until the true ownership has been definitely deter- mined. § 42. Pledges of Stock. The quasi-negotiability of stock renders its use as a pledge or collateral security a very simple matter, effected by the mere endorsement and delivery of the certificate.^^ "Knox V Eden Musee Co.. 148 N. Y. 441 (1896); Simpson v. Jersey City Con- tracting Co., 165 N. Y. 193 (1900); Bank v. Lanier, 11 Wall. 369, 111 (1870); Trust & Sav. Co. V. Home Lumber Co., 118 Mo. 447 (1893). 1? * r ^n.^°°^^°" Corp. S 416; Railway Co. v. Bank, 56 O. St. 351 (1891); Real Estate Trust Co. v. Bird, 90 Md. 229 (1899). t^o \J'^^'^ Birmingham Land Co. v. Dennis, 85 Ala. 565 (1888); O'Herron v. Gray, JfJ Mass. 573 (1897); Bangor Electric, etc. Co. v. Robinson, 52 Fed. Rep. 520 (1892). "Christian v. Atlantic & N. C. R. R., 133 U. S. 233 (1890); Seymour v. Hen- dee, 54 Feb. Rep. 563 (1893); Atkinson et al, v. Foster, 134 111. 472 (1890). 1 i 1 1 ^\ TRANSFER OF STOCK. 73 The usual procedure is for the pledgor to give his note for the amount secured, the note reciting the pledge of stock and the terms under which it is held. These terms usu- ally empower the pledgee to sell the collateral without notice to the pledgor. (See Form 164.) The delivery of the stock as security is, however, the essential feature, constituting the pledge without any written contract,^^ which is necessary only as a record and proof of the trans- action. The pledgee may or may not, at his option, have the pledged stock transferred on the books of the corporation to his own name.^^ If transferred, the word "pledgee" should follow the name of the owner on the new certif- icates of stock or otherwise the phrase "as collateral se- curity" should appear on the certificates so as to definitely^ characterize the nature of the pledgee's holding. A mem- orandum of the facts should also appear in the stock ledger against the entry in both pledgee's and pledgor's accounts.15 Such entries, if showing clearly the nature of the transaction, relieve the pledgee of any corporate lia- bilities involved in the absolute ownership of the stock.^^ In some states the pledgee is expressly relieved from these liabilities by statute.^^ When stock is transferred on the iDooks of the company to the pledgee, the voting right, as a general rule and in the absence of any agreement to the contrary, follows the stock.^^ In some states, however, as in New York, the owner of the stock may demand and receive a proxy from the pledgee upon paying any neces- sary expenses. In other states, as New Jersey, if it ap- Nevadf bS 7l3^r?l"'?7?^1iZf ^^"^,' ^^ l^h ^^P" ^03 (1899); Spreckels v. Mass 23Y n8?^f.'"AAHi°c ^^%J?,^^!^^?>\,F'*'=!^b"^g Savings Bank v. Torrey. 134 » 2 Cook on C^rp § 466''" ^^'^^^^^P^'^ Warehouse Co., Ill U. S. 479 (1884). 101 Fe^d'"'^en: llTilkS) ^ '^'""'* ^°- ''' ^^ ^^ ''' ^'^''^' ^o^^telot v. Stolteben. V. Seli^Sian^ ^o1"a ''^""'- ^°-' ''' ^^^^^ ''' (^879); Burgess f>^u:lhTl^I9^f^:■^ ih^z^^a^i^ ^^ ^rgus PHnt^g co., i n. 74 STOCK. pears on the transfer books that such stock has only been transferred as a pledge, the owner retains the right to vote thereon. Statutes protecting the voting rights of pledgors are found in many states. When stock is pledged, the pledgee is entitled to re- ceive any dividends declared meanwhile, and if the stock has been transferred to the pledgee, or if the company has been properly notified that the stock is held in pledge, they must be paid to him.^^ In the absence of notice or transfer, as the pledgor remains the owner of record of the pledged stock, dividends are properly paid to him. and the pledgor and pledgee must then settle the owner- ship of the dividends between themselves. On the ter- mination of the pledge, the pledgee must account for any dividends received by him. Upon default in payment of the amount it secures, the pledgee has the right to sell pledged stock. If the note or other memorandum of the pledge contains no agreement or provision for such sale, the pledgee must give the pledgor due notice of his intention to sell the stock and thereupon may sell the stock at public sale and apply the proceeds to the payment of his debt. Notice must be given the pledgor a reasonable time before the sale and such notice must specify the time and place of sale, both of which must also be reasonable. Two days' notice has on occasion been held sufificient,^^ and four days' notice when the parties lived in different towns. ^^ When notice of time and place is waived by express terms of the pledgor's notice, as is usually the case, the pledgee may sell at any time after default. The sale must be by public auction, unless otherwise agreed, must be in good faith and an endeavor must be made to obtain a fair price. The pledgee himself may not bid the stock in, "Fairbanks v. Merchants National Bank, 132 111. 120 (1889); Guarantee Co. v.. East Rome Co., 96 Ga. 511 (1895); Boyd v. Conshohocken Worsted Mills, 149 Pa» St. 363 (1892). 20 Edwards on Bailments, § 285. " Guinzburg v. Downs Co., 165 Mass. 467 (1896). I if m TRANSFER OF STOCK. 75 either directly or indirectly. If he does, the pledgor may have the sale set aside. In many of the states the whole matter of the pledge of stock and its sale is regulated by statute. At any time before sale the pledgor may pay the debt and all interest and any reasonable expense involved in the preliminaries of the sale and claim his stock. This stock need not be the particular shares pledged but merely an equal amount of the same stock. § 43. Restrictions on Transfers. Every stockholder whose stock is paid for in full is entitled to transfer his stock freely. Even where the stockholders have entered into a contract to restrain the alienation of stock or have enacted by-laws for the same purpose, the courts have usually set the restraining provisions aside as being contrary to public policy.^^ In some states the statutes prescribe specifically that stock subscribed for but not fully paid in accordance with the subscription agreement is not transferable save with the consent of the corporation. Elsewhere charter or by- law provisions may give the corporation the right to re- fuse to register transfers of unpaid stock.^^ In the ab- sence of such provision, the right of transfer is absolute and may be enforced against the corporation.^^ (See §48.) At times the restriction of stock transfers becomes de- sirable and various plans have been attempted to effect this end. The courts, however, defend this right so strictly that its legal waiver is difficult. Perhaps the most Grav'fco T7^^ns^5;^^.°n^- ^' ^°S/l^,^2^'.^^^^^" ^ A««°- ^- ^'^^"^ Bank, 5 KinLn V l;,ir ^^^^*^v9"u"^^. \- Marblehead, etc. Co., 10 Mass. 476 (1813); M^^* Sullivan County Club, 26 App. Div. 213 (1898) restr:,.^VhTlJ- -^'"5' J^^ ^^''- "^^^ ^^^^^h ^^'^ ^ discussion of the best means to restrain the sale of stock, see Conyngton on Corp. Organization, S 217. aub, 2^6'""^ 5m?(^898))^- '^"' "' ""''■ ' ^''''^-' ^^""^" ^- S""'^^" ^-"*y 76 STOCK. successful method when all the parties are in agreement as to the advisability of such restraint is to form a voting trust for a certain number of years. All the stock — or all the stock entering into the agreement — is placed in the hands of voting trustees appointed under the terms of the voting trust agreement and is held by them, withdrawn from sale, for the period of the trust. Such arrangements are effectual and are upheld by the courts in most states if they do not extend for an unreasonable period.^^ In some states they are expressly permitted by the statutes under restrictions as to the term of their duration. CHAPTER VII. RULES REGULATING TRANSFERS. "Brown v. Britton, 41 App. Div, 57 (1899); Williams v. Montgomery, 148 N. Y. 519 (1896); Hey v. Dolphin, 92 Hun (N. Y.) 230 (1895); See Conyngton on Corp. Organization, § 217. § 44. Responsibility of Corporation as to Transfers. It is the duty of the corporation to record all lawful transfers, and if it refuses, the record may be compelled by recourse to the courts^ or the corporation may be held liable in damages.^ If there is doubt as to the identity of the transferee or the authenticity of the transferrer's sig- nature, the corporation may require proper proof thereof, and in cases where two parties claim the ownership of stock or where the corporation has been notified not to register a transfer, the corporation may, if there is any real uncertainty or reason therefor, decline to make any record on the corporate books until the matter has been settled by the courts.^ (See § 38.) The corporation is responsible if its officials record a forged transfer.^ It is the duty of the corporate officials to know the stockholders' signatures or otherwise to se- cure evidence of their authenticity before making a trans- fer. For this purpose, they may require the personal at- tendance of the transferrer or clear proof that his signa- ture is genuine. (See §§ 38, 45.) In case stock certificates endorsed in blank are lost Oi- stolen, the corporation is not liable for receiving the cer- 134 K y! m^a892T* ^°' ^' ^'''^' ^° ^^' ^^^ ^^^^^^' ^'""^ ""■ ^°'=^^^«"^'- et -^J" of CaHforn^." S*^ ? Tlf '^J^?^?i'«Ql^ ^^-^ City. 119 Mich. 448 (1899); Ralston v. Bank (N. Y.) 348'(1839f (1896); Commercial Bank, etc. v. Kortright, 22 Wend »Tel Co. V. Da'venport, 97 U. S. 369 (1878). Fay. W^'W.'V, in9%"' "" '"'- '' ""■ "■ '" <'^">' C"'"^" EdUon Co. v 77 li 78 STOCK. tificates and transferring the stock represented thereby, if the circumstances are not suspicious and the transfer is made before notice of the theft or loss is received by the corporation.^ (See § 41-) § 45. Duties of Officers as to Transfers. *The officers of the company are the custodians of its stock books, and it is their duty to see that all transfers of shares are properly made, either by the stockholders themselves or persons having authority from them. If upon the presentation of a certificate for transfer they are at all doubtful of the identity of the party offering it with its owner, or if not satisfied of the genuineness of a power of attorney produced, they can require the identity of the party in one case, and the genuineness of the document in the other, to be satisfactorily established before allowmg the transfer to be made. In either case they must act on their own responsibility."^ The record of any proper transfer, if refused, may be compelled by either transferrer or transferee. § 46. Who May Transfer Stock. Any person of full age who has not been adjudged in- competent, may transfer stock standing in his own name. All who are duly authorized to represent others, as attor- neys, trustees, guardians, executors and administrators, may'transfer stock belonging to these others upon giving satisfactory evidence of their authority so to do. Stock belonging to minors and others incompetent to contract may be transferred only by their legally appointed and au- thorized representatives. The holder of unpaid stock, i. e. stock upon which the •Mandelbaum v. North American Mining Co.. 4 Mich. '*6^. ^857) ; Barstow v. manaeioauxii v. i w n883)- Dew ne v. Perdicans, 96 L. b. 193 (18//), ^%'llf%^Smith:7 Abb^Pr.lll Us/sV; Br^wn' Lancaster & Co. v. Howard Fxre Ins. ""'■'. 'LlCo'V. ^Sort, 97 U. S. 369 (1878). RUIZES REGULATING TRANSFERS. 79 r 4 subscription or purchase price has not been fully paid, may as a rule transfer his stock without restriction, but in some states by statute provision such transfer is prohibited or may only be made by consent of the corporation. § 47. To Whom Stock May be Transferred. There are but few restrictions as to the transferees of stock. A corporation may, if its officials see fit, refuse to transfer stock to any one not competent to assume the obligations of a stockholder, such as a minor or a person of unsound mind. (See § 53.) Also a corporation when in a failing condition may refuse to transfer stock to an irresponsible transferee.^ Beyond these few exceptions, stock may be transferred freely and in the absence of fraud the transfer is valid and must be recorded by the corporation. § 48. Liability Involved in Transfers. The liability of unpaid stock obtains in every state of the Union. (See § 73.) Full-paid stock, on the other hand, involves no liability to the corporation or its credi- tors whatsoever, save in the case of financial institutions — on the stock of which a further liability is usually im- posed — and in those states in which by express statutory provision liabilities are imposed or assessments are per- mitted on stock even though full-paid. (See § 74.) When liabilities do or may exist on full-paid stock, and transfers of such stock are made between parties com- petent to contract, any liabilities accruing before the trans- fer remain with the transferrer, but any liabilities accru- ing thereafter pass to the transferee. The liabilities of unpaid stock are aflfected by statute provisions in a number of states (See § 74), but other- wise are subject to the general rules that the transferrer "> 2 Cook on Corps., § 396. 80 STOCK. i is liable for any calls or assessments already made and which are still unpaid,^ but the transferee is liable for the amount that has not yet been called. An exception to this general rule obtains when a trans- fer has been made but has not been recorded on the books of the corporation. In such case the transferrer is still the owner of record (See § 33) and is therefore still liable for any amounts unpaid on his transferred stock, and if calls are made before the transfer is recorded, must pay them. He may collect these payments, if he can, from the transferee. Another exception to the general rule is found when the corporation has wrongfully issued stock certificates marked 'Tull-paid," in which case any bona fide purchaser of such certificates without knowledge of the true char- acter of the stock takes it free from liability to the cor- poration and to corporate creditors in case the corporation becomes insolvent.^ This is also true when a purchaser in good faith takes over stock under such circumstances as to lead him to believe it is full-paid. In any such case as far as the transferee is concerned, the stock is held to be full-paid and the corporation or its creditors cannot hold him liable. In the following cases the rule as to the liabilities in- volved in transfers of stock is as set forth. A married woman may take stock in her own name, in practically every state of the Union, and take therewith every right and responsibility of ownership.^° A minor may receive a transfer of stock and the cor- poration may record it if the corporate officials see fit, but as the minor may at will repudiate the whole transaction, the transferrer remains liable.^^ (See § 53.) The same ■May V. McQuillan, 129 Mich. 392 (1902): Brigham v- Mead, 92 Mass 245 (1865); Sigua Ir6h Co. v. Brown, 171 N. Y. 488 (1902): Webster v. Upton, Assi- inee. 91 if. S. 65 (1875); Pullman v. Upton, 96 U. S. 328 (1877). *^i Rochester, etc. Co. v. Roe. 7 App. Div. (N. Y.) 366 (1896); Sprague v. Na- tional Bank, 172 111. 149 (1898); 42 L. R. A. 606. i» Cook on Corp., S8 250, 396. „, »,. ^ . t> "^••chizky v De Haven. 97 Pa. St. 202 (188!): Foster v. Chase. 75 Fed. Rep. 797 (J896); Foster v. Wilson, 75 Fed. Rep. 797 (1896). RULES REGULATING TRANSFERS. 81 * m rule holds as to a transfer to a person known to be insol- vent, the transferrer not being relieved from liability.^^ (See § 47.) A transfer to an agent, attorney, trustee, guardian, ad- ministrator or executor in his own name followed by a statement of the capacity in which he acts, as ''James H. McLane, Agent," renders him personally liable on the stock so held,^^ except where expressly exempted by statute.^'* (See §§ 51-52.) The same is true where a transfer is made to the treasurer of a corporation in his own name, as ''Henry James, Treasurer."^^ A transfer to two persons, as "George Howard and John Mackel," makes them tenants in common and each may be held for one-half of any liability on such stock and both must join in a transfer.^^ A transfer to a firm, how- ever, as "Howard & Mackel," does not have this effect but creates a partnership holding and a partnership liability.^^ (See § 56.) A transfer to an existing corporation authorized to hold stock, as "The Strathmore Scale Company," renders the assignee corporation liable as is an individual on the stock transferred. A transfer to a membership corpora- tion or unorganized association, as "Grace Methodist Church" or the "Brooklyn Decorators' Union," is of doubt- ful legality, and, if the matter of liability is of importance, should not be recorded by the corporation until the right of the body to hold stock has been proved. If not au- thorized to hold stock, it cannot assume the liabilities of a stockholder. A transfer to a dummy stockholder, as in case of trans- .,„ "Bowden v. Johnson, 107 U. S. 251 (1882); Rochester, etc. Co. v. Raymond, 158 N. Y. 576 (1899). "McKim V. Glenn, Trustee, 66 Md. 479 (1887); Baines v. Babcock. 95 Cal. 581 (1892); Wadsworth v. Laurie, 164 111. 42 (1896); Brown v. Ellis, 103 Fed. Rep. 834 (1900); Winston v. Dorset Pipe, etc. Co. 129 111. 64 (1889). "Davis V. Essex Baptist Society, 44 Conn. 582 (1877); Lucas v. Coe, 86 Fed. Rep. 972 (1898). '• 2 Cook on Corp., § 724, and notes. "Markell v. Ray, 75 Minn. 138 (1898). " Barton National Bank et al. v. Atkins et al., 72 Vt. 33 (1899). 82 STOCK. RULES REGULATING TRANSFERS. 83 fer to any other agent, renders the dummy liable if he has property sufficient to make the liability effective.^^ The party for whom the dummy is acting is, however, likewise liable as an undisclosed principal.^' A transfer to a pledgee m his own name without qualification renders him liable. It is otherwise, however, if the nature of the transfer is shown by its form, as "Howard Fielding, Pledge e.^'' § 49. Form of Transfer. A general form of assignment for stock is always printed or engraved upon the back of each stock certificate (See Forms 19, 20.) If there were any reason therefor, stock might with equal effect be transferred by means of a separate assignment written or pnnted and attached to its certificate. In such case the certificate should be more fully described and identified than is the case in the usual form of assignment. (See § 38.) The signature to the assignment of a stock certificate must correspond exactly with the name on the face of the certificate and should be witnessed. If the signature of the transferrer is entirely unknown to the transfer officer or agent, it should be guaranteed by some responsible party or be acknowledged before a notary public. If the party signing a transfer of stock acts in a repre- sentative capacity, a description of the capacity in which he signs should be added to the signature, as "Howard Fielding, Trustee for Jane Hathaway." If a certificate, is- sued in her maiden name, is to be transferred by a married woman, the signature should be in the following form: '*(Mrs.) Alice H. Walker formerly Alice H. Ainsley." Oc- casionallv a married woman holding stock in her maiden name wishes it transferred to the name acquired by mar- ;:?aTy v. l'^:: ^t'c' ll-lfs'ij't 6^0^(1897); Davis v. Stevens. 7 Fed. Gas. ^^^ "^Robinson v. Southern National Bank. 180 U. S. 295 (1901); Pauly v. State Loan & Trust Co.. 165 U. S. 606 (1897). # m riage. In such case the signature to the assignment is similar to that just given and the blank for the name of the transferee is filled in as follows: "(Mrs.) Alice H. Walker." The name of the transferee should be written in the proper blank of the assignment form without abbreviation, complimentary title or suffix, though where the transferee is a woman, the designation "(Miss)" or "(Mrs.)," as the case may be, is frequently and properly placed before the name. When a transfer of stock is to be received by an agent, it should be made out in the name of his principal, unless the agent is willing to assume any statutory liability on the stock transferred. (See § 48.) When stock is trans- ferred by an agent or one acting for another, the name of the principal should be appended to the assignment fol- lowed by the agent's name and a statement of the capacity in which he signs ; thus, "Frank H. McClelland by Howard James, Attorney." § 50. Transfers to and by Agents. Any person competent to contract and wishing to transfer stock, may transfer stock or receive the transfer of stock through an agent. In case of transfer, the agent or attorney in fact should present the certificate to be transferred, accompanied by his power of attorney or a duly acknowledged copy thereof, w^hich should be left on file with the transfer agent or officer of the corporation. Express authority to transfer stock should be given by the power of attorney and, if necessary, evidence should be furnished that the signature to the power is genuine, that the instrument is still in force and that the party pre- senting it is the party named therein. ^^ CO «''^o- ^9u\' Davenport. 97 U. S. 369 (1878); Bayard v. Farmers', etc. Bank, 5? ^*-„^*i 232 (1866); Davis v. Bank, 2 Bing. (Eng. Rep.) 393 (1824); Ireland v. Hart. 86 L. T. Rep. (Eng. Rep.) 384 (1902). 84 STOCK. In case of transfer by an agent, it is the duty of the corporation to require satisfactory evidence of the agent's authority. Otherwise in case of a fraudulent transfer the corporation is liable.^^ The corporation is also liable if, with knowledge of the facts, it recognizes a power of at- torney executed by a minor, an insane person or any one else unable to contract.^^ In case of transfers of stock to an agent, the cer- tificates, as stated, should be issued in the principal's name, the agent merely receiving the certificates and receipting therefor for account of his principal. If a certificate is endorsed in blank and entrusted to an agent and the agent assigns the stock fraudulently, the stockholder has no recourse save against the agent, as his own act made it possible for his agent to perpetrate the fraud. The rule is different, however, if the agent trans- fers the stock directly into his own name. In such case, if the corporation knew of the agency, it is liable,^"* and the original owner will not be estopped from reclaiming the stock.^^ § 51. Transfers to and by Executors and Administrators. A corporation cannot refuse to record transfers of stock belonging to an estate, made by the executor or administrator of such estate, provided the proper letters testamentary or letters of administration are presented for inspection.^^ Such executor or administrator may trans- fer the stock directly from the deceased party to a pur- "TaflFt V. Presidio, etc. R. R. Co., 84 Cal. 131 (1890); Caulkins v. Gaslight Co., 85 Tenn. 683 (1887); Cooper v. Illinois Central R. R. Co., 38 App. Div. (N. Y.) 22 (1899); Geyser-Marion Gold-Min. Co. v. Stark, 106 Fed. Rep. 558 (1901); Tel. Co. V. Davenport, 97 U. S. 369 (1878). 2» Chew & Goldsborough v. Bank of Baltimore, 14 Md. 299 (1859). "McNeil V. Tenth National Bank, 46 N. Y. 325 (1871); O'Herron v. Gray, 168 Mass. 573 (1897); Nelson et al, Ex'rs v. Owen, 113 Ala. 372 (1896); see Knox v. Eden Musee Co., 148 N. Y. 441 (1896); Tafft v. Presidio, etc. R. R. Co., 84 Cal. 131 (1890). ^ _ , "Tel. Co. V. Davenport, 97 U. S. 369 (1878); McNeil v. Tenth National Bank, 46 N. Y. 325 (1871); Elliott v. Miller & Co., 158 Fed. Rep. 868 (1908). 2« Carter v. Manufacturers' Nat. Bank, 71 Me. 448 (1880); Marbury, Trustee v. Ehlen et al, 72 Md. 206 (1890); Wooten v. Railroad, 128 N. C. 119 (1901). T RULES REGULATING TRANSFERS. 85 chaser, or may transfer the stock to his own name as ad- ministrator or executor,27 or may pledge the stock if this be necessary. The corporation should not, however, per- mit him to transfer the stock into his individual name.^s When there are two or more executors of an estate, one alone may not transfer stock ; all must join.^^ Before a transfer of stock by an executor or adminis- trator is allowed, a certified copy of the appointment of the party acting should be filed with the corporation.^^ Or in case there is a will, a certified copy of this instru- ment should be presented for inspection.^i The will or certified copy should always be inspected by the corporate officials before the transfers of an executor are recognized^ as the free right of transfer may be restricted by the terms of the instrument under which he is acting, and if so, pur- chasers and corporate officials are bound to take notice of and be governed by these limitations.^^ Corporate officials recording transfers of executors or administrators with knowledge that a fraud or breach of official duty is involved therein, are liable to the estate." An administrator or executor cannot compel the transfer of stock belonging to the estate when the corporation is domiciled in another state. A purchaser of stock from such an administrator or executor can, however, compel the corporation to recognize his right of property in the purchased stock and to issue to him new certificates.^^ When a trust discharged by an executor or adminis- trator continues for a long period, the executor or admin - ^J London, Paris & Am. Bank v. Aronstein, 117 Fed Ren 601 (^QC^o\ Rep. ^Ol'^^&l)" ''^'■P-' ^ ''^-' ^°"^°"' ^-- & Am'^'&nk ?: aL^^^Su Fed. 70 (T892)t"i) Cjcf p/s94'!" ^' ''' ^''''^' '^^^^ ^ ^^^ R' R- Co., 149 Pa. St. J»Schell V. Deperyen, 198 Pa. St. 591 (1901). i^^t.„4Tin\it^,:'tn?rvitim,'''- ''' "*'«^ ^'^"' "-^-.'-v. s^ond can Loan & Tr. Co., 115 N. Y. 65 (1889) " (1892); Moore v. Ameri- Mattcr of Fitch, 160 N. Y. 87 (1899); Luce v. Railroad, 63 N, H. 588 (1885) 86 STOCK. istrator becomes in fact a trustee and his transfers then become subject to the rules governing trustees.^^ (See § 52.) The corporation must then refuse the transfer of stock unless the executor or administrator brings satis- factory evidence of his right to make such transfer. § 52. Transfers to and by Trustees. The corporate officials must refuse the transfers of a trustee unless his authority is clearly established. His appointment must be in v^riting and expressly authorize the sale or transfer of stock. If such instrument exists in due form, the trustee may compel transfers by the cor- poration when the certificates of stock are duly assigned by him in his representative capacity.^^ The corporation is responsible if it permits any trans- fer by a trustee not authorized by the trust instrument.''^ If there is more than one trustee, all must sign the trans- fer,^^ which should be accompanied by a properly certified copy of the instrument of trust establishing clearly the authority of the trustees to make such transfer. Trus- tees appointed by court should show a copy of the court appointment. Before stock is purchased from a trustee — provided the certificates of stock indicate that he is a trustee — the purchaser should ascertain whether the trustee is au- thorized to make the sale.*'^ "Certificates for shares of stock running to *A. B., Trustee,' or to *A. B. in trust,' without disclosing the names of beneficiaries or the particulars of the trust, is notice to a purchaser of »»Peck V. Bank, 16 R. I. 710 (1890); 2 Cook on Corp., § 398. '•Bird V. Chicago, etc. R. R., 137 Mass. 428 (1884); Loring v. Salisbury Mills. 125 Mass. 138 (1878). " Marbury, Trustee v. Ehlen et al. 12 Md. 206 (1890); Geyser-Marion Gold-Min. Co. V. Stark, 106 Fed. Rep. 558 (1901); Bird v. Chicago, etc. R. R., 137 Mass. 428 (1884); Loring v. Salisbury Mills, 125 Mass. 138 (1878) Rep. 248 (1902) »• Bohlen's Estate, 75 St. 304, 312 (1874); Oliver v. Governor & Co., 86 L. T. "First National Bank v. National Broadway Bank, 156 N. Y. 459 (1898); Shaw y. Spencer et al 100 Mass. 382 (1868). 'nmmm RUIZES REGUI.ATING TRANSFERS. 87 f shares that *A. B.' does not hold them in his own right but as a trustee. ""^^ When transfers are made to a trustee, his represent- ative capacity should be clearly indicated by reference in the certificate to the will or other instrument under which the trusteeship was created,"^^ and the name of the bene- ficiary should be mentioned when possible; thus, "John Hayden, Trustee for Howard Waller under the will of Horace Waller." § 53. Transfers to and by Minors. A corporation may refuse to transfer stock to a minor as he is incapable of assuming the obligations of a stock- holder.^2 jj^ ^^^^ ^^^y^ ^ transfer is made, the liability of the transferrer as a stockholder of the corporation con- tinues until the minor becomes of age and ratifies the transfer.'^^ Minors may receive and hold stock in their own names but cannot transfer stock so held. Assign- ments should therefore be made to their guardians in the following form: "Alfred Carr (minor j under guardian- ship of Henry B. Boerum." A minor is himself unable to make a legal transfer of stock even tliough the stock is held in his name, and the corporation renders itself liable for any resulting damages if it records such transfer. The only legal method of transferring a minor's stock is therefore by assignment executed by a duly appointed guardian.^^ (See § 54.) § 54. Transfers to and by Guardians. Certificates for stock owned by minors or other per- sons not competent to contract should properly be issued ♦» Gerard V. McCormick, 130 N. Y. 261 (1891). «?'&^oTcorp°^t'3% """■ " ^*"'^' '°' ^'^- ^^P- ''« ^^^°^>- Pa. St^^lpf (^88^"'''" '' ^'' ^^ ^^^' ^"P- ^^^ ^^^^^^' ^^^^\^^zVy v. De Haven. 97 Corp:'l^fMl-ss.^?0"(1901)''"" ^''' ^'^ ''' ''^^''' ^"^^ ^ ^^^ ^^^ford. etc. 88 STOCK. in the name of the trustee or guardian of such person. (See § 53.) In most states parties not competent to con- tract cannot transfer stock and therefore all transfers of stock belonging to such persons m.ust be made by their legally appointed trustees or guardians. Usually the statutes require the guardian of a minor to be specially authorized by order of a proper court be- fore he may sell stock belonging to his ward, and the cor- poration cannot safely record a transfer of a minor's stock though made by his guardian until it ascertains the ex- istence of such authority."^^ The guardian should there- fore secure proper authority and file a certified copy thereof with the secretary of the corporation before or at the time the transfer is made. When no statutes regulate the sale of stock by guar- dians, a guardian may freely transfer stock without any special court authorization,"^^ though in this case it is safer for him to obtain authority from the court as a measure of self protection. A guardian has no authority to pledge stock."^^ § 55. Transfers to and by Corporations. Under the common law, one corporation cannot hold stock in another."*^ In a number of states, however, cor- porations are by statute expressly authorized to hold stock of other corporations, or may be so authorized by in- clusion of the power in their charters. Even where this is not the case, the general rule has been relaxed, and it may now be said in general that a corporation may be- come a stockholder in another corporation wherever the stock is acquired in pursuance of a legitimate purpose of ,,„«!rv^*''*"^" ^- Atkinson, 90 Mass. IS (1864); O'Herron v. Gray, 168 Mass. 573 (1897). ♦•Lamar v. Micou, 112 U. S. 452 (1884). "O'Herron v. Gray, 168 Mass. 573 (1897). "People V. Chicago Gas Co., 130 III. 268 (1889); De La Vergne Co. v. German Savings Inst., 175 U. S. 40 (1899). 1. 1 I ^ . KULES REGULATING TRANSFERS. 89 its creation."' Hence an investment company, an insur- ance company, a trust company and others of similar char- acter, may properly invest in and hold the stock of other corporations. Also corporations may acquire stock by foreclosure proceedings or may take it in order to escape loss, as for instance, in settlement of a debt.'" Also the so-called "holding" corporations are not uncommon in the present day, which are expressly authorized to hold stock m other corporations and have been organized for this purpose. In all cases where the corporation properly holds stock It has all the rights of a stockholder as to such stock in- cluding the right to receive dividends and to have its rep- resentatives vote and, when duly elected, act as directors or officers of the corporation by which the stock was is- sued.*' As a rule, a corporation may buy its own stock with Its surplus profits, if not prohibited by statute and all its stockholders acquiesce." It may not, however, do so save from surplus profits-unless expressly authorized thereto by statute-since such procedure impairs and prac- tically amounts to an illegal reduction of its capital stock Transfers of stock held by associations, societies or corporations must be made under the corporate seal by the duly authorized officers, and must be accompanied by a properly certified copy of the resolution or by-law author- izing the transfer. The certificate of authority should in- clude a designation and statement of the due election of the officers who are to act. Occasionally transfer agents or officers require an exemplified copy of the minutes or Pa. |^i"08 lisJaf-^""' " *">• ^" <'«8°)= Layng v. A. French Spring Co.. 149 ville, etc. Ry. Co., 91 Fed Ren' 2Q9nidL^ir^-j^'';, "' (1883); Rogers v Nash. Co,.^m Fed. Rep. 49. (»ol5%'e7beS^ v^}?e'„n'oV e.^^g'^g. ^'/^'l^f ^ (189«^" ' '^"'^ °" Corp.. S 311; Lowe v. Pioneer Threshing Co.. 70 Fed. Rep. 646 90 STOCK. by-laws of the organization before they will register such a transfer. (See Form 176. j When stock is acquired by an association or society not incorporated, it is usually placed in the hands of trus- tees. When stock of another corporation is acquired by a corporation authorized to hold such stock the assignment may run direct to the corporation or to its treasurer or to a trustee for the corporation (See § 39), though if the stock actually and unreservedly belongs to the corpora- tion, there is no reason why it should not be held in the corporate name. The certificates for such stock, assigned in blank or assigned direct to the corporation— or the treasurer or a trustee if desired — are turned over to the treasurer or other designated officer of the transferee cor- poration, who presents the certificates for reissue, the new certificates being taken in the name of the transferee as indicated by the completed assignments on the back of the certificates. When such stock is held in the corporate name and is to be transferred, the corporate signature is affixed to the assignment by the duly authorized officer or officers of the assigning corporation. The corporation which issued the stock, before registering the transfer on its books may and should require proper evidence that these officers were properly empowered to affix the corporate signature. This proof is best supplied in the form of a certified copy of the resolution whereby the transfer of the stock was authorized. The procedure is much the same where stock is held in the name of the treasurer or a trustee for the corpora- tion, save as to the signature to the assignment. § 56. Transfers to and by Partnerships. A partnership may deal in stocks as freely as may in- RUI.ES REGUIvATING TRANSFERS 91 dividuals, and if it is a trading partnership, i. e. a part- nership formed for the purpose of buying, selling or man- ufacturing,^^ any member of the firm may sign the part- nership name to a transfer of stock if this stock is held in the firm name.^"^ The signatures of the individual partners to the assign- ment is not necessary, the firm name affixed by one of the partners being legally sufficient. The corporation may re- quire evidence when necessary of the assigning partner's membership in the firm. If stock is issued to the partners as individuals, as *'To John Gray and Henry H. Harriman " they are tenants in common and both the individuals named must join in any transfer. The same is true when the stock is held in the firm name if the partnership is not a trading partnership. Thus if stock is held by a professional firm, even though in the firm name, the partners must sign their individual names to the transfer. In the absence of objection, any partner may vote on stock held in the firm name but in case of disagreement the stock cannot be voted.^^ One joint owner cannot sell or vote stock standing in the names of two or more, but each name must be signed to its assignment or proxy.^^ § 57. Summary of Rules Regulating Transfers. The following rules regulating transfers of stock are those recognized by the trust companies of New York City and are given here as a very clear, concise summary of the general laws governing the subject. (i) The assignment of a certificate should be executed by the stockholder personally or by duly authorized at- torney. In the latter case the assigned certificate should »»Lee V. Bank, 45 Kan. 8 (1890); 11 L,. R. A. 238. Tj K** H^y'J^o!'?^ ^- Prentiss, 10 Colo. App. 295 (1897); Comstock v. Buchanan, 57 xiarb. 127 (1864). •^7 T>"¥^no';°/,fi?f^^'" ^^P^"" ^°-' ^^ "°^- P'"- 111 (1865); Comstock v. Buchanan, 0/ rsarb. 127 (1864). "Tunis V. R. R. Co.. 149 Pa. St. 70 (1892); S. C, 15 I,. R. A. 665. 92 STOCK. be presented to the transfer officials accompanied by the power of attorney under which the party acts, and the original or a notarial copy of this power should be left on file. Authority to transfer stock should appear in the power of attorney and, if necessary, the authenticity of the signature and the fact that the instrument is still in force, must be proved. (2) The signature must be witnessed and must cor- respond with the name as written on the face of the cer- tificate. Signatures unknown to the transfer agent should be guaranteed by some bank official or acknowledged be- fore a notary public. (3) The name and full post-office address of the trans- feree should be given in full without abbreviation of any kind. The space for the name of the attorney should be left blank. (The address of the transferee is not entered in the assignment form but may be noted on the certificate or be furnished on a slip attached to the certificate.) (4) The full first name of the transferee should bo given. If the transferee is a woman, the prefix "Mrs." or "Miss" should be used. No other prefixes and no suf- fixes should be used. (5) In transferring to a married woman, use her full Christian name — not that of her husband. (6) In case a new certificate is required because of change of name by marriage, the old certificate should be signed "(Mrs.) Henrietta F. Bowen, formerly (Miss) Hen- rietta F. Francisco," while in the space for the name of transferee should be placed the name "(Mrs.) Henrietta F. Bowen." (7) Agents, attorneys, executors, administrators, guardians or trustees should not transfer stock to them- selves directly, i. e. as individuals. (8) Transfers to a minor should give the guardian's name; thus, "Frederick McAllison (a minor) under guar- Rui^Es m:gui and obligations have been paid. 4. To inspect the corporate books and accounts. These rights are discussed in detail in the sections which follow. §60. (i) Voting. Unless expressly denied in some way, every stock- holder, whether his stock be common, preferred or special, has the right to participate in and vote at all meetings of stockholders. (See §§ 90, 91.) Usually he is entitled ta cast one vote on all matters passed upon at stockholders' meetings for each share of stock standing in his name upon the books of the corporation, — a right secured to him in a majority of the states by express statute provision. In other states the right, if desired, should be definitely set forth and secured by proper provision in the charter or by-laws. If this is not done, the common law prevails, under which every stockholder is entitled to one vote on all matters passed upon by the stockholders, regardles:> of the amount of stock he holds. ^ If the statutes make no provision as to voting, the mat- ter may be regulated by either charter or by-laws. In some few states, as in Washington and Maine, the statutes expressly authorize such regulation by the by-laws. In others, as in Connecticut, Delaware, New Jersey and Nevada, the statutes provide the method that shall be fol- lowed in voting unless otherwise prescribed by charter or by-laws. •Commonwealth v. Dalzell, 152 Pa. St. 217 (1893); Taylor v. Griswold, 14 N. J. L. 222 (1834). RIGHTS AND POWERS OF STOCKHOLDERS. 97 iN The Statutes usually prescribe that voting at elections of directors shall be by ballot. Where no special method of voting is prescribed by statutes, charter or by-laws, it may be by call of roll, by ballot, or by any other method that will properly and legally indicate the sense of the meeting. If all are agreed, it is always permissible to in- struct the secretary to cast the single ballot of the meet- ing for the election of specified candidates for directors, or for or against any other measure properly before the meeting. As between the corporation and its members, the right to vote and usually also the number of votes a stockholder is entitled to cast is determined by the stock books of the corporation.^ The possession or non-possession of a stock certificate is immaterial. (See §§ 31, ^;^^ 34, 36, 91.) The right to vote by proxy is generally given by express- provision of either the statutes or by-laws, though in some states the right is secured by constitutional provision. It did not exist at common law.^ (See § 85.) Trustees may vote upon the stock held in their names as trustees. An executor or administrator may vote upon the stock belonging to the estate even though'standing in the name of the deceased party. In the absence of dis- agreement, any partner may vote stock standing in the partnership name. A corporation holding stock of an- other corporation may vote such stock through duly au- thorized agents. A receiver usually votes stock in his possession. When stock is held jointly or in common, as in the case of a partnership or where there are two' or more trustees or executors, all must agree on the vote or otherwise it will be lost.^ The right to vote carries with it the right to be notified m7]?J?prj^^lt l^nSf Co^.!VlJ- I}- III [\lllV '"^^ - ^-'-^ '' ^-"- ^^- YO 59Wf8y)^^C=^^^^ 1 Paige (N. (N. Y^)"T30^1^?5r"'^' '''• ^°' ^^^^- ^t.^^0'(^,89%;^^I^e^^^«^Aolphi„. 92 Hun 98 STOCKHOLDERS. of all special meetings/ and of all regular meetings if so prescribed. (See §§ 80, 97.) § 61. (2) Dividends and Participation Rights. Save when affected by the issue of some preferred or other special stock, each stockholder has the right to share in dividends with the other stockholders of his corpora- tion proportionately to the number of shares of stock he holds, and there must be no discrimination of any kind in the declaration or the payment of these dividends. (See § § 169, 171O Holders of preferred stock, unless otherwise expressly provided, are entitled in any year to payment of their pre- ferred dividends before any dividends are paid the com- mon stock, and thereafter, as soon as the common stock has received an equal dividend, to participate equally with the common stock in any further dividends declared in that year.^ If the capital stock of a corporation is increased, each stockholder has the right to subscribe for the new stock proportionately to his holdmg of the old outstanding stock.^ Thus if he holds ten per cent, of the outstanding stock and the capital stock is increased, he has the privi- lege of subscribing for ten per cent, of the new stock. This rule applies to any actual increase of stock, but not to a sale of treasury stock, nor usually to stock which is part of the original capitalization but which has not yet "been issued.^^ If, however, this unissued stock has been held for a considerable period of time and is then issued, the stockholders should all have an equal opportunity to subscribe therefor." Holders of preferred stock have the T People V. Batchelor, 22 N. Y. 128 (1860); In re St. Helen Mill Co., 3 Sawy. 88 (1874); Wiggin v. First etc. Church 8 Mete (Mass.) 301 (1844). •Boardman v. Lake Shore, etc. R. R. Co., 84 NV. 157 (1881) •Way V. Am. Grease Co., 60 N. J Eq. 263 (1900); Electric Co y Edison, etc. Co., 200 Pa. St. 516 (1901); Stokes v. Cont Trust Co., 185 N. Y. 285 (1906) "Crosby V. Stratton, 68 Pac. Rep. 130 (1902); State v. Smith, 48 \ t. 266 (1876). "Electric Co. v. Edison El. Co., 200 Pa. St. 516 (1901). RIGHTS AND POWERS OF STOCKHOLDERS. 99 same rights of subscription as do holders of common stock unless expressly denied them by the provisions which cre- ated the preferred stock. The right of subscription is sometimes of considerable value as where a new issue of stock is authorized at a fixed price and this price advances before the day of sale § 62. (3) Distribution of Assets on Dissolution. Each stockholder is entitled to share equally in any dis- tribution of the assets of the corporation, whether on final distribution or on some partial intermediate distribution Under whatever proceedings a corporation is dissolved the general rule holds that all corporate obligations and the expenses of the proceedings must first be discharged and that any remaining assets must be distributed amon?' the stockholders, the same rules applying as to equality of payment, of time and of kind, as in the case of dividends '' (See § 179.) In the absence of any express provision to the contrary common and preferred stock share alike in the distribution of assets. If by its terms preferred stock takes prece- dence. It must first receive any assets available for distri- bution up to its full face value. The common stock then receives any remaining assets up to its full face value If any balance of assets still remains, both common and preferred stock participate therein alike, unless otherwise expressly provided. § 63. (4) Inspection of Books. Under the common law every stockholder had the nVht to inspect the books and accounts of the corporation in person or by agent and to make abstracts or copies there- from without restriction, save that the examination b. 33 i^?SS-"^' 5?^ ¥e|-i-^||Hll^??\?JbS^- 1- CO.. 100 STOCKHOLDERS. made at a reasonable time and for a proper purpose. By modern statutory regulations and judicial decisions, the right has been much curtailed,^"* until it is now in many states but little more than nominal. In these states a stockholder desiring to examine the books of account or the records of his corporation must, if refused, secure an order of court for such examination, which will only be granted when he shows some good rea- son therefor.^^ This reason must be substantial and must be for the specific purpose of investigating some matter concerning the management of the corporation in which his rights as a stockholder are or may be affected in- juriously.^^ This restriction of the right is not unreasonable. It is obvious that it would be impracticable in a large modern corporation with its multitude of scattered stockholders, to allow these to come in at any time and make an exam- ination of the books. The interference with the regular business would in itself be intolerable, but beyond this the right might be so used in the interest of business com- petitors as to render it destructive of the interests of the stockholders at large. In some states statutes have been passed which some- what enlarge the stockholders' usual right to examine the corporate records, and in a few states the right has been considerably extended. In most of the states there is a statutory right to inspect the stock and transfer books, ^^ though in New Jersey the courts hold that even this right cannot be enforced unless the stockholder can show some reason for his inspection "germane to his status as a stock- " Ranger v. Champion Cotton Press Co., 51 Fed. 61 (1892); Chable v. Nicaragua Canal Construction Co., 59 Fed. 846 (1894); Huylar v. Cragin Cattle Co., 40 N. J. Eq. 392 (1895); People v. Eadie, 63 Hun. 320; AflF'd, 133 N. Y. 573 (1892); Matter of Steinwav. 159 N. Y. 250 (1899); Cincinnati Volksblatt Co. v. HoflFmeister, 62 O. St. 189 (1900). "Paine v. Warren, 33 Fed. Rep. 357 (1888); Ranger v. Champion Cotton Press Co., 51 Fed. Rep. 61 (1892); Varnev v. Baker, 194 Mass. 239 (1907); Kuhbach v. Irving, etc. Co., 220 Pa. St. 427 (1908). '•Phoenix Iron Co. v. Commonwealth, 113 Pa. St. 563 (1886); Sage v. Lake Shore, etc. R. R. Co.. 70 N. Y. 220 (1877). "Lozier v. Saratoga, etc. Co., 59 App. Div. (N. V.) 390 (1901); Lewis v. Brain- erd, 53 Vt. 519 (1881). i f RIGHTS AND POWERS OF STOCKHOLDERS. 101 holder."^^ In many of the states a statutory penalty is imposed on the corporate officers who refuse a stockholder the right of inspection prescribed by the statutes. In such cases the stockholders' rights are not difficult of enforce- ment.^^ Where the right to examine the corporate records ex- ists, it includes the right to make copies and abstracts.^° It also includes the right to be accompanied by the party's attorney or expert accountant, or the inspection may be delegated to one or both of these.^^ § 64. Special Charter Rights. In many states special provisions "for the regulation of the business and the conduct of the affairs of the cor- poration" may be inserted in the corporate charter. Where this privilege exists, rights not usually belonging to the stockholders of a corporation may be thereby se- cured. Thus, stock may be classified so as to give the minority stockholders unusual voting powers; minority representation may be insured by cumulative voting; the right to examine books may be defined and extended; the right to be present at directors' meetings may be given; it may be provided that profits when they exist shall be declared as dividends at regular intervals, or the power of the directors to pay salaries, contract debts, sell cor- porate property, and the like, may be restricted. It should be noted that special provisions incorporated in the charter are difficult of repeal or amendment. For this reason only those which are expressly desired to be permanent should be made the subject of charter pro- vision. Less important provisions are better included in '* State V. National Biscuit Co., 54 Atl. 241 (1903). Br.^itll VV M9"(!881)'" *'°- " *'"'• ""• ""■ ^■'> "» <"""• ^"'= "' ^ocmcinnati Volksblatt Co. v. Hoffmeister, 62 O. St. 189 (1900); Martin v. W. J^^Johnston Co, 62 Hun 557 (1891); Contra Commonwealth v. Empire, etc. Ry. Co., rioQo/^S?^ ^- Nassau Ferry Co., 86 Hun 128 (1895); Foster v. White, 86 Ala. 467 (1888); Ellsworth v. Dorwart, 95 Iowa 108 (1895). i 102 STOCKHOI.DERS. the by-laws, where they may be changed when necessary with less formality. § 65. Statutory Rights. In most of the states the usual common law rights of stockholders — discussed in the preceding sections — have been re-enacted in the statutes. In many states the statutes give the stockholders additional rights. Thus, in New York, Kansas, North Dakota and a number of other states, stockholders may call for prescribed statements and reports from the corporate officials. In California and Washington they may inspect mines owned by the cor- poration. In Connecticut any stockholder may apply for a mandamus to compel the corporation to obey the statutes. In Delaware any stockholder may demand a statement of amounts paid on capital stock and the amount of stock issued. In a number of states meetings for elec- tion of directors may be compelled by following prescribed procedure. Provisions as to inspection of books are com- mon and go beyond the common law rights. (b) Powers of Stockholders. § 66. Individual and Collective Powers. The individual stockholder, no matter how large his holding, has no power as a stockholder to interfere in the lawful management of the company or its business.^^ If the directors take, or are about to take any illegal or wrongful action, he may restrain them by appeal to the courts. If, however, the action taken or about to be taken is in itself not unlawful but merely objectionable to him, his only recourse is to induce, if he can, a majority of the stockholders to act with him in a duly assembled stockholders' meeting, when the by-laws may be amended or such other remedial steps be taken as may be possible. *»Demarest v. Spiral, etc. Tube Co., 71 N. J. L. 14 (1904). t i RIGHTS AND POWERS OF STOCKHOLDERS. 103 The collective powers of the stockholders apply to but few matters and may be summarized as follows: I. 2. 3- 4- 5- 6. Amendment of charter. Adoption, repeal or amendment of by-laws. Election of directors. Sale of entire assets. Dissolution of corporation. Exercise of any special charter powers. § 67. (i) To Amend Charter. A charter is a contract between the state and the stock- holders of the particular corporation, and the assent of both the state and these stockholders is a prerequisite to its amendment. As the charter is also a contract between the corporation and its stockholders, the unanimous vote of all the stockholders is required for its amendment unless otherwise prescribed by statute.^ In most of the states such statutes exist providing thai the charter may be added to or amended, usually in cer- tain prescribed details or matters, by the action of a speci- fied proportion of the stockholders ranging upward from a bare majority to three-fourths of the outstanding stock. (See § 12.) § 68. (2) To Adopt, Repeal or Amend By-laws. The adoption or amendment of by-laws is one of the common law powers of the stockholders. (See § § 19, 23.) If no provision is made otherwise, the power to adopt, amend and repeal by-laws rests with the stockholders alone,^ who must, to exercise this power, be duly assembled in a meeting at which such action can be lawfully taken.^ If the charter or by-laws do not otherwise prescribe, the by- laws may be adopted, amended or repealed at any regular vir lJ^?S^^^*e- ■^r'i^V,??;.^^-,?^'^^'"^""' "^7 M°- 93 (1870); Marietta, etc. R. R. v. Elliott 10 p. St. 57 (1859); Mercantile, etc. Co. v. Kneal. 51 Minn. 263 (1892). * Angel & Ames on Corp., § 327. » North, etc. Co. v. Bishop, 103 Wis. 492 (1899). \ 104 STOCKHOLDERS. -meeting of the stockholders or at any special meeting where such proposed action has been duly announced. There is some question whether by-laws may be adopted or amended without previous notice at the annual meeting held in accordance with statutory requirements, unless the charter or by-laws expressly so provide."^ If the power to adopt by-laws is delegated to the direc- tors (See § 119), this does not, unless expressly so stated, confer on them the exclusive right to make by-laws nor empower them to repeal by-laws enacted by the stock- holders.5 (See Ch. Ill, "By-laws.") § 69. (3) To Elect Directors. The election of directors is one of the common law powers of stockholders which has been re-enacted in the statutes of most of the states. In all corporations for profit the power exists without specific statutory author- ity.^ (See § 90.) In the absence of other provision, the stockholders have the right to fill vacancies in the board of directors. Ordinarily, however, either by statute or by-law provision this power is given to the board. (See § 1 1 1.) § 70. (4) To Sell Entire Assets. A solvent corporation can only sell its entire assets by the unanimous consent of all its stockholders.^ Where, however, a corporation is financially involved or likely to become so, the sale of all its property may be made in any manner that will secure a fair return, by authorization of a ♦Dill on N. J. Corp., p. 27; Smith v. Nelson, 18 Vt. 511 (1846); Kent v. Quicksilver Mining Co., 78 N. Y. 159 (1879); Bagley v. Reno, etc. Co., 201 Pa. St. 78 (1902). • Heintzelman v. Druids' Relief Assoc, 38 Minn. 138 (1888); Stevens v. Davison, 18 Gratt. (Va.) 819 (1868); Commonwealth v. Gill, 3 Whart. (Pa.) 228 (1838); Alters v. Journeymen, etc. Assoc, 19 Pa. Super. Ct. 272 (1902). 'Re Union Ins. Co., 22 Wend. 591 (1840); In re Long Island R. R. Co., 19 Wend. 37 (1837). » Abbot v. American Hard Rubber Co., 33 Barb. 578 (1861); People v. Ballard, 134 N. Y. 269 (1892); Eldred v. American Palace Car Co., 96 Fed. Rep. 59 (1899); 99 Fed. Rep. 168 (1900). i 1 RIGHTS AND POWERS OF STOCKHOLDERS. 105 majority of the stockholders.^ Also if the statutes or charter so provide, the entire assets of a corporation may be sold by action of a majority of the stockholders, or by majority action of the directors, the prescribed formalities being duly observed.^ § 71- (5) To Dissolve the Corporation. **It is an unquestioned rule that all the stockholders, by unanimous consent, may effect a dissolution of the cor- poration by the surrender of the corporate franchises."^° Where the corporation is insolvent or is in danger of be- coming insolvent, and is unable to further conduct its cor- porate business, a majority of the stockholders may eflFect its dissolution. This is the extent of the power of the stockholders under the common law.^^ Statutory provisions, however, exist in a majority of the states prescribing procedure whereby dissolution may be had by action of a stated majority of the stockholders. (See § 179.) § 72. (6) Special Powers. In many states special powers are conferred upon the stockholders by express statutory provision. Thus in Kentucky, Maine and some other states, it is provided that corporations may merge or consolidate with others upon the consent of a prescribed majority of the outstanding stock, usually with a provision for the appraisement and purchase of the stock of any dissenting stockholder. In New York, Pennsylvania and some other states it is pro- vided that any mortgage of corporate property must be 5^n ^%l'^^" u ^/^*' ^^^'xS^:',^? ^- J" E^" ^^^ (1893); Skinner v. Smith, 134 N. Y. 240 (1892); Hayden v. Official Hotel Red-Book, etc Co., 42 Fed. Rep. 875 (1890). T«, P"^A^^"'^n*';V^'5lf^7o.^/°^"' ^^ Fed. Rop. 644 (1893); St. Louis v. St. 7iqqI\ ^\^V ^°" /O ^?^ 69 (1879); Peabody v. Westerly Waterworks, 20 R. I. 176 ^ ,00 ^""i^ord V. Ecuador, etc. Co., Ill Fed. Rep. 639 (1901). f«« la^ °"i^?,''P' §62^: Denike v. N. Y., etc Co., 80 N. Y. 599 (1880); Hous- ton V. Jefferson College, 63 Pa. St. 428 (1869). "Berry v. Broach, 65 Miss. 450 (1888); Price v. Holcomb, 89 Iowa 123 (1893). 106 STOCKHOLDERS. authorized by a vote of the stockholders. In several states, as California and Montana, directors may be re- moved by a two-thirds vote of the entire stock. In the states where special provisions may be inserted in the char- ter, as in New York, Delaware and South Dakota, it is possible to extend the powers of stockholders far beyond their usual scope. (See §§ 14, 64.) CHAPTER IX. LIABILITIES OF STOCKHOLDERS. § 73. Liabilities of Subscribers to Stock. "The public, in dealing with a corporation, assumes that its actual capital in money or money's worth, is equal to the capital stock which it purports to have, unless it is impaired by business losses,"^ and those who credit the corporation have a right to assume that if this is not the case, any difference between the amount of capital actually paid in and the par value of its issued stock will be made up as far as necessary to meet corporate liabilities. In other words, those dealing with a C(jrporation are justified in assuming that a dollar's worth of cash or property has been contributed to the corporation or will be contributed if the necessity arises, for every dollar of its stock out- standing. This is a broad statement of the claim which corporate creditors have upon stockholders. While the assumption on the part of the public of the value represented by stock has often but little basis in fact, it is the foundation for the common law liability of the subscriber, first to the corporation and then to the creditors of the corporation, for any amount unpaid on his subscription.2 If subscriptions are not paid according to their terms, or when subscriptions are unconditional as calls are made by the directors, the corporation may either bring suit to collect unpaid amounts, obtain judgment and ' 1 Cook on Corp., §199. *Hollins V. Brierfield, etc. Co., 150 U. S. 371 (1893). 107 108 STOCKHOLDERS. levy on the stock if necessary,^ or, where the statutes give such power, may forfeit the delinquent stock. If the cor- poration does neither, the liability of the stockholder on his unpaid stock still remains for the benefit of creditors of the corporation. (As to transfers of unpaid stock, see §§ 48, 74') When the statutory forfeiture of stock for unpaid calls is enforced in good faith, a stockholder who is thus de- prived of his stock is released from further liability to the corporation and its creditors.** When stock is so forfeited, it is necessary to observe the prescribed statutory formali- ties carefully, as otherwise the proceedings may be set aside and the corporation be liable in damages.^ An important difference must be noted here between the stockholder's liability to the corporation and to the corporate creditors. The corporation may, if it desires, sell stock to subscribers at less than par, and, if it does so with the agreement that such payment shall be payment in full, the agreement will stand as to the corporation, and, upon payment of the agreed amount, the subscriber's ob- ligations to the corporation are at an end. The corporate creditors, however, who are not parties to the agreement, are not estopped thereby but may proceed against the stockholder for the difference between the amount he has paid on his stock and its full par value, and the agreement with the corporation is no defense. As a rule, corporate creditors must first proceed against the corporation for the collection of their claims. If they secure judgment against the corporation and are unable to collect from it, they may then proceed against any stockholder who has not paid in full for his stock.^ If, however, the corporation has been dissolved or is no- » Nashua Bank v. Anglo-Am. Co., 189 U. S. 221 (1903); Upton v. Tribilcock, 91 U. S. 45 (1875). * Mills V. Stewart, 41 N. Y. 384 (1869); Germantown, etc. Co. v. Fitler, 60 Pa. t>t. 124 (1869). •Lewey's Island R. R. Co. v. Bolton, 48 Me. 451 (1860). •Wetherbee v. Baker, 35 N. J. Eq. 501 (1882). *l LIABILITIES OF STOCKHOLDERS 109 toriously insolvent, creditors may proceed directly against the stockholders of the corporation,'' If the corporation goes into the hands of an assignee, a receiver, or a trustee in bankruptcy, it is the duty of that official to collect all unpaid subscriptions.^ The fact that other stockholders have not paid their subscriptions does not avail a stockholder as a defense against payment of his own subscription. Nor has he any claim against these other subscribers. When, however, payment of his subscription is enforced by corporate credi- tors, the conditions are different. A corporate creditor need not, as a rule, proceed against or join all the stock- holders whose subscriptions are unpaid but may collect from any one or more of them up to the full amount due on their stock if his claim amounts to so much. In such case, as the corporate debts are a joint obligation to be borne by all the delinquent stockholders in proportion to the amounts due on their stock, any subscribers who are compelled to pay more than their due proportion can com- pel contribution from other delinquent stockholders up to their proportion of the debts paid.^ Where corporate property has been purchased with stock, the stock issued therefor is usually supposed and in- tended to be full-paid. If, however, there has been unfair dealing or such overvaluation of the property as to be fraudulent, the stock might be held but partly paid and in case of insolvency there would then be a liability to the corporate creditors for the amount still due.^° (See "Full- paid Stock." § 29; also "Exchange of Property for Stock," Ch. XXVI.) An exception to the general rule that a corporation may not sell its stock below par on original issue without ^New Lamp Chimney Co. v. Brass Co., 91 U. S. 656 (1875); Terry v. Tubman, 92 XJ. S. 156 (1875). ri88lJ" ^'^ Crystal Spring Co., 96 Fed. 945 (1899); Scovill v. Thayer, 105 U. S. 143 » 3" Thomp. Corp., § 3816. '• For full discussion of issuance of stock for property, see Conyngton on Corp Organization, pp. 204-225. no STOCKHOLDERS. UABIUTIES OF STOCKHOLDERS. Ill fl! ill involving liabilities to subscribers, is found when a cor- poration is financially embarrassed and in danger of be- coming insolvent. If it still has unissued stock it may then sell this stock for any price reasonably possible and the purchasers incur no obligation for the unpaid portion. It may be noted that the payment of commissions on the sale of stock when reasonable is not held to constitute a sale of stock below par, even though the net proceeds are thereby diminished to less than the par value of the stock.^^ § 74. Liabilities of Purchasers of Stock. Stock issued direct by the corporation is termed an original issue as distinguished from stock transferred thereafter from one stockholder to another or taken from the treasury stock of the corporation itself. If such out- standing stock is purchased in good faith with the under- standing or express statement that is is full-paid, and par- ticularly when the certificates are so marked, the pur- chaser does not incur any liability either to the corpora- tion or its creditors even though the subscription price or the par value of such stock has not been paid in to the corporation. In any such case the unpaid liability on the stock either remains with the transferrer or is lost.^^ (See §48-) When, however, a purchaser takes unpaid stock with a knowledge of the conditions, the liability for any call al- ready made, even though the payment date of such call has not yet arrived, remains with the transferrer, but the transferee is liable for any subsequent calls.^^ The general rule is, however, modified by statute in many of the states. Thus in Oregon and Tennessee the liability on unpaid stock remains with the transferrer, "Arapahoe, etc., Co. v. Stevens, 13 Colo. 534 (1889); Zabel v. New State, etc. •Co., 86 N. W. Rep. (Mich.) 949 (1901). lowest Nashville, etc. Co. v. Bank. 86 Tenn. 252 (1888); Brant v. Ehlen, 59 Md. 1 (1882); Rood v. Whorton, 67 Fed. 434 (1895). "Boulton Carbon Co. v. Mills, 78 Iowa 460 (1889); 5 L. R. A. 649; Webster v. Upton, 91 U. S. 65 (1875). . while in Kentucky it continues with the transferrer for two years from the date of transfer, and in Maine and Mis- sissippi for one year. In Wisconsin the liability may be shifted to the transferee with the consent of the corpora- tion but the liability of the seller continues notwithstand- ing for six months after the transfer. In Nebraska the liabiHty follows the unpaid stock. In Illinois both trans- ferrer and transferee are liable. The common law liability of holders of unpaid stock for any unpaid portion of its par value is confirmed by statute in most states of the Union. In a few states this common law liability has been extended, and in a number of states additional liabilities are imposed. These subse- quent or additional liabilities extend to all stockholders, whether their stock is full-paid or otherwise. Thus in California stockholders are liable in propor- tion to their stock interests, for all debts of the corporation. In Minnesota a double liability is imposed, save as to stockholders of manufacturing and mechanical corpora- tions. In Arizona stockholders are liable for all debts of the corporation unless expressly otherwise provided in the charter of the corporation. In Wisconsin stockholders are liable for all debts of the corporation until one-half the capital stock is subscribed and twenty per cent, has been paid in. In Nebraska a double Hability is imposed if th- incorporation is defective or if the annual report of indebt- edness is not made. The stockholders of a New Hamp- shire corporation are liable for all the corporate debts until its capital stock has been paid in full and has been duly certified. In Massachusetts, New York, Pennsylvania, Indiana and a number of other states, stockholders are liable for corporate debts for labor performed, or for amounts due employees of the corporation. In Wiscon- sin a double liability exists for certain labor claims. In several states the statutes expressly provide that the lia- ,,'f FT Pt I 112 STOCKHOLDERS. UABIUTIES OF STOCKHOLDERS. 113 bilities of a stockholder may be extended by proper pro- vision in the charter of the corporation. On the other hand, in some few states special exemp- tions are found, as in Delaware, New Jersey, Indiana and New Mexico, where, regardless of whether it is full-paid or otherwise, preferred stock is exempt from all claims of corporate creditors; or in Ohio where preferred stock is liable only after the liability of common stock has been exhausted; or in Tennessee where preferred stock is not liable for corporate debts unless it has the voting power; or in Michigan where preferred stockholders are exempt from personal liability for all corporate debts save for labor performed. In New Mexico common stock may be exempted from the usual liabilities by proper procedure. Statutory liabilities pertaining to irregularities of in- corporation are treated of in the section which follows. § 75. Liabilities of Stockholders as Partners. In every state of the Union the procedure for the for- mation of a corporation is prescribed, and, if this pro- cedure is duly followed and the charter is granted by the proper authorities, the corporation comes into being with every right and privilege of a corporation. Also if an honest effort has been made to comply with the law, minor omissions, failures or irregularities will not invali- date the incorporation.^'* Even when material errors omissions or failures occur in the observance of the pre- scribed formalities, the usual effect is the formation of a de facto corporation, liable at the suit of the state to be deprived of its right to do business as a corporation, but, until this is done, having every corporate right and privi- lege,^^ and its stockholders having only the usual liabilities of stockholders. " 1 Cook on Corp., § 234. ^c^ /*,n^«^/*°^* Y- Railroad Co., 24 Mich. 389 (1872); Harris v. Land Co., 128 Ala. 652 (1900); Cooley on Const. Limitations, § 309. When, however, there is some essential irregularity or failure, as for instance if there is no legal authority for the formation of a corporation such as was purposed, or if the filing of the prescribed charter or articles of association was omitted, there is not even a de facto corporation and the parties engaged may be held liable as partners, and this applies to those entering after organization of the corpora- tion as well as to those originally involved.^^ Also in a number of the states, by express statutory provision, defects in observance of the statutory procedure for incorporation, or failure to observe the requirements of the laws relating to corporations thereafter, render the stockholders of such corporations liable as partners. Thus stockholders are liable in Iowa as partners if the incorpora- tion has been irregular, and in Florida if the incorporation has been irregular or incomplete. In Illinois, also, the stockholders are liable as partners if the provisions of the law are not complied with, and in Maine they are liable for the corporate debts in case of failure or fraud in ob- servance of the corporation laws. In a few states lia- bilities follow if some specific act is not performed, as in Louisiana and Idaho where the stockholders are liable as partners unless the word "Limited" follows the corporate name in all advertising matter, on signs, etc., while in Ne- braska a double liability is imposed if the incorporation is defective or if the annual report of corporate indebted- ness is not made as prescribed. Where stockholders of a corporation reside in another state or when a corporation is formed in one state to do business in another, the stockholders usually incur only such liabilities as are prescribed in ^he state of incorpora- tion. If, however, a company is incorporated in one state to carry on in another state business of a nature not al- lowed to corporations organized in that other state, the mqoo\^*''t"^^°'"^''5;7- ,Fo'"bes, 148 Mass. 249 (1889): Eaton v. Walker, 76 Mich. 579 (1889); Jones v. Hardware Co., 21 Colo. 263 (1895). 114 STOCKHOLDERS. LIABILITIES OF STOCKHOLDERS. 115 parties engaged may be held liable as partners. ^^ Also corporations organized in one state to conduct businesses in other states which they are not authorized to carry on in the state of incorporation, as to build railroads or do a banking business, are sometimes held to be merely part- nerships in these other jurisdictions.^^ § 76. Assessment Liability. "It is a principle of law, coeval with the existence of corporations having a capital stock, that, unless the cor- porate charter or a constitutional statute provides other- wise, a stockholder, the full par value of whose stock has been paid in, is not liable and cannot be made to pay any sums in addition thereto. The mere legislative act of creating a corporation produces by implication this limited liability of its members. "^^ This exemption from liability of stockholders whose stock is full-paid is, however, subject to modification, as stated, either by statute provision or, as to the corporation. by charter provision. Accordingly we find the power of levying assessments is given by the statutes in a number of states. Thus in California and Idaho assessments may be made by the directors for the purpose of paying ex- penses, conducting the business or paying debts. The same provision exists in North and South Dakota. In Colorado mining and irrigation companies may, under cer- tain circumstances, assess full-paid stock. In Montana full-paid stock may be made liable to assessments by char- ter provision, or the charter may expressly exempt it, but in such case the provision for non-assessment may be changed by three-fourths' written consent of the stock- holders. Where power of assessment of full-paid stock is given "Empire Mills v. Alston Grocery Co., 15 S. W. Rep. (Texas) 200, 505 (1891). "Land Grant Ry. v. Commissioners, 6 Kans. 245 (1870). "1 Cook on Corp., §241; United States v, Stanford, 161 U. S. 412 (1896). the directors, any assessed amount is merely a liability of the stock, not extending to other property of the parties who hold the assessed stock. If the assessments are not paid, the defaulting stock may be forfeited by prescribed statutory procedure, but this ends the matter. § 77. Liability for Disbursements from Capital. The capital of a corporation is considered a fund held for the protection of the corporate creditors and therefore not to be distributed in any way among the stockholders save on dissolution of the corporation, and then only in accordance with the provisions of the law. For this rea- son dividends can lawfully be declared only from surplus profits. In New York and some other states, the declaration of any dividend which impairs the capital stock is made a penal offense. In almost every state of the Union such dividends are illegal and corporate creditors may reclaim them from stockholders to whom they are paid. In like manner stockholders are liable to the corporate creditors for any assets of the corporation received by them in any way, save as a dividend from profits. ^° There is no such liability for dividends declared from profits, even though the company afterward becomes insolvent. ^^ (See Ch. XX.) "Finn V. Brown, 142 U. S. 56 (1891); Hastings v. Drew, 76 N. Y. 9 (1879); Bartlett v. Drew, 57 N. Y, 587 (1874). »^ Reid V. Mfg. Co., 40 Ga. 98 (1869). CHAPTER X. ANNUAL MEETING OF STOCKHOLDERS. m § 78. The Annual Meeting. The annual meeting of stockholders is prescribed by statute in most states, and elsewhere is required by the charter or by-laws of the corporation. It is the only usual regular meeting of stockholders. If other meetings are necessary, they are '^special meetings," called as re- quired. Stockholders' meetings must be held within the state of incorporation. In many states the statutes so provide. Elsewhere it is a matter of common law,^ save in some few instances, as in Delaware, West Virginia and Ari- zona, where the statutes expressly provide that stock- holders' meetings may be held out of the state. The principal office of the company within the state is the customary and most appropriate place for stockholders meetings and in many states is the place designated by statute. The by-laws usually prescribe the details of the an- nual meeting, such as the time and place, the notice re- quired, the number necessary to constitute a quorum, the time of closing books, the officers of the meeting and the order of business. By-law provisions also usually regu- late the use of proxies, method of casting votes and the employment of inspectors or tellers at elections of direc- tors. ^Ormsby v. Vermont Mining Co., 56 N. Y. 623 (1874). 116 ANNUAL MEETING OF ST0CKH0I.DERS. 117 Whenever there is any probability of the proceedings of the annual meeting being attacked or when there are any disputes or differences of opinion among the stock- holders of a corporation, every formality in connection with the annual meeting should be carefully observed. Under other circumstances such close observance, though always advisable, is not so essential If the proceedings are characterized by good faith and are a fair expression of the sense of those present, ''mere irregularities in the manner of conducting the business are immaterial."^ § 79. Closing Transfer Books. The corporate calendar (See § 153; Form 198) should show the exact date prior to the annual meeting on which the transfer books are to be closed to transfers. (See § 37.) The object in thus closing the books is to obviate any uncertainty as to who is entitled to receive notice of and to vote at the annual meeting. § 80. Notice of Annual Meeting. Notice of the annual meeting is usually prescribed by the by-laws and in some few states is required by statute. Such notice is not, however, of the same vital importance as in the case of special meetings, since the time and place of the annual meeting are specified in the by-laws and are supposed to be familiar to the stockholders. For this reason, failure to send out notice of its time and place as required by the by-laws, while a very serious breach of duty on the part of the secretary, is not ordinarily held ^ to invalidate the proceedings of the meeting, save as to any unusual or specially important business considered thereat.^ The notice of the annual meeting should not only •1 M°o°rawe"tz, 8^^482; Warner v. Mower, 11 Vt. 385 (1839); Sampson v. Steam Mill, 36 Me. 78 (1853). t ;'^ 118 STOCKHOLDERS. Specify its time and place but also its objects. This is not always legally necessary but is an advisable precaution, particularly when business of special importance is to be considered thereat. "Where unusual business is to be transacted even at a regular meeting, the notice of that meeting should state the unusual business.'"^ In Penn- sylvania it has even been held that important amendments of the by-laws cannot be legally effected at the annual meeting unless previously notified to the stockholders.^ In the larger corporations the by-laws frequently pro- vide specifically that any failure or irregularity in tha notice of the annual meeting shall not affect its validity or the validity of any of its proceedings. Written notice of the annual meeting mailed to the stockholders of record is usually prescribed. This notice should be signed with the official signature of the secre- tary or other corporate officer authorized thereto,^ and should be mailed, postage paid, on the date specified in the by-laws — which ranges widely from five to sixty days or more before the date of the meeting — to the address of each stockholder as shown by the books of the com- pany. (See Forms 55-59.) A copy of the notice with date of sending endorsed thereon, should be preserved by the secretary as evidence that proper notice of the meet- ing has been given. Publication of the notice of annual meeting is in some states required by statute, and is customary in all states among the larger corporations. It is, however, a most uncertain and inadequate method of notification and should only be used in connection with notice by mail. Copies of the papers in which the publication notice appears should be preserved by the secretary as proof of due pub- lication, or, if preferred, a copy of the notice may be made and an affidavit of the publisher or of the secretary cer- *2 Cook on Corp., S 595. •Bagley v. Reno, 201 Pa. St. 78 (1902). •Johnston v. Jones, 23 N. J. Eq. 216 (1872). 1* f' ANNUAL MEETING OF STOCKHOLDERS. 119 tifying to its due publication be attached. (See § 87; also Forms 165-167.) The notice of the annual meeting usually states the dates for the closing and reopening of the transfer books. § 81. Preparations for Annual Meeting. It is the secretary's duty to see that all stationery, blanks and materials and any of the corporate books or documents in his keeping that may be needed at the meet- ing, are at hand or readily accessible at the proper time. His preparations will also usually include, — (i) Order of Business. Unless the presiding officer is very famiHar with the regular order of business as given in the by-laws of the company, a copy should be prepared by the secretary in convenient form for reference and be handed to the chairman at or before the time he takes charge of the meeting. (See Form 24, By-laws, Art. II.) The object of the formal order of business is to insure the systematic and orderly conduct of meetings and of the business of such meetings. The order prescribed is, how- ever, directory, not mandatory as are most of the by-law regulations, and may therefore be suspended at any meet- ing in whole or in part, either by a majority vote of those present or by their mere assent.^ (2) List of Stockholders. Under the laws of New Jer- sey and some other states, an alphabetical list of the stock- holders entitled to vote at the annual meeting must be prepared by the secretary, be presented at the meeting and be kept there for the inspection of any stockholder. The requirement is a reasonable one, and a similar list will be found a convenience in any state. Its preparation is frequently made a by-law requirement. This list of stockholders is made out from the stock books after they are closed to transfers, and gives the T Matter of Wheeler, 2 Abb. Pr. (N. S.) 361 (1866); Matter of Mohawk, e*«. R. R. Co., 19 Wend. 135 (1838). 120 STOCKHOLDERS. ANNUAL MEETING OF STOCKHOLDERS. 121 names and addresses of the stockholders and the amount of stock held by each. It must be remembered, however, that the company's stock books are the final authority in any such matters and should be at hand for reference in case the accuracy of the list is impugned.^ In the smaller corporations the secretary will in addi- tion find an alphabetical list of the stockholders of much convenience for his own use. This list should be ar- ranged with columns m which may be noted those present in person or by proxy, those absent and the amount of stock held by each. (See Form 99.) (3) Outline Minutes. These will be found convenient for the use of the secretary. Properly prepared, they cover all routine business so that a few short pencil notes will usually dispose of these matters, leaving the secretary free to attend to any new or special business that may de- mand his services. (See Form 100.) § 82. Officers of Meetings. No fixed rule prevails as to officers of stockholders' meetings. The regular officers of the company usually serve, but not unless authorized thereto by the charter or by-laws. If no such provision exists, the stockholders elect or appoint the officers of their own meetings. As a rule, the secretary so appointed should be the secretary of the company. To appoint a secretary not familiar with the records, the personnel and the general condition of the company is apt to cause delay and confusion and is but seldom advisable. When the regular officers are designated, the president will take charge of the meeting as a matter of course, or in his absence the vice-president takes the chair. If both are absent, the treasurer might act as presiding officer. If the treasurer is also absent, the secretary might very •Johnston v. Jones, 23 N. J. Eq. 216 (1872); Downing v. Potts, 23 N. J. L. 66 (1851). i \ properly ask someone present to call the meeting to order, who will then preside until a more permanent chairman is selected, or the secretary might act temporarily him- self. If so, he should not preside longer than is necessary for the appointment of a chairman. He cannot act as president and secretary at the same time, and his more important duty is to record the proceedings of the meet- ing. In the absence of all the regular officers from the meeting, the stockholders appoint a chairman and a sec- retary pro tern, who serve for that meeting. § 83. Opening the Meeting. Usually, as stated, the by-laws provide that the presi- dent and secretary of the company shall officiate at stock- holders' meetings. In such case, at the appointed time and place the president, or in his absence the next rank- ing officer present, requests the meeting to come to order, and the secretary, if he has not already done so, furnishes the presiding officer with a copy of the order of business and presents a list of the stockholders of the company which remains open during the meeting for the inspection of those present. § 84. RoU-Call. In the smaller corporations, the presiding officer after calling the meeting to order requests the secretary to call the roll. Practice varies as to the precise manner of roll-call. Usually the secretary employs an alphabetical list prepared for the purpose and, calling the names if he is not personally acquainted with all the stockholders, notes thereon those present either in. person or by proxy, and any absentees. (See Form 99.) In the larger corporations this plan is not practicable. When the list of stockholders runs far up in the hun- 122 STOCKHOLDERS. I Ml dreds or thousands, an actual call of roll is obviously im- possible. Instead, the chairman first requests the stock- holders present in person to report to the secretary. As each reports, reference is made to the secretary's hst of stockholders, and if the person reporting is found thereon, his name and the amount of stock he holds are recorded. The chairman then calls for those who represent stock- holders by proxy. These also report, each giving the name of the stockholder and the number of shares he represents, handing in his proxy or, after exhibiting the original, a certified copy thereof, as evidence of his right to vote. The statements are verified in each case, and the names of both principal and proxy and the stock rep- resented are duly noted. In this way the number of shares represented and entitled to vote at the meeting is arrived at accurately and expeditiously After the secretary has completed the roll-call or an- notation of stockholders present, he announces to the chairman the total number of shares outstanding entitled to vote, the number necessary to constitute a quorum, the number represented at the meeting, in person and by proxy, and, if such is the fact, that they constitute a quorum. If a quorum is present, the presiding officer announces the fact and states that the meeting will proceed to busi- ness. (See § 86.) If a quorum is not present and no other stockholders can be secured, the meeting may take either one of two courses. It may adjourn sine die, which defers the election of directors indefinitely and leaves the existing board to hold over until the next annual meeting or until a special meeting is called for the election of di- rectors, or the meeting may adjourn from day to day or, if the charter or by-laws so permit, to any desired future date, when, if a quorum is secured, the meeting may be held. (See § 93.) ANNUAL MEETING OF STOCKHOLDERS. 123 The important point to be determined at roll-call is the amount of stock represented. The number of persons present is immaterial. One man, by stock ownership or proxies, or by both, might represent the entire outstand- ing stock of the company and such meeting, if properly conducted, is legal in this country.^ In England it has been held that one person cannot hold a meeting.^^ In either country, however, the party in control could avoid all question and satisfy every requirement by giving proxies for one or more shares of stock to convenient parties and allowing the parties thus qualified to partici- pate with him in the meeting. t § 85. Proxies. A proxy is a special power of attorney executed by a stockholder of the corporation and authorizing some specified person to represent him at one or more stock- holders' meetings of that corporation. A party who holds and exercises the powers of a proxy is said to act as a proxy. Any person competent to act as an agent may act as a proxy. ^^ (See Ch. XXX, "Forms of Proxies.") The right to vote by proxy is not a common law right. ^^ It cannot therefore be exercised unless conferred either by constitutional provision as is the case in some states, by statute provision as is the case in many states, or otherwise by charter or by-law provisions. In the majority of states the statutes prescribe that voting at stockholders' meetings may either be in person or by proxy. In some states the statutes are merely per- missive, allowing voting by proxy if provision therefor is made by charter or by-laws. Variations or restrictions "Morrill v. Little Falls Mfg. Co., 53 Minn. 371 (1893); see note 21 L. R. A. 174. i»Sharpe v. Dawes, 2 Q. B. D. 26 (1876); in re Sanitary Carbon Co., 12 W. N. 223 (1877). "People's Bank v. Superior Court, 104 CaV 649 (1894); Re Lighthall Mfg. Co., 47 Hun 258 (1888). "Philips V. Wickham, 1 Paige 590 (1829 124 STOCKHOLDERS. ANNUAL MEETING OF STOCKHOLDERS. 125 of the usual right to vote by proxy are found in many ! a es Thus in New Hampshire no person may vote a. proxy or as prmcipal and proxy, for shares exceedmg one- S; of the whole capital stock. In Mame. a general pow of attorney authorizing the votmg of stock .s good until it expires or is revoked, but a proxy must have been ex cuted withm thirty days preceding the day of meet "in Pennsylvania a proxy must have been executed whhin two months of the date of meetmg m Massa- dusetts within six months; in New York, Cahforma and Conn ci-t within eleven months; in Minnesota wUhm one year- in New Jersey, Delaware, North Carohna and Porto Rko within three years, and in New Mexico w>thm '^''The'odginal, or a duplicate or certified copy of every proxy shoutd be filed with the secretary of the meetmg at which the powers conferred by the proxy are to be ex- erc ed and should be preserved by him in case the validity of he meeting or any of its proceedings should be ques- tiLned If the proxy is a continuing one, it should be filed aHhe first meeting at which its powers are exercised but need not be filed at subsequent meetings. 8 86. Quorum. A quorum at stockholders' meetings is the number of shares of stock which must be represented-or the num- be^of members which must be ^^^^^-^-^'^'1^^^^ the meeting and enable the legal t-nsact,on of busines. In some of the states the statutes provide that at least a majority of the outstanding stock must be present m order o constitute a quorum. Elsewhere a similar provision is usuairinserted'in the charter or by-laws of the pa.icular corporation. If no regulating provisions exist, he com mon law prevails, under which those present at a duly Assembled stockholders' meeting are entitled to act, no matter whether they represent a majority of the outstand- ing stock or otherwise. "The law is clear that those stockholders who attend a duly called stockholders' meet- ing may transact the business of that meeting, although a majority in interest or in number of the stockholders are not present."" In the absence of conflicting statutes, the stock neces- sary to constitute a quorum may be fixed at any amount desired The usual and best practice requires a majority of all the outstanding stock. A smaller quorum is some- times prescribed but is not always safe. A majority of a legal quorum may always act. Hence if less than a ma- jority constitutes a quorum, it is entirely possible that matters of the greatest importance to the corporation will be decided by less than one-fourth of the outstanding stock It* may be noted that the statutes of a few states- New York among them— reaffirm the common law as to a quorum in the case of meetings for the election of direc- tors.i^ In these states the stockholders, meetmg at the duly appointed time and place for the election of directors, have power to act regardless of the amount of stock they represent.^^ § 87. Proof of Notice. After the presence of a quorum has been ascertained, the secretary, in response to a request from the chair, should submit proof that due notice of the meeting has been given. For this purpose a copy of the notice should be exhibited with the secretary's certificate as to its due service attached. If greater formality is desired, the sec- retary's certificate might appear in the form of an affi- i» 2 Cook on Corp., §607. "Stock Corp. Law (N. Y.), ^ ^U. (1897). "Matter of Rapid Transit terry, 15 App. D:v. (N. Y.) 5JU K^o^n. 126 STOCKHOLDERS. ANNUAL MEETING OF STOCKHOLDERS. 127 davit. When less formality is deemed sufficient, the sec- retary merely presents a copy of the notice with a verbal statement that it has been sent out as required by the by- laws. (See Forms 165-167.) If notice by publication has been given, the secretary should exhibit copies of the papers containing the notice, or copies of the notice with the affidavit of the publisher or of the secretary himself as to its publication. If the formality of an affidavit is deemed unnecessary, the secre- tary's certification, or even his mere statement, as to the facts of publication will usually suffice. § 88. Reading of Minutes. The presiding officer next calls for the reading of any unapproved minutes. The secretary in response reads the minutes of the annual meeting held the preceding year, also the minutes of any special meeting or meetings of the stockholders held during the year. Occasionally it will happen that the reading of the minutes at the pre- ceding annual meeting has been passed or the minutes of preceding meetings have not been approved at such meeting, and the secretary will then go back still further, presenting all minutes of stockholders' meetings that have not theretofore been read and approved. At the close of the reading of each set of minutes or, if preferred, at the close of the reading of all unapproved minutes, the chairman may announce: 'Tf there are no objections, the minutes as read will stand approved;" or a motion may be passed that "the minutes be approved as read." If errors are discovered, the minutes may be corrected at once or when the reading of the particular minutes is concluded, or at any time previous to their approval. If the errors are obvious or immaterial, the presiding officer may, in the absence of objection, merely direct the secre- ^ tary to make the corrections. If there is any question as to an alleged error or if the matters are important, the correction of the minutes is best effected by motion. If the motion prevails, the minutes must be amended accord- ingly and are then ''approved as corrected," usually by order of the president or chairman; otherwise by formal motion. The minutes of an annual or special meeting cannot be approved at a special meeting of stockholders unless so specified in the call for such meeting. Minutes of a directors' meeting are never read at a stockholders' meet- ing, except for purposes of information or to obtain the stockholders' ratification of acts recorded in the minutes. (See Chs. XIX, XXXIII.) The reading of the minutes may be dispensed with, if desired, either by formal motion, or, in the absence of objection, by mere announcement of the chairman. § 89. Annual Reports. Under the usual order of business the annual reports of officers and committees follow the reading of minutes. The president's report is the first official report to be pre- sented. Following this usually comes the treasurer's re- port, and if other officers have reports to make or if the board of directors or any committees have reports to sub- mit, they are in order at this time. (See Forms 11 5-1 17.) Before a report presented at the annual meeting is formally received, it is discussed if necessary and any de- sired questions asked and answered concerning it. A motion is then made that the report be received and filed, or otherw^ise disposed of as may be necessary, or, in the absence of objection, its proper disposition may be effected by order of the chairman. If any report proves to be in- complete, erroneous, or otherwise objectionable, a motion may be made to return such report for correction or for II |9g STOCKHOLDERS. revision, or it might even be rejected absolutely, such re- jection serving as an emphatic rebuke to the official or committee by whom the report was made. As reports are ordered received, the secretary, unless it is expressly otherwise ordered, takes charge of and pre- serves them for future reference. Reports of special im- portance are sometimes ordered spread upon the minutes. or entered in the minute book immediately following the minutes of the meeting. § go. Election of Directors. In the larger corporations the annual election of di- rectors is the most important event in the corporate cal- endar, deciding the management and the general policy of the company for the ensuing year. (See §§ 69, no.; In small or close corporations, on the other hand, the election of directors is frequently omitted, the directors then in office holding over for another year or until then- successors are elected. There is no legal objection to this practice when all the stockholders acquiesce, (bee ^ ' Voting for election of directors should be by ballot. In perhaps the majority of the states the statutes require this method to be followed. The election is usually con- ducted by inspectors or tellers, in some states as a mat- ter of statutory requirement; elsewhere as a matter of by-law provision or merely of convenience. These inspec- tors or tellers, usually two in number, may be stockhold- ers or otherwise, as seems best to the meeting, but can- didates who are to be voted upon at the election should not be appointed. The inspectors take entire charge of the election. At its close they announce the results, or, otherwise, hand their report to the chairman of the meet- ing who reads the results from the inspectors report. The report is then handed to the secretary for preserva- ^ft ANNUAL MEETING OP STOCKHOLDERS. 129 ' tion or for such other disposition as may be prescribed. (See Forms 101-106.) In the larger corporations the formahties of an elec- tion of directors are usually strictly observed. In the smaller corporations such elections are frequently con- ducted very informally. Where there is entire agree- ment, the board is sometimes selected by conference, and the secretary — authorized thereto by motion — casts the single ballot of the meeting for the parties named. Unless otherv^ise provided by statute or the charter or by-laws of the corporation, a majority of the votes cast at an election of directors held at a duly constituted meeting elects,^^ even though these are not a majority in interest of all those present at the meeting. In other words, stockholders who do not vote cannot have their votes counted in the negative. ^^ The charter or by-laws may, however, in the absence of any conflicting statutes, modify this rule by providing that the votes of a majority of thos^ present at the meeting, or of a majority or any other de- sired proportion of the outstanding stock, shall be neces- sary to elect. If less than the full number of directors to be elected receive the majority or plurality vote necessary to elect, those receiving the required majority or plurality vote are elected and another ballot or another election may be held to elect the remainder.^^ It may be noted that unless the statutes, charter or by-laws provide that a plurality of votes elect, a majority of all the votes cast is necessary to an election. ^^ After the ballot has been counted or an- nounced, it is too late to receive additional votes. § 91. Voting at Elections. If the statutes do not prescribe the method of voting " 2 Cook on Corp., § 608. "State V. Green, 37 O. St. 227 (1881); Smith v. Proctor, 130 N. Y. 319 (1891). '8 Wright V. Commonwealth, 109 Pa. St. 560 (1885); Matter of Union Ins. Co., 22 Wend. (N. Y.) 591 (1840). " 1 Thompson on Corp., § 775; 2 Cook on Corp., § 608. 130 STOCKHOLDERS. !i I at elections of directors, it may be by any desired method that will fairly indicate the will of those entitled to vote. (See § 60.) The stock books of the corporation which show the transfer and ownership of stock are in most states the final and decisive evidence as to who is entitled to vote at corporate elections. (See §§ 35» 3^, 60.) If the corpora- tion keeps no other stock book than a stock certificate book, this will be sufficient if it shov/s the stock transfer:, and ownership. A stockholder cannot be kept from vot- ing on account of the loss or absence of his stock certifi- cate (See § 41), nor can he be denied the voting right be- cause his stock is not fully paid, unless it is expressly so provided by the statutes of the state or the charter of the corporation.^^ (See § 58.) A by-law provision restrict- ing the voting right is not ordinarily effective. A cor- poration cannot vote on its own stock, whether held in the name of the corporation or a trustee for the corpora- tion. Any sale or issue of stock made by the directors to control an election can usually be stopped by injunction or the courts may be invoked to set the election aside. The inspectors, tellers or other officers conducting an election have no authority to refuse the vote of any stock- holder of record, nor the right to receive the vote of any one who is not a stockholder of record. Even when grounds for so doing exist, the courts alone can go be- hind the corporate records and enjoin stockholders of record from voting, or set aside an election carried by the vote of such stock. The secretary or chairman of the meeting has no authority to decide who may vote, the matter resting with the tellers or other persons conduct- ing the election, who must be governed by the stock books of the corporation. Under the general rule in regard to voting at elec- «o Downing v. Potts. 23 N. J. L. 66 (1851); f ^oPl«^\ A^^^^jyA fi'onS' ^' " Barb. 344, 386 (1869); Am., etc. Co. v. State Board, 56 N. J. U 389 (1894). i ANNUAI, MEETING OF STOCKHOLDERS. 131 f ,. tions, a stockholder is entitled to one vote for each direc- tor to be elected, for each share of stock standing in his name on the books of the corporation.^^ (See § 60.) If there are any variations of this usual rule, such as cumu- lative voting, classified voting, or restriction of voting to one class of stock, such variation should be stated as clearly as possible in the charter or by-laws of the cor- poration and must, as a matter of course, conform to the requirements of any state statutes on the subject. Cumulative Voting. The usual method of voting for directors results in the election of the entire board of di- rectors by those holding a majority of the stock. The cumulative system of voting is a modification of this usual method whereby representation on the board may be secured by the minority. Under it, while each share stiil has as many votes as there are directors to be elected, and these votes may be cast one for each candidate as before, all of these votes, if so desired, may be cast for one can- didate or may be divided among any or all of the candi- dates as the stockholder sees fit. Thus if five directors are to be elected, a stockholder owning one share of stock may, under the cumulative system, cast one vote for each of five candidates but, if he prefers, may cast five votes for one candidate, or two votes for one and three for an- other, or divide his five votes among the candidates in any other way he sees fit. The practical result of this modification of the usual system is to ensure minority representation whenever the minority holding of stock is at all material. Thus if a corporation has one hundred shares of stock outstanding and five directors are to be elected, a stockholder ownin*^ or controlling forty-nine shares of this stock would not under the usual system be able to elect a single director. Under the cumulative system he could infallibly elect two " 2 Cook on Corp., § 609; State v. White, 42 Conn. 560 (1875). r n if Itr m J32 STOCKHOLDERS. directors Or if he controlled but thirty-four shares, he could still elect the same number of directors. If he con- trolled but seventeen shares he would still be able to elect one member of the board. The calculation is simple. As each stockholder is en titled to one vote on each of his shares for each of the five directors to be elected, this gives him five votes for eaci share held, or eighty-five votes for his seventeen shares. The remaining stock-eighty-three shares-.f under one control, gives a total of four hundred and fifteen votes opposed. If then the eighty-five votes of the mmor- ity stockholder are cast for one candidate, no possible combination of the opposing four hundred and fifteen votes can defeat him. . In a number of states cumulative votmg is prescnbe.1 either by the constitution or statutes. In many other states the statutes permit it but leave its adoption optional with the corporation. In any state where the statutes are not directly or indirectly prohibitive, cumulative voting may be secured by proper provision in the charter or by- laws of the corporation. _ _ Under the system of cumulative voting, it is never pos- sible for the minority stockholders to control, provided the majority act together intelligently. It may be said however, that when it is employed the majority should understand its workings, or otherwise unexpected results may ensue. If the majority scatter their votes, whil^ a strong minority combine, it would be entirely within he realm of possibility for this minority to gain control of the board. , • -^ • The board representation secured to the minority in- terests by cumulative voting is a very material advantage, enabling them to keep in touch with the operations of the company and informed as to any proposed action of the board. The minority cannot interfere with or prevent any proper action, but if these actions are objectionable t ANNUAL MEETING OF STOCKHOLDERS. 133 to them, they are informed in advance and may use such restraining influence as they can. If improper actions are proposed, they may prevent them by legal interference. § 92. Other Business. The consideration of any unfinished business follows the election of directors. This includes any matters which were under consideration but not disposed of at any prior stockholders' meetings, whether regular or special. Mat- ters referred to committees for consideration, or investi- gation, or report come under this head and may be acted upon at this time. The secretary usually brings up any matters of un- finished business but the stockholders or the chairman himself may properly call them to the attention of the meeting. If there is no unfinished business or, otherwise, upon its disposal, the presiding ofhcer passes on to the next order of business and enquires if there is any new business to be brought before the meeting. Under this head come any matters requiring the attention of the meeting not before considered. These may be brought up either by the ofBcials of the meeting or by any of the stockholders present. § 93. Adjournment. After the disposal of any new business brought before the meeting, adjournment is in order. This may be by motion. Usually, however, when this point is reached the chairman enquires if there is any other business before the meeting, and if no response is received, declares the meeting adjourned. Such adjournment is sine die, i. e. final. If the business of the meeting cannot be completed at 134 STOCKHOLDERS. the one session, or if any other reasons render its con- tinuation desirable, it is not adjourned sine die, but to such convenient future date as may be decided upon. An ad- journment of this kind is usually by motion, but if it is obviously desirable or advisable, the chairman might properly adjourn the meeting himself, merely announcing: ''If there is no objection, the meeting stands adjourned until ." Adjournment may only be made by consent of a ma- jority of those present, and the chairman has no power to declare a meeting adjourned in defiance of this majority. If he does so notwithstanding, any stockholder may de- mand a vote, and, if this vote is against adjournment or if the chairman should decline to put the matter to vote, a majority of the stockholders may remain and continue the meeting, electing a new chairman if necessary, and even adjourning to another room.^^ If the meeting adjourns, the adjourned meeting is re- garded as a continuation of the original meeting and need not therefore be again notified to the stockholders. If the adjournment is for more than a few days, however, it is always proper for the secretary to send out notice of the adjourned meeting a reasonable time before it con- venes. As an adjourned meeting is, from a legal standpoint, merely a continuation of the original meeting, the same officers preside and any business that might have been transacted at the first meeting may be acted upon at its adjournment, or at any adjournment from an adjourned meeting.^^ § 94. Signing Minutes. As soon after the meeting as convenient and while its « State V. Cronan, 23 Nev. 437 (1897). ,„,,„, e • n ^ » People V. Batchelor, 22 N. Y. 128 (1860); People's Bank v. Superior Court, 104 Cal. 649 (1894). ANNUAL MEETING OF STOCKHOLDERS. 135 details are fresh in his mind, the secretary should write up its proceedings in the minute book and sign them with his name and official designation. The presiding officer, also, usually affixes his signature. The minutes are the legal evidence of the proceed- ings of the meeting, and this double signature is of ad- vantage in event of any dispute as to the accuracy of the record. (See Ch. XXXIII, "Minutes of Corporate Meet- ings.") I CHAPTER XI. STOCKHOLDERS' SPECIAL MEETINGS. § 95. Special Meetings of Stockholders. "Special" or "called" meetings are held when matters demanding the attention of the stockholders arise in the interim between annual meetings. As in the case of an- nual meetings, special meetings of stockholders must be held within the state in which the corporation was or- ganized, unless otherwise expressly permitted by statute or charter provision, and usually at the principal office of the corporation. Statutory provisions regarding spe- cial meetings are found in a number of states. These mainly relate to the method of calling or notifying such meetings. Special meetings differ from the annual meeting in the following important details: (i) They must be author- ized by a more or less formal call. (2) Notice of the time, of the place and of all business to be transacted at the meeting must be given each stockholder of record. (3) No other business save that so notified may be trans- acted at the meeting. The formalities of special meetings must be strictly observed, or action taken thereat may be invalidated. They may, however, be waived by consent of every in- terested party, either formally expressed in writing, or in- dicated by their presence at and participation or acquies- cence in the meeting. (See §§ 96, 98; also Forms '^'^^ 33, 39) 136 4. stockholders' special meetings. 137 i § 96. Call for Meeting. The time and place of special meetings cannot, from the nature of the case, be prescribed by the by-laws and hence each meeting must be formally called as the neces- sity arises. The manner of this call is sometimes pre- scribed by statute or charter but is usually left for the by- laws. If neither the statutes, charter nor by-laws pre- scribe the manner of calling special meetings of stock- holders, the directors may always do so by resolution,^ or the stockholders may unite in calling a meeting, which, provided the number joining in the call represents a fair proportion of the outstanding stock and the time and place is reasonable, will be legal. (See Form 47.) Ordinarily the by-laws provide that special meetings may be called in any one of four ways: (i) By written call signed by the president (See Forms 40, 41); (2) by resolution of the directors (See Form 44); (3) by written call signed by two or more directors (See Forms 42, 43) ; (4) by written or published call subscribed by a specified number of stockholders, or a certain proportion of the outstanding stock, usually ranging from one-third to a majority. (See Forms 45-47.) The call and notice for a special meeting must state its time, place and purpose.^ These essentials every stock- holder is entitled to know, and the omission of any one might invalidate the entire action of the meeting. No business except that which has been specified in the call and in the notice which follows the call, can be legally transacted at a special kneeling} To end the call or notice, as is fre- quently done, with some general phrase, such as "and all other matters that may come before such meeting," does not add to the scope of the meeting in any way and does 1 Commonwealth v. Smith, 45 Pa. St. 59 (1863); Stebbins v. Merritt, 64 Mass. 27 (1852); Cassell v. Lexington, etc. Co., 9 S. W. Rep. 502 (1888). 2 2 Cook on Corp., § 595. » Clark & Marshall on Corp., § 647. ;■ ^"^d 138 STOCKHOLDERS. not in itself legally authorize the consideration of any- thing."* Where a company with but few stockholders is to be assembled in special meeting, time may be saved by em- ployment of the combined call and waiver of notice. (See Form 39). This requires the signature of every stock- holder to make it effective, but the meeting so authorized may be held at once, and, if so agreed, any business with- in the powers of the stockholders may be transacted there- at. A provision in a duly signed call and waiver for the "transaction at such meeting of any and all business per- taining to the affairs of the company," is effective, since everyone interested has agreed thereto.^ (See § 98; also Ch. XXVIII, "Calls and Waivers.") The first meeting of stockholders is merely a form of special meeting and is usually assembled by call and waiver signed by all those entitled to be present. (See Forms 32, 33.) § 97. Notice of Special Meeting. The call for a special meeting must not be confused with the notice of such a meeting. The call is the written authority or instructions, usually handed or sent to the secretary, pursuant to which the meeting is to be as- sembled. (See Forms 40-47-) The notice, on the other hand, is the actual statement of the time, place and pur- poses of the meeting, sent out to the stockholders usually by the secretary, in obedience to the instructions of the call and in accordance with its terms. (See Forms 52- 54-) The notice of a special meeting must state the three essential elements of time, place and purpose.^ These must accord with the specifications of the call. If there is • 1 Morawetz on Corp., S 482; People's Ins. Co. v. Westcott, 80 Mass. 440 (1860). • Cook on Corp., § 599. • 1 Morawetz on Corp., § 482. stockholders' speciai. meetings. 139 any material difference as to these between the call and the notice, the meeting is invalidated thereby. The time means both the day and the hour. No business other than that specified in the notice may be transacted at a special meeting. (See § lOO.) If one single stockholder is not properly notified, he may be able to set the entire pro- ceedings of the meeting aside. When, as is usually the case, notice of a special meet- ing must be sent by mail to the "last known address" of each stockholder, or to his "address as it appears on the books of the corporation," the secretary must be prepared to make affidavit, if necessary, that this has been done. If no special method of service or publication is prescribed by the statutes, the by-laws or other corporate regula- tion, the secretary must himself or by deputy give per- sonal notice by placing a copy of the notice in the hands of each stockholder.^ If no time is prescribed, notice must be served a "reasonable time before the meeting."^ When notice is required to be given a certain number of days before the meeting, the time should be counted ex- clusive of the day of notice and the day of meeting, though in New York by statute provision but one of these days need be excluded. If the secretary refuses to give proper notice of a spe- cial meeting after it has been duly called, anyone inter- ested may send out the notice, and such notice, if in due form and properly served on each stockholder, will be effectual. § 98. Consent Meetings. Special meetings of stockholders may be assembled at any time without the usual call and notice if all interested T Stebbins et al., Admrs. v. Merritt et al., 64 Mass. 27 (1852) ; Tuttle v. Mich. Air Une R. R. Co., 35 Mich. 247 (1877). _ ,.. ^ ,^, f^Re Ivong Island Railroad, 19 Wend. 37 (1837); Covert v. Rogers, 38 Mich. 363 (1878). 140 STOCKHOLDERS. sign a formal waiver thereof.' Also, if without any such waiver, all the stockholders assemble in meeting, no matter how called or whether called at all, it is termed a "consent meeting," and, all present acquiescing, any business with- in the stockholders' powers may be transacted thereat.^^ Those present and participating in such meeting are thereby estopped from later objection to any informality of call or notice, and as all concerned are present, no one is left who has a right to object. When consent meetings are held, it is important that the minutes shall show the presence of every stockholder. Also if the action taken is important, it is always advis- able that every person present shall either sign the min- utes, which is the most effective evidence of attendance and acquiescence, or otherwise sign a waiver of the usual formalities. (See Form 49.) In a small or close corporation consent meetings can readily be assembled and are the rule when special meet- ings are necessary. In the larger corporations such meet- ings are in most cases obviously impossible. § 99- Opening Formalities. The procedure for opening a special meeting is the same as in the case of the annual meeting. (See §§ 83, 84.) The alphabetical list of stockholders required by statute in some of the states at the annual meeting of stockholders, is not required at special meetings unless di- rectors are to be elected. The proof of proper call and notice of the meeting fol- lows the roll-call. The secretary should present the orig- inal dulv signed call ; also a copy of the notice sent out pursuant to the call, with his certificate attached showing •3 Clark & Marshall on Corp., S 647, note 278. -_ /loig-v. 53 N. J. L. 168 (1898); Aff'd 63 N. J. L. 357 (1899). stockholders' special meetings. 141 ■* 4t 4 that the notice was properly addressed and mailed to each stockholder the necessary number of days before the date of the meeting. The call and notice may be ordered re- ceived and filed as in the case of a regular meeting, or, as the validity of the meeting is dependent upon its due as- sembling evidenced by the call and notice, they may very properly be ordered spread upon the minutes. If the meeting has been assembled by call and waiver signed by all the stockholders of the company, this instru- ment should be presented to the meeting and may be properly included by the secretary in his minutes without instruction. § 100. Special Business. Minutes of previous stockholders' meetings cannot properly be approved at a special meeting unless so pro- vided in the call and notice or other authorization of the meeting, nor can any other business be transacted save that so specified.^^ Hence the particular business for vv^hich the meeting was called should be taken up at once. The presiding ofilicer, or at his request someone present, states the purposes of the meeting and makes such ex- planations as may be necessary. Or the presiding officer may call upon the secretary to read the notice of the meet- ing in which its purposes are set forth and then call upon someone familiar with the matter to explain it to the stock- holders. After such statement and explanation and any desired discussion, someone interested usually presents and moves the adoption of a resolution covering the mat- ter. The meeting may then, at its discretion, dispose of this resolution in any parliamentary way. "Warner v Mower, 11 Vt. 385 (1839); People's Mut. Ins. Co. v. Westcott, 80 Mass. ^0 (I860) ; AtTantic De Laine Co. v. Mason. 5 R. L. 463 (1858); Mutual, etc. Co. V. Farquhar, 86 Md. 668 (1898). ! I 142 STOCKHOLDERS. § 1 01. Adjournment. As already stated, no business of any kind may be transacted at a special meeting save that specifically au- thorized. As soon, therefore, as the particular business for which the meeting was called is disposed of, nothing is left but adjournment. This may be by motion, or, if no one objects, the president may merely state that "no fur- ther business being before the meeting, it stands ad- journed." A special meeting may be adjourned to another day just as may an annual meeting, and at the adjourned meet- ing any business set forth in the notice for the original meeting may be considered. New business cannot, how- ever, be introduced or considered. No notice of an ad- journed meeting is necessarily sent to stockholders. (See t PART IV.— DIRECTORS AND OFFICERS. CHAPTER XII. THE BOARD AND ITS MEMBERSHIP. § . 102. Functions and Action of the Board. The board of directors is the managing body of the cor- poration. Unless otherwise expressly provided by charter or by-law provision, it has the entire management and con- trol of the corporate property and affairs.^ It acts through agents, who are usually the officers of the corporation. In exercising its appointed powers, the directors must act as a board in duly assembled meeting with a quorum present,^ and their action is expressed by means of motions and resolutions, which, though differing in form, are of the same legal effect. (See Ch. XXXI.) § 103. Action Without Meeting. It is only as a body in lawful meeting assembled that the directors have authority to act and bind the corpora- tion.^ The separate assent of every one of the directors to a measure is of no legal force. It frequently happens, how- ever, that important corporate action is authorized by mere informal conference between members of the board, or at times by written agreement signed by all or a majority of »Ellerman v. Chicago, etc. Co., 49 N. J. Eq. 217 (1891); Sellers v. Greer, 172 111. 549 (1898). « Johnston v. Jones, 23 N. J. Eq. 216 (1872). •In re St. Helen Mill Co., 3 Sawy. 92 (1874); Gashwiler v. Willis, 33 Cal. 11 (1867). 143 144 DIRECTORS AND OFFICERS. THE BOARD AND ITS MEMBERSHIP. 145 the members of the board. Such authorization is in itself absolutely ineffective/ though it may be ratified at any subsequent duly assembled directors' meeting, and then be- comes the lawful action of the board. In Nevada, by express statute provision, action by a majority of the directors without a legally called meeting, is valid if afterwards assented to in writing by all the other members of the board. § 104. Number. The statutes usually impose general limitations as to the number of members constituting the board of direc- tors. The exact membership within these limits must, in a majority of the states, be fixed by charter provision; elsewhere by the by-laws. In many of the states the stat- utes merely prescribe a minimum number of directors, ranging from two, as in Washington, up to five, as in Illi- nois, Ohio, Tennessee, and the Philippines. The most common minimum is three. Maximum limitations are also found in many states, ranging from nine, as in South Caro- lina, to thirty, as in Ohio. In West Virginia a fixed board of five members is prescribed unless otherwise provided by the by-laws. In a few states no statute provisions as to number are found, the whole matter being left to the discretion of the incorporators or stockholders as the case may be. An odd number is usually selected, as three, seven or thirteen, in order to avoid tie votes. To change the number of directors is usually a matter of difficulty, requiring an amendment of the charter. In some of the states, how^ever, the number is fixed by the by- laws, and may be changed by their mere amendment. When the membership of the board is increased in the in- terim between annual meetings, the stockholders elect the ♦Peirce v Morse-Oliver, etc. Co. 94 Me. 406 (1900); People's Bank v. St. An- thory's, etc. Church, 109 N. Y. 512 (1888). J 1 additional members to hold for the balance of the year, unless otherwise expressly provided by statutes, charter, or stockholders' by-laws.^ § 105. Qualifications. The only qualification required of a director under the common law is the ability to act as an agent. Additional qualifications are, however, frequently imposed, either by the statutes of the state, or by the charter or by-laws of the corporation. The statutory requirements almost inva- riably relate to residence or to the holding of stock by directors. Charter and by-law provisions usually relate to the amount of stock that must be held. § 106. Residential Qualifications. Residential qualifications for directors are' imposed in perhaps the majority of the states of the Union. Com- monly one member must be a resident of the state of in- corporation ; in the Philippines and Vermont, two must be residents; in Kansas and Missouri, three; in Pennsylvania and Oklahoma, one-third of the total number; while in California, Ohio, and Alaska, a majority of the board must be residents. In Indiana all, and in Washington a majority of the directors must be citizens of the United States. It may be said that there is some doubt as to whether any of the statutory requirements as to residence of direc- tors are of legal force.^ The directors act as agents or trus- tees of the stockholders, and it is questionable whether the state can restrict the stockholders' choice by imposing resi- dential requirements. § 107. Stockholding Qualifications. In most of the states the statutes expressly prescribe 'In re Griffing Iron Co., 63 N. J. h. 168 (1899). •2 Cook on Corp., § 623; Farmers' h. & T. Co. v. Chicago, etc. Ry., 27 Fed. Rep. 146 (1886); Shirk v. City of La Fayette, 52 Feb. Rep. 857 (1892); Roby, Trus- tee V. Smith et al., 131 Ind. 342 (1891). 146 DIRKCTORS AND OFFICERS. that directors shall be stockholders. In some few states a minimum holding is prescribed, but usually the ownership of a single share of stock is sufficient. In New Jersey and some few other states, a director must hold stock of the corporation at the time he is elected.^ As a rule, however, the election of a person not a stockholder is effective if he acquires stock before acting as a director.^ Where a corporation holds stock of another company, any of its directors or officers may, as its repre- sentatives, be elected directors of this other company, though personally owning no stock.^ When directors are required to hold stock, and a **dummy" director is to be elected, or some person is de- sired as a director who does not own the necessary stock, and is not able or does not care to purchase it, the usual plan is to assign to him the requisite amount. Sometimes this assigned stock is given outright in return for the ser- vices to be rendered. Frequently, however, this is not de- sired. In such case a certificate of stock is actually issued to the proposed director, or director-elect, as the case may be, and he is entered on the stock books as a stockholder of record. He is then required, however, to endorse his cer- tificate, usually in blank, and hand it back to the original owner, who then again becomes the owner in fact of the stock it represents. This last certificate is not, however, turned in for cancellation, and so long as this condition con- tinues the director is technically the owner of the stock, and is qualified to act.^° If, however, the real owner of the stock surrenders the endorsed certificate, the stock it rep- resents is credited to him on the corporate books, and a new certificate is issued in his name. This terminates the technical ownership of stock by the "dummy" director, and Ipso facto his directorship. Wherever directors are re- ^Re St. Lawrence Steamboat Co., 44 N. T. L. 529 (1882) •Greenough v. Ala., etc. R. R. Co., 64 Fed. Rep. 22 (1894). •Wight V. Springfield, etc. R. R., 117 Mass 226 (1875) co m x t '^ReSt. Lawrence Steamboat Co., 44 N. J. L. 529 (1882); Re Leslie. 58 N. J. L. 609 (1896); In re Argus Printing Co., 1 N. D. 434 (1891). THE BOARD AND ITS MEMBERSHIP. 147 V H quired to be stockholders the transfer of a director's stock on the books of the company terminates his de jure direc- torship." When the first directors are named in the certificate of incorporation, as in New York, North Dakota, Montana, and a number of other states, these first directors need not be stockholders, even though the statutes prescribe a stock- holding qualification.^^ § io8. Compensation of Directors. Unless otherwise provided in the charter or by-laws, directors are not entitled to compensation for their ser- vices as directors. They are supposed to be working for the general welfare of the corporation, and not in expec- tation of receiving personal compensation.^^ This is a matter of common law, re-enacted by the statutes in sev- eral of the states. In Colorado a director is not entitled to compensation for services as such, unless such compen- sation is expressly provided for or sanctioned by the char- ter.^"* Even where a director performs services outside of those ordinarily pertaining to the position, the ten- dency of the courts is to hold, in the absence of express agreement otherwise, that they are undertaken through zeal for the company's welfare rather than through ex- pectation of direct remuneration.^^ While directors do not usually receive any salary or compensation for their services, an inducement for at- tendance at meetings is commonly offered by the larger corporations in the shape of a director's fee or allowance, prescribed by the by-laws and usually ranging from five "Chemical Nat. Bank v. Colwell, 132 N. Y. 250 (1892); Beardsley v. Johnson et al., 121 N. Y. 224 (1890). "Hamilton Trust Co. v. Clemes, 163 N. Y. 423 (1900); Camden, etc. Trust Co. V. Burlington, etc. Co., 33 Atl. Rep. 479 (1895). ^ "Farmers', etc. Trust Co. v. R. R., 152 N. Y. 251, 254 (1897); Mather v. E. M. Co., 118 N. Y. 629, 632 (1890). >* Brown v. R. M. S. Mines, 17 Colo. 421 (1892). "Stout V. Security Co., 82 App. Div. (N. Y.) 129 (1903). 148 DIRECTORS AND OFFICERS. to twenty dollars for each meeting. This is not earned unless the director is present at the meeting, and it is sometimes prescribed that he must be present "from roll- call until adjournment, unless sooner excused." The whole matter of directors' compensation for their services as directors is one resting in the discretion of the stockholders, and if they deem any fee or compensa- tion desirable, it should be provided for in the stock- holders' by-laws. Where, however, services clearly out- side those pertaining to his position, are rendered by a director he should be paid. This is best provided for in the by-laws, but, if not, the board should enter into an ex- press agreement for such services, and the compensation therefor, before the services are rendered. It is doubtful whether the board can legally allow compensation to a di- rector who is also a stockholder, for services already ren- dered.^^ If the director is not a stockholder the rule does not apply. (See § 120.) "Brophy V. Am. Brewing Co.. 211 Pa. St. 596 (1905): Klein v. Ind. Brewing Assn., 231 111. 594 (1908). fj «i CHAPTER XIII. ELECTION AND REMOVAL OF DIRECTORS. § I eg. Appointment of Directors. Directors are usually elected each year by the stock- holders at their annual meeting. (See § 90.) In some few states, as in Colorado and Maine, this annual election of directors is a matter of statutory requirement. In most of the states it is merely a matter of custom, which may be regulated by the by-laws as the stockholders see fit. The effect of a longer term is sometimes secured by mere omission of the annual election, the old directors then holding over until their duly qualified successors are elected. (See § 112.) If the time and place of elec- tion of directors is not prescribed by the charter or stat- utes, the by-laws should make proper provision therefor. In some of the states the first directors are named in the charter, and their appointment is made effective by the allowance of that instrument. (See § 107.) In the other states the first board of directors is usually elected by the incorporators at their first meeting. Every statu- tory requirement should be followed exactly in this first election, and the minutes should show in detail that this has been done. (See Form 37.) Speaking generally, irregularities in procedure at an election of directors, unless material, will not be sufficient ground for setting the election aside, provided it has been 149 150 DIRECTORS AND OFFICERS. EI^CTION AND REMOVAI, OF DIRECTORS. 151 conducted in good faith and more regular procedure would not have changed the result.^ § no. Classification of Directors. In order to prevent any sudden change of manage- ment, the board of directors is sometimes divided into classes, one class being elected each year. Such classifi- cation is seldom necessary when cumulative voting (See § 60) prevails, as this in itself tends to prevent sudden and radical changes of management. It is also rarely ad- visable in the smaller corporations. The usual classification of directors is their division into three as nearly equal classes as possible, each class holding for three years, and one class being elected each year. Under this plan three years is required for a com- plete change of the board membership. The three classes are provided for at the first election of directors on any agreed plan — as, for instance, that of the directors elected those receiving the highest number of votes shall consti- tute the first class with a three years' term; those receiv- ing the next highest number of votes shall constitute the second class with two years of their term to run, and those receiving the lowest votes shall constitute the third class, with one year of their term yet to run. Classification of directors is expressly permitted by statute in a number of the states. It may, however, be obtained by proper charter or by-law provision in every state of the Union, save in those few where the statutes provide for the annual election of the entire board. § III. Vacancies on the Board. The stockholders alone have power to fill vacancies on the board, unless otherwise expressly provided by statute, ^Re Argus Printing Co., 1 N. D. 434 (1891); Re Mohawk, etc. R. R., 19 Wend. 135 (1838); Union, etc. Bank v. Scott, S3 N. Y. App. Div. 65 (1900). ^ charter or by-laws. Such vacancies must therefore await the election of directors at the next annual meeting, or be filled by special election, unless the power of filling va- cancies has been conferred upon the board.^ It is advisa- ble that the directors have this power, and in praciice it is almost invariably given them. Vacancies on the board may be caused by the death, removal, resignation, or disability of a director, or the failure of a director-elect to accept his office.^ The con- tinued absence of a director from meetings is not itself sufficient to vacate his position. If it is desired that such continued absence shall have this effect, the by-laws should so provide, specifying the exact number of consec- utive absences from regular meetings or from regular and special meetings necessary to create a vacancy. A board of directors may legally continue to act in spite of vacancies, provided enough remain to make up' a quorum of the whole board. Less than a quorum of the board cannot fill vacancies unless expressly so empowered by charter or by-laws. (See Form 24, Art III, § i.) § 112. Directors Holding Over. 'Tf the directors shall not be elected on the day des- ignated in the by-laws, or by law, the corporation shall not for that reason be dissolved; but every director shall continue to hold his office and discharge his duties until his successor has been elected.'"* This statement of the law taken from the New York statutes is also a statement of the common law, existing in practically every state of the Union.^ A similar provision also usually appears in the by-laws. 3853'^" ''^ ^"^"^ ^'■°" ^°-' " ^- J- ^- ^^^' ^^7 ^1^99); 3 Thompson on Corp., § V. eS;"2?Xp;: ^i;"?^i.\^!) ?7J^897) ""■ J- "^^^ ''' ^''''^'' ^"'^^^ ^— ^ c- *Gen. Corp. Law, N. Y., § 23. ^dn n«ol% ""V^r^^?"^"' ^l ^^'° S*- 10 (1878); Noble v. Euler, 20 App. Div (N ^ > 548 (1897); Manhattan Co. v. Kaldenberg, 165 N. Y. 1 (1900). ' 152 DIRECTORS AND OFFICERS. ELECTION AND REMOVAL OF DIRECTORS. 153 The powers of directors who continue in office because of a failure to elect their successors are the same in every respect as before their fixed term of office expired. They are directors both de jure and de facto, and their acts are valid.^ (See § 148.) The smaller corporations relying upon this condition sometimes omit the annual meeting with its election of di- rectors for years, thereby avoiding the formalities of the .annual meeting. In such case the old board holds over indefinitely, and, duly empowered thereto by charter or by-laws, fills by vote of its own members any vacancies that may occur. As long as the stockholders do not pro- test, the practice is not legally objectionable. In New York the omission of the election of directors for eight years has been upheld.^ ^.113. Resignation of Directors. A director is under no obligation to continue in the service of his corporation longer than he desires. Even though the statutes or by-laws provide that he shall con- tinue in office until the end of his term, he may resign .at any time and thereby terminate his official position.^ The effect of a resignation is governed by its terms. It may be tentative (See Form 135), requiring acceptance tby the board before it is efifective, or peremptory (See Form 137) and effective as soon as delivered to the proper representative of the corporation.^ The resignation should, for purposes of record and proof, be in writing, but an oral resignation properly pre- sented to the board of directors and recorded in the min- utes as so presented, is sufficient. It is obvious, how- ever, that an oral resignation is objectionable on account •2 Cook on Corps, § 713; Kent Co., etc. Soc. v. Houseman, 81 Mich. 609 (1890). » Geneva Mineral Springs v. Coursey, 45 App. Div. (N. Y.) 268, 275 (1899). ■3 Clark & Marshall on Corp., § 667 and cases cited; Fearing v. Glenn, 73 Fed. Rep. 116 (1896); Briggs v. Spaulding, 141 U. S. 132 (1890). •Manhattan Co. v. Kaldenberg, 165 N. Y. 1 (1900); Int. Bank v. Faber, 86 FeJ. Rep. 443 (1898); Noble v. Euler, 20 N. Y. App. Div. 548 (1897). [ 1 of its difficulty of proof. A peremptory resignation may be made effective at a future date.^^ A tentative resigna- tion may fix a future date on which it will be effective if accepted. (See Form 138.) A peremptory resignation cannot be withdrawn after its formal presentation to the board, save with the con- sent of the board. A tentative resignation may be with- drawn at any time before its acceptance. § 114. Removal of Directors. The directors have no power to suspend or remove a fellow member of the board. The stockholders have a common law power to remove directors for adequate cause, but such removals are not frequent. The cause must be good and capable of proof, charges must be pre- ferred, a meeting must be called, and the accused be given a hearing. The whole procedure is troublesome, and it is usually preferable to await the expiration of an offend- ing director's term rather than to attempt his forcible removal sooner. In some states, however, the statutes extend this com- mon law power of removal, and wherever special pro- visions are permitted in the charter, the same end may be attained by proper charter provision. When thus given by the statutes or charter, the power of removal is usually summary, i. e., an objectionable director may be removed by prescribed procedure — usually by a two-thirds vote of the stock, but in a few states by a bare majority — at once and with or without cause. Under these circumstances the removal of directors is more frequent. When the office of director has been usurped or is un- lawfully held, and is claimed by a party who is not in possession, quo warranto will lie, or an equitable action for possession may be instituted.^^ '"Van Amburgh v. Baker, 81 N. Y. 46 (1880). "Powers V. Blue, etc. Assn., 86 Fed. 705 (1898); Commonwealth v. Detwiller, 131 Pa. St. 614 (1890). POWERS AND UABILITIES OF DIRECTORS. 15S CHAPTER XIV. POWERS AND LIABILITIES OF DIRECTORS. §115. Powers of Directors. Unless restricted by statute, charter, or by-laws, the board of directors, acting as a board, exercises the active controlling power in all corporate business. "The board of directors and not the stockholders, nor the president, secretary, treasurer, or other agent, is the original and supreme power in corporations to make corporate con- tracts."^ They are the embodied power of the corpora- tion, so constituted by the mere fact of their appointment.^ The stockholders can neither force the directors to act nor restrain them from acting — save by charter or by- law provision — unless the omission in the one case or the act in the other is so glaringly unjust or injurious to the interests of the stockholders as to warrant an appeal to the courts. The powers of the board do not, however, extend be- yond the purposes for which the corporation was formed. Thus the sale of the entire assets, the dissolution of the corporation or a radical change of its business are not within its unsupported power. Also the statutes in the different states restrict in greater or less degree the com- mon law powers of the board. Thus, as a rule, directors are not allowed to issue bonds or to mortgage corporate property unless expressly authorized thereto by the stockholders. Also the absolute authority of the board i Landers °v" fS Um. El'church. 114 N. Y. 626 (1889). 154 T « may always be limited by charter or by-law provisions. On the other hand, the powers of directors are sometimes extended by charter or by-law provisions, or by the stat- utes, in the latter case mainly as to adoption of by-laws. (See § 119.) The authority of the directors may only be exercised as a board in duly assembled meeting with a quorum present.^ A single director, as such, has absolutely no authority over the corporate affairs.'* He may be appoint- ed by the board to manage some feature of the corporate business, or as managing director may practically control the corporate affairs, but in any such case his powers are only those which are delegated to him by the board and are limited strictly by the terms of his appointment.^ The powers of the individual director are few. As a knowledge of the corporate affairs is essential to the prop- er discharge of his duties, he has a right to inspect the records and the property of the corporation and to famil- iarize himself with its operations.^ He is also entitled to attend any meeting of the standing committees,^ to be noti- fied of all special meetings of the board, to attend all board meetings and to be heard, if he so desires, on all matters coming before any such meeting.^ If he discovers any- thing wrong in the conduct of the corporate affairs, he has no individual power to right it, but must present the mat- ter to the board for its action. § 116. Duties of Directors. A director of a corporation is virtually a trustee for the body of stockholders, and must exercise the same care •North Hudson, etc. Assn. v. Childs, 82 Wis. 460 (1892); Edgerly v. Emerson, 23 N. H. 555 (1851). ♦Alabama Nat. Bank v. O'Neil, 128 Ala. 192 (1900); Gaynor v. R. R., 189 Pa. St. 5 (1899). • Clark & Marshall on Corp., § 690. ^^ 'People V. Throop, 12 Wend. (N. Y.) 183 (1834); Rosenfield v. Einstein, 46 N. J. L. 479 (1884). ' Western Ry. v. Rashout, 5 De G. & Sm. 290 (1852). 'Metropolitan, etc. Co. v. Domestic, etc. Co., 44 N. J. Eq. 568 (1888); Curtin v. Salmon, etc. Co., 130 Cal. 345 (1900); Broughtor ». Jones, 120 Mich. 462 (1899). 156 DIRECTORS AND OFFICERS. and diligence in the conduct of the corporate affairs as a prudent business man would exercise in the conduct of his own affairs.^ As a trustee, he must have no interest adverse to the interest of the company. (See § 121.) §117. Appointment and Removal of Officers and Agents. The authority of the board to appoint and remove offi- cers and agents of the corporation is not a common law power, but must be given it by statute, charter or by-law provision. Unless this is done, the power belongs to and may be reserved by the stockholders. (See §§ 143, I49-) § 118. Appointment of Committees. The board has general power to appoint standing com- mittees, to which may be delegated any desired authority up to the full power of the board "in the interim between its meetings." Usually, however, this power of appoint- ment is restated by the charter or by-laws of the corpor- ation, and in some states is confirmed by statute provision. The members of the committee, exercising discretionary powers of the board, should also be members of the board. (See Ch. XVI.) § 119. Adoption of By-laws. Originally the stockholders were supposed to express their wishes as to the management of the corporation through the by-laws, and the directors to exercise their powers in subordination thereto.^^ Of late years, how- ever, in many states the statutes confer more or less ex- tended power to adopt by-laws upon the directors. In some of these states the by-laws adopted by the directors must be either in harmony with the by-laws passed by •Cook on Corp., S 648; Elliott v. Baker, 194 Mass. 518 (1907). i« North Milwaukee, etc. Co. v. Bishop. 103 Wis. 492 (1899); Morton, etc. Co. v. Wysong, 51 Ind. 4 (1875). POWERS AND LIABILITIES OF DIRECTORS. 157 the stockholders, or subject to their revision, but in some few states the board is given the sole and entire right to adopt by-laws. Also in some other states they are given power to make by-laws for their own government. (See § 19.) When the stockholders have by by-law provision delegated the power of making by-laws to the directors, it has been held that the directors are not thereby author- ized to repeal by-laws passed by the stockholders.^^ Un- less directors are given independent power to adopt by- laws by statute or charter provision, their by-laws may be repealed or amended at any duly assembled stockholders' meeting. (See Ch. Ill, "By-Laws.") § 120. Directors as Officers. A director may, in addition to his directorship, hold any other corporate office or offices, provided his official positions are not incompatible with each other. The president as presiding officer of the board is always se- lected from its membership. A director when elected as an executive officer of the corporation, is as a matter of course entitled to any sal- ary attached to the office by by-law provision. If the sal- ary was fixed by mere resolution of the board, it should, however, be reaffirmed after the appointment of the direc- tor to his office. When the salary of an officer who is also a director is to be fixed by action of the board, the direc- tor to whom the salary is to be paid should withdraw from the room while the resolution fixing his salary is adopted. If he remains in the room and participates in the vote fixing his salary, the legality of the action so eflFected is doubtful. ^^ (gee §§ io8, 121, 145.) " Stevens v. Davison, 18 Gratt. (Va.) 819 (1868). "Reynolds v. Diamond Mills Co., 69 N. J. Eq. 299 (1905); Jacobson v. Brook- lyn, etc. Co., 184 N. Y. 152 (1906); Francis v. Brigham, etc. Co., 70 Atl. Rep. (Md.) 95 (1908). 158 DIRECTORS AND OFFICERS. § 121. Directors Dealing with Corporation. The subject of directors' deahngs with their corpora- tions is too extensive for full treatment here. A director occupies a fiduciary relation to his corporation and should as far as possible avoid any position in which his personal interest is adverse to that of the corporation. He may, however, speaking generally, make any contract with his corporation that is fair and to its interests. His contract is therefore not void but merely voidable, and if no stock- holder objects will stand.^^ Also cases have arisen where a contract between a director and his corporation has been ratified by a majority of stockholders at a duly called meeting, and the courts have sustained the contract.^"^ Also, if all the stock is owned by the directors, and there are no creditors, a director may contract with his corpora- tion at pleasure. ^^ In all cases where a director is personally interested in any particular contract or other matter to be acted upon by the board, he should withdraw from the room while the vote is being taken and his absence should be noted on the minutes. To be valid the action must be taken by a legal quorum exclusive of the interested party.^^ (See § ^33) Sometimes when it is obviously necessary or desirable for directors to contract with their corporation, the whole matter is covered by proper by-law provision, as in the following extract from the by-laws of the United States Steel Corporation: "Any director individually may be a party to, or may be interested in any contract or transaction of this company, provided that such contract or trans- N V ^7?nlSnf ?,''"'"g Mill V. Hill, 174 Mass. 224 (1899); Welch v. Bank, 122 ^' lix/^ (1890); Cont. Ins. Co. v. N. Y., etc. R. R. Co., 187 N. Y. 225 (1907). N Y sfr(1890)*°''"' ^^^ ^^^^' ^^ ^^^^^^' Gamble v. Queens Co. Water Co., 123 .jg^"McCracken v. Robinson, 57 Fed. 375 (1892); Barr v. R. R. Co., 125 N. Y. 263 /.o.l'x^HT*'",'^- Salmon, etc. Co., 130 Cal. 345 (1900): Butts v. Wood. 37 N. Y 317 Co 218 Plst''" 2^8 (1907)^°"' ^^ ^^*'' ^^^'^"'^ ^"^^ ^^^°^^' Schaffhauser v. Brewing POWERS AND LIABILITIES OF DIRECTORS. ' 159 f mf I i action shall be approved or be ratified by the affirm- ative vote of at least ten directors not so inter- ested. § 122. Common Law Liability of Directors. The liabilities of directors fall naturally under two heads— common law liabilities and liabilities imposed by statute. Under the common law the directors are per- sonally liable for loss or damage resulting from ultra vires acts 17 (See § i6) ; for any unlawful corporate act commit- ted with their connivance, assent or knowledge; for issu- ance of unpaid or partly paid stock as full-paid; for paying dividends, either negligently or wilfully, that impair the capital stock (See §§ 169, 172), and for any other gross mismanagement. As trustees for the company, they are bound to give its affairs all requisite care and attention. If they do not, they are responsible for any resulting loss or damage.18 -pj^^^ ^^^ ^^^^^ however, responsible for the re- sults of errors of judgment in their management of the ordinary business affairs of the corporation.^^ § 123. Statutory Liabilities of Directors. In almost every state of the Union liabilities have been imposed upon directors by statute. Thus in New York— a typical state— directors may be held personally liable as follows : (i) For declaring dividends except from surplus profits, or for dividing, withdrawing or paying out any part of the capital except that authorized by law. -^ (2) For making a loan of corporate money to any stockholder, or for discounting from corporate den."9?"caTl7'^a895)'^- ^^^ "^ '^^^^"^' ^' ^'^- ^'^ (^899); Wickersham v. Critten- hoo£;?^lBtAk%^-N^^^^5L ^diit, Ca^X-JlT ^l^a^tso^n I2 ^' j''^'^9^?{?^- ""^'^^^^i-lrr^'JdAil- I'd 'II H^sivY'i r^s^^,'f9f-Jass^^5ir'(/9i'7')^^^ n8Q9^. A-f- . T>ij' A ^^- ^'^ (1902) Swentzell v. Penn Bank 147 Pa St 14n it'fi'odSrm Z'uff^i Sf.?fu'uu. ^'- ''' ''''''■■ p-p'^-'E^'^itire 160 DIRECTORS AND OFFICERS. funds any note or evidence of debt for any stock- holder, or for receiving the same for any instalment due on stock. (3) For making any certificate or report or pub- lic notice that is false in any material respect. (4) For making transfers of property to officers or stockholders w^hen the company is insolvent or threatened with insolvency, for the purpose of pre- ferring or defrauding creditors. (5) In case of dissolution, as trustees for all cor- porate property that may come into their hands. In the majority of the states directors guilty of most of the enumerated offenses are not only personally liable, but are also criminally liable under the laws against fraud, larceny and embezzlement. When any action is taken by the board in violation of law or which might involve its members in a liability, any dissenting director may always relieve himself from re- sponsibility by proper procedure. In some states this pro- cedure is prescribed by statute. Usualh it involves the entry of his dissent or protest on the minutes of the partic- ular meeting, or, if such entry is refused, publication of the protest. It may be said generally that the law as to the liabili- ties and obligations of directors is much more satisfactory in theory than in practice, and that the best possible method of avoiding loss through wrongful or ill-judged acts of the directors is to confine the membership of the board to men of known integrity and character. CHAPTER XV. MEETINGS OF DIRECTORS. § 124. Time of Meetings. The by-laws usually set forth the general details of di- rectors' meetings. The board may itself provide for any details not already prescribed by some competent au- thority. Special meetings of directors are called when the neces- sity arises. Regular meetings are held at specified times — commonly once a month — usually fixed by the by-laws. In the smaller corporations with boards consisting of a few members easily assembled in special meeting, and also in the larger corporations whose affairs are conducted mainly by standing committees, regular board meetings once a quarter, or even at longer intervals, are frequently suffi- cient. § 125. Place of Meetings. The usual place for meetings of directors is the princi- pal office of the corporation in the state of its creation. Directors' meetings may, however, be held elsewhere, either within the state,^ or without the state in the absence of prohibition,^ if properly authorized by the charter, the by-laws or by due resolution of the directors. If pro- lAa T»°?^o"ioox^°°'^^*''^' ^ ^^^y* "^^^ (1879); Ashley Wire Co. v. 111. Steel Co., 104 111. 14" 10^0/- ='2 Cook on Corp., § 713a; Saltmarsh v. Spaulding, 147 Mass. 224 (1888). 161 I I 162 DIRECTORS AND OFFICERS. hibited by statutes, charter or by-laws, meetings outside the state are void, and their actions of no effect.^ In a majority of the states the statutes provide that di- rectors' meetings may be held outside the state if author- ized in some specified manner — usually by the by-laws, in some states by the charter, in others by either, but in one or two states by mere resolution of the directors. Other provisions affecting directors' meetings outside the state are found in a number of states. m § 126. Purposes of Meetings. At duly assembled regular meetings of directors any business within the power of the board may be trans- acted. At special meetings, unless otherwise agreed by every member of the board, only such business may be acted upon as is set forth in the call and notice of the meeting. If, however, the notice of a special meeting does not specify its purposes, any ordinary business afTairs of the corporation may be transacted thereat, unless the by- laws specifically provide that only such business as has been duly notified may be transacted at special meetings of the board. (See § 129.) § 127. Assembling Meetings. The time and place of regular meetings are usually pre- scribed in the by-laws, are supposed to be known to the directors, and do not depend for their legality upon calls, waivers or notices.** Notices are, it is true, generally pro- vided for in the by-laws, but this is a practical measure to ensure the attendance of directors, and is not in compli- ance with legal requirements. To prevent any question on this point, however, the by-laws of the larger corporations •Brockway v. Gadsden, etc. Co., 102 Ala. 620 (1893); Union Nat. Bk. v. State Bank, 155 Mo. 95 (1899). ♦Whitehead v. Rubber Co., 52 N. J. Eq. 78 (1893): Western Imp. Co. v. Bank, 103 Iowa 455 (1897); Atlantic, etc. Co. v. Sanders, 36 N. H. 252 (1858). ¥ 6i I MEETINGS OF DIRECTORS. 163 customarily provide that failure to send out notice of a regular meeting shall not affect its legality, nor the legality of any action taken thereat. Special meetings, on the other hand, are assembled as the necessity arises, must be called by proper authority, and must be formally notified to every member of the board, unless these formalities are duly waived. Accord- ingly special meetings of the board are assembled by means of the call (See Forms 50, 51) followed by notice (See Form 60), or by means of a combined call and waiver of notice. (See Form 48.) Or if all the members of the board can be gotten together, a special meeting may by agreement (See Form 49) be held at any time and without formality. These methods of assembling meetings of di- rectors are discussed in the sections which follow. § 128. Call for Special Meetings. The call for a special meeting of directors is the formal instrument which authorizes its assembling, specifying its time, place, and purposes, and usually directing or other- wise obligating the secretary to notify such meeting to the members of the board. (See Forms 50, 51.) In some few states the statutes prescribe by whom spe- cial meetings of directors may be called. In the majority of the states the matter is left entirely for by-law regula- tion. These almost invariably empower the president to call special meetings, usually alone, but sometimes in con- junction with some other officer. Usually they provide that two or more of the directors may call such meetings. Occasionally a certain proportion in interest of the stock- holders are authorized thereto. Whether so specified in the by-laws or not, special meetings of directors may al- ways be called by due resolution of the board. The call for a special meeting of directors by whomso- ever issued, to be legally effective, must always specify the 164 DIRECTORS AND OFFICERS. time of meeting and its place, and if business of special importance is to be considered this must also be set forth. The place is usually — though not necessarily unless so specified by statute or by-laws — the principal office of the corporation within the state of incorporation. (See § 125.) In the absence of conflicting provisions, special meetings may be called to meet at any reasonable place in the discre- tion of the party or parties issuing the call. The time at which the meeting is to be held must be reasonable, and must be definitely stated, both day and hour being given. The particular business to be transacted must be specified with reasonable detail, and ordinarily no other business may be transacted at such special meeting. § 129. Notice of Special Meetings. When a call in due form for a special meeting of direc- tors is handed to the secretary, it is his duty to send out notices of the meeting thereby authorized. These notices are sent in such manner — usually by mail or telegraph — and at such time before the meeting as is prescribed by the by-laws, or otherwise as will under ordinary conditions, permit the attendance of all the members of the board.^ The by-laws also frequently prescribe that no business save that specifically set forth in the call and notice shall be considered or acted upon at such special meetings. If not so prescribed, a notice specifying time and place, but not the business to be transacted, is sufficient to authorize all ordinary corporate business.^ It is otherwise if impor- tant or unusual business is to be transacted at the special meeting.^ When the by-laws do not prescribe the specific details •People V. Albany Medical College, 26 Hun (N. Y.) 348 (1882); Ashley Wire Co. V. Illinois Steel Co., 164 111. 149 (1896); Stockton, etc. Works v. Houser, 109 Cal. 1 (1895). •In re Argus Co., 138 N. Y. 557 (1892); Ashley Wire Co. v. Illinois Steel Co., 164 111. 149 (1896). 'Mercantile Library Hall Co. v. Pittsburg, etc. Assoc, 173 Pa. St. 30 (1896). .. MEETINGS OF DIRECTORS. 165 i of notice, both its time and manner must be reasonable. Just what constitutes reasonable notice of special meetings of directors is a matter on which judicial decisions vary, and should therefore be settled by express by-law pro- vision. (See Forms 60, 61.) It is always presumed that notice duly mailed with postage prepaid to the last known address of each member of the board is received by the party addressed. Notice by postal card is sufficient when this method of notification is customary. Any irregularity in call or notice may be cured by a ratification of the special meeting or of the busi- ness transacted thereat at a subsequent regular meeting of the board, or if all the members are present at and parti- cipate in a special meeting (See § 131), this in itself cures any defect in call or notice.^ Unless cured in some way, failure to give notice to any one director invalidates the action of a special meeting.^ § 130. Call and Waiver of Notice. The call and waiver of notice of a special meeting of directors is merely a call for the meeting combined with a waiver of the usual formalities of notice This must be signed by every member of the board, but when so signed authorizes a meeting to be held at the time and place, and for the transaction of the business specified therein. Whenever the members of the board are readily accessible, the call and waiver is the preferable method of assembling special meetings. (See Ch. XXVIII.) § 131. Consent Meetings. If all the members of the board of directors are gotten together or find themselves together, and all agree to hold Conn.^sTosSS) '^'"^^ ^°' ''' ■^^'"°'=^^' ^^ ^'""- ^^^ (1893); Chase v. Tuttle, 55 nQni?.^°S^^ V Batchelor, 22 NY 128 (1860); Relley v. Campbell, 134 Cat. 175 (1893) ^""""S^*"" ^- J°"^^' ^20 Mich., 462 (1899); Hill v. Coal Co.. 119 Mo. 9 166 DIRECTORS AND OFFICERS. a Special meeting, it may be held then and there, and any desired business transacted thereat without further for- mality. Such a meeting is usually termed a ''consent meet- ing," and in New York and some few other states is recog- nized by statute law. Elsewhere such a meeting is valid under the common law.^° (See Form 49.) ^fl § 132. Opening Directors* Meetings. At the time appointed for the meeting, the president of the corporation— or the chairman of the board, if such offi- cial exists — or in his absence the vice-president, calls the meeting to order. Should these officers be absent, the next ranking officer of the corporation, if a member of the board, presides. Should such officer be the secretary, he should merely call the meeting to order, and then request some other member of the board to act as chairman, or, if objection is made, the appointment should be effected by motion. (See § 82.) If no officer of the corporation who is also a member of the board is present, it is proper for any member of the board in attendance to call the meeting to order, and in the absence of objection ask some one to act as chair- man. If there is objection, the appointment should be made by means of a motion. No formal roll-call of a directors' meeting is usual the secretary merely noting the names of those present, which are later entered on the minutes. If there is no quorum, business may not be transacted at that session, but the meeting may adjourn from day to day, if desired, until a quorum is secured. Formal submission of proof of notice of a directors' regular meeting is not necessary unless called for by the president or some member of the board. The secretary "Minneapolis Times Co. v. Nimocks, 53 Minn. 381 (1893); Bank of Nat. City V. Johnston, 60 Pac. Rep. 776 (1900). IL) 1 MEETINGS OF DIRECTORS. 167 should, however, preserve a copy of the notice sent out and endorse upon it the fact that it was duly mailed on the date given thereon to the last known address of each member of the board. In the case of special meetings of directors the call and notice, or call and waiver of notice as the case may be, should be submitted to the meeting, and be entered on the minutes in full with a statement of the circumstances. The matter is of importance, as the due call of the meeting with sufficient notice to each member is absolutely essential to its legality. At a regular meeting of directors the order of business as set forth in the by-laws is followed, unless set aside by formal motion or unanimous consent. At a special meet- ing it is but seldom applicable. § 133- Quorum. The number required for a quorum at directors' meet- ings should be fixed by the charter or by-laws.^^ If this is not the case, the common law prevails, and a majority of the whole board is necessary for a quorum.^^ ^ majority of the board in this connection is a majority of the whole number constituting the board, and not of some reduced number resulting from vacancies or removals.^^ A ma- jority of a quorum can decide any question properly brought before the meeting.^'* Directors cannot vote by proxy at directors' meetings, but must be personally present in order to act thereat.^^ No legal authority exists for permitting directors to vote or to be considered as present when merely connected by telephone, nor for permitting an absent member to sign «w°^,* ""• Thompson's Ex., 19 N. Y. 207 (1859). "Wells V. Rubber Co., 19 N. J. Eq. 402 (1869). "Moore v. Rector, 4 Abbott's N. Cas. (N. Y.) 51 (1873). (1887) ^' ' ^^ ^- J- ^*^- "^^^ ^^^^^^' ^°'^" ^- Mill Co., 92 Mo. 79 (1901')?'"'^ ""' ^" ^°-' ^^ ^^''' ^^^ ^^^^^^' ^^^te V. Perkins. 90 Mo. App. 603 168 dire:ctors and officers. HI \1- the minutes of the directors' meeting, and be counted present after the fact, though any action so taken may be validated by action at a subsequent meeting where a quo- rum is really present. A director cannot legally vote at directors' meetings on a matter in which he is personally interested, nor is such action usually valid if he is counted to make a quorum when such a question is put to vote.^^ (See §§ io8, 120, 121.) § 134. Reading of Minutes. As a matter of due parliamentary procedure, any un- approved minutes of preceding directors' meetings should be read and approved or be otherwise disposed of at a reg- ular meeting of directors before any other business is con- sidered. If, however, time is pressing, the president some- times directs that the reading of the minutes be dispensed with, or the same end is accomplished by formal motion. The minutes of stockholders' meetings are never read at directors' meetings unless as a matter of information or by special request, nor, if read, would their approval by the board be of any legal effect. The minutes of any pre- ceding board meeting should not be approved at a special meeting unless the approval of such minutes was specifi- cally mentioned as one of the purposes of the meeting. (See § 165.) § 135- Reports. At a regular meeting, after disposal of the minutes, the president takes up the next order of business and calls for reports, from officers first, and then from committees, if any are to report. When a report is made it may be dis- posed of by motion, or, if there are no objections, the presi- "Metropolitan etc. Tele. Co v. Domestic, etc. Co., 44 N. J. Eq. 568 (1888): Curtin V. Salmon River Co., 130 Cal. 345 (1900). -' h \ oo/ , { tL 1 MEETINGS OF DIRECTORS. 169 dent may himself direct that the report be received and filed. A verbal report does not require any formal dis- posal, the secretary reporting its substance in the minutes as a matter of course. § 136. Unfinished and New Business. The business of a special meeting is, as a rule, all new business. It is set forth in both the call and notice, and may be presented by the presiding officer, or he may call on the secretary or some member of the board for its in- troduction. At regular meetings of directors it usually rests with the secretary to bring up any matters of unfinished busi- ness. New matters requiring attention are brought up by the president or by any member interested. The election of officers, as it takes place but once a year, does not appear upon the regular order of business. It therefore comes under the head of "New Business," and, at the proper meeting, may be taken up at any suitable time when new business is under consideration. Usually the by-laws provide that the election of officers shall be held at the first directors' meeting after the annual meeting of stockholders. (See Ch. XLIII.) Officers are usually elected by ballot though in the ab- sence of express provision therefor, the board may follow any method that will secure a fair expression of the wishes of its members. When the board is agreed as to who are to be elected, time is frequently saved by instructing the secretary to cast the single ballot of the meeting for the recited list of officers. Or a mere motion unanimously carried that the named persons be respectively appointed to the specified offices, is legally sufficient. The election of officers by the board is sometimes held to be more in the nature of an appointment than of an election.*^ " State V. Kupferle, 44 Mo. 154 (1869). 170 DIRECTORS AND OFFICERS. I Unless otherwise specified by the by-laws or prevented by conditions, the officers-elect may at once begin the dis- charge of the duties of their respective offices. Frequently the newly elected president and secretary take charge of the meeting immediately after the result of the election has been announced. A person cannot be made an officer against his will.^* Acceptance of the position to which an officer-elect has been appointed is therefore necessary. This may either be expressed, or be indicated by the performance of the duties of his office, or even by his failure to decline the office when properly notified of his election thereto.^^ To prevent any question as to whether a vacancy has been created by the election to an official position of a per- son who does not accept the office, the statutes, charter or by-law^s should provide that officers hold their positions until the election and acceptance or qualification of their successors. (See §§ 112, 143.) § 137. Adjournment. When the business of a meeting has been finished, or when for any reason the board cannot longer continue in session, an adjournment should be taken, either sine die^ which terminates the meeting absolutely, or, if important business is left unfinished, to some specified future date. A meeting adjourned to some future time is on re- assembling legally regarded as a continuation of the orig- inal meeting, may transact any business that could have been transacted at the original meeting, and does not nec- essarily require any notification to the members of the board.2o '« Blake v. Bayley, 82 Mass. 531 (1860). "Danville, etc. Co. v. Brown, 90 Va. 340 (1893); Lockwood v. Nat. Bank, 9 R. I. 308 (1869). 2» Smith V. Law, 21 N. Y. 296 (1860); Western Imp. Co. v. Bank, 103 lowa^ 455 (1897). i CHAPTER XVI. STANDING COMMITTEES. § 138. General. Standing committees are those permanent committees of the board to which some measure of its discretionary power has been delegated. Their purpose is twofold: (i) to secure the prompt, decisive action of a small, easily as- sembled body, and (2) to obviate the necessity for frequent meetings of the board. As the discretionary powers of the board itself are dele- gated to standing committees, they must be composed of members of the board. Their powers are exercised during the interim between the board meetings, and within the limits of their authority they act with the same binding force and effect as the board itself and their contracts are not subject to revision by the board.^ When authorized thereto by the charter or by-laws of the corporation, the power of the board to delegate its au- thority to properly constituted standing committees is well established.^^ How much power should be so delegated is to be determined by the nature and conditions of the com- pany's business. It is but rarely that more than two standing commit- tees are deemed necessary. If but one committee exists, it is usually termed the "executive committee," and its powers are ordinarily those of the board. If two commit- ^ But see Com'l, etc. v. Northampton, etc. Co., 190 N. Y 1 (1907) 'o Sheridan El. L. Co. v. Chatham Nat. Bank, 127 N Y 517 (IRQIV Olrntt v 171 J*«aitt«»ti6e» 172 DIRECTORS AND OFFICERS. tees are appointed, the second is usually designated the ''finance committee," and to this committee is given direct supervision of the corporate finances and accounts; all gen- eral matters remaining in charge of the executive commit- tee. The matter is, however, one to be regulated by the charter or by-lav^s, and variations of the usual arrange- ments are frequent. When standing committees are appointed with the usual powers, they are the real managing bodies of the cor- poration, the board merely receiving their reports and su- pervising their operations. In a small corporation, or any corporation with a compact, easily assembled board, they are, as a rule, an unnecessary and even undesirable compli- cation. They are advantageous only when the board is so large or so scattered as to be diflficult of assembling, or when for other reasons the business of the corporation cannot be properly transacted by the board as a whole. Not infrequently the standing committee is used as a de- vice by which a few men practically manage the affairs of the corporation, the board being superseded when there is no real occasion therefor. The membership of standing committees is seldom less than three, nor, save in very large corporations, more than five. To increase the number renders the standing com- mittee unwieldy and defeats the purpose of its creation. § 139. Appointment of Standing Committees. The appointment and the membership of standing com- mittees are usually prescribed by charter provision. The details of appointment, and of the duties and procedure of these committees thereafter are sometimes fixed by the charter, but are usually and better left for the by-laws. Frequently the charter merely prescribes that a standing committee, or committees, shall or may be appomted, leaving all details to the by-laws. ^ ^^^^^^ ^ ^^^-^er CHAPTER XVII. THE CORPORATE OFFICIALS. § 142. Officers. The term ''officers" is here applied to those permanent agents of the corporation appointed or elected— usually by the board of directors— as the direct representatives of the board, and of the corporation. The directors are them- selves at times and with legal correctness styled "officers," but to avoid confusion the term is, as a rule, employed in the present volume to designate those officials subordinate to the board. § 143. Appointment of Officers. The stockholders have the original right to elect or ap- point officers of their corporation, and in the absence of preventing statutes this power may be reserved to them. In practice, however, by express provision of the statutes, charter or by-laws, the power of appointing officers is al- most invariably vested in the board of directors. Certain corporate officers are usually specified and re- quired by statutes, charter, or by-laws, and such officers are elected as a matter of course. Beyond these, the board may appoint any other officers or agents necessary to prop- erly conduct the business of the corporation. If the time and manner of election of corporate officials is not pre- scribed by some higher authority, the directors may ap- point them in such manner and at such time as they deem best. (See § 136.) 175 !Z ! u \ t 176 DIRECTORS AND OFFICERS. The election of one person to two corporate offices is common, and is usually authorized by charter or by-law provision. If otherwise, the board still has power to com- bine any two or more official positions in one person if the duties of the combined positions do not conflict.^ The term for which corporate officials are elected is usually prescribed by proper charter or by-law provision, and seldom exceeds one year. As a matter of business policy such term should not be longer than that of the di- rectors by whom the officials are elected. That is, if the directors are elected annually, the officers also should be elected annually so that each new board may appoint its own agents. The appointment of managers, experts or other special- ly skilled employees is, however, of a different nature. These are not so directly agents of the board, and con- tracts for their services extending over a term of years are frequently advantageous or even necessary to the corpora- tion. Such contracts are entirely within the power of the board without special charter or by-law authorization. Unless they resign or are removed in some manner, the corporate officials hold over after the expiration of their elective term, until they are relieved by properly elected or appointed successors.^ This is frequently a statute, charter or by-law provision, but, if otherwise, is a matter of common law. (See § 136.) These de facto officials have every power that they possessed before the expiration of their elective terms. (See § 148.) As the board elects and appoints officers, it has also the power to fill vacancies among them without specific au- thorization.^ fiOA^F^^'P^n ""•, ^'■^^^' ^^ ?^-,X- 295-304 (1874); Sargent v. Webster, 54 Mass. 497 (1847); 2 Cook on Corp., § 712. /•.o.,tx^^*"J"^. ^?- V. Abraham, 26 Ore. 282 (1894); Thorington v. Gould, 59 Ala 461 (1877); Agricultural Soc. v. Houseman, 81 Mich. 609 (1890). »/n Matter of Union Ins. Co., 22 Wend. 591 (1840). THE CORPORATE OFFICIAI^S. 177 § 144- Qualifications of Officers. The officers are the agents of the board of directors- and of the corporation. Hence any one who may act as an agent is capable of acting as a corporate official, and in the absence of prohibition a married woman, a minor, an alien, or one of its own directors, may be legally elected as an officer of the corporation. Membership in the board is, as a rule, a necessary qual- ification for the president and vice-president of a corpora- tion. They are almost invariably the presiding officers of the board, and when this is the case, the election of a pres- ident or vice-president not a member of that body might lead to difficult situations. § 145. Compensation of Officers. The compensation to be paid officers is occasionally prescribed or limited by the by-laws, and still more occa- sionally by the charter, but as a rule is left to the discre- tion of the board. Directors have no power to fix their own compensation as directors, nor should officers who are also members of the board vote upon their own salaries.'^ (See §§ io8, 120.) The board has, however, unless restricted by char- ter or by-law provision, full power to fix the salaries or other compensation of its appointees.^ Any officer, agent or employee who is not a director may recover the reason- able value of his services from the corporation even though no specific agreement as to compensation was made at the time of his election or appointment.^ (See § io8.) § 146. Powers and Duties of Officers. The mere fact of election to office does not necessarily App. 5:r(N:- yTi?M18?9-) ^^"- ^°-' ^^ V^ 608 (^«^^)^>'chL\^T-Murphy. 46 Co..'l02 N"'f "i9S''('f?8l)' ^^- ^°-' '' '"• ''' ^'^''^' S-ith V. Long Island R. R. li ^ i 178 DIRECTORS AND OFFICERS. in itself confer any power or duties upon the officials of a corporation.^ Custom or usage may have attached cer- tain powers and duties to certain official positions, but the corporation may disregard this and vary the powers and duties of the different officers as seems to it best. In general it may be said of corporate officials that, as agents of the corporation, they are governed by the gen- eral law of agency. Accordingly a corporate official has only those powers which are conferred upon hnn or are incidental to the exercise of these powers. The different sources from which the powers of cor- porate officials are derived are, in rank of their authority, (i) the statutes of the state, (2) the charter, (3) the by- laws, (4) resolutions of directors, and (5) usage. Statutory provisions affecting corporate officials are few. The charter likewise but seldom contains provisions affecting the officers of the corporation, though occasion- ally such provisions are inserted therein for the sake of permanence. The by-laws, however, usually prescribe the official powers and duties with fulness, and the directors, subject to the provisions of the higher authorities referred to, confer such other proper official powers and prescribe such other proper official duties as they see fit. Beyond all these, it will usually be found that the offi- cers transact certain routine business^ and perform certain duties as a matter of custom, and their acts are valid and binding upon the corporation, even though not specifically authorized.^ Also it may be stated generally that whenever the di- rectors permit an officer to exercise apparent authority in the corporate affairs or transactions, the corporation is »R. R. Co. V. Bayne, 11 Hun (N. Y.) 166; Aff'd, 75 N. \. 1 (1877); Cushman V. Cleveland, etc. Co., 84 N. E. (Ind.) 759 (1908). « Fitzgerald, etc. Co. v. Fitzgerald, 137 U. S. 98 (1890); Mining Co. v. Bank, 95 Fed. Rep. 23 (1899); Phillips v. Campbell. 43 N. Y. 271 (1870). •Ins. Co. V. McCain, 96 U. S. 84 (1877); New York. etc. R. R. Co. v. Schuyler, 34 N. Y. 30 (1865); Story on Agency, SS 126, 127; Clement v. Young, etc. Co., 69 N. J. Eg. 347 (1905). 1 THE CORPORATE OFFICIAI^S. 179 bound thereby as to third persons as fully as if such officer had been duly authorized.^^ Beyond this, corporate officers not infrequently act clearly without the bounds of their authority, relying upon ratification of their acts by the board of directors later. If so ratified, the corporation is bound and the officials are absolved from all responsibility for their ultra vires acts.'^^ If, however, the official action is not ratified, the corpora- tion is not bound and the officers are personally liable for their acts.^^ The validity of an officer's acts depends entirely upon his authority, and not on the place in which the authority is exercised.^3 Therefore, when in the proper discharge of his duties, his acts are as effective in one place as an- other, and equally binding upon the corporation. The board may temporarily delegate the powers of an official to another person, provided such delegation is rea- sonable and only for such length of time as may be actually necessary to conserve the interests of the corporation. An officer cannot delegate his powers to another officer in any material matter, even temporarily, unless specially authorized thereto by the by-laws or by action of the board.*"^ § 147. Liabilities of OfBcers. An officer contracting for his corporation within the limits of his authority is merely a corporate agent, and if not guilty of fraud or deceit, does not bind himself and cannot be held personally liable in any way. If, however, he exceeds his authority, he renders himself personally Ban;v'?^L,l°;a'd^Co'',^T3?1?.V23?\r89f?'T^Sa^ l^f'^^'P ^'^^^ ^-• Uuchheim V. Bldg. Assn., 2li Pa St 499 (1905) Marshall on Corp.. § 708; MVight V. Madison, 26 N. Y. 117 (1862) Uisyy). "Hastings v. Ins. Co., 138 N. Y. 473 (1893). •Caldwell V. Life Assn., 53 App. Div (N Y "> 24«; nonn'v Ao «.^ u tion will be bound, see Emerson v Hat Co 12 Mass 237 181^?- oi'^H" .?''?,°''*' Martin, 112 N. C. 593 (1892). Mass. ZJ7 (1815); also Luttrell v. 180 DIRECTORS AND OFFICERS. liable,^^ unless the corporation later ratifies his action, ^^ when he is released. Officers are bound to use ordinary care aad diligence in the conduct of the corporate business and are therefore liable for any losses caused by their neglect, mismanage- ment or wrong-doing in the discharge of their official duties,^^ though not for an error of judgment.'^ An officer is also personally liable for any wrong he does on behalf of his corporation, such as sending out false and deceptive reports, statements, prospectuses, etc., even though the corporation is also liable. ^^ (See § 122.) In many states statutes exist prescribing penalties for various misdeeds of corporate officials. Thus in New York, neglect to make proper entries in the stock book, or to exhibit this book on request to those entitled to its in- spection involves a penalty of fifty dollars and of resulting damages; rendering a false report involves liability for all resulting damages; loaning corporate funds to a stock- holder or allowing him to withdraw his investment in any way renders officers and directors personally liable for all debts of the corporation until the amount is returned, while falsifying accounts or erasing or destroying the corporate records is made a forgery. (See § 123.) § 148. De Facto Officers. A de facto officer is one actually in possession of an office and exercising its powers and duties by virtue of some other authority or right than that of a regular, un- questioned election or appointment. He must be "dis- tinguished on the one hand from a mere usurper of an '•Wight V. Madison, 26 N. Y. 117 (1862). *• See citations under 11. "Mason v. Henry, 152 N. Y. 529 (1897); Wilkinson v. Dodd, 40 N. J. Eq. 123 (1885). 18 Briggs V. Spaulding, 141 U. S. 132 (1890); Freeman v. Sea View Hotel Co., 57 N. J. Eq. 68 (1898); Holmes et al. v. Willard, 125 N. Y. 75 (1890); People v. Equit,, etc. Society, 124 App. Div. (N. Y.) 714 (1908). _ ^^ „ « Cowley V. Smyth, 46 N. J. L. 380 (1884); Morgan v. Skiddy, 62 N. Y. 319 (1875). t 1' I THE CORPORATE OFFICIAI^S. 181 office and on the other hand from an officer de jure"^^ i. e. one holding his position by legal right. Jt not infre- quently happens that the results of an election are dis- puted or that an election is not held. In the first case if the officers claiming election enter upon their official duties, or in the second case if the old officers continue in office, the acting officials are de facto officers, and, until ousted, or superseded, their official acts are legal and bind- ing upon the corporation. (See §§ 112, 142.) Speaking generally it may be said that anyone con- nected with a corporation who is publicly allowed to act as its officer or agent, is a de facto officer. Persons dealing with the corporation cannot usually investigate and ascer- tain whether those who purport to represent it are legally appointed. The law therefore holds that the acts of these de facto officers are binding on the company even though they have no legal right to the position they pretend to hold. § 149. Removals and Resignations. When an officer is elected for a definite term and ac- cepts the office, a contract has been made for that term, and, unless power has been given the board by express provision of statutes, charter or by-laws to remove the cor- porate officers at pleasure, the incumbent can only be legally removed for cause.^^ If a removal is to be made, the cause must be such as will justify breaking the contract with the offending official, charges must be brought against him, and he must be allowed an opportunity to de- fend himself.22 If removed without cause, his official "Waterman y. Chicago, etc. R. R. Co., 139 111. 658-665 (1892); Merchants' Bank B.2:roTv%' hl\\s?i) ''' ''^"- ''' ^'''''•' ^^"'"« ^- v.'AngllSilFor^nla";; ^e±%l'''mS,\lZf^^^^^^^^ - ^^- ^-- « Assn., 86 " State V. Adams, 44 Mo. 570 (1869); State v. Kuehn, 34 Wis. 229 (1874). 182 DIMICTORS AND OFFICERS. §11' 1 ^i ■:j\ r status ceases but the corporation is liable to him for breach of contract.^^ In some few states the statutes give the directors power to remove officers at pleasure. Elsewhere it may be given them by charter or by-law provision.^"^ Such provisions are usually desirable as the board is responsible for the proper conduct of the corporate business and should have power to remove an objectionable official without the necessity of a formal trial. When by-laws are adopted giving the directors power to remove officers without cause, they do not authorize the removal of officers already elected, but are effective as to officers elected thereafter. Under the usual conditions of election, a corporate officer may resign at will,^^ unless he has entered into some distinct agreement to serve the corporation for a fixed period. His resignation should, as a rule, be in writing, be phrased to meet the exact end in view and be delivered to the secretary ,^^ though an oral resignation in open meet- ing is sufficient, especially if followed by acceptance by the board.27 (See Ch. XXXVI.) It has been held that all the corporate officers cannot resign at once for the pur- pose of throwing the corporation into the hands of a re- ceiver. 28 »7n re Griffing Iron Co., 63 N. T. L. 168 (1899); Douglass v. Merchants Ins. Co.» 118 N. Y. 484 (1890); Brindley v. Walker, 70 Atl. Rep. (Pa.) 794 (1908). "State V. Adams, 44 Mo. 570 (1869); Danah v. Ice & Storage Co., 50 W. Va. "Yorkville Bank v. Zeltner B. Co., 80 App. Div. (N. Y.) 578 (1903); Van Amburgh V. Baker, 81 N. Y. 46 (1880). "Manhattan Co. v. Kaldenberg, 165 N. Y. 1 (1900); Noble v. Euler, 20 App. ^*^"" Briggs V. "^Spaulding, 141 U. S. 132-150 (1891); Fearing v. Glenn, 73 Fed. 116 "Zeltner v. Brewing Co., 174 N. Y. 247 (1903>. i CHAPTER XVIII. THE CORPORATE OFFICIALS.— (Continued.) § 150. Executive Officers. The necessary officers of a corporation, sometimes termed the "executive officers," are the president, secre- tary and treasurer. One or more vice-presidents are usual. In addition to these, other officers or agents are frequently appointed, as managing directors, general man- agers or superintendents, counsel, auditors and special agents for particular purposes. § 151. The President. The president is the usual presiding officer of the cor- poration. His duties vary widely. In the smaller cor- porations, in addition to the duties more strictly pertain- ing to his office, he is frequently assigned the active man- agement of the corporate business. In tlie larger corpora- tions the duties usually incident to the president's office are frequently allotted in greater or less degree to other officers. Thus a chairman of the board is occasionally ap- pointed to preside at meetings of the directors; chairmen of the standing committees supervise and direct the mat- ters within the scope of their committees, and vice-presi- dents will discharge some measure of the president's duties. The usual duties of the president assigned him by the by-laws are well set forth in the following extract '} 1 Conyngton on Corporate Organization, pp. 314-315. 183 184 DIRECTORS AND OFFICERS. THE CORPORATE OFFICIALS. 185 "The President, when present, shall preside at all meetings of the stockholders and of the Board of Directors; shall sign all certificates of stock; shall sign, or countersign, as may be necessary, all such bills, notes, checks, contracts and other instruments as may pertain to the ordinary course of the Com- pany's business, and sign, when duly authorized thereto, all contracts, orders, deeds, liens, licenses and other instruments of a special nature. "He may also, in the absence or disability of the Treasurer, endorse checks, drafts and other nego- tiable instruments, for deposit or collection, and shall, with the Secretary, sign the minutes of all meetings over which he may have presided. "At the first regular meeting of the Board in January he shall submit a complete report of the operations of the Company for the preceding year, together with a statement of the Company affairs as existing at the close of such year, and shall sub- mit a similar report at the annual meeting of stock- holders; also, he shall report to the Board of Di- rectors, from time to time, all such matters coming within his notice and relating to the interests of the ; Company as should be brought to the attention of the Board "He shall be, ex officio, a member of all standing committees, shall have such usual powers of super- vision and management as may pertain to the office of President, and perform such other duties as may he properly required of him by the Board of Di- rectors." Unless expressly authorized thereto, the president has no power to execute a corporate deed, a mortgage, an as- signment of property, a license or other formal instrument, or to borrow money or bind the company by a promissory note.^ Nor has he legally power to buy. sell or contract for the corporation outside the regular routine of business, unless authorized thereto by resolution of the board, or •Bennett v. Keen, 59 N. J. Eq. 634 (1899); Tobin v. Roaring Creek, etc. R. Co. «6 Fed. 1020 (1898); Western Nat. Bank v. Armstrong, 152 U. S. 346 (1893); Cause V. Trust Co., 124 App. Div. (N. Y.) 438 (1908). I 1 ) • unless, from his previous action as the authorized agent of the company in particular directions, such authority may be rightly inferred. When, however, the president is authorized to attend to any particular business, he is also empowered to make all contracts usual or necessary in the course of that busi- ness.3 Also in practice he is so commonly authorized to act generally for the corporation that unless it can be shown in any particular instance that he has gone clearly outside the bounds of his usual authority, his contract will bind the company.'* The president, as he is to preside over the meetings of the board, must himself be a director. He is usually ex officio chairman of one at least of the standing committees. (See § 140.) § 152. The Vice-President. Vice-presidents designated in rank as first, second, third and so on, are usually appointed in accordance with the corporate needs. These, in the order of precedence, per- form the duties of the president in the absence of that offi- cial. Beyond this in the larger corporations active func- tions are usually provided for one or more vice-presidents, these duties being taken more or less directly from those usually discharged by the president. The position of vice- president is, however, frequently entirely honorary. When the vice-president rightly assumes the office of president, he possesses and exercises every power of that official as fully as does the president himself when acting.^ § 153. The Secretary. The secretary is the recording officer of the corpora- 104 \Ff%7nRS)^'w%\'^li ^- I-r^^^ (1889); Mining Co. v. Anglo- Am. Bank. ;.Snowf'l23y'Y' 343^1890)^''^^° ^ ^°- "^ ^""^'*' ''' '^^'' ''' ^'^'^^' ^^thbun 105 *J;^r.h'*%^nh ''n«QO^°K".°"y' ^^^ Mass. 272 (1892); Sarmiento v. Boat & Oar Co 105 Mich. 300 (1895); Fitzgerald Cons. Co. v. Fitzgerald, 137 U S 98 nSQnV- Scnbner v. Flagg Mfg. Co., 175 Mass. 536 (1900) (1»90), •Elhson V. Branstrator, 153 Ind. 146 (1899); Smith v. Smith, 62 111. 493 (1872). 186 DIRECTORS AND OFFICERS. THE CORPORATE OFFICIALS. i! !l tion. His usual duties are well set forth in the following by-law extract:^ "The Secretary shall keep full minutes of all meet- ings of the stockholders and of the Board of Di- rectors; shall read such minutes at the proper sub- sequent meetings; shall issue all calls for meeting's and notify all officers and directors of their election; shall have charge of and keep the seal of the cor- poration and affix the same to certificates of stock when such certificates are signed by the President and Treasurer, and shall affix the seal, attested by his signature, to such other instruments as may re- quire the same. **He shall keep the stock certificate book and the other usual corporation books, and shall prepare record, transfer, issue, seal and cancel certificates of stock, as required by the transactions of the Com- pany and its stockholders. He shall sign with the President all contracts, deeds, licenses and other instruments when so ordered. **He shall make such reports to *he Board of Di- rectors as they may request, and shall also prepare such reports and statements as are required by law. He shall make out, twenty days before any election of directors, a complete list of the stockholders en- titled to vote at such election, arranged in alphabeti- cal order and g^iving the number of shares of stock that may be voted by each, and shall keep the same open to inspection at the office of the Company un- til the time of and during the said election. He shall allow any stockholder, on application in busi- ness hours, to inspect the stock certificate book, the stock transfer book and the stock ledger. "He shall attend to such correspondence and to such other duties as may be incidental to his office or be properly assigned him by the Board." The proviso that stock certificates are to be signed by the president and treasurer accords with the provisions of the statutes in New Jersey and some few other states. In • Conyngton on Corporate Organization, page 315. 187 K the majority of the states the signatures to stock certif- icates are determined entirely by the by-laws and the sec- retary is commonly one of the signing officials. (See § 31.) The secretary usually has the seal of the company in his sole charge,^ though it is sometimes otherwise provided by the charter or by-laws. Ordinarily lie should not let the seal go out of the company's office save in his own custody, or otherwise only when directed by resolution of the board. The general rule as to the use of the seal is that alf instruments that require a seal when executed by an in- dividual, require the corporate seal when executed by a corporation. It is customary, however, to use the cor- porate seal on all formal corporate instruments. It is also used on stock certificates, and it may be said generally that its use on any corporate instrument is not legally objec- tionable. (See § 15; also comment on Forms 144, 145.) In event of the absence or disability of the secretary, the board of directors may authorize any other officer or agent of the company to affix the seal. The mere impression of the seal upon the paper, without the use of wax or wafer, is sufficient. Almost any duly authorized device or im- pression intended to serve as a corporate seal will be recog- nized by the courts as such. The secretary is distinctively the recording officer of the corporation, and is the custodian of the minute book and usually of all other corporate records save those per- taining to the financial transactions of the corporation. The seal and the corporate books should be kept in the office of the corporation. The directors are entitled to inspect the corporate books at any time, and the secretary should also extend this privilege to the stockholders to such extent as is (i) prescribed by the statutes, (2) by the ' Ellison V. Branstrator, 153 Ind, 146 (1899). 188 DIRECTORS AND OFFICERS. by-laws or usage of the corporation, (3) by order of a court having jurisdiction. If he wrongfully refuses to al- low inspection of the corporate records h*^ will be liable in damages.^ (See §§ 35, 147.) When the secretary's term of ofhce expires, or prior thereto if he resigns or is re- moved, he must surrender the corporate records even though he may have paid for them out of his own pocket.^ It is most desirable that the secretary be informed as to all ordinary matters of corporate procedure. Not only is this required for the proper discharge of his own offi- cial duties, but he is usually expected to supply his official associates with information as to details of corporate man- agement. The secretary will find a practical work on corporate procedure of much assistance. In addition he should have a copy or a digest of the statutes of the state as far as these relate to corporations. A manual of parliamentary pro- cedure will also be found useful. Where the statute law modifies or adds to the general or common law, or requires additional formalities, such data should be noted on the margins of the proper pages of the secretary's book on cor- porate procedure in order to make it complete for that particular state. A volume so annotated will be found in- valuable for the use of the corporate officials. A corporate calendar or some equivrjlent (See Form 198) is almost indispensible to the proper discharge of the secretary's duties. The dates and data of this calendar will vary in the different states. They are also varied by the charter or by-law requirements of the particular cor- poration. § 154. The Treasurer. "When not otherwise prescribed by the state laws or * Legend re v. N. O. Brewing Assn., 45 La. Ann. 669 (1893); Fuller v. Hollander, 47 Atl. (N. J.) 646 (1900). » State V. GoU, 32 N. J. L. 285 (1867). THE CORPORATE OFFICIALS. 189 by the charter or by-laws of the corporation, any person who may act as agent for another is eligible to act as treasurer of the corporation. Thus in the absence of pro- hibition, a married woman, a minor, an alien, one of its directors or even another corporation might be elected and legally serve as its treasurer. Nor does election to an- other office in the same corporation in itself disqualify an incumbent to act as treasurer, provided the duties of the two offices do not conflict. "In the smaller corporations the treasurer is usually either acting bookkeeper or has direct control of the books of account and keeps his own special books as well. A knowledge of bookkeeping and of the financial duties con- nected with his office is then a necessary qualification. "In the larger corporations the treasurer's duties do not usually include the details of accounting. These de- volve upon subordinate employees or are perhaps relegated to an accounting department, leaving the treasurer free to devote his attention to the general oversight and manage- ment of the corporate finances and financial affairs. A knowledge of accounts and bookkeeping, though desirable, is not then so essential. "^° The following by-law extract presents an excellent synopsis of the usual duties of the treasurer:" "The Treasurer shall have the custody of, and be responsible for, all moneys and securities of the Company; shall keep full and accurate records and accounts in books belonging to the Company, show- ing the transactions of the Company, its accounts, liabilities and financial condition, and shall see that all expenditures are duly authorized and are evi- denced by proper receipts and vouchers. He shall deposit in the name of the Company in such deposi- tory or depositories as are approved by the Direc- tors, all moneys that may come into his hands for "Rentley on Corporate Finance & Accounting, page 32. " Conyngton on Corporate Organization, pages 315-316. I [ 190 DIRECTORS AND OFFICERS. the Company account. His books and accounts shall be open at all times during business hours to the inspection of any Director of the Company. **The Treasurer shall also endorse for collection or deposit all bills, notes, checks and other negotia- ble instruments of the Company; shall pay out money as may be necessary in the transactions of the Company, either by special or general direction of the Board of Directors, and on checks signed by the President and himself, and shall generally, to- gether with the President, have supervision of the finances of the Company. *'He shall also make a full report of the financial condition of the Company for the annual meeting of stockholders, and shall make such other reports and statements as may be required of him by the Board of Directors or by the \3.ws of the State. "He shall give bond in the sum of five thousand dollars, with sureties satisfactory to the Board of Directors, for the faithful performance of his duties and for the restoration to the Company in event of his death, resignation or removal from office, of all books, papers, vouchers, money and other property belonging to the Company that may have come into his custody." The first and most important function of tlie treasurer is to care for the corporate funds.^^ For their safe-keep- ing he is personally responsible and to this end he is re- quired to exercise all such reasonable vigilance as a care- ful man of business would employ in safe-guarding his own funds. Whenever the treasurer's position involves the hand- ling or possession of large sums of money or of consider- able property values belonging to the corporation, he should be required to give bond, the amount depending upon the value passing through his hands and the particu- lar conditions. In a small corporation or one where the « Second Ave. R. R. Co. v. Coleman, 24 Barb. (N. Y.) 300 (1857). THE CORPORATE OFFICIAI^S. 191 responsibilities of the treasurer are light, a bond is an un- necessary formality. Any regulations as to bank deposits and the signature to checks should be slated clearly in the by-laws. At the first meeting of directors a resolution should be passed in accordance with these by-law provisions, directing that the funds of the company be deposited in a designated bank or banks. (See Forms 38, 84, 85.) The deposit is then opened as directed by this resolution. The corporate funds should be deposited in the corporate name. Under no cir- cumstances should the treasurer deposit funds of the com- pany in his own name or in his name as treasurer, or mingle them in any manner with his own. The treasurer has, as a matter of course, charge of the corporate books of account. These he must surrender on the termination of his treasurership, to his duly appointed successor, even though they may have been purchased with his personal funds. ^^ The treasurer is directly responsible to the board of di- rectors and must obey any instructions within its powers. Also the individual members of the board have the right at any reasonable time to examine the bocks and accounts of the company and to make any proper enquiries of the treasurer, but they have no power to instruct him or inter- fere with the proper discharge of his duties.^^ § 155- Chairman of the Board. In addition to the officers already named, provision is sometimes made for a chairman of the board. His first and frequently only duty is to preside at all meetings of di- rectors. In some cases he is given much of the authority that usually belongs to the president, whose position then becomes either subordinate or largely honorary. The "State V. Goll. 32 N. J. I,. 285 (1867). "People V. Throop, 12 Wend. (N. Y.) 183 (1834). n 192 DIRECTORS AND OFFICERS. duties of the chairman of the board are usually determined entirely by the by-laws. § 156. Managing Director. Occasionally a member of the board is appointed to the active management of the corporate affairs, and is then termed a "managing director." His powers are strictly defined by the terms of his appointment. The managing director is the direct representative of the board and his position is usually equal to or superior to that of the president. It is of much greater dignity and responsibility than the position ot general manager, though the managing directors duties may and sometimes do in- clude those generally assigned to the general manager. The appointment of the managing director is usually provided for and his duties fixed by by-law provisions. These should be as clear and complete as possible. The duties of the position are not so definite or so well under- stood as those of the other corporate ofilicials, and custom cannot be relied upon to supply missing details or settle conflicts. § 157. General Manager. The general manager, while an ofificer of the company, is not one of the executive officers. He has usually no concern with the general corporate affairs or finances, but is appointed to take charge of its ordinary business, which he manages exactly as he would were he employed by a firm or an individual. His powers and duties are limited to the transaction of the particular business in which the company is engaged, and, unless expressly given him, he has no power to contract for the company outside its rou- tine business If the by-laws do not specifically provide for the elec- .. THE CORPORATE OFFICIALS. 193 tion of a general manager, the board still has authority to appoint or employ such an official and prescribe his duties and salary just as it might employ any other necessary agent or employee of the company. § 158. Counsel. In the larger corporations one or more attorneys are usually retained as a permanent feature of the manage- ment. In the smaller corporations such regular employ- ment is not usual, the board being left to employ counsel at such times and on such terms as may be expedient. Sometimes payment of counsel is made entirely con- tingent on services rendered. Usually, however, a re- tainer is paid to cover general advice and consultation, with the understanding that anything beyond this, such as drafting contracts, conducting litigation or other active legal assistance, shall be paid for at the regular rates. The counsel of the company has usually no authority over the company affairs save in connection with litigation which the board of directors has authorized him to under- take, or in special matters which have been placed in his hands. § 159. Auditor. In the larger corporations it is customary to elect an auditor, whose daty it is to devise and supervise the whole system of corporate accounts. He should of necessity be an expert accountant. His specific duties are usually fixed by the board of directors, or the finance committee when one exists. Where the operations of the corporation are not suffi- cient to justify the permanent employment of an auditor, it is usual to provide for periodical audits of the corporate accounts. Such audit should be made by a professional 194 DIRECTORS AND OFFICERS. •M accountant accustomed to the work and whose reputation and standing will insure an accurate and proper report. The superficial examination and report made by the usual auditing committee of directors is of but little practical value. PART v.— MISCELLANEOUS CORPORATE MATTERS. CHAPTER XIX. MINUTES AND OTHER CORPORATE RECORDS. § 1 60. The Corporate Books. The financial records of a corporation are much the same as those of a firm or individual. Some of their en- tries and accounts are peculiar to the corporation but the Dooks do not diflPer from those of any other form of busi- ness organization. The discussion of che books of ac- count IS outside the province of the present volume ' The more important books of record peculiar to the corporation are the minute book (See § 161 ; Forms ^7 ^8 109-114). the stock certificate book (See § 34; Forms' 16- 20), the transfer book (See § 36; Forms 190, 191) and the stock book and stock ledger (See S35; Forms 192 193), which are kept by the secretary of the corporation' In addition to these, conditions may arise which require one or niore of the following books.-subscription book (See § 167), instalment book (See § 167, Form 104) in- stalment scrip book (See §167; Form 8), dividend book or register (See § 168; Form 195) and bond and coupon regis- ters. (See § 168.) These books are usually kept by the treasurer of the corporation. Fin,L« &'Lcounlin"g." ''''*'''°" "' "" """"'"' "■=""""• =« B""'/' "Corpora.. 195 II •I 196 MISCELLANEOUS CORPORATE MATTERS. (a) Minutes. § i6i. The Minute Book. The minute book of a corporation properly kept is legal evidence of the proceedings of its stockholders' and di- rectors' meetings. The secretary is its custodian and its entries should be made by him alone. Any director has the right to inspect this book at any suitable time. A stockholder usually does not have this right. The minute book is ordinarily a blank book of the style termed "record" by stationers. It may be had at any price from plainly bound books at fifty cents or less, up to elaborately bound and specially printed books costing from five to twenty-five dollars or even more. A reasonably good and substantially bound book is alv^ays to be desired. The minute book varies in size and general form ac- cording to the taste or requirements of the secretary. A common and convenient form is S'A by 13 inches. Some- times the book is specially made, of a size and style to match the other corporate records. For a small corpora- tion with few meetings, a book containing one hundred pages will usually be found ample. When the minutes are kept in a sui)Stantially bound volume with longhand entries succeeding each other in regular order, later additions or insertions are difficult if not impossible, and their evidence as to proceedings at the company's meetings is difficult to controvert. Minutes are, however, not infrequently written with the typewriter on sheets of thin paper, which are then pasted in the minute book. Also at times loose-leaf min- ute books are employed, in which the pages may be re- moved, and, after the minutes are written upon them, be reinserted in the book. When either of these plans is followed, substitutions and alterations in the minutes may be made with comparative ease and their value as evi- dence is diminished. MINUTES AND OTHER CORPORATE RECORDS. 197 To avoid this objection to the convenient loose-leaf minute book, each page is sometimes water-marked with its proper number in such manner that substitution is ex- tremely difficult and practically impossible. The same end is sometimes accomplished by the inscription of the presi- dent's and secretary's signatures or initials on each page, making substitution without the participation of these officials impossible. It is obvious that this latter method of verification may also be efifectively employed when min- utes are pasted into the minute book. § 162. Contents of Minute Book. A copy of the company's charter or certificate of in- corporation is usually entered on the first pages of the minute book. This may be a copy certified by the Sec- retary of State, bound or pasted into the oook, or, equally sufficient, a careful and legible copy written in the book by the secretary, or, if written on separate sheets, bound or pasted into the minute book. If the copy is made by him, the secretary usually certifies to its correctness. Following the charter come the by-laws of the com- pany. These begin at the top of the next right-hand page and should also be a careful ard legible copy, or a copy bound or pasted in, followed by the secretary's certificate as to the accuracy of the transcription. (See Form 25.) A few pages immediately following the by-laws should be left blank for the entry of any amendments. Then follow the minutes of the first meeting of stockholders closely followed by the proceedings of the first meeting of directors, and thereafter the minutes of stockholders' and directors' meetings in due sequence as held, each with its distinctive heading. Each meeting should begin at the top of its proper page and no blank pages should be left between the records of the dififerent meetings. In the larger corporations separate minute books are 198 MISCELLANEOUS CORPORATE MATTERS. provided for stockholders' and directors' minutes and also for the minutes of standing committees. In the smaller corporations a single minute book will usually suffice. § 163. Form and Subject Matter of Minutes. The secretary should spare no pains to secure accuracy in his minutes as they are the legal evidence of the pro- ceedings of the meetings recorded and the authority for any action of the officers required thereby. The minutes given in the present volume (See Forms 37» 38, 109-114) are in conventional form. Any clear statement of the proceedings is, however, ^egally sufficient, thougfh a reasonablv close adherence to the conventional arrangement is desirable. It is usual to enter on the minutes of directors' meet- ings the names of those present. Save in the case of very small corporations, this is not customary or necessary in the case of stockholders' meetings. The secretary should, however, preserve the lists (See Form 99) showing the names of stockholders present at meetings. During the progress of meetings, letters, reports and other instruments are frequently presented. When of im- portance, the secretary is usually instructed to enter these upon the minutes. If not instructed, he may use his dis- cretion. If the matters to which they relate are important, they should usually be spread upon the minutes, i. e. en- tered in full. Generally, however, it is sufficient if the in- struments be filed and preserved, such reference being made to them in the minutes as the conditions may de- mand. When reports or other instruments are ordered spread upon the minutes, the secretary may usually exercise his discretion as to whether they shiill be included in the body of the minutes or follow immediately afte^ them. If, how- ever, the motion or order directs that the instrument fol- MINUTES AND OTHER CORPORATE RECORDS. 199 low the minutes, or that it appear in the body of the min- utes, the secretary should comply with the letter of his instructions. § 164. Recording the Proceedings. The corporate minutes are a record of the transactions of corporate meetings,— a record of what is done, not of what is said; and the record should usually be as concise and accurate as possible. If a motion or resolution is passed upon at a meeting, no matter whether adopted or rejected, its disposition should be recorded, but, speaking generally, the debate and discussion should not be set down, nor are the names of the parties by whom minor motions or resolutions are made or seconded of sufficient importance to be entered, nor need any record be made of those voting for or against any such matter. It may be said further that when the presiding officer decides that a motion or a resolution is properly before the meeting and puts it to vote, the fact that the names of the parties who moved and seconded it or who voted for or against it, are not recorded, does not affect the force of the corporate action. If, however, a motion or a resolution is of importance, or is contested, or of such a nature that it may thereafter be of importance to know by whom the matter was introduced and by whom it was favored and opposed, the record should be made in full. (Se^ Ch XXXI.) It sometimes happens that a stockholder or a member opposing some proposed action wishes his objections or protest recorded in the minutes. If his objections arj per- tinent and not too lengthy, this should usually be per- mitted, but the secretary should not enter any such objec- tions upon his record unless so directed by a vote of the meeting or by unopposed direction of the presiding officer. IP 200 MISCELLANEOUS CORPORATE MATTERS. The objecting member sometimes files his protest in writing and in such case the document should be received and filed in the usual course of business, and this fact be noted in the minutes. In some cases it is necessary for a member of the board to have the dissent to proposed ac- tion noted in order to avoid liability. In such case he has a right to demand its entry upon the minutes, and, if re- fused, may force its entry by proper legal procedure. Motions are not usually entered verbatim. It is suffi- cient if their sense is preserved. Resolutions are how- ever, more formal and should usually bo entered in the exact form in which they are adopted. (See Forms 74- 98.) The presiding officer of the meeting may always re- quire resolutions and important motions to be reduced to writing before consideration, and if he does this the work of the secretary is greatly lightened. All papers presented to or used at meetings should be filed for future reference in the custody of the secretary unless otherwise ordered. Notes of the proceedings are taken as the meeting progresses (See Form 100), and these should be written up in permanent form as soon after the meeting as possible while the events are fresh in the secretary s mmd. Should he delay the final entry of his record unduly, doubt may arise as to whether the secretary's notes, or the record of the minute book is the original entry, and if it should be held that the formal minutes are not the original entry, their value as evidence is destroyed. As soon as the minutes are duly entered m the min- ute book, they should be signed with the official signatures of the secretary and the presiding officer of the meeting, the secretary usually signing at the right and the presiding officer at the left. MINUTES AND OTHER CORPORATE RECORDS. 201 § 165. Approval and Amendment of Minutes. Minutes should be approved by the body whose pro- ceedings they record. The approval of stockholders' minutes by the board of directors is absolutely ineffective as is also the approval of directors' minutes by the stock- holders, save by way of endorsement or ratification of the directors' action recorded therein. The minutes of a stockholders' annual or special meet- ing cannot be approved at a subsequent special meeting unless such approval is noted in the call and notice, but the minutes of any preceding stockholders' meetings, whether annual or special, may always be approved at the stock- holders' annual meeting. Likewise the approval ot the minutes of a directors' regular or special meeting at a sub- sequent special meeting is effective if such approval was duly notified as one of the purposes cf ihe meeting (See §§ 128, 129), while any unapproved minutes of directors' meetings may always be approved at a regular meeting of directors. (See § 134.) The minutes of a stockholders' meeting are usually not passed upon until the following annual meeting, when all unapproved minutes should be read and, if no objections are offered, approved. (See § 88.) Directors' minutes likewise are usually only approved at n^gular meetings. The approval of minutes relieves the secretary of all di- rect responsibility for the accuracy of their record and also serves as a ratification of the proceedings recorded therein.^ When minutes are approved, no record need be made save the statement in the minutes of the meeting then in progress that the minutes of the previous meeting or meet- ings, giving their dates, were read and approved. Usu- ally, however, for convenience the secretary also notes 161 '(PsssT ^' '^'■"'''''' ^^^ ^^''' " ^^^^^^' ^°""'y ^°"^* ^- »y- ^°-' 35 Fed. Rep. 202 MISCELLANEOUS CORPORATE MATTERS. at the bottom of each set of approved minutes the proper facts as ''Approved at the annual meeting of stockholders held January loth, 1909." If corrections of minutes are ordered (See § 88), the minutes of the meeting then in session should show ex- actly what corrections were directed and m what minutes. In the corrected minutes the alteration should appear in red and a marginal note should give the aate of the meet- ing at which such correction was directed. Red lines may be drawn through any part ordered stricken out and any correction be interlined, but no erasure should be made in any case, as the corrected minutes should show both the error and the correction. Sometimes it happens that those present at a meeting decide, contrary to the facts, that the secretary has made errors in his record of a preceding meeting, and move that a portion of the minutes be stricken out or corrected. Whether right or wrong, if the majority of those present at the meeting vote in favor of the motion, the secretary must carry it into eftect. In such case he should draw red lines through the part ordered stricken out and inter- line in red any matter ordered inserted, and make the proper entry in the margin of the min-ites. This then shows the whole matter; that the record was made in one way, and was, at a later date, ordered chinged. The min- utes of the meeting at which such charge was ordered should also give a complete statement of tne matter. § 166. "Cut and Dried Minutes." The annual meeting of stockholders is frequently held m a locality distant from the residence of the parties really in interest, as for instance the meetings of the non-resident corporations of New Jersey, Maine and many other states, which must be held within the state of incorporation. Also there are many corporations in which the whole or 4^ MINUTES AND OTHER CORPORATE RECORDS. 203 the greater part of the stock is held by combinations and the subordinate corporations only hold such meetings as are essential to maintain their legal existence. In these and in many other cases the only necessity for meetings is to give the proper legal expression to matters that are already determined, and it is possible to write out the en- tire minutes in advance. The proceedings at such meetings are simple. A con- trolling interest, usually in the shape of proxies, is sent or taken to the place of meeting. If the regular officers are not present or are not authorized to act, officials for the meeting are appointed at the time by those holding these proxies. The prepared minutes are then read and agreed to, the meeting is adjourned and the accepted minutes, signed by the officials who acted at the meeting, are re- turned to the secretary of the company and preserved in his minute book. (b) Other Corporate Records. § 167. Subscription and Instalment Books. The subscription book is nothing more than the or- dinary subscription list (See Forms 1-3), followed by pages properly ruled for the entry of subscriptions the whole bound into a single volume. The instalment scrip or instalment certificate book is a book of blank instalment certificates (See Forms 8-10) at- tached to the proper stubs, the whole book being similar in plan and arrangement to the stock certificate book. The scrip or certificates of this book are issued as instalments are paid on stock subscriptions in evidence thereof. When all the instalments are paid and the regular stock certif- icates are issued to the subscribers, these receipts are sur- rendered to the secretary and are by him cancelled and pasted to their proper stubs in the instalment scrip book. The instalment book is a book in which a record is kept \ 204 MISCELLANEOUS CORPORATE MATTERS. of each instalment due on subscr.ptions wh- subsc"p tions are so payable. The arrangement and manner keeping this book is shown under Form 194- § 1 68 Dividend Book and Bond Register. The dividend book contains for each d-^dend declared, a lilt of the stockholders with their respective stockhold- ing the amount due each, the date of its pay--t^ and Zlly the stockholder's receipt therefor. (See Form ,nc \ In the larger corporations and m many oi in Sailer ones, the book is not kept at all, dividend checks and vouchers taking its place. The bond register is a book of record in ^"f ^ ^^"^ tered the data relating to bond issues, showing for each bond its number, datf. names of the parties to whom i siied any transfers, and the due dates aiid amount o in_ rafeHro^n^Lrc^:^^^^^^^^^^^ ?:; payment, are, after cancellation, pasted in convenient form for subsequent reference.- I V 1, c,. Bentley's "Corporate Finance & Accounting." • For forms of these books see Bentley s v, v^ pages 129-134. CHAPTER XX. DIVIDENDS. § 169. Declaration of Dividends. Profits are the only proper source of dividends. The declaration of dividends when there are no profits is con- trary to law, usually involves a personal liability to the parties responsible, and in many states involves a criminal liability as well. If an illegal dividend is contemplated, any stockholder may enjoin its declaration or payment, and should the company become insolvent, the stockholders who receive such dividends may be compelled to make restitution.^ The declaration of dividends rests entirely in the dis- cretion of the board unless otherwise provided by statutes, charter or by-laws.^ It is but seldom if ever that the stockholders can compel the directors against their judg- ment to declare a dividend, even though liberal reserva- tions of profits are being made for working capital or as a surplus fund for future contingencies. ''The courts have, no doubt, in many cases overruled the directors who pro- posed to pay dividends, but I am not aware of any case in which the court has compelled them to pay when they have expressed their opinion that the state of the accounts did not admit of any such payment."^ There is, however, a point at w^hich the courts will in- »2 Cook on Corp., § 458; Stevens v. U. S. Steel Corp., 68 N. J. Eq. 373 (1905). 'Hunter v. Roberts, Throp & Co., 83 Mich. 63 (1890); Burden v. Burden 159 N. Y. 287 (1899); New York, etc. R. K. v. Nickals, 119 U. S. 296 (1886). •Bond V. Barrow, etc. Co., 86 L. T. Rep. 10 (1902). 205 ll I 206 MISCELLANEOUS CORPORATE MATTERS. terfere, but this point is not ordinarily reached until bad faith on the part of the directors can be shown. "The di- rectors must act in good faith. If they fail to do so and it clearly appears that they have accumulated earnings not required in the prosecution of the business which they withhold from the stockholders for illegitimate purposes, a court of equity may interfere and compel a distribution of such earnings.""* As between holders of the same class of stock, dividends must always be equal. Particular stockholders cannot be favored in any way as to time, amount or manner of pay- ment. Different classes of stock may, however, be created with different rights as to dividends. (See § 29.) Dividends are declared by resolution of the board and are usually fixed at a certain percentage of the par value of the outstanding stock, though not infrequently at a cer- tain number of dollars per share. The dividend is usually made payable at some specified future date to stockholders of record at some earlier date, also specified. (See Forms 123-129.) This effective date of dividends cannot be fixed prior to the date of declaration. Thus the direc- tors could not November ist, declare a dividend payable to stockholders shown to be such by the books of the com- pany on the 15th of the preceding October.^ Any such power would, it is obvious, open a wide door for injustice and fraud. When a dividend is once declared, it becomes an in- debtedness of the corporation and the corporation cannot thereafter rescind the resolution nor recall the dividend. (See § 172.) Also if the funds necessary to pay a dividend are actually set aside for the purpose, they cease to belong to the company, and, in accordance with the terms of the declaration, become the property of the stockholders.^ ♦Matter of Rogers, 161 N. Y. 108 (1899). •Tones v. Terre Haute, etc. R. R., 57 N. Y. 196 (1874). •King V. Paterson, etc. R. R., 29 N. T. L. 82 (1860); Hunt v. O'Shea, 69 N. H. 600 (1899); Pollard v. First Nat. Bank, 47 Kans. 406 (1891). DIVIDENDS. 207 § 170. Form of Dividends. Dividends are usually payable in cash and, unless other- wise stated, cash payment is always understood. Actual cash is not, however, essential to the declaration or even to the payment of a dividend. 'The surplus may be in cash and then it may be divided in cash. It may be in property and if the property is so situated that a division thereof among the stockholders is practicable, a dividend in prop- erty may be declared and that may be distributed among the stockholders."^ Or if the property is not in form for direct distribution among the stockholders, it may be sold, or be used as the security for a loan, and the cash secured be used in payment of dividends. Or scrip, bonds or stock may be issued against this property and be declared as dividends. So long as every dollar of dividends is taken directly from, or is represented by an equal amount of actual profits, the form of the dividend is immaterial.^ Profits earned and invested or passed over to surplus in years of prosperity, do not lose their character as profits, but if no profits are made in subsequent years may be drawn on for dividends. Also profits for the current year, though expended upon betterments or, as stated, existing in the form of property, may be made the basis of divi- dends.' An exception to the general rule that dividends impair- ing capital may not be paid, is found in the case of com- panies working mines or operating under leases, patent rights, etc. Here the corporation is organized for the ex- press purpose of working out the property which repre- sents its capital, and the impairment and final exhaustion of this property is the object of the corporate operations. » Williams V. W. U. Tel. Co., 93 N. Y. 162 (1863). • Rose V Barclay, 191 Pa. St. 594 (1899). • Beers v. Bridgeport Spring Co., 42 Conn. 17 (1875); Williams v. W. U. Tel. Co., 93 N^ Y. 162 (1883). J ■ 208 MISCELLANEOUS CORPORATE MATTERS. Hence, if the company is solvent and its receipts from legi- timate operation are in excess of its expenditures, these re- ceipts may be treated as profits and be declared as divi- dends.^° Dividends when declared should be duly notified to the stockholders. (See Forms 123-129.) Notice of dividends may be sent by mail or may be published, though notice by publication may not in itself be sufficient.^^ In many cor- porations dividend checks are sent to the stockholders and the form of notice is not then of the same importance. The notice to be given of dividends may be prescribed by the by-laws but is usually left to the discretion of the treasurer or otherwise is fixed by resolution of the board. Dividend notices are usually signed by the treasurer but are at times and not improperly signed by the secretary. § 171. Payment of Dividends. Dividends as usually declared are to be paid to stock- holders who appear of record on a certain date. It is cus- tomary at the close of business on that day, to close the stock books to transfers for a prescribed time in order to give the treasurer an undisturbed opportunity to make up his dividend statement. (See § 37.) As soon as the stock books are closed, or otherwise, as soon as the proper date is reached, the treasurer is fur- nished by the secretary with a list of the stockholders of record as they appear upon that date, or otherwise the stock books are turned over to the treasurer in order that he may secure the names and addresses of the stockholders himself. The treasurer then makes up his dividend state- ment, showing the stock held by each stockholder and the amount of dividends due him. (See Form 195.) The checks for dividends (Form 154) are made out in accord- »Lee V. Neuchatel Asphalte Co., L. R. 41 Ch. D. 1 (1889). " King V. Paterson, etc. Co., 29 N. J. L,. 82 (1860). . DIVIDENDS. 209 ance with this statement and on the appointed date are mailed to the parties to whom they belong, or otherwise the stockholders are notified to call and receive their divi- dends in person. When the stockholders are required to call in person for dividends, they usually receipt for the same upon the divi- dend book. If the checks are mailed, receipt forms are sometimes sent with them, to be signed and returned by the recipient. Usually and preferably, however, the check itself is deemed an all-sufficient receipt. Dividends are always payable to the owner of stock v-ho appears of record upon the books of the company on the day on which the dividend becomes effective. Thus a dividend might be declared payable December 15th to stockholders who are of record November 4th. Then if no stipulations are made as to the ownership of the divi- dend, stock transferred before November 4th carries the dividend with it, but stock transferred after November 4th does not.^^ It sometimes happens, however, that a party owns stock on the effective date of the dividend, evidenced by assigned certificates, but has neglected to have this stock transferred to his name on the books of the company. His dividends will then be credited, and, unless due notice of the conditions is filed by the real owner, be paid to the holder of record. This latter must, however, account to the real owner of the stock for any dividends received after the termination of his equitable ownership of the stock. Difficult questions sometimes arise as to respective rights of life-tenants of stock and the remainder man as to the ownership of dividends, particularly when these divi- dends are declared in the form of stock, scrip or bonds. Speaking generally, the life-tenant has a right to all divi- dends declared while his life-tenancy continues. Where stock has been pledged, the dividend must be i^Corgan v. Lee Coal Co., 218 Pa. St. 386 (1907). 210 MISCELLANEOUS CORPORATE MATTERS. paid to the party to whom the stock is pledged if the com- pany has been properly notified. (See § 42.) This pledgee, however, must account to the real owner of the stock for any such dividends at the time the pledge is re- deemed. § 172. Illegal Dividends. Illegal dividends are of three classes: (i) Those de- clared in disregard of the rights of some of the stockhold- ers; (2) those declared in violation of charter or by-law provisions of the particular corporation; (3) those which either impair the capital stock^^ or threaten the solvency of the corporation. The declaration of an illegal dividend or the payment of an illegal dividend already declared may be enjoined and stopped by proper action of the stockholders. In most of the states a liability is imposed by statute upon the directors and officers for any violation of laws regulating dividends. (See §§ 122, 123, 147.) The treas- urer is not, however, personally liable in any way for the payment of dividends in obedience to a proper resolution of the board — unless he knows such dividends to be abso- lutely fraudulent — save in a few states where the liability for dividends prohibited by statute has been extended by express enactment to the executive of^cers of the corpora- tion if they consent thereto or concur therein. The general rule that a resolution declaring a dividend cannot be rescinded does not apply in the case of resolu- tions authorizing illegal dividends. Such dividends may be rescinded at any time before their actual payment. " Goodnow V. Am. Writing Paper Co.. 69 Atl. Rep. (N. J.) 1014 (1908). IT I CHAPTER XXI. CONSOLIDATION, REORGANIZATION AND DISSOLUTION. § 1 73. Forms of Consolidation. The methods by which corporations may be practically unified are as follows : 1. Consolidation of one or more corporations by statutory procedure. 2. Purchase by a corporation of the entire assets of one or more other corporations. 3. Lease by a corporation of the entire property of one or more other corporations, usually for a specified amount or a guaranteed dividend. 4. Purchase by a corporation of a stock control in one or more other corporations. 5. Combination, usually by means of a holding company.^ The terms "consolidation," "combination," "merger" and "amalgamation" are loosely applied to any of the fore- going plans for joining the interests of two or more cor- porations. Strictly speaking, a consolidation is the com- bination or merging by procedure prescribed by the stat- utes, of two or more corporations into a single new or- ganization embracing the respective interests and property of the merged corporations.^ Such consolidation without statutory authority is ultra vires and hence void, unless au- thorized by unanimous vote of all the stockholders. * Noyes' Intercorporate Relations, § 1. •Green's Brice's Ultra Vires (Second Edition), § 631. 211 i> 212 MISCELLANEOUS CORPORATE MATTERS. In any case where it is desired to unify corporate busi- nesses, careful study of all the circumstances and local statutes should be made before deciding on the method to be followed, in order on the one hand to avoid violation of statutory provisions, and on the other hand to secure the most effective possible combination. § 174. Statutory Consolidation. In nearly all the states provision is made for the con- solidation of non-competing railroads. Not so many have statutes authorizing consolidation of business corporations. Such statutes, when they exist, are usually made to apply only to corporations engaged in the same or similar busi- ness. Under such provisions a gas company and an elec- tric-light company have been held competent to consoli- date. Ordinary business corporations rarely combine un- der the statutory provisions, as it is usually simpler to unite by some other method. Where there are statutes providing for consolidation, it is usually specified that a majority or two-thirds or three- fourths of the stockholders must vote in favor of such ac- tion. In many of the states dissenting stockholders may require the corporation to purchase their stock at an ap- praised valuation. If there is no statutory form for con- solidation, it may, unless in some way prohibited, always be authorized by the unanimous vote of all the stockhold- ers. The usual procedure for statutory consolidation is as follows: (i) Agreement as to terms by directors of the consolidating corporations; (2) submission of directors' agreement to the stockholders of each company at a duly assembled meeting; (3) assent of the stockholders to the directors' agreement by a required vote ; (4) filing of cer- tified copies of the agreement and the vote in its favor in it CONSOLIDATION, REORGANIZATION AND DISSOLUTION. 213 the same offices in which the original certificate of incor- poration of each of the consolidated corporations was filed. § 175. Consolidation by Sale or Lease of Assets. (a) Sale of Assets. When all the stockholders consent, a business corporation — as distinguished from a public utilities corporation — may sell its entire assets for the stock of another corporation. The first corporation may then dissolve and divide its assets — which consist of the stock of the other corporation — among its stockholders. The purchasing corporation then continues both its own business and the business of the dissolved corporation, the stockholders of the defunct corporation now holding their proportionate interest in the operating corporation. This is the simplest and best method of effecting a con- solidation. The only obstacle to its use is found in the fact that one dissenting stockholder can interpose and pre- vent the consummation of the plan. In such case it is often possible to buy out the dissenting stockholder or stockholders, and carry out the consolidation as proposed. A public utilities corporation having a franchise derived from the public is not free to sell it at pleasure. In such cases consolidation must be effected in some other way. (b) Lease of Property. A lease of the entire property of a prosperous corporation may only be made by unani- mous consent of all its stockholders, and consolidation by means of a lease contract is therefore only available where consolidation could be effected by sale of the corporate as- sets as already discussed. A corporation that is in a failing condition may, how- ever, lease its property by action of its directors, or of a majority of its stockholders when such lease is for the best interests of the creditors and stockholders,^ and in this » Skinner v. Smith, 134 N. Y. 240 (1892); Bartholomew v. Derby Rubber Co.. 69 Conn. 521 (1897). M : I*! .1 ' I ; i I 1 214 MISCELIi SUBSCRIPTION LISTS AND RECEIPTS. 221 Frequently subscription agreements provide that sub- scriptions thereunder are not effective unless a certain specified amount is secured. Also in many states the statutes require that a certain proportion of the capital stock shall be subscribed before the corporation may begin its business operations. In either case the subscribers, unless restrained by the terms or form of the agreement, may cancel their subscriptions at any time before the re- quired amount in bona Ude subscriptions has been secured. It must also be noted that unless the statutes of the state or the charter of the particular corporation provides that the corporation may begin business when but a por- tion of its capital stock is subscribed, or unless the sub- scription list itself provides that subscriptions shall be due and payable sooner, subscriptions are not enforceable until the total authorized capital stock is subscribed in full. Some time limit is usually fixed in an agreement of this nature within which the prescribed minimum must be raised. If not, a failure to raise the minimum within a reasonable time will in itself release the subscribers. Form 3. — Subscription Agreement. Conditional. Stock Bonus. Subscription Agreement. THE HARVARD STEAMSHIP COMPANY. A Corporation to be Organized under the Laws of the State of New York for the Operation of a Steamship Line between New York City, New Orleans and Intermediate Points. Capital Stock $10,000,000. Common Stock ... . $7,000,000. Preferred Stock.. .$3,000,000. Shares $100 each. We the undersigned, hereby agree with John H. Leigh and Howard P. Moran, as Trustees for the incorporation of The Harvard Steamship 1*^ 222 FORMS RELATING TO INCORPORATION. Company, to subscribe and do hereby severally subscribe for the number of shares of the Six Per Cent., Cumulative Preferred Stock of said Com- pany set opposite our respective signatures, and agree to pay the value thereof as follows: Twenty-five (25%) Per Cent, of the amount of our respective subscriptions ninety days after the organization of said Com- pany; Twenty-five (25%) Per Cent, ninety days after the date of said first payment, and the balance at such times and in such amounts as may be required by the Board of Directors of said Company. The subscriptions of this agreement are conditioned as follows : 1st. That bona fide subscriptions hereunder to the amount of Five Hundred Thousand ($500,000) Dollars shall have been secured on or be- fore the 2nd day of January, 1909. 2nd. That the complete organization of the Company shall have been effected on or before the 1st day of February, 1909. And in case of the failure of either of these conditions, the subscrip- tions hereunder are to be null, void and of no effect. It is further understood and agreed and is a condition of the sub- scriptions hereunder, that for each share of Preferred Stock hereby sub- scribed for, and paid for in accordance with the terms of subscription, the subscriber is to receive as a bonus and without further payment, one share of the full-paid and non-assessable Common Stock of the said (Company. For the purposes of this agreement, the 1st day of February, 1909, shall be considered the date of organization of said Company, provided its organization has been effected on or before that date. It is agreed that this instrument may be executed in separate instru- ments with the same force and effect and individual obligation as if all the signatures thereto were affixed to a single instrument. New York City, September 1st, 1908. DATE. NAMES, ADDRESSES. SHARES. Sept. 5. . .' Schuyler H. Wilson, , iMorristown, N. J. i 500 AMOUNT. $5,000 Under the agreement given above subscriptions cannot be withdrawn by the subscribers but are not payable until the subscription conditions have been fulfilled, and in case of failure are entirely cancelled. Form 4. — Subscription Blank. Individual. Subscription Blank. THE NEWARK HARDWARE COMPANY. 225 Montgomery St., Newark, New Jersey. Capital Stock $100,000. Shares $100 each. T hereby subscribe for Twenty-five (25) shares of the Capital Stock of The Newark Hardware Company at the par value thereof and agree ,i SUBSCRIPTION USTS AND RECEIPTS. 223 to pay Fifty (50%) Per cent, of said subscription on demand of its Treas- urer so soon as said Company is incorporated; the remainder to be paid at such times and in such amounts, not exceeding Ten (10%) Per Cent, of said subscription in any one month, as may be required by the Board of Directors of said Company. Dated, October 10th, 1908. Harry F. Du Bois, 210 Washington Avenue, Easton, Pennsylvania. When subscriptions are to be obtained from parties widely scattered or at a distance, an individual subscrip- tion blank is usually desirable and is circulated together with such statements and prospectuses as may be neces- sary, which are then in effect a part of the subscription agreement. Subscriptions to the stock of a corporation already formed are at once binding and payable in accordance with their terms. In New York, however, by statute provision any such subscription must be accompanied by at least ten per cent, of its amount before it is binding. A form of individual subscription blank very frequently used after organization is as follows: Form 5. — Subscription Blank. After Organization. Subscription Blank. OREGON DEVELOPMENT COMPANY. Portland, Oregon. Eastern Office : 10 Wall Street, New York City. Capital Stock $500,000. Shares $10 each. Enclosed find certified check for payment for Shares of the full-paid and non-assessable Stock of the Oregon Development Company to be issued in the name and mailed to the address given below. Dated, Make checks payable to order of the Company. The right is reserved to reject or pro-rate subscriptions. Give full name of party to whom stock is to be issued. f ■ I 224 FORMS RELATING TO INCORPORATION. The foregoing blank will usually be sent out together with a prospectus giving full details of the company and of the subscription. As will be noted the right is expressly reserved to reject any objectionable subscriptions, or, in case of an over subscription, to pro-rate the same. Form 6.— Application for Stock. Instalment Payments. Application for Stock. JOHN McNEIL MANUFACTURING CORPORATION. 325 Main Street, Trenton, New Jersey. I hereby make application for Twenty-five (25) Shares of the Capital Stock of the John McNeil Manufacturing Corporation a company or- caSzed under the laws of the State of New Jersey with a capital stock of Two Hundred and Fiftv Thousand ($250,000) Dollars, divided into shar^erof^he" par value of One Hundred (|1^)^ ^oll-s^each and agree to pav for said stock the sum of One Hundred ($100) Dollars per share as fo'llows- Twenty ($20) Dollars per share in cash and Ten ($IU) DollarsTrshareo/ the fifth day of each month thereafter until the entire '"Tis'u'nde""ood"fnd agreed that I may at any time pay up any balance due hereunder before the due date thereof and that whenever the full amount of my subscription has been paid I shal receive fu^^^^^^^^ non-assessable certificates for the said Twenty-five (25) Shares ot stock. Check for $ enclosed. ^^^^^^ ^ ^^^^^^^ Boonton, New Jersey. Dated October 10th, 1908. Remit by Check, Bank Draft. Express or Money Order All applica- tions a^e subject to acceptance by the John McNeil Manufacturing Cor- poration. (b) Receipts for Subscription Payments. When a subscription to stock is paid in full, certificates are usually issued to the subscriber at once and serve as a receipt for the payment. When, however, payment is made before the organization of the company, or is not in full, or the permanent stock certificates are not ready for delivery, receipts must be given for the moneys paid, the form depending upon the conditions. If payments on subscriptions are to be made before in- 4> U (0 V 2 SUBSCRIPTION LISTS AND RECEIPTS. 225- o en (V < Oh o u :^ Oh O Q en < O o u < CO o ^ '^ ,\ L 'O <-| r-i O C •" O M-. O .2 Js "U -*-■ en ^ 2 ^ ,- a ^ a «- p o Ml r3 «- C (U > O 03 »2 O CJ en u: o o Pk o a o O < X en 3 .2 O j:: Pu. c Vh .N -t-l 4-1 en C3 c en (Li o ^ c 3 (U en en c rt rt & CJ n -3 = "S > o ^ i S. - n! ^ rt P-i In J! *-> o w< -^ ^ "^ :§ ^ 4-> M-) en Ui O «- OJ "^ ns jD O Q 2: cn - •a I t3 (L» en C u C rt "^ c *^ '" bo c *S O I •" 3 (J fO en Id - .^ en en rt C O C 3 O u o Q •a tS en en JC u *- 3 en o . Ui -o O (u ^ '"S d -P > OS Ph X 03 vrT 3 3 en ■*-> C o ;^ 3 en •— » •t-> ■4-) en C H c a> 3 3 ^ Q xfi < O CJ a 1—4 to I— I a < o O a, 3 ■♦-< u 10 oQ ^ C rt «« o cnO rt O 3 03 I C o 3 to 3 w) S^E3 o rt (u "-' rt So '^ ^ JO o s o CJ rt.5 rt rt t; "^ « &5 UI '"^ o o c3 •« H +:? S Vh *j C/3 O W tn CO j3 « 3 '^ if o , c in (U O 3 •-* ln-H rt ii .0 r^ ^ \r ^ C u 4> < O'j:: X5 Y* o "-§ -OJ- H ^ O 4J 5 to E'2 t^ ^ ft 3 tn O ^ "^ ■*-* Co ■*-> C J2 O bo*- u c C 3 "^ t^ Q O CO rj O rt !? DS rt t-i id'— 1 G, «-• en o > c o bo o K Cue en < in tnC/J C en en 3 bfl 3 •55(1, ■ ^ 10 CM to CVJ ■vol ■ 10 d :2: •c " ♦1 (/) tn "S •§ " en tn C a> 3 CO < n E 03 4; en 3 03 *- 13 c o o t-' •0 ^ cS -4-) cn 1^ ^^ X tn •4-> C 03 1^ a E • • a •4— i 3 en rt »— 1 ;2 en be < 4> -4—* Q 228 FORMS RELATING TO INCORPORATION. tificates. In such case the ruling shown in Form 9 should appear on the back of the certificate. Form 9. — Endorsement of Instalment Payments. DATE. INSTALMENTS PAID. SIGNATURE OF TREASURER. September 1, 1908 October 1, 1908 $500 $500 Harold M. Jones. Harold M. Tones. A sufficient number of lines should be allowed for the prescribed number of instalment payments. As payments are made each one is entered and is verified by the signa- ture of the treasurer in the last column. When this plan is followed the stub of the certificate should also have rul- ings to permit the same entries of date and amount, in order that both certificate and stub may show a complete record of the conditions. This arrangement is satisfactory and convenient but is not always practicable, in which case a separate receipt or certificate is issued for each instalment payment. The form which follows is practically a certificate of partly paid stock. As further payments are made they are either endorsed on the certificate, or the certificate is surrendered and a new certificate issued in its stead. Form 10. — Instalment Certificate. Organized under the Laws of West Virginia. No. 106. STAMSWOOD IRON COMPANY. 60 Shares. Instalment Certificate. This Certifies that Harold P. Bronson is entitled to Sixty Shares of the Capital Stock of the Stamswood Iron Company of the par value of One Hundred Dollars each, upon which Sixty-five Per Cent, has been paid, and which is subject to further calls and assessments to the extent of Thirty-five Per Cent. A full-paid certificate will be issued for said stock after all instalments have been paid and upon surrender of this certificate. SUBSCRIPTION USTS AND RECEIPTS. 229 Said stock is transferable only on the books of the Company by the stockholder or his duly authorized attorney upon surrender of this cer- tificate. r CORPORATE ) Howard H. Stamswood, John H. Stamswood. I seal. / ,, . . Dated, October 9, 1908. ^ President. Treasurer. When stock subscriptions have been paid and per- manent certificates are not ready for deHvery, temporary certificates are usually issued. (See Form 12.) If a less formal instrument is preferred, the following interim re- ceipt will be found convenient. This has the usual stub- not shown in the form — and may be signed by the presi- dent as well as the treasurer if desired. Form II. — Interim Receipt. No. 75. Treasurer's Receipt. HARVEY STEEL COMPANY. 320 Broadway, New York. Capital Stock $500,000. Shares.... $100 each. Shares, 5. $500.00. This is to Certify that John G. Wymond has paid into the treasury ot the Harvey Steel Company the sum of Five Hundred Dollars in full payment for Five Shares of its Common Stock, duly executed certificates tor which will be issued to his order upon surrender of this receipt so soon as said certificates are ready for delivery. * ^, . „, ^ ,^ Nathan H. Beebohn, Chicago, 111., August 15, 1908. Treasurer. Temporary certificates of stock when issued are in the general form of the permanent certificate but reference is made in the body of the instrument to its temporary char- acter, and the certificate itself is usually printed or other- wise prepared at a small cost in keeping with its temporary nature. 230 FORMS RELATING TO INCORPORATION. j I I u U U O CO >* u (d o a. B H (N o en a CO w < H OS U 06 < £ to d 2; < Oh o u a < w o H O ;^ < o •a a; N *c a; o «r o en 1? .> rt 1-4 o -<-> V C/i JZ ■fl ^^^ rt u 4-* CX c »1 u I en t; '^ o 4) O in ei tn C/3 O C C o , jn «r tn ■♦•• •«-> «*- (/) O 3 (n*S t: «^ i- tn 3 M "O - o tn ^ o E o •— > o *^ •^0 3 •3 tn E.S2 4>X) U 1> C o a 3 •^ .S ■— tn H « O 06 JZ^ . I- o c ^^ c c ur <" TO CM 55-0 4, N >> cn^^ ^35 C rt-^ H < u •< W Vi w 06 < X m 1-1 O u /J oj C P i U Ui tn qj 4) >^ —I o 4> O u tn :;; o c tn (fl 4, U 4) •O •- u o o, 06 (A 8 W 4, o *^ > > < ■«-> u CJfo >. d rs Z u O o. c 4> 4> ..a " 3 u 3 u 4> r- Qi O •o tn Q « In — 3 £:0 -!=: c 3 •O O Vm bo== in -rj "O .. S W k. -^ 3 O rt ''J ^ ^ o .E tn v-^' — en SI 41 0< 4> o o 4)'0 2: ii .> tng 4, *-—' c OS c c < a: u 4) E 4) -S > u o 4I»-, •O 4» 3 in tn en 4» tn 4) !-• rt, O'-H rt--r u • C a E 4) •a "fly u rt 41 3 4* c 't \ V, 41 Cm !£ 1- - o: rt in tn tn •Eo o o zzz SUBSCRIPTION USTS AND RECEIPTS. 231 (c) Assignment of Stock Subscriptions. Subscriptions, or when payments have been made the partly paid stock represented thereby, may be assigned in whole or in part as may any other contract right or prop- erty, unless otherwise expressly provided by the statutes of the state or by some other competent authority. If no payments have been made, the following assignment form may be used. Form 13. — Assignment of Subscription. No Payments. For Value Received, I hereby sell, assign and transfer to John H. Mc- Lane of New York City, my subscription rights to Twenty-five (25) Shares of the Capital Stock of the Richmond Paper Mills Company, and I do hereby authorize and instruct the proper officers of said Company upon completion of the conditions of my said subscription, to issue said stock to the order of my said assignee. Patrick H. McGuffy. New York, September 10, 1908. In the presence of : Henry H. Sinclair, If payments have been made on the subscription and are evidenced by treasurer's receipts or by instalment scrip, the subscription and the payments thereon might be conveyed by one blanket assignment, though a separate assignment of each receipt is usually preferable. The form of blanket assignment is as follows: Form 14. — Assignment of Subscription. Partly Paid. For Value Received, I hereby sell, assign and transfer to William M. Stanton of Philadelphia, my subscription rights to Twenty-five (25) Shares of the Capital Stock of the Pacific Coast Development Company together with the payments made thereon aggregating Two Thousand ($2,000) Dollars and evidenced by the attached instalment certificates which are hereby likewise assigned and transferred to the said William M. Stanton, and I do hereby authorize and instruct the proper officers of said Company upon completion of the conditions of my said subscription, to issue said stock to the order of my said assignee. Max M. Werlein. Philadelphia, Pa., November 10, 1908. In the presence of: Jerry H. McCall. 232 FORMS RELATING TO INCORPORATION. When the subscription rights are transferred by a :formal assignment, a very simple endorsement will suffice to convey the receipts by which payments on such sub- scription are evidenced. Perm 15. — Assignment of Instalment Receipt. For Value Received, I hereby sell, assign and transfer to William M. Stanton the within receipt and the payments evidenced thereby. Max M. WerIvEin. Philadelphia, Pa., November 10, 1908. In the presence of: Jerry H. McCali,. CHAPTER XXIII. FORMS OF STOCK CERTIFICATES. Stock certificates may be obtained in many different styles and sizes. The lower-priced certificates are usually prepared in quantity with lithographed design and word- ing, complete save as to the then undetermined data, such as the company name, capital stock, date of issue, name of purchaser, etc., for which blanks are left. The certificates thus partially prepared are supplied to the local printers who, when certificates are ordered by some particular cor- poration, print in the name, capitalization and other fixed data, leaving blanks for the variable data which can only be filled in at the time of issue, such as the number of shares, name of purchaser and date of issue. The better certifi- cates of this class are neat, attractive and satisfactory. When a higher grade of certificate with special wording or design is desired, the certificate is lithographed or en- graved throughout and a fine quality of bond paper is employed. On the other hand, if the issue is but tem- porary or the incorporators indifferent, the certificates are printed in the plainest design, or even at times merely written on common paper. Any certificate which clearly indicates the stock it rep- resents and the ownership of this stock, is legally sufficient regardless of its form and style. As a matter of business, however, and of good taste as well, a neat and presentable certificate is always to be preferred. 233 234 FORMS REI*ATING TO INCORPORATION. It is customary for two of the company officials to sign stock certificates ; also for the corporate seal to be affixed. The officers to sign stock certificates are usually desig- nated by the by-laws of the corporation, though in some states they are prescribed by statute. The president is al- ways required to be one of the signing officials, and the secretary or treasurer is designated as the other. When there is no special reason for the selection of the treasurer, the second signing officer is preferably the secretary. The words ''full-paid and non-assessable" should not appear upon the face of a stock certificate unless the cor- poration has been paid in full for the stock which such certificate represents. (See § 29.) The word ''Com- pany" is usually given in full in the title on the stock cer- tificate, though the abbreviation "Co." may be used if pre- ferred. In some states the word "Incorporated" or its abbreviation "Inc." must appear in connection with the name. Stock certificates are numbered consecutively and are issued in the order of their numbers, not as a matter of legal obligation but merely one of convenience. When the number of certificates to be issued is very large, or other reasons make it desirable, the certificates are sometimes run in series. Thus the first certificate of the first, second and third thousand might be numbered respectively "i,"" "Ai"and"Bi." In the small or "close" corporations, a book of fifty to one hundred stock certificates is usually amply sufficient. In the larger corporations, or smaller corporations where the stock is active, one or more larger books are usually prepared, each containing five hundred or one thousand certificates. For very active stock a number of volumes are frequently required. In such case the serial numbers run up regularly through the volumes, as i to 500 in the first volume, 501 to 1,000 in the second, and so on. The STOCK CERTIFICATES. 235 o o CO c o o u CO ■| o t-l O o o CO VO o a en h4 u o ■4-> C a> _ u O 4> ax o c to < O o o 2; > < o o o o O C . « — 2 S Cu (U cot: 1l < • -" i!' rt tj ^_> ^u^^X.^ O O o c V- i: Cti V {/} GO'S C o 52 O O (/3 E tfJ W § 9 HO w PS "-^ CO S 8 e V < u ZCL, Q o :^ M 13 O < u 8 w < XfX t-l « 2; M O U tn w < X? a C/3^ or:: ^ O C vO TO o So I I £ E O a> xn o > cnOO p OS o o c CT3 (J •4-> o a; ■4-< xn (A to fe o o tH O OS s o o c 12: ;? 236 FORMS RELATING TO INCORPORATION. binding of the stock certificate book should be durable, as it is one of the permanent records of the corporation. When preferred stock is issued its certificates are also numbered from **i" up and are usually bound in a separate volume. If, however, only a few certificates are required, they are sometimes bound up with the certificates of com- mon stock as a separate division of the book, the number- ing of each kind of certificate being entirely separate and distinct. The certificate and stub given in Form i6 will be found legally correct. The signatures follow the requirements of the New Jersey statutes, which provide that stock cer- tificates must be signed by the president and treasurer. The receipt on its stub is signed by the party to whom the certificate is delivered, who may or may not be the party in whose name it is issued. (See § 38.) When sent to parties at a distance, certificates should either be sent by registered mail or by express, in this latter case accom- panied by a receipt to be signed before the certificate is delivered. In either case the receipt which is returned is pasted to the proper stub in the stock certificate book. Form 17. — Stock Certificate Stub. Common Form. Certificate No. 125 For 20 Shares. Issued to Howard H. McNeil, 35 William St., New York. Dated, September 10, 1908. From Whom Transferred, James H Dated, January 1, 1908. Stanley. : NO. ORIGINAL CERTIFICATE. NO. ORIGINAL. SHARES. NO. OF SHARES : TRANSFERRED. I 16 20 20 : Received Cei this 12th da -tificate No. 125 ly of September, ] HOWA for 20 Shares, : 908. : RD H. McNeil. : STOCK CERTIFICATES. 237 When a certificate represents an original issue, on its stub under the heading ''Issued against surrendered cer- tificate No " should be entered the statement "Orig- inal Issue." The foregoing somewhat complicated form of stub (Form 17) is given merely because it is frequently en- countered and is difficult to understand and use without illustration. The data of this stub are the same as ap- pear on the preceding certificate and stub (Form 16), but in addition thereto appears — somewhat unnecessarily — the name of the transferrer, the date of issue of his cer- tificate and the number of shares it represented. If nothing appears on the face of a stock certificate to the contrary, it represents common stock. If the com- pany issues preferred stock, this fact should be shown by both the common and preferred stock certificates and the kind of stock represented by the particular certificate should appear unmistakably on its face. Usually the term "Common Stock" or "Preferred Stock," as the case may be, is stamped, printed or lithographed prominently across the face of each certificate. Form 18. — Preferred Stock Certificate. No. 35. Incorporated under the Laws of The State of New York. HOWARD BANK NOTE COMPANY. Capital Stock $500,000. Common Stock $400,000. Preferred Stock. .. .$100,000. Full-paid and Non-assessable. 25 Shares. This is to Certify that Henry J, McVeigh is the owner of Twenty- five Shares of the Preferred Capital Stock of the Howard Bank Note Company, transferable only on the books of the Company by the said owner, in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. 238 FORMS RELATING TO INCORPORATION. The Preferred Stock represented by this Certificate is entitled to an annual cumulative dividend of Five (5%) Per Cent., payable out of net profits before any dividend is paid upon the Common Stock of the Com- pany. Should the net profits in any year be insufficient to pay said pre- ferred dividend, either in whole or in part, any unpaid portion thereof shall become a charge against the net profits of the Company and shall be paid in full out of said net profits before any dividends are paid upon the Common Stock. After the Common Stock in any year shall have also received a dividend of Five (5%) Per Cent., both the Preferred and Common Stock shall participate equally in any further dividends that may be declared in that year. On liquidation of the Company said Preferred Stock shall receive any unpaid dividends accrued thereon and shall receive payment of its full par value of One Hundred ($100) Dollars per share from the assets of the Company before anything is paid therefrom to the Common Stock, but shall not participate further in the distribution of said assets. f CORPORATE 1 Witness the Seal of the Company and the signatures \ SEAL. J of its duly authorized officers, this first day of October, 1908. Edwin T. Howard, John J. Howard, President. Secretary. Shares, $100 Each. Preferred stock certificates are of the same general form as certificates for common stock but must show upon the face of the certificate the conditions under which the preferred stock is issued. In many states this is a statute requirement. In some few states the conditions of pre- ferred stock must appear upon the certificates of both pre- ferred and common stock. The stubs of preferred stock certificates are the same in form as those of common stock certificates. Properly they should be headed ''Preferred Stock," but the require- ment is usually disregarded. When the conditions of preferred stock are lengthy, their full statement is frequently omitted from the face of the certificate — if the statutes of the particular state per- mit — and reference is made to the charter or by-law pro- vision by which the preferred stock is created. In such case the second, third and fourth paragraphs of the cer- tificate given under Form i8 would be omitted and their place be taken by a new paragraph stating: "Said stock is part of an issue of One Hundred STOCK CERTIFICATES. 239 Thousand ($100,000) Dollars par value of Preferred Stock authorized by the Certificate of Incorporation of the said Company as filed in the office of the Sec- retary of State of New York on the 5th day of Au- gust, 1908, and is issued under the terms and con- ditions therein set forth." Certificates of preferred stock are sometimes issued in very crude form, the ordinary certificate being used, with the statement that it represents preferred stock and the conditions under which such preferred stock is issued, or the reference to the authority under which it is issued, printed across its face in red or some other distinctive style. Transfers of Stock. Stock is transferred by assignment, the form for which is printed or lithographed upon the back of the certificate. The assignment form which follows is almost invariably employed, and while informal and incomplete in some re- spects, is sufficient. The form as shown is in the partially completed condition known as an assignment in blank. (See § 38.) Form 19. — Assignment of Stock Certificate. In Blank. For Value Received hereby sell, assign and transfer unto Shares of the Capital Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint my Attorney to transfer the said stock on the books of the within-named Company, with full power of substitution in the premises. Eli.is K. D0YI.E. Dated 190 In presence of: Charles T. Estabrook. When the owner of a certificate assigned in blank wishes to become the owner of record of the stock it repre- sents, he completes the assignment by the insertion of his '. I 240 FORMS RELATING TO INCORPORATION. own name as in the following form. He may or may not fill in the name of his attorney at his discretion. (See § 38-) Form 20. — Assignment of Stock Certificate. Complete. For Value Received, I hereby sell, assign and transfer unto Martin T. Marshall, of New York City, Twenty-five (25) Shares of the Capital Stock represented by the within Cerfificate, and do hereby irrevocably constitute and appoint Chester A. Slater my Attorney to transfer the said stock on the books of the within-named Company, with full power of sub- stitution in the premises. ^^ ^ Ellis K. Doyle. Dated, October 1, 1908. In presence of: Charles T. Estabhook. When assigned certificates are surrendered to the sec- retary of the corporation for cancellation, it frequently happens that an immediate transfer and reissue is impos- sible. In such case the secretary should give a receipt for the surrendered certificates. He may then transfer and reissue them at his convenience. The following is a re- ceipt of this nature. Form 21. — Secretary's Receipt for Stock Certificates. CARROLL MILLING COMPANY. Received from Harvey J. McConnell the following duly assigned cer- tificates for transfer and reissue : NUMBER. OWNER OF RECORD. SHARES. 245 John A. Brown 35 595 Henry Ackers 20 235 John H. Carroll 100 Howard McMasters, Secretary .. CHAPTER XXIV. CHARTER FORMS. I'M The charter or certificate of incorporation — the terms are legally synonymous — is the instrument which brings the corporation into existence and from which most of its powers are derived. It should be drawn by a competent attorney familiar with its possibilities and capable of ad- justing these to the needs of the particular corporation. (See Ch. II, "The Charter.") The general form and requisites of the charter are much the same in all parts of the Union but the details differ in compliance with statutory requirements in almost every state. (See § 11.) The charter forms which fol- low illustrate this variation. The charter is prepared and executed in duplicate or triplicate. One of these copies is usually filed with the state authorities, one with the local authorities, and one, as a matter of course, is retained for the files of the cor- poration. Usually a copy certified by the Secretary of State or other competent authority, is preferred for the corporate files. Save in case of litigation, however, such certification is not essential. The forms which follow, while taken from charters of existing corporations, are included here merely to ex- emplify the numerous references to the charter in the pres- ent volume. For larger or more complex incorporations the charter is usually much expanded by amplification of its purposes and by inclusion of special provisions. 241 242 FORMS REI^ATING TO INCORPORATION. Form 22. — New York Charter. Certificate of Incorporation of the MICROMETER SCALE COMPANY. I We, the undersigned, all being of full age and two-thirds being citi- zens of the United States and one of us a resident of the State of New York, for the purpose of forming a corporation under the Business Cor- porations Law of the State of New York, do hereby certify and set forth : First. — The name of said corporation shall me "Micrometer Scale Company." Second. — The purposes for which said corporation is to be formed are as follows : (1) To manufacture, buy, sell, import, export and generally deal in and with scales, weighing machines and mechanical devices for weighing, measuring and recording the weight and measure- ment of all kinds of goods and merchandise. (2) To acquire patent rights throughout the world for the in- ventions of Wilhelm Simonsson, as far as they relate to weighing and measuring mechanisms, and to manufacture under the same and to use, sell, lease and otherwise dispose of the mechanisms so manufactured, and to sell, let on royalty, grant licenses in respect of, and otherwise turn to account and profit the patent rights so acquired. (3) To apply for, obtain, purchase or otherwise acquire and to register, hold, own, use, operate, sell, assign or otherwise dispose of and turn to account and profit, any and all trade-marks, im- provements, inventions, tools, apparatus, mechanisms and machin- ery, useful or necessary in the operations of the Company, whether secured under letters patent of the United States or of any foreign country, or held or secured in any other manner. (4) To take, lease, purchase, hire or otherwise acquire and to hold, use, sell, lease, exchange, mortgage, improve and develop real estate, real property and any interest or right therein, and to con- struct or have constructed, houses, buildings, store-houses, factories, works, plants and structures of every description, and to buy, sell, own, use, manage, operate and lease the same or similar structures. (5) To take, lease, hire, purchase, manufacture or otherwise acquire and own, and to sell, hire, lease, pledge, mortgage and otherwise deal in and with all kinds of goods, wares, chattels, mer- chandise, and other personal property, excepting gold and silver bullion, foreign coins and bills of exchange. (6) To conduct any other business permissible under the Busi- ness Corporations Law of the State of New York, manufacturing or otherwise, which may be carried on to advantage in connection with or in addition to the specified purposes of the corporation. Third. — The amount of capital stock of said corporation shall be Five Hundred Thousand ($500,000) Dollars. The amount of capital with which said corporation will begin busi- ness is Five Hundred ($500) Dollars. Fourth. — The number of shares of which said capital stock is to con- sist shall be Five Thousand (5,000) Shares of the par value of One Hun- dred ($100) Dollars each. CHARTERS. 243 Fifth.— The prmcipal office of the corporation shall be in the Borough of Manhattan and m the City, County and State of New York. Sixth. — The duration of said corporation shall be perpetual. Seventh.—^i^ht number of directors of said corporation shall be seven. Eighth.— The names and post-office addresses of the directors for the first year as as follows : TT ^j"^^P* „ addresses. Howard Maxwell 510 West 176th Street, New York City. Howard J. McCall 270 Broadway, New York City. Edward Blashfield 30 Broad Street, New York City. James H. McLane 30 Broad Street, New York City. Howard H. Thomas Montclair, New Jersey. Lewis H. Glass Oyster Bay, L. I., New York. Leonard H. Matthews Hartford, Connecticut. Ninth.— The names and post-office addresses of the subscribers to this certificate and the number of shares which each agrees to take in said corporation, are as follows : NAMES. ADDRESSES. SHARES. Howard Maxwell 510 West 176th Street, New York City. ... 460 Howard J. McCall 270 Broadway, New York City... 20 Edward Blashfield 30 Broad Street, New York City 20 ^/wf^— Pursuant to Section 40 of the Stock Corporation Law as amended, this corporation shall have power to purchase, acquire, hold and dispose 9f the stocks, bonds and other evidences of indebtedness of any corporation, domestic or foreign, and issue in exchange therefor its stock, bonds or other obligations. Eleventh.— At all elections of directors of this corporation, each stockholder shall be entitled to as many votes as shall equal the number of his shares of stock, multiplied by the number of directors to be elected, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or any two or more of them as he may see fit. In Witness Whereof, we have made and signed this Certifi- cate in triplicate, this 27th day of August, in the year One Thousand, Nine Hundred and Eight. Howard Maxweli,. Howard J. McCall. Edward Blashfield. State of New York, \ County of New York, j"^"^-* Personally appeared before me this 27th day of August, 1908, Howard Maxwell, Howard J. McCall and Edward Blashfield, to me personally known to be the persons described in and who executed the foregoing certificate, and severally acknowledged that they executed the same for the purposes therein set forth. Oscar Jacobs, I notarial ) Notary Public, Suffolk County, N. Y. *• SEAL. ; Certificate filed in New York County. The essential features of a New Jersey charter are the same as for a New York charter, but the form is varied by the requirements of the state statutes. 244 FORMS RELATING TO INCORPORATION. Form 23. — New Jersey Charter. Certificate of Incorporation of the STERLING ICE COMPANY. We, the undersigned, for the purpose of forming a corporation under and by virtue of the provisions of an Act of the Legislature of the State of New Jersey, entitled "An Act Concerning Corporations (Revision of 1896)," and the several supplements thereto and acts amendatory thereof, do hereby severally subscribe for and agree to take the number of shares of stock of said corporation hereinafter placed opposite our respective names and do certify and set forth as follows : First. — The name of said corporation shall be "Sterling Ice Company." Second. — The location of its principal office in the State of New Jer- sey shall be at No. 275 Montgomery Street, Jersey City. The name of the agent who shall be therein and in charge thereof upon whom process against this corporation shall be served, is John H. Welch. Third. — The objects for which this corporation is formed are: (Purposes.) Fourth. — The total authorized stock of the corporation shall be Two Hundred and Fifty Thousand ($250,000) Dollars, divided into Two Thousand, Five Hundred (2,500) Shares of the par value of One Hun- dred ($100) Dollars each, and the amount of Capital Stock with which said corporation will begin business is One Thousand ($1,000) Dollars. Of said Capital Stock One Thousand, Five Hundred (1,500) Shares shall be Common Stock and One Thousand O.^KX)) Shares shall be Preferred Stock. Such Preferred Stock shall after January 1st, 1909, be entitled to a preferential, cumulative, annual dividend of Six (6%) Per Cent., payable on or before the 31st day of December of each year from the surplus profits of the Company, and after the Common Stock of the Com- pany shall have received a like dividend, shall participate with the Com- mon Stock in all further dividends declared in that year above Six (6%) Per Cent, and up to but not exceeding Twelve (12%) Per Cent, but no further. Fifth. — The names and post-office addresses of the incorporators and the number of shares subscribed for by each, are as follows: NAMES. ADDRESSES. SHARES. Harry H. Sterling 275 Montgomery St., Jersey City, N. J... 5 Edward Penfold " " " " " ' ... 3 Oscar McComb " " " " " "... 2 James Hamilton " " " " " "... 2 Sixth. — The period of existence of said corporation shall be unlimited. In Witness Whereof, we have hereunto set our hands and seals this 31st day of August, A. D., One Thousand, Nine Hundred and Eight. Harry H. Sterling. (L. S.) In the presence of: Edward Penfold. (L. S.) Howard Masterson. Oscar McComb. (L. S.) Robert Benjamin. James Hamilton. (L. S.) (Acknowledsment.) CHAPTER XXV. BY-LAW FORMS. As the general corporate mechanism is much the same in all corporations, there is a general resemblance between their by-laws. The details of these by-laws should, how- ever, in each case be adapted to the special requirements of the corporation for which they are prepared. (See Ch. Ill, "The By-Laws.") The set of by-laws which follows, though more par- ticularly intended to illustrate the many references of the present volume to the by-laws, has been proved by long experience and will afford very excellent material from which to construct the by-laws of any particular corpora- tion.^ The set, though concise, is perhaps more complete than is entirely necessary for the smaller corporations. It is, however, far better for by-laws — if properly adapted to the needs of the particular corporation — to err on the side of completeness than of insufficiency. Certain features of the by-laws given are required by the New York statutes. These features have for the most part been indicated and must be omitted or modified to meet the varying statutory provisions when the by-laws are used in other states. As a matter of convenience, by-laws are usually re- corded in the first part of the minute book immediately following a similarly recorded copy of the charter. (See Ch. XXIV.) * More extended sets of by-laws suitable for the larger corporations may b« found in the author's work, "Corporate Organization," pages 310-330. 245 246 FORMS RELATING TO INCORPORATION. Form 24. — By-Laws. By-Laws of the NEW YORK CONSTRUCTION COMPANY. Article I.— Stock." 1 Certificates of Stock shall be in form approved by the Board of Directors; shall be numbered consecutively; be issued m numerical order from the stock certificate book ; be signed by the President and becre- tary, and be sealed with the corporate seal. A record of each certificate issued shall be kept on the stub thereof. u u ^ r.f *u^ 2 Transfers of Stock shall be made only upon the books ot the Company, and before a new certificate is issued, the old certificate properly endorsed shall be surrendered. Surrendered certificates shall be can- celled and be attached to their proper stubs in the stock certificate book The stock books of the Company shall be closed to transfers twenty days before general elections and ten days before dividend days. 3 The Treasury Stock of the Company shall include such issued and outstanding stock of the Company as may be acquired by purchase, dona- tion or otherwise and shall be held subject to disposal by the Board of Directors. Such stock shall neither vote nor participate in dividends while held by the Company. Article II.— Stockholders. 1 The Annual Meeting of the stockholders of the Company shall be held in the principal office of the Company m New \ork City at ll> o'clock A. M. on the 3rd Monday of January of each year-if not a le^al holiday ; but if a legal holiday, then on the next business day succeeding -for the purpose of electing directors and the transaction of such other business as may be brought before the meeting. ,,,,,, , • • 1 ^Special Meetings oi the stockholders shall be held at the principal office'of the Company and may be called by the President at his discretion and must be called by him when so directed by resolution of the Board of Direaors, or when requested thereto in writing by stockholders holding one-third of the outstanding stock. . , ^ 1 ^, .^o^.-oi 3 Notice of Meetings, written or printed, for every annual or special meeting of the stockholders shall be prepared and mailed to the post- Xe address of each stockholder as shown by the stock books of the Company not less than ten days before such meeting, and if for a special meXg such notice shall state the object or objects thereof, and no other business shall be transacted at any such special meetings save that so nnHfied* No notice need be given of adjourned meetings. 4 ^^ Quorum at any melting of the stockholders save as otherwise orescribed by statute,* shall consist of a majority of the votmg stock of FhrCompany represented in person or by written proxy. A majority of such quorum shall be necessary to decide any question coming before the meedng If a quorum is not present at any duly called meeting a rnajoTy of those present may adjourn the meeting from day to day, but until a nuorum is secured mav transact no business. ,,,11 5 Toth^ at Elections of Directors shall be by ballot, and shall also be by ballot on any other matter submitted to a stockholders meeting ' If preferred stock is created by by-law provision, the section devoted to it should appear under Article I. 4 BY-LAWS. 247 when so requested by not less than one-fourth in interest of the stock- holders present at such meeting. Each stockholder shall be entitled to one vote for each share of stock held by him and such vote may be cast in person or by written proxy. 6. The Election of directors shall be held at the annual meeting of stockholders and shall be conducted by two inspectors of election ap- pointed, after the first election, by the President.* 7. The Presiding Officer at meetings of stockholders shall be the President, or in his absence or disability, the Vice-President. In the ab- sence or disability of both of these officers, a Chairman shall be chosen by the stockholders present and shall preside at such meeting. In the absence of the Secretary of the Company, the presiding officer shall ap- point a Secretary pro tern. 8. The Order of Business at the annual meeting and as far as possi- ble at all other meetings ^f the stockholders, shall be : 1. Reading and Disposal of Any Unapproved Minutes. 2. Annual Reports of Officers and Committees. 3. Election of Directors. 4. Unfinished Business. 5. New Business. 6. Adjournment. Article III. — Directors. 1. The Business and Property of the Company shall be managed by a Board of Seven (7) Directors, who shall be stockholders continuously during their respective terms of office and who shall be elected annually by ballot by the stockholders for the term of one year and shall serve until the election of their successors. Any vacancies in the Board may be filled by the remaining members of the Board for the unexpired term or terms. Directors shall receive no compensation for their services. Ab- sence from four successive regular meetings of the Board of Directors may, in the discretion of the Board, terminate the membership of the ab- sent director. 2. The Regular Meetings of the Board of Directors shall be held in the principal office of the Company in New York City at 3 P. M. on the third Tuesday of each month if not a legal holiday; but if a legal holi- day, then on the next succeeding business day. 3. Special Meetings of the Board of Directors, to be held in the principal office of the Company in New York City, may be called at any time by the President or by any three members of the Board, or may be held at any time and place without notice and for the transaction of any business by unanimous written consent of all the members or by the presence of all the members at such meeting. 4. Notices of both regular and special meetings* shall be mailed by the Secretary to each member of the Board not less than five days be- fore any such meeting, and notices of special meetings shall state the purpose thereof, and no other business shall be transacted at a special meeting save as so notified unless by unanimous consent of all the mem- bers. No notice need be given of adjourned meetings. * It is sometimes provided that no failure or irregularity of notice shall invalidate the annual meeting or any proceedings thereat. In New York annual meetings re- quire two weeks' notice by publication; also the notice to be given for certain special meetings, such as to mortgage corporate property, to create preferred stock, etc., is prescribed by statute. * Special quorums are prescribed in many states for special actions, as amend- ment of charter, etc. In New York the statutes provide that at meetings for election of directors the stockholders present constitute a quorum without regard to their number. » Inspectors for first meeting are in New York appointed by the board of direc- tors. II «■! 248 FORMS RELATING TO INCORPORATION. 5 A Quorum at any meeting shall consist of a majority of the en- tire membership of the Board. A majority of such quorum shall be nec- essary to decide any question that may come before the meeting 11 a quorum is not present at any duly assembled meetmg a majority of those present may adjourn the meeting from day to day but may transact no other business until a quorum is secured. 6 Voting. Each member of the Board present in person at any meeting shall have one vote upon all matters voted upon at such meeting 7 The Presiding OfHcer at meetings of the Directors shall be the President, or in his absence or disability, the Vice-President. In the ab- sence or disability of both these officers the directors Present at any meeting shall appoint a chairman who shall preside at such "meeting In the abfence of the Secretary of the Company, the presiding officer shall ""''T ol"r7o7Ve" ompany shall be elected by the Board of Directors at their first meeting after the election of Directors each year. If any office becomes vacant during the year, the Board of Directors shall fill th^ same for the unexpired term. The Board of Directors shall hx the compe^sat on of the officers and agents of the Company. An officer may be rer^oved at any time by a two-thirds vote of the entire membership ^^ %^ rT/ Order of Business at any regular meeting or special meet- ing of the Board of Directors shall be : , At- . 1 Reading and Disposal of Any Unapproved Minutes. 2. Reports of Officers and Committees. 3. Unfinished Business. 4. New Business. 5. Adjournment. Article IV.— Officers. 1 The Oncers of the Company shall be a President, who shall be elected from among the directors, a Vice-President, a Secretary and a Treasurer all of whom shall be elected for one >;ear and shall hold office until the'; successors are elected and qualify. The positions of Secre- tarv and Treasurer may be united in one person. „a r.( tary ana 1 reas y ^^ meetings of stockholders and of directors shkll have general supervision of the affairs of the. Company; shall siA; or countersign all certificates, contracts and other instruments ^tLr^n?n;,nvT^5 authorized bv the Board of Directors; shall make re- pLts to 7e'd?L" rs and sTockliolder^ and perform all such other duties as are incident to his office or are properly required of him by the Board of Directors In the absence or disability of the President, the Vice- ^-f''^j::'t:^'^^:s^^^s for an meetings of^both stocJ<- required Of hhnby^^^^^^^ of all moneys and securi- T ^' ^^rkzr^^^ rh"?n\tTu1n^nlr a: as n,ay be required by .he Bo-d of D.rec.ors^ ^^ ai..c'.?rs." FTr'oUr.fctp-.ro°n roh'attiLn^is hard,, advisable. BY-I,AWS. 249 Article V. — Dividends and Finance. 1. Dividends shall be declared only from surplus profits at such times as the Board of Directors shall direct, and no dividend shall be declared that will impair the capital of the Company. 2. The Moneys of the Company shall be deposited in the name of the Company in such bank or trust company as the Board of Directors shall designate, and shall be drawn out only by check signed by the Treasurer and countersigned by the President. Article VI.— Seal. 1. The Corporate Seal of the Company shall consist of two con- centric circles, between which appears the name of the Company, and in thi centre shall be inscribed "Incorporated 1908, New York," and such seal, as impressed on the margin hereof, is hereby adopted as the Cor- porate Seal of the Company. Article VII. — Amendments. 1. These By-Laws may be amended, repealed or altered, in whole or in part, by a majority vote of the entire outstanding stock of the Com- pany, at any regular meeting of the stockholders, or at any special meeting where such action has been announced in the call and notice of such meeting. 2. The Board of Directors may adopt additional by-laws in har- mony therewith, but shall not alter nor repeal any by-laws adopted by the stockholders of the Company. Certification of the by-laws as they appear in the min- ute book, though usual, is not essential. Such certifica- tion when desired should immediately follow the by-laws and be in the following general form. Form 25. — Certification of By-Laws. We, the undersigned. President and Secretary of the New York Con- struction Company, do hereby certify that the foregoing are the By-laws of the said corporation duly adopted by the stockholders thereof, at their first meeting held in the City of New York, on the 10th day of October, 1908, all as shown by the Minutes of said meeting. In Witness Whereof, we have hereunto affixed our official signatures and the corporate seal of said corporation on this 15th day of October, 1908. j corporate 1 James T. Holden, President ( seal. / Everett A. Barrett, Secretarv. i •I «l iM CHAPTER XXVI. EXCHANGE OF PROPERTY FOR STOCK. f ; When a corporation is organized to take over prop- erty, giving its stock in exchange, the matter is conven- iently brought up for consideration by means of a formal proposition addressed to the company by the owner of the property. Sometimes, instead, a proposed form of agree- ment between the owner of the property and the corpora- tion covering the details of the exchange is submitted for consideration and action. In either case the matter is usually presented to and approved by the stockholders at their first meeting. Final action is then taken by the board of directors. The di- rectors have power to act without previous authorization by the stockholders, but as the matter is an important one, a stockholders' authorization, by which they are estopped from any future objections, is considered a desirable pre- liminary to the directors' acceptance. The usual form of proposition for exchange of prop- erty for stock involves the issue of the entire stock of the company in payment for the property offered. This is usually desired but, as a certain portion of the stock has already been subscribed for by the incorporators, either the subscribed stock must be excluded or some adjust- ment of the incorporators' subscriptions must be made. A simple method of arranging the matter is for the owner of the property to make some mutually satisfactory arrangement with the incorporators for the payment by him of their subscriptions. (See Form 26.) This is en- 250 *i EXCHANGE OF PROPERTY FOR STOCK. 251 tirely legitimate so far as the corporation is concerned, as It is a matter of indifference to the company whether sub- scriptions are paid by the subscribers themselves or by someone else for them. Another method is for the incorporators to formally assign their subscriptions to the person making the prop- osition. (See Form 27.) In such event, it must be re- membered that as soon as the assignment becomes effec- tive, the incorporators are no longer stockholders of the company and cannot act as such unless some other ar- rangement is made for their qualification. In view of recent decisions and dicta it is not advis- able to incorporate in the proposition any agreement for donation of stock to the treasury of the company.^ Form 26.— Proposition to Exchange Property for Stock. Sterling Ice Company, 275 Montgomery Street, Jersey City, N. J. Gentlemen : — I hereby offer your Company in exchange and full payment for its entire capital^ stock— mcludmg by agreement of the incorporators the shares subscribed by them— the entire rights and letters patent, domestic and toreign for all my inventions pertaining to ( 1 ) the manufacture of ice, {Z) refrigeration, and (3) mechanisms and processes to be used in connection therewith. In event of your acceptance of this offer, I will at once assign to the Company all United States rights, letters patent and applications therefor and all foreign rights for my said inventions, and will from time to time execute all such further instruments as may be necessary or desirable to vest fully in your Company the ownership of my said inventions. I will also assign to your Company any further inventions relating to the manufacture of ice, or to refrigeration, or to mechanisms and processes to be used in connection therewith, which may be made by me within five years from the date of your acceptance of this proposition either assigning the rights before patent applications are made therefor' or assigning the patents after issue of the same. I will also turn over to the Company all models, drawings and data pertaining to my said inven- tions. It is a condition of this proposition that the Company shall refund to me my actual expenditures to date for models, drawings and letters patent, as per statement and vouchers to be submitted on demand said expenditures amounting in all to the sum of $5,245.43. If this offer is accepted, the stock subscribed for by Messrs Harry H. Sterling, Edward Penfold, Oscar McComb and James Hamilton is to Asse;sors/74 N?Tl'183' 0907)!"- ^^ "^^ '' ^''''^'' ^"-^-^-^er. etc. Co. v. V i II ii 252 FORMS Rf:LATlNG TO INCORPORATION. IH kI 'ttj I be issued to them or their order; the balance of the stock of ,h^ fn,^ pany to my order; all said stock to be issued fun-plid and non assessabTe" Yours very truly, New York, September 2nd, 1908. ^""^^^^ ^''''''''^• (See Forms 37, 38.) If an assignment of the incorporators' subscription is deemed preferable, the following form may be used. Form 27.— Assignment of Incorporators' Subscripti ions. nfa.f^ ' n ""^^^signed, bemg all the incorporators of the Lerov Man- ufacturmg Company, in consideration of the sum of One Dollar {o each of us m hand paid the receipt whereof is hereby acknowledged and for Cteru^n?o%t/H" hI^H?"^!'^";"."^' /". ''T^^ -"' -sfg'n a'nd"mat over unto Albert H Hardin the stock of the Leroy Manufacturing rnm TZf'TyF'^T^^ subscribed for by us, and do hereby aulmrizefndi": said klben°H'H',rH '""' Company, to issue said stock to Ve order of said Albert H. Hardin upon completion of the terms of our subscriptions This assignment is conditioned upon the acceptance bv safd I ernv i^"""^""""8 Company of said Hardin's proposition of this da e to ex- Witness our hands and seals this 10th day of September, 1908 William McCall. (L. S.) Frank H. Flynn. (L. S ) T„ ,r,^ „ c Robert H. Sterling. (L S ) In the presence of • v*-.. o./ Howard H. Flint. This assignment when employed is usually either writ- ten on the same sheet or sheets as the propo^sition for ex- change of property for stock, or otherwise is attached thereto. Under its conditions the incorporators cannot lose their qualifying stock until after the first meetings. The following stockholders' resolution approving the exchange of property for stock is in pursuance of the proposition of Form 26. EXCHANGE OF PROPERTY FOR STOCK. 253 Form 28. — Stockholders' Resolution. Property for Stock. Whereas, A proposition has been received from Edward Dumont offering to sell, assign and convey to this Company certain rights and letters patent, domestic and foreign, for his inventions pertaining to the manufacture of ice, to refrigeration, and to mechanisms and processes to be used in connection therewith, in exchange for the entire capital stock of the Company, to be issued full-paid and non-assessable to the order of the said Edward Dumont, all as set forth in said proposition ; and Whereas, It appears to the stockholders of this Company that the said inventions are desirable for the purposes of the Company and are reasonably worth the stated purchase price thereof: Now, Therefore, Be It Resolved, That the exchange of said rights, patents and inventions for the entire capital stock of this Company, on the terms and conditions set forth in said proposition, be and hereby is approved, and the Board of Directors of this Company are hereby au- thorized, empowered and instructed to accept the said proposition, to re- ceive the rights and patents offered therein, and to cause the entire capitaf stock of the company to be issued in payment therefor. (See Stockholders' Minutes, Form 37.) After approval by the stockholders, the proposition is submitted to the board of directors, usually accompanied by a copy of the stockholders' resolution, and the board in its turn adopts a resolution of acceptance. Form 29. — Directors' Resolution. Property for Stock. Whereas, Certain letters patent and certain rights, domestic and foreign, for the inventions of Edward Dumont pertaining to the manufac- ture of ice and to refrigeration, and to mechanisms and processes to be used in connection therewith, are offered to this Company in exchange for its entire capital stock as set forth in a proposition made by the said Edward Dumont to this Company under date of September 2nd, 1908; and Whereas, The exchange of said letters patent and rights for the stock of the Company as contemplated by said proposition, has been approved by the stockholders of this Company; and Whereas, The letters patent and rights so offered are adjudged by this Board to be of the reasonable value of Two Hundred and Fifty Thousand ($250,000) Dollars and to be necessary for the use and lawful purposes of this Company: Now, Therefore, Be It Resolved, That said proposition be and hereby is accepted in accordance with its terms, and that said letters patent and rights for the inventions of Edward Dumont be received in full payment for the entire capital stock of this Company, and that the President and Treasurer of this Company be and hereby are authorized and directed to receive such duly executed assignments from the said Edward Dumont as 254 FORMS RELATING TO INCORPORATION. may be necessary to carry into effect the terms of said proposition and to convey to and vest in this Company the entire right and title in and to said inventions, and to issue in exchange therefor the entire capital stock of this Company, full-paid and non-assessable, to the persons designated in said proposition, and the said officers of the Company are further em- powered and instructed to do all other things necessary and desirable to consummate the exchange of the said letters patent and rights for the stock of this Company and to carry into effect the terms of said proposition ; Provided, However, That the acceptance of the proposition of said Edward Dumont as herein set forth, shall be and is conditioned upon his further granting this Company licenses to use any other inventions already made by him or that may be made by him within the period of five years from this present acceptance, in so far as said inventions are applicable to or may be used in connection with the manufacture of ice or with re- frigeration, or with mechanisms or processes to be used in connection therewith. (See Directors' Minutes, Form 38.) The assignment executed in pursuance of the forego- ing resolutions is given in the following form. Form 30. — Assignment. Property for Stock. ASSIGNMENT. In consideration of the sum of One Dollar paid to me, Edward Dumont of the City of New York, by the Sterling Ice Company, a cor- poration organized and existing under the laws of the State of New Jersey, the receipt whereof is hereby acknowledged, and for other good and valuable considerations to me moving, I do hereby sell, assign and transfer to the said Sterling Ice Company all my right, title and interest in and to certain new and useful inventions and improvements for the manufacture of ice and for refrigeration, and for mechanisms and processes to be used in connection therewith, all as set forth in and covered by certain applications for patents filed in the Patent Office of the United States as follows : Applications Allowed. Serial No. 895,762, filed August 1, 1907. " No. 925.644, " October 1, 1907. " No. 925,962, " November 1, 1907. Applications Pending. Serial No. 926,182, filed January 2, 1908. " No. 928,462, " March 2, 1908. together with the right, title and interest in and to all other inventions relating to the manufacture of ice, to refrigeration, or to mechanisms or processes to be used in connection therewith, already made by me, or that may be made by me within five years from the 3rd day of September, 1908, IN AND FOR the following countries : United States Italy Austria Canada Australia Spain EXCHANGE OF PROPERTY FOR STOCK. 255 Sweden Norway Denmark Belgium Switzerland New Zealand Mexico Great Britain France Germany Portugal Japan Brazil Argentine Confederation Chili and for all other countries wherein it may be deemed profitable by said Company to patent said inventions ; And I hereby further undertake and agree to grant to the said Com- pany licenses to use any other inventions already made by me or that may be made by me within the said period of five years from the 3rd day of September, 1908, in so far, but only so far as such inventions are applic- able to or may be used in connection with the manufacture of ice or with refrigeration, or with mechanisms or processes to be used in connection therewith. In pursuance of the foregoing assignments, I do hereby authorize and empower the said Company to apply for and take out all such letters patent as may be necessary to secure its rights to the inventions and im- provements hereby assigned, and I agree and bind myself to execute and deliver to said Company from time to time all such further instruments of transfer and assignment, and to do all such further things as may be necessary or desirable to enable it to secure said letters patent and to perfect its title to such rights and inventions ; And I hereby authorize and request the officials of the Patent Offices and Departments of the several nations, countries and governments in the territory herein specified, to issue to the said Company, its successors and assigns, any and all letters patent that may be granted for my said in- ventions ; And I hereby bind myself, my executors and administrators, to do all things herein specified and agreed to be done : But it is hereby agreed that all further assignments, patent applica- tions, drawings and models furnished by me shall be at the charge and expense of said Company and without cost to me ; And it is further expressly agreed that if within ninety days of written notice from me or my legal representatives of any invention made by me and covered by this present agreement, said Company shall not have taken due and proper steps to secure letters patent therefor in any part of the territory hereinbefore set forth, I or my legal representatives may make application for such letters patent in such unoccupied territory and the said Company shall have no claim or title to the patents so secured. It is the intent of this assignment to convey to the Sterling Ice Com- pany, its successors and assigns, the entire interest for the whole world in any and all inventions and improvements in mechanisms for the man- ufacture of ice and for refrigeration, or relating thereto, so far as the same may be applicable, now made by me or that may hereafter be made by me within five years from the 3rd day of September, 1908. Witness my hand and seal this 5th day of September, 1908. Edward Dumont. (L. S.) This assignment is general in its form and carries the rights to the inventions covered by its terms without fur- ther specific assignment. In practice, however, individual assignments of each invention for each country would 256 I^ORMS RELATING TO INCORPORATION. probably be required for filing in the proper patent office. As a precautionary measure, but not as a matter of neces- sity, the assignment as given should be acknowledged. Stock given in exchange for property may either be issued in one or more certificates to the owner of the prop- erty, who then breaks up the certificates and distributes the stock as may be necessary, or it may be issued direct to the parties named by him. The procedure in either case is equally effective, as payment to his order is as effective as if made to him direct. If the stock is issued to his order, the owner's instructions to the secretary might be in the following form. Form 31. — Instructions for Issuance of Stock. To the Secretary of the Sterling Ice Company, Jersey City, N. J. ^^^ PurTu^t to the terms of the resolution adopted by the Directors of vour Company on September 3rd, 1908, acceptmg my proposition of Sep- [ember 2nd, ^908, and authorizing the issue of the entire cap.tal stock of said Company, full-pa d and non-assessable, to my order, save tne share subscXd^ for by the incorporators, you are hereby authorized and instructed to issue said%tock of the Sterling Ice Company in the follow- ing names : ^''fT^'Z^XfJ'' 500 shares. John Mackey rp^ u Edward Dumont ^^ Common Stock^ ^^q ^^^^^ Henry Brown- A> res „ Theodore McFarrell f^ « Horace H. Wight ^ .. T^^cerdfic^t^eTTssued 'in accordance 'with' the' foregoing instructions are to be delivered to me. Yours very truly, Edward Dumont. New York, September 5, 1908. CHAPTER XXVII. FORMS FOR FIRST MEETINGS. (a) Calls and Waivers. When its charter is granted, the corporation is a legal entity, entitled to all corporate rights and privileges, but wholly unprovided with the mechanism through which these are ordinarily secured. Primarily the object of the first meetings is to perfect the organization of the corpora- tion and thereby supply this need. In some few states the charter itself provides for the time and place of the first meeting of stockholders. In some other states the statutes prescribe the method by which it may be called. Unless otherwise prescribed, the first meetings — both of stockholders and directors — are most conveniently and commonly assembled by means of calls and waivers. (See also Ch. XXVIII.) Calls and waivers should be signed before the time of meeting or at the meeting. Occasionally signatures of parties absent from the meeting are affixed later, and — though the practice is not to be commended — are held to be effective. In the majority of states the incorporators named in the charter are the only parties entitled to attend the first meeting of stockholders and to sign its call and waiver. (See § 58.) The following form of call and waiver for the first meeting of stockholders will serve for any state. It is simple but sufficient unless specially important action is contemplated. 257 258 PORMS RELATING TO INCORPORATION. Form 32.-Call and Waiver. Stockholders'. Short Form. Call and Waiver of Notice. FIRST MEETING OF STOCKHOLDERS. We, the undersigned, all the incorporators and stockholders of the Crystal Spring Water Compam-. do he^by - ' , ';„h„-!,„7^r'^,naque, stockholders v| t ^ NOTICES. 281 (b) Meetings of Directors. Form 60. — Notice. Special Meeting of Directors. HYDRO-CARBON STEEL COMPANY. 134 West 23rd St., New York City. September 15, 1908. Mr. Walter H. Sinclair, Montclair, New Jersey: Dear Sir : — You are hereby notified that pursuant to call of the Presi- dent, a special meeting of the Board of Directors of this Company will be held in its oflfice at 3 o'clock P. M. on the 18th day of September, 1908, to act upon a proposition to purchase the plant of the Scranton Foundry Company and to transact such other business in connection therewith as may be necessary or desirable. Respectfully, Milton H. Sanderson, Secretary. This notice must be sent to every member of the board. The time, place and purpose of the meeting must be stated, and, unless every member of the board is pres- ent and agrees thereto, no business may be transacted at the meeting save that so specified. Porm 61. — Notice. Regular Meeting of Directors. HYDRO-CARBON STEEL COMPANY. 134 West 23rd St., New York City. October 1, 1908. Mr. Walter H. Sinclair, Montclair, New Jersey: Dear Sir: — You are hereby notified that the regular quarterly meet- ing of the Board of Directors of the Hydro-Carbon Steel Company will be held in the office of the Company, No. 134 West 23rd St., New York, on Tuesday, October 13, 1908, at 3 o'clock P. M. Respectfully, Milton H. Sanderson, Secretary. It is but rarely that publication notices are used in as- sembling directors' meetings. Either of the foregoing notices might be readily modified, if desired, to serve as a publication notice. Consent meetings, from their nature, neither permit nor require any formal notice. (See § 131.) I' • ••! (I / CHAPTER XXX. FORMS OF PROXIES. A proxy is merely a special power of attorney (See § 85) and may convey any authority the maker desires up to the limit of his own. The powers conferred by a proxy are limited strictly to those specified. Thus a proxy to vote on a proposed amendment of the charter at a certain meeting would not authorize the holder to also vote upon a proposed amend- ment of the by-laws though considered at the same meet- ing. The time for which a proxy runs is also governed strictly by the provisions of the instrument unless sooner terminated by statutory or by-law provisions (See § 85), or by the death of the maker, or by the sale of his stock, or by his formal revocation filed with the secretary, or, for the meetings at which he appears, by the presence and participation thereat of the maker.^ A proxy given for a particular meeting holds good for any meeting adjourned therefrom, whether so specified or not. "A proxy should be in writing, but it need not be in any particular form; it need not be acknowledged or ap- proved, but it must be in such a shape as reasonably to satisfy the inspectors of election of its genuineness and validity."^ To meet this requirement the proxy should be 1 Chapman v. Bates, 61 N. J. Eq. 658 (1900); Commonwealth v. Patterson, 158 Pa. St. 476 (1893). ' 2 Cook on Corp., § 610. 282 « PROXIES. 283 signed and sealed by the maker and be witnessed by at least one person, but does not ordinarily require acknowl- edgment. It may cover all or any part of the stock owned by an individual, and two or more proxies may be given by a single stockholder, each proxy covering a part of his holding. (See Form 66.) A proxy may be revoked by the maker at any time even though by its terms the proxy is irrevocable. The only exception to this rule is where occasionally a proxy is coupled with an interest in the stock on which the proxy is given. The revocation of a proxy should be in writing and be filed with the secretary of the meeting. The mere presence of the owner of the stock at any meeting, with the express intention of voting his stock thereat, has the effect of revoking for that meeting all outstanding proxies given by him. If a proxy is issued while a prior proxy for the same stock is outstanding, a revocation of the first proxy should be incorporated in the second. Should this not be done, the more recent proxy will on presenta- tion revoke the first, but the absence of formal revocation is a suspicious circumstance, liable to provoke inquiry and cause trouble. Notices of the annual meetings of the larger corpora- tions are usually accompanied by proxy forms, which stockholders unable to be present at the meeting in per- son are requested to sign and send in to the corporate officials. (See Form 56.) In this way a quorum is often secured when otherwise it would fail. The plan is some- times utilized with much effect for the purpose of secur- ing a majority for some measure favored by the directors of the company. Proxies sent with notices of meetings sometimes name the parties to act (See Form 68) but are frequently sent out without, and are then usually returned signed in blank ; i. e., while duly signed and witnessed, the name of the *if*4ai I |i 284 FORMS RELATING TO MEETINGS. person who is to act as proxy is omitted. The name of the secretary or someone else present at the meeting is then inserted and the instrument so completed is legally effective. Proxies signed in blank are usually employed in any case where the name of the party to act has not been definitely decided upon or where it is immaterial. In this shape the proxy can be used by anyone into whose hands it may come. When once completed, however, by the insertion of the name of the party to act, it can be used only by the specified party, nor can this party authorize anyone else to vote the stock covered by the proxy un- less the proxy itself distinctly confers upon him full rights of substitution. Directors cannot give proxies authorizing others to represent and vote for them at directors' meetings. The directors occupy a position of trust and they cannot as in- dividuals delegate the trust vested in them to others. When proxies are to be used they are filed with the secretary of the meeting. If the holder desires to retain his original proxy, he may, after exhibiting the original, file a certified copy with the secretary of the meeting. Form 62. — Proxy. Simple Form. Proxy. I hereby appoint George H. Brewer my proxy with full authority to vote for me and m my place at any and all stockholders' meetings of the Brewer Plow Company. Witness my hand and seal this 7th day of October, 1908. „.. , , Harold J. McCormick. (L. S.) Witnessed by Henry F. Simmons. This proxy is under most circumstances legally suffi- cient and the powers it conveys are broad. A more formal proxy is, however, desirable when important matters are to be considered. The proxy which follows is still simple as to form but more specific in its terms. PROXIES. 28S Form 63. — Proxy. Unlimited. Proxy. I, the undersigned, do hereby constitute and appoint George J. Mc- Clelland my true and lawful attorney to represent me at any and all meet- ings of the stockholders of the Carney Falls Power Company, and for me and in my name and stead to vote thereat upon the stock standmg m my name on the books of said Company at the times of said meetmgs, and I hereby grant my said attorney all the powers that I should my- self possess if personally present thereat. ^ iooq Witness my signature and seal this 1st day of August, iyu». Harold B. McClelland. (L. S.) In the presence of Alphonse H. DurET. At the expiration of the specified term the following proxy becomes null and void without formal revocation or other action on the part of the maker. Form 64. — Proxy. Time Limited. Proxy. I, the undersigned, do hereby constitute and appoint Henry M. Wil- liams my true and lawful attorney to represent me at all meetings of the stockholders of the Carney Falls Power Company held on or prior to the 15th day of June, 1909, and do hereby authorize and empower him for me and in my name and stead to vote at such meetings upon the stock now standing in my name on the books of said Company, and I hereby grant my said attorney all the power at said meetings that I should my- self possess if personally present thereat. Witness my signature and seal this 15th day of August, lOT. Samuel B. Fremont. (L. S.) In the presence of J. J. Masterson. It should be noted that the wording of the foregoing proxy authorizes the appointee to vote only upon the stock "now standing in my name." Should the maker acquire additional stock of the company after the date of this proxy, but during its life, such additional stock is not covered by the proxy. In this the proxy differs from the proxy of Form 63 which covers all stock owned by the maker "at the times of said meetings." 286 FORMS REI.ATING TO MEETINGS. |1 Form 65. — Proxy. Particular Meeting. Proxy. Know All Men by These Presents: , • . 1^ .u That I, the undersigned, do hereby constitute and appoint Kenneth J Johnson my true and lawful attorney with full powers of substitution and revocation, to represent me at the special meetmg of stockholders ot the Graham Navigation Company, to be held on the 19th day of October, 1908 at 3 o'clock P. M., and do hereby authorize and empower him to vote' at said meeting and at any adjournment thereof, for me and in my name and stead, upon the stock then standing in my name on the books ot said Company, and I hereby grant my said attorney all the powers that 1 should possess if personally present at said meeting. . ^ ^ , .q^q Witness my signature and seal this 1st day of October 1W«. Melver M. McKim. (L. S.) In the presence of Henry P. Swenton. Outside its limitation as to time, the preceding proxy is broad. It not only covers all stock held in the name of the maker at the time of meeting and empowers the ap- pointee to act as fully and with the same authority as the owner might himself, but also empowers him to give and revoke proxies conveying similar voting powers to others. If it is not desired to convey these latter powers, the words '*with full power of substitution and revocation" should be omitted. If all the stock covered by a proxy is disposed of before the date of meeting, such proxy is thereby nullified. If part of the stock is sold, the proxy still holds for the re- maining stock. If a proxy specifies the number of shares of stock to be voted upon, such proxy is good for the num- ber of shares standing in the maker's name up to the specified number. Form 66. — Proxy. Limited as to Stock. Proxy. I the undersigned, do hereby nominate and appoint John H. Mc- Cracken my true and lawful attorney, for me and in my name, place and stead to vote at all stockholders' meetings of the Fowler Watch Com- pany upon Twenty-five Shares of the stock of said Company standing in my name, and I hereby grant my said attorney all the powers as to said in PROXIES. 287 Twenty-five Shares of stock that I would myself possess if personally present at ^-^^.^li'^y si^n.tnre and seal this 10th day of October 1908. Francis P. Sterling. In the presence of Harry H. French. The preceding form may be used when but a portion of the stock owned by a stockholder is to be represented by his proxy. A single stockholder may give several such proxies to cover his entire holding of stock, the object be- ing to admit several representatives to the proceedings of the meeting. Form 67. — Proxy. Annual Meeting. Formal. Proxy. Know All Men by These Presents : , , ^ i? n p^ ,.r That we, the undersigned, stockholders of the Carney Falls Power Company, do hereby constitute and appoint J. Adam McCall our true ana lawful attorney with full power of substitution and revocation, for us and in our names, place and stead to vote upon the stock then standing in our respective names upon the books of said Company, at the annual meeting of the stockholders thereof to be held in the office of the Company 4^5 Fifth Ave., New York City, January 15, 1909, at 10 o clock m the fore- noon, and at any meeting postponed or adjourned therefrom, hereby granting to our said attorney full power and authority to act for us and in our names and stead to vote thereat upon our said stock in the elec- tion of directors and in the transaction of such other business as may be brought before the said meeting, all as fully as we might or could do it personally present, and we hereby ratify and confirm all that our said at- torney or his substitute shall lawfully do at such meeting in our names, place and stead. ^ , «. , In Witness Whereof, we have hereunto affixed our respec- tive signatures and seals this 2nd day of November, 1908. S. S. FoLSOM. (L. S.) Henry M. Cleveland. (L. S.) J. B. McLain. (L. S.) Sargent McLain. (L. S.) In the presence of William. J. Hammond as to S. S. Folsom and Henry M. Cleveland. Jerry T. McAllister as to J. B. McLain and Sargent McLain. The preceding proxy does not convey any greater or more complete powers than the shorter forms heretofore M 288 FORMS RELATING TO MEETINGS. considered but is more specific and conventional and therefore preferable when matters of importance are to be considered and acted upon. The following proxy for an annual meeting is also formal and is in addition specific; i. e., it directs that the vote of the proxy shall be cast in favor of certain specified measures. The proxy is also peculiar in the fact that five attorneys are appointed thereby, all to act through a ma- jority of those present at the meeting. Form 68.— Proxy. Annual Meeting. (U. S. Steel Corp.) UNITED STATES STEEL CORPORATION. Proxy for Seventh Annual Meeting of April 20, 1908. Know all Men by these Presents, That the undersigned Stock- holder in United States Steel Corporation, do hereby constitute and appoint J. P. Morgan, H. C. Frick, E. H. Gary, N. B. Ream and N. Thayer, and each, or any of them, true and lawful attorney or attorneys, agent or agents and proxy or proxies of the undersigned, with power of substitution, for and in the name, place and stead of the undersigned, to- vote upon all Common Stock and all Preferred Stock, or either, held or owned bv the undersigned, at the Seventh Annual Meeting of the Stock- holders of the United States Steel Corporation, to be held at the office of said Corporation at Hoboken, New Jersey, on Monday, the twentieth day of April, 1908, and at any and all adjournments thereof, for the transaction of any and all business that may come before the meeting, in- cluding considering and voting upon the approval and ratification of all purchases, contracts, acts, proceedings, elections and appointments by the Board of Directors or by the Finance Committee since the sixth annual meeting of the Corporation, the authorization of the purchase of the prop- erties belonging to the Tennessee Coal, Iron and Railroad Company, and all matters referred to in the notice of this meeting and in the Sixth An- nual Report to Stockholders and in the minutes of the meetings of the Board of Directors and of the Finance Committee, the election of eight Directors to hold office for three years, the election of independent auditors^ and upon any and all matters that may come before the meeting, according to the number of votes the undersigned would be entitled to vote if then personallv present ; hereby revoking any proxy or proxies heretofore giver? to vote upon such stock, and ratifying and confirming all that said attor- neys, agents, and proxies may do by virtue hereof. A majority of all or of any of said attorneys, agents and proxies who shall be present and shall act at the meeting (or if only one shall be present and act, then that one) shall have, and may exercise, all of the powers of all of said attorneys, agents and proxies hereunder; and they are instructed to vote in favor of the authorization of the purchase above mentioned and the approval and ratification of each and every of said purchases, contracts, acts, pro- ceedings, elections and appointments. Witness hand and seal this day of , 1908. Witness: (seal.) Address. ill ' ti |i ! II I r PROXIES. 289 A simpler form of specific proxy limiting the acts of the proxy to a single object, is as follows: Form 69. — Proxy. Specific Action. Proxy. Know All Men BY These Presents : , That I, the undersigned, do hereby constitute and appomt Wilson H. McCall my true and lawful attorney to attend a special meeting of the stockholders of the American Desk Company to be held at the office of said Company, No. 35 Fulton St., New York, at 10 o'clock A. M. on the 13th day of October, 1908, and for me and in my name, place and stead to cast thereat the number of votes to which I may be entitled by virtue of the stock then standing in my name on the books of the said Corn- pany, against any and all propositions that may be presented to said meeting for the consolidation of the said American Desk Company with the Desk Company of New Jersey, and I do hereby grant my said attorney full power and authority to cast my said votes as herein set forth, and do hereby ratify and confirm my said attorney's action in so doing, ex- pressly denying, however, to my said attorney, all right, power and au- thority to vote in my behalf on any other matter or matters coming up at said meeting. In Witness Whereof, I have hereunto affixed my signature and seal this 3rd day of October, 1908. Franklin S. Sibley. (L. S.) Signed, sealed and delivered in the presence of Hamilton W. Maxwell. It frequently happens that stock of one corporation is the property of another corporation. Such stock may be held in the name of the owner corporation, or in the name of its treasurer or other trustee for the corporation. If the stock stands in the name of the treasurer or other trustee, the party in whose name it is held is as a matter of course entitled to vote the stock, or give a proxy. Usu- ally such proxy is given in accordance with the instruc- tions of the corporation for whose benefit the stock is held. A form of trustee's proxy is as follows: Form 70. — Proxy. Trustee's. Proxy. Know All Men by These Presents : That I, William H. Parker, holding in my name as Trustee for the Steel Company of the Republic, Five Hundred Shares of the Capital 41 li I 290 FORMS REI.ATING TO MEETINGS. Stock of the Howard Welding Company of New York City, do as said Trustee fully authorized thereto, hereby constitute and appoint Frederick W. Morton of New York City my true and lawful attorney to represent said stock at the annual meeting of the stockholders of the said Howard Welding Company, to be held in the office of said Company, No. 22 Broad St., New York City, on the 10th day of October, 1908, at 10 o'clock in the forenoon, and for me and in my stead to vote thereat upon the said Five Hundred Shares of stock belonging to the said Steel Company of the Republic, and I hereby grant the said Frederick W. Morton full power and authority to represent the said stock at the said meeting and to vote thereon in the election of directors and in the transaction of any other business that may be brought before the said meeting, or before any meeting adjourned therefrom, all as fully as I, as said Trustee, might do if I were personally present thereat, and I hereby ratify and confirm all that the said Frederick W. Morton shall lawfully do at said meeting by virtue of this present authority. In Witness Whereof, I have hereunto affixed my signature and seal as Trustee for the said Steel Company of the Republic in the City of Philadelphia on this 3rd day of October, 1908. William H. Parker, (L. S.) Trustee for the Steel Company of the Republic. In the presence of Fred W. Morgan. If the corporate stock is held in the name of the treas- urer or secretary, the general form of proxy is similar to that given. It is, however, signed with the maker's offi- cial title, as 'Treeman H. Duncan, Treasurer," and in the body of the proxy a statement should appear that the stock held by him is in trust for his company. If the corporate stock is held in the name of the owner corporation, the proxy might be given under the corporate name as in the following general form. Form 71. — Corporate Proxy. Proxy. Know All Men by These Presents : That the Steel Company of the Republic, a corporation organized un- der the laws of the State of Pennsylvania, owning and holding Five Hun- dred Shares of the Capital Stock of the Howard Welding Company of New York City, does hereby constitute and appoint Frederick W. Morton of New York City its true and lawful attorney to attend the annual meet- ing of the aforesaid Howard Welding Company to be held in its office. No. 22 Broad St., New York, on October 10th, 1908, at 10 o'clock in the forenoon, and thereat for this Company and in its name, place and stead to vote upon the said Five Hundred Shares of stock, and to do all such PROXIES. 291 ether things competent to a stockholder ot said Howard Welding Com- pany, as may in his judgment be necessary or advantageous for the in- terests of this Company, and to that end the said Steel Company of the Republic does hereby grant to its said attorney for said meeting, and for any meetings adjourned therefrom, any and all powers belonging to or pertaining to this Company as a stockholder of the aforesaid Howard Welding Company, hereby ratifying and confirming all that its said at- torney may lawfully do at said meeting in its name, place and stead. In Witness Whereof, the President and Secretary of the said Steel Company of the Republic, duly authorized thereto, have hereunto affixed the signature and seal of their said Company, all being done in the City of Phila- delphia, Pennsylvania, on this the 3rd day of October, 1908. Steel Company of the Republic, I By John H. Sherman, ) President. Attest Seal: William H. McDonald, Secretary. r CORPORATE \ SEAL. A directors' resolution as in the following form, when duly certified by the secretary of the company, is an ex- cellent form of corporate proxy. Form 72. — Corporate Proxy. Directors' Resolution. Whereas, This corporation is the owner of record of Five Hundred Shares of the Capital Stock of the Howard Welding Company of New York City, and is entitled to representation thereon at the annual meet- ing of said Company to be held in its office. No. 22 Broad St., New York on the 10th day of October, 1908, at 10 o'clock in the forenoon : Now, Therefore, Be It Resolved, That Frederick W. Morton of New York City be and hereby is constituted and appointed the true and lawful attorney of this Company to attend the said annual meeting of the Howard Welding Company, with full power and authority to vote thereat in the name, place and stead of this Company upon the said Five Hun- dred Shares of stock, and to do all such other things thereat competent to a stockholder of said Howard Welding Company, as may in his judg- ment be necessary or advantageous for the interests of this Company, and that he be hereby granted for said meeting and for any meetings ad- journed therefrom, any and all powers belonging to or pertaining to this Company as a stockholder of the aforesaid Howard Welding Company, and that all its said proxy shall lawfully do at said meeting in the name, place and stead of this Company be hereby fully ratified and confirmed. In some state the statutes empower the corporate offi- cials to vote the stock of other corporations held by their corporation. In such case no proxy is necessary, but a certification that the official representing the company is its official, properly representing the company, is required. 3t| ■'1 * |) i I I I 292 FORMS RELATING TO MEETINGS. Form 73. — Revocation of Proxy. Revocation of Proxy. ""'Thf^t^'i ^he undSed'lo'hereby revoke and annul any .and alJ oroxTes or 'powers of Xrney heretofore given by me, authorizing or ESli -s vzz sr™ .== s-.;; rr."; = In the presence of John H. Dunn. The foregoing revocation of outstanding proxies is sweeping in its terms. If some particular proxy is to be excepted from the general revocation, such proxy may be specifically reserved, or otherwise the revocation may it- self be limited by its terms to the one or more proxies to be revoked, and any other proxies then outstanding are not affected. |i i ! CHAPTER XXXI. FORMS OF MOTIONS AND RESOLUTIONS. In the proceedings of corporate meetings, whether of stockholders or directors, anything obviously proper and of no great importance may be merely directed by the president, and, in the absence of objection, this is held to be the action of the meeting. Matters of more import- ance are sometimes acted upon in this same way, but, usually, and preferably, action is taken by means of either a motion or a resolution. There is no distinct line of demarcation between these two. They differ as to form but both are expressions of the decisions of the meeting and are of the same legal force. The motion is the simpler in form, and, though there is no well established rule, is usually employed for matters of minor importance, while resolutions, which are formal and usually go further into their subject matter, are employed for such important corporate actions as re- quire a more complete statement and record. (See Ch. XIX.) (a) Motions. Motions are not as a rule submitted in writing. The secretary must therefore exercise every care to get the sense of what is intended. If he is in doubt in any case as to whether he has understood the motion, or if its subject matter is of unusual importance, or if it is desirable that the exact wording be preserved, the presiding officer 293 294 Forms rklating to meetings. should request the maker of the motion to repeat it, or, better, to reduce it to writing. When this is done, the motion is turned over to the secretary, and, if carried, is incorporated in his minutes in the exact form submitted. The following forms show motions as they appear in the secretary's minutes. The form is the same for either stockholders' or directors' minutes. Form 74.— Motion. To Receive President's Report. "On motion duly seconded and unanimously carried, the President's report as read was ordered received and filed." Form 75. — Motion. Instructing Secretary to Cast Vote. "There being no other nominations, the Secretary was instructed by motion unanimously carried, to cast the single ballot of the meeting for the five candidates for Directors already named." Form 76. — Motion. Instructing Secretary to Cast Vote. Formal. "On motion unanimously carried, the Secretary was instructed to cast the single ballot of the meeting as follows : For President John H. McNeil. " Vice-President Samuel French. " Secretary Harry McGill. " Treasurer Joseph F. Macklin." An amendment to the by-laws is usually acted upon by means of a resolution. (See Form 83.) In the following instance, as the amendment is of minor importance, it is decided by motion. Form 77.--Motion. To Amend By-Laws. "By motion unanimously carried. Section 1 of Article II of the By- Laws was amended by changing the hour for the assembling of the an- nual meeting of the Company from 12 o'clock noon to 3 o'clock P. M." MOTIONS AND RESOLUTIONS. 295 Form 78.— Motion. To Pay Bills. """TTnnn motion duly seconded and unanimously carried, the Treasurer Franklin Mill as per statement submitted. Usually the secretary uses his discretion as to record- ing the names of the parties making and seconding mo- tions. They are not essential in the case of routme mo- tions, motions covering matters of minor importance or motions unanimously carried. Under other circumstances the name of the party making and also the party second- ing a motion should be recorded. The vote on miportant motions when there is opposition, is sometimes recorded as well. Form 79.— Motion. To Employ General Manager. """Mr Henry Sheldon moved that James J. McLain be employed as General Manager of the Company for a term of two years from date at fhe anrual salfry of Fifteen feunYed Dollars payabk - -onf J^^^^^ ments The motion was seconded by Mr. Charles H. Corbett and car Hed Messrs Sheldon, McLemore, Corbett and Johnson votmg in the af- firmative and Mests.' Fr^^^^^^ Hereford and Trask voting in the nega- tive." A motion in writing should appear on the minutes in the exact form submitted, as in the following example, and should be introduced by an explanatory statement, as *'The following motion offered by Mr. Wilson was duly seconded and carried by unanimous vote.' if Form 80.— Motion. To Appoint an Investigating Com- mittee. "Moved that the President be authorized and directed to appoint a committee consisting of three directors of this Company, to investigate the books and accounts of the Treasurer for .the Past. three years such committee to have full access to the Company s financial f ^^rd^ and to have authority to employ an Auditor to conduct the technical work of their exlmfnation, the compensation of said Auditor not to exceed the sum of Three Hundred Dollars." h 296 FORMS RELATING TO MEETINGS. (b) Resolutions. Resolutions should be submitted in writing. They are entered in the minutes prefaced with such explanatory remarks as the conditions require or the secretary thinks desirable, as "Upon motion duly made and seconded the following resolution was unanimously adopted," or "The following resolution was presented by Mr. Cassellton, seconded by Mr. Edwards and adopted, Messrs. Cassellton^ Edwards, Brice and McNeil voting in the affirmative, and Messrs. Mack and Adams voting in the negative.'* A pre- amble is always admissible but if the subject matter of a resolution is simple, is not necessary. There is no difference in form between a resolution adopted by the stockholders and one adopted by the di- rectors. (i) Stockholders' Resolutions. Form 8 1. —Resolution. For Sale of Entire Assets. nrcr.}ff''?^^^'/^'lu^"\T^- ^?^'"'''' ^"^ J^"^^^ G. Reilly as Trustees before organization for the New Hampshire Granite Company, have made a proposition to purchase the entire plant and business of this Company as nn^h3T%'"' ''?u"'^'"^/llfn''^^-^^^"^ HabiHtics, save cash in bank and ?Sj^r?.^\ n n'" thousand ($10,000) Dollars in cash and Fortv Thousand Com ^ • ^ ^^ ^^^ ^ ^^^"^^ °^ ^'^'^ ^^'"^ Hampshire Granite Now, Therefore Be It Resolved, That the said proposition be hereby approved and that the Directors of this Company be and hereby are fully authorized instructed and empowered to accept the said proposition for the sale of its entire property and business, and to do all things necessary tion^^^^ ^ acceptance into effect according to the terms of said proposi- (For corresponding directors' resolution, see Form 98.) Form 82.— Resolution. Authorizing Consolidation. Tiyr-^^X^?^^?'/^ consolidation of the Midvale Foundrv Companv and the Midvale bteel Company under the name of the New Jersey Foundry Com- pany, has been proposed, on terms and conditions set forth in an agree- ment entered into on the 17th day of November, 1908, between the Di- rectors of said corporations and heretofore submitted to the stockholders of this Company; and Wh£reas, Said proposed consolidation meets with the approval of the stockholders of this corporation: MOTIONS AND RESOLUTIONS. 297 Now, Therefore, Be It Resolved, That the Board of Directors of this Company be and hereby is fully authorized, empowered and instructed to take all such steps as may be necessary or desirable to carry said con- solidation into effect in accordance with the terms of said agreement be- tween the Directors of the two aforementioned corporations. (See Minutes, Form 111.) Form 83. — Resolution. To Amend By-Laws. Whereas, Section 4 of Article IV of the By-laws of this Company reads and provides in part as follows : "The Treasurer shall have the custody of all moneys and securi- ties of the Company and shall keep regular books of account and balance the same each month." And Whereas, It seems to the stockholders of the Company that the interests of the Company will be better conserved if its moneys and securities are placed in the custody of its President : Now, Therefore, Be It Resolved, That said Section 4 of Article IV of said By-laws be and hereby is amended as to the part above set forth to read and provide as follows : "The Treasurer shall keep regular books of account and balance the same each month." and that Section 2 of Article IV of said By-laws be amended to read and provide as follows : "The President shall preside at all meetings of stockholders and directors ; shall have general supervision of the affairs of the Com- pany; shall have the custody of all its moneys and securities; shall sign or countersign, etc." (2) Directors' Resolutions, The following is a simple form of resolution authoriz- ing the treasurer to open a bank account. It should be certified before submission to the bank. (See Form 168.) Form 84. — Resolution. To Open Bank Account. Resolved, That the Treasurer be and hereby is authorized and in- structed to open an account for the Company with the Seaboard National Bank of New York City and to deposit therein all funds of the Com- pany coming into his possession, such account to be in the name of the Company and funds deposited therein to be withdrawn only by check signed by the Treasurer and countersigned by the President. In some cases the designated bank requires a certified transcript of any by-laws relating to the duties and powers of the officers in relation to the funds. Such by-laws may 298 FORMS RELATING TO MEETINGS. be certified separately (See Form 172), or may be included in the resolution, as in the following example. Form 84a. — Resolution. Designating Depositary. Whereas, Section 3, Article VII of the By-laws of the Standard Milling Company is as follows : "The Moneys of the Company shall be deposited in the name of the Company in such bank or banks as the Board of Directors shall designate, and shall be drawn out only by checks signed by the Treasurer and countersigned by the President, unless otherwise pro- vided by resolution of the Board." Now, Therefore, In pursuance of said By-law, the Board of Di- rectors of the Standard Milling Company hereby designates the Sherman Trust Company of New York City as a depository of this Company, and authorizes and instructs the Treasurer to open an account with said Trust Company in the name of the Company, and to deposit therein all funds of the Company coming into his custody, save as may be otherwise directed bv the Board, said funds to be withdrawn only by check signed by the Treasurer and countersigned by the President. (For certification of above resolution, see Form 168a.) In many cases the banks have their own forms of reso- lution for designation of the corporate depositary, which they supply on request and which they naturally prefer should be used. As a rule these forms are good, though occasionally the latitude and power they confer upon the officers of the corporation are somewhat excessive. If this is the case, the resolution may be modified to meet the requirements of the particular corporation while still pre- serving its general form. The form of resolution which follows is used by some of the large New York banks. Form 85. — Resolution. Designating Bank. Resolved, That the Sherman National Bank of the City of New York be and the same is hereby designated as the depository of the funds of the American Textile Company, and that an account be opened with such Bank in the name of said Company, and that George H, Wahrman, the Treasurer of said Company, so long as he shall be Treasurer thereof is hereby authorized to sign or endorse any instrument for or on behalf of said Company and have the same placed to the credit of said account, and also from time to time to withdraw or transfer by check or draft or other instrument signed by him and countersigned by Henry G. Maxim, Presi- dent of the said American Textile Company, or any successor President of said Company, any amount or parts thereof which may from time to time be to the credit of said account ; and MOTIONS AND RESOLUTIONS. 299 Resolved Further, That the respective powers and the authority con- veyed by this present resolution shall pass to any duly elected and quahhed successor Treasurer or President of the said American Textile Company without further action of this Board, and as fully and to the same extent as if said successor officers were named herein. (For certification of this resolution, see Form 169.) Under this resolution if a new treasurer or president is elected, nothing is necessary save for the election and acceptance of the new ofificial to be certified to the bank by the secretary of the company. (See Forms 170, 171.) Form 86. — Resolution. Authorizing Issue of Stock. Resolved, That the President and Treasurer be and hereby are au- thorized and directed to issue certificates of the ^ull-paid Capital Stock of this Company to the aggregate amount of Ten Thousand ($10,000) Dol- lars, and to deliver the same to the written order of Robert H. btuart. Fiscal Agent for the Company, against payment into the treasury of the Company of the full par value thereof. Form 87. — Resolution. Authorizing Contract. Resolved, That the President and Secretary be and hereby are au- thorized and instructed to enter into a contract with the Wilbur Collins Construction Company on behalf of this corporation, for the erection of a power house, the construction of said power house to be in accordance with the plans and specifications on file in the office of this corporation and the cost thereof not to exceed Twenty Five Thousand ($25,000) Dollars, payment thereof to be made as set forth in the written proposition hereto- fore submitted to this corporation by the said Wilbur Collins Construc- tion Company. Form 88. — Resolution. Declaring Dividend. Resolved, That the sum of Ten Thousand ($10,000) Dollars be and hereby is appropriated and set aside from the surplus profits of this Com- pany for the payment of the regular Two (2%) Per Cent, quarterly dividend upon its outstanding stock, said dividend to be due and payable on the 20th day of October, 1908, to stockholders of record as shown by the books of the Company at the close of business on the 15th day of October, 1908. , . ^ ,. , u Resolved Further, That the Treasurer of this Company be hereby authorized and instructed to give due notice of such dividend and to pay the same when due. M 300 FORMS RELATING TO MEETINGS. Form 89. — Resolution. Declaring Dividend. Preferred Stock. Resolved, That the semi-annual dividend of Three (3%) Per Cent upon the outstanding Preferred Stock of the Company be and hereby is declared from surplus profits, said dividend to be paid on the 10th day of October, 1908, and to be payable to stockholders who appear of record on the 1st day of October, 1908, at 3 o'clock P. M., and that the Treasurer of this Company be hereby instructed and fully authorized to give due notice of such dividend and to pay the same on the date set forth. Form 90. — Resolution. Declaring Dividend. Preferred and Common Stock. e J^^^^^^' '^^^ surplus profits of this Company now exceed the sum of Ten Thousand ($10,000) Dollars required by the By-laws of this Com- pany to be held as a reserve, and such excess is now available for pay- ment of dividends: Now, Therefore, Be It Resolved, That a dividend of Five (5%) Per Cent be and hereby is declared upon the outstanding Preferred Stock of this Company, and a dividend of Three {Z7o) Per Cent, on the outstand- ing Common Stock of this Company, said dividends to be payable from f^o ^^^^^^ surplus profits of the Company on the 5th day of November 1908, to stockholders appearing of record at 3 o'clock P. M., on this ISth day of October. 1908; and that the Treasurer of this Company be hereby fully authorized and instructed to give proper notice of said dividends, to pay the same when due, and to take all other necessary steps to carry out the mtent of the present resolution. Form 91. — Resolution. Appointing Managing Director. Resolved, That Mr. William S. Weston be hereby appointed Manag- ing Director of this Company and be given the general supervision and "^^"agernent of the Company's affairs and business, with such other powers and duties as the Board of Directors may from time to time confer upon him; the annual salary of said Managing Director to be Twenty-Four , " , ^^l^^^^-"^^ Dollars, payable in monthly instalments of Two Hun- dred ($200) Dollars each. Form 92.— Resolution. Calling Special Meeting of Stock- holders. Whereas, The authorized Capital Stock of this corporation is One ?1"/5^''^^^o ^^^"^^"^ ($100,000) Dollars divided into One Thousand }\\nS< ^^^^^^ o^ Common Stock of the par value of One Hundred ($100) Dollars each, of which Five Hundred (500) Shares are issued and Five Hundred (500) Shares are unissued; and \/ MOTIONS AND RKSOLUTIONS. 301 Whereas, It is deemed advisable by this Board that said Capital Stock shall be so classified and divided into Common and Preferred S ock that the said Five Hundred (500) Shares of outstanding stock shall be and remain Common Stock, but that the said Five Hundred (5TO) Shares of unissued stock shall become and be non-voting Preferred Stock en- titled to receive a cumulative, preferred dividend of Six (6%) Per Cent, per annum and redeemable at its par value at the option of the Company at any time after ten years from the date of its issue, and upon the liquidation of the Company to be redeemed if outstanding, at its tu" tace value from the assets before any payment is made upon the Common Stock but not to participate further in said assets : r .u . 1 Now Therefore, Be It Resolved, That a special meeting of the stock- holders of this Company be and hereby is called to meet in the office of the Company on the 10th day of October, 1908, at 10 o'clock in the fore- noon, for the purpose of considering and actmg upon the P[oP<^f fj^^.^^^^- fication of the stock of this Company as afore set forth, and that the Sec- retary of the Company be hereby authorized and instructed to send out notices of said meeting as required by law and by the By-laws of this Company. This resolution conforms to the requirements of the New York laws, classification of the company's stock re- quiring authorization by the stockholders. Form 93. — Resolution. To Sell Bonds. Resolved, That Howell & Wilkins of New York City be and hereby arp authorized and empowered to sell bonds of this Company to the aggregate face value of '^^ Hundred Thousand ($100,000) Dollars and to deduct from the price received therefor a commission of Two (^7o) Per Cent., provided, however, that the net price received by this Company for each One Thousand Dollar ($1,000) Bond shall not be less than Nine Hundred and Fifty ($950) Dollars ; and , , . ^ , , , Resolved Further, That the Treasurer of this Company be and here- bv is authorized and instructed to deliver said bonds in whole or in part on the written order of the said Howell & Wilkins, and to receive and receipt for all amounts paid by them into the treasury of the Company on account of sales of said bonds. Form 94.— Resolution. To Purchase Property. Resolved, That the President and Treasurer of the Company be and hereby are authorized and instructed to consummate the purchase of the West Valley Marl Beds in accordance with the terms of the option under which said Beds are now held, and that they be further authorized and empowered to do all such things for and on behalf of the company and in its name as may be necessary thereto. (See Minutes, Form 113.) ;■•■ ii 302 FORMS RELATING TO MEETINGS. Form 95. — Resolution. For Settlement of Claim. Resolved, That the President and Secretary of this Company, acting with its Counsel, be hereby instructed to use their best efforts to arrive at some favorable settlement with th-e employees of this Company in- jured in the recent accident, and that said officers be hereby fully author- ized and empowered to accept any settlement deemed by them satisfac- tory and approved by the Counsel of the Company, provided that the total payments involved therein shall not exceed the sum of Twenty-five Hundred ($2500) Dollars. (See Minutes, Form 114.) Form 96. — Resolution. Ratifying Sale of Property. Whereas, The President and Treasurer of this Company have here- tofore on the 21st day of July, 1908, sold and disposed of the machinery, tools and other apparatus belonging to this Company and then in the premises at 235 Main St., Newark, New Jersey, the amount realized from such sale— Two Thousand, Seven Hundred and Fifty ($2,750) Dollars- having been duly paid into the treasury of this Company; and Whereas, Said sale was made without authorization from this Board, owing to the absence from the city of a majority of its members; and Whereas, In the opinion of the Board such sale was for the best inter- ests of the Company, and the action of said officers in consummating the same therefore meets with its approval : Now, Therefore, Be It Resolved, That the action of the said of- ficers of this Company in selling and disposing of the aforementioned property as aforesaid be and hereby is ratified, approved and confirmed, and that said action be accepted as the action of the Company, and the assignments thereof be ratified, confirmed and accepted as the duly exe- cuted assignments of this Company, of the same force and effect as if entered into under direct authorization of this Board. Form 97. — Resolution. For Removal of Officer. Whereas, In the opinion of this Board the interests of the Company do not permit the continuance, in his present official position, of its Presi- dent, John Farraday; and Whereas, The said John Farraday has refused to resign although re- quested thereto by members of this Board duly authorized thereunto : Now, Therefore, Be It Resolved, That exercising its statutory power the Board of Directors of the Manly Electric Corporation does hereby remove the said John Farraday from his official position as President of this Company, and declares said office vacant and said John Farraday no longer authorized to act on its behalf in any capacity; and Resolved Further, That the Secretary of the Company be and here- by is instructed to at once notify the said John Farraday of his removal from the presidency of this Company, and to give such other proper and public notice of said removal as may in his judgment be necessary to protect the interests of the Company. i> ((» I MOTIONS AND RESOLUTIONS. 303 Form 98. — Resolution. For Sale of Entire Assets. Whereas, A proposition has been made by the Trustees of the New Hampshire Granite Company to purchase the entire property and busi- ness of this Company for Ten Thousand ($10,000) Dollars m cash and Forty Thousand ($40,000) Dollars in stock of the said proposed corpora- tion as set forth in their written proposition heretofore ordered to be spread upon the minutes of this meeting ; and Whereas, The stockholders of this Company in duly assembled meet- ing at which all the voting stock of the Company was represented in per- son or by proxy, did by resolution unanimously carried, approve said sale and authorize and instruct this Board to accept said proposition: Now, Therefore, Be It Resolved, That the said proposition be and the same is hereby accepted by this Company on the terms set forth in said written proposition as entered upon the minutes of this meeting, and the President and Secretary of the Company are hereby empowered and instructed to execute all proper instruments to carry such acceptance into effect, and on behalf of this Company to receive the said Ten Thousand ($10,000) Dollars in cash and Forty Thousand ($40,000) dollars in stock of the said New Hampshire Granite Company, and to do all such other things in connection with such sale and the said transfer of property as may be found necessary for its proper consummation. (For corresponding stockholders' resolution, see Form 81.) it tii CHAPTER XXXII. INCIDENTAL FORMS. The secretary will find a list of stockholders, giving- the stock held by each and arranged as in the following form, of much convenience for use at stockholders' meet- ings. This does not take the place of the statutory list required in some states (See § 8i), but is merely for use in calling the roll or noting those present and absent, and preserving in compact form a record of the results. Form 99. — Secretary's List of Stockholders. I^ fDUSTR L lAL SUPPLY ( :OMPANY. J ERS. 1 1ST OF StoCKHOLD October 10, 1908. SHARES NOT PRESENT PRESENT Name. OWNED. PRESENT IN PERSON. BY PROXY. Name of Proxy. Adrian, Henry F. 100 100 ■ • 1 Ahrens, Sam'l T.. 50 56 • • . Allison, Daniel H. 75 75 George T. Foster. Barry, John J 85 85 • • Belmont, Maurice 25 25 • • Colville, Frederick 100 100 • a Daniels, E. F 100 50 • • 50 Harry H. Winters. Grcenwald.Martin 80 ■ ■ 80 William Greenwald. Hughes, Cora H. 150 150 • • Lawrence, Edw... 25 25 « • • • McCabe, Albert.. 50 • • 50 W. B. Wells. Miillins, Chas. D. 35 35 • • Price, Harvev 200 2C0 , , Rollins, James H. 50 • • 50 Henry Siebert. Shanlev. J. J 25 25 • • • • Sherman, B. L... 150 150 • • Wiley, Edwin H.. 100 . . 100 Harry T. French. Zimmer, Henry T. ICK) 100 • • 1,500 150 945 405 •< 304 a (< INCIDENTAL FORMS. 305 The list as shown is after the secretary's notations have been made. The data of the first two columns are taken from the stock books of the company before the time of the meeting. If a stockholder is not represented at the meeting, a check mark, or, better, the number of his shares^ is entered in the third column. If present in person, the number of shares owned is entered in the fourth column. If represented by a proxy, the number of his shares is entered in the fifth column and the name of the person holding the proxy in the last column. It will be noted that in the foregoing list, a portion of the holding of one stockholder is entered in the column Not Present" and a portion is entered in the column Present by Proxy." This shows that the party gave a proxy for a portion of his stock and that the person to whom this was given was present, while the remaining stock was not represented. (See Form 66.) The list when the secretary's notations are finished, gives a complete record of the attendance at the meeting. The combined footing of columns four and five give the number of shares represented, which added to the footing of column three must, if the work is correct, give the total stock outstanding and equal the footing of column two. At the annual meeting routine work is apt to be gone through with some rapidity and the secretary does not al- ways have time for its proper record unless provision is made therefor prior to the meeting. For this purpose outline minutes are frequently prepared. Form 100. — Outline Minutes for Annual Meeting. n! '."vJ Minutes. INDUSTRIAL SUPPLY COMPANY of New York. Annual Meeting of October 10, 1908. Meeting called to order at a. m. by who presided over meeting. Officiating Secretary 306 FORMS RELATING TO MEETINGS. Present at meeting in person • • ^,o^''^^r:^fi[ Proxy Shares. Total Shares. (See Form 99 for this data.) Necessary for quorum, 751 Shares. Copy of notice of meeting submitted with secretary s certificate of due service attached. Ordered spread upon minutes. Minutes of previous meeting read and Annual Reports: President's. Treasurer's. Special. Election of Directors. Nominated : Inspectors of Election: Results: {To be taken from inspector's certificate of election; see Form 102.) New business. These outline minutes are best prepared on sheets of loose paper with ample room between the items for the interpolation of any comments or additional matter. They are merely intended to afford memoranda from which the secretary will later write out the complete min- utes. If, through unexpected changes or omissions, any portion of the outline minutes cannot be used, the secre- tary has merely to draw his pencil through the part super- seded In some states the statutes require that the election of directors must be conducted by inspectors. Elsewhere they or similar officers are employed as a matter of con- venience. (See §§ 90, 91.) Usually inspectors are not sworn, but m some states this is required by the statutes or is a matter of custom. The oaths and certificates of inspectors of election in the general form employed in New York and New Jersey follow. They may be easily modified to meet any statu- tory requirements of other states. INCIDENTAL, FORMS. 307 Form 1 01. — Oath. Inspectors of Election. New York. Oath of Inspectors of Election. State of New York, \ County of New York, /^•^•* We, the undersigned, duly appointed to act as Inspectors of Election at the annual meeting of the stockholders of the Hudson River Naviga- tion Company, to be held in the office of the Company, No. 72 Broadway, New York, on the 2nd day of November, 1908, being severally duly sworn, depose and say and each for himself deposes and says that he will faith- fully execute the duties of Inspector of Election at such meeting with strict impartiality and according to the best of his ability. Frank H. Astor. David J. McKane. Severally sworn to before me this 2nd day of November, 1908. Allen T. Bauvelt, f NOTARIAL ) Notary Public in and for New York County. \ SEAL. J The oath of the inspectors of election and their cer- tificate as to the election results — as given in the form which follows — are usually written, as a matter of con- venience, on one sheet of paper, the oath preceding the certificate. Form 102. — Certificate. Inspectors of Election. New York. Certificate of Inspectors of Election. We, the undersigned, duly appointed Inspectors of Election of the Hudson River Navigation Company of New York City, New York, do hereby certify that at the regular annual meeting of said corporation, held in the office of the Company, No. 72 Broadway, New York City, on the 2nd day of November, 1908, a quorum being present, we being first duly sworn by oath hereunto annexed, did conduct the election for directors of said corporation and that the result of the vote taken thereat was the elec- tion by the plurality vote set opposite their respective names, of the fol- lowing directors : NAMES. VOTES RECEIVED. Charles E. Shepherd 2,135 Frank J. Piatt 2,000 Harry P. Tucker 1,970 Edward T. Bowles l|875 Henry P. Moody 1,825 George McDonald 1825 Albert T. Calkins 1,800 In Testimony Whereof, we have executed this certificate this 2nd day of November, 1908. Frank H. Astor, David J. McKane. -^ :t; 306 FORMS RELATING TO MEETINGS. Present at meeting in person Shares. By Proxy Shares. Total Shares. (See Form 99 for this data.) Necessary for quorum, 751 Shares. Copy of notice of meeting submitted with secretary's certificate of due service attached. Ordered spread upon minutes. Minutes of previous meeting read and Annual Reports: President's. Treasurer's. Special. Election of Directors. Nominated: Inspectors of Election : Results: {To he taken from inspector's certificate of election; see Form 102.) New business. These outline minutes are best prepared on sheets of loose paper with ample room between the items for the interpolation of any comments or additional matter. They are merely intended to afford memoranda from which the secretary will later write out the complete min- utes. If, through unexpected changes or omissions, any portion of the outline minutes cannot be used, the secre- tary has merely to draw his pencil through the part super- seded. In some states the statutes require that the election of directors must be conducted by inspectors. Elsewhere they or similar officers are employed as a matter of con- venience. (See §§ 90, 91.) Usually inspectors are not sworn, but in some states this is required by the statutes or is a matter of custom. The oaths and certificates of inspectors of election in the general form employed in New York and New Jersey follow. They may be easily modified to meet any statu- tory requirements of other states. 1 INCIDENTAL FORMS. 307 Form loi.— Oath. Inspectors of Election. New York. Oath of Inspectors of Election. State of New York, 1 ^ . County of New York, / " , r . r T?i^^f;«« We, the undersigned, duly appointed to act as Inspectors of Election at the annual meeting of the stockholders of the Hudson River Naviga- tion Company, to be held in the office of the Company, No 72 Broadway, New York, on the 2nd day of November, 1908, being severally duly sworn, depose and say and each for himself deposes and says that he will taith- fully execute the duties of Inspector of Election at such meeting with strict impartiality and according to the best of his ability. Frank H.. Astor. David J. McKane. Severally sworn to before me this 2nd day of November, 1908. Allen T. Bauvelt, „ , ^ / notarial \ Notary Public in and for New York County. t SEAL. J The oath of the inspectors of election and their cer- tificate as to the election results— as given in the form which follows — are usually written, as a matter of con- venience, on one sheet of paper, the oath preceding the certificate. Form 102.— Certificate. Inspectors of Election. Nev; York. Certificate of Inspectors of Election. We, the undersigned, duly appointed Inspectors of Election of the Hudson River Navigation Company of New York City, New York, do hereby certify that at the regular annual meeting of said corporation, held in the office "of the Company, No. 72 Broadway, New York City, on the 2nd day of November, 1908, a quorum being present, we being first duly sworn by oath hereunto annexed, did conduct the election for directors of said corporation and that the result of the vote taken thereat was the elec- tion by the plurality vote set opposite their respective names, of the fol- lowing directors : NAMES. VOTES RECEIVED. Charles E. Shepherd 2,135 Frank J. Piatt 2,000 Harry P. Tucker 1,970 Edward T. Bowles }»875 Henry P. Moody J»825 George McDonald I»825 Albert T. Calkins ^ V^OO In Testimony Whereof, we have executed this certificate this 2nd day of November, 1908. Frank H. Astor, David J. McKane. 308 FORMS RELATING TO MEETINGS. INCIDENTAL FORMS. 309 Form 103.— Acknowledgment of Inspectors' Certificate. ss.: State of New York, 1 County of New York, J « t? 1 On this 2nd day of November, 1908, before me personally came Frank H Astor and David J. McKane, to me known to be the persons de- scribed in and who executed the foregoing certificate and severally ac- knowledged that they executed the same for the use and purposes therein set forth. f NOTARIAL \ Allen T. Bauvelt, ^ ^ ^, ^ , ^ , \ SEAL. J Notary Public in and for New York County. In New York the inspectors' oath and certificate must be filed in the county clerk's office. In New Jersey they are merely handed the secretary to be filed among the company archives. Form 104.— Oath. Inspectors of Election. New Jersey. Oath of Inspectors of Election. State of New Jersey, 1 ^^ . County of Hudson, i '* e , i^r ■ n We, the undersigned, duly appointed Inspectors of the Morris Con- struction Company of Jersey City, New Jersey, being severally sworn, upon our respective oaths do undertake and swear that we will faithtully, honestly and impartially perform our duties as Inspectors at the election of directors of said Company, to be held in the office o/^ the Company. No. 15 Exchange Place, Jersey City, New Jersey, on the 10th day of No- vember, 1908, and that we will make a true report of the results of said election. „, ^^ ... Walter H. Wilson. Oswald J. McCutcheon. Subscribed and sworn to before me this 10th day of November, 1908. /notarial! Harry Fenwald \ seal, i Notary Public. Form 105. — Certificate. Inspectors of Election. New Jersey. Inspectors' Certificate of Election. We the undersigned, Inspectors of Election, duly appointed to con- duct the election of directors of the Morris Construction Company of Jer- sey City N€w Jersey, at the meeting of the stockholders thereof, held this day at the office of the Company, No. 15 Exchange Place, Jersey City, New Jersey, do hereby certify and report that we being first duly sworn bv oath hereunto annexed, did hold and conduct the said election by ballot and in due form, and that the votes cast thereat were as follows : 9 NAME. VOTES received. George A. Canfield 500 G. W. O'Brien 500 Harold W. Hunter 500 George T. Gravenor 500 Thomas F. Decker 450 Edward A. Miller 425 Samuel A. Webster 425 In Testimony Whereof, we have hereunto affixed our re- spective signatures this 10th day of November, 1908. Walter H. Wilson. Oswald J. McCutcheon. When not required by statute the formality of swear- ing inspectors is usually dispensed with. An inspectors* report is, however, a convenient method of entering the results of the election upon the minutes, and the written report is therefore desirable. Its form under such circum- stances might be as follows: Form 106. — Certificate. Inspectors of Election. General. Certificate of Inspectors of Election. We, the undersigned, duly appointed Inspectors of Election of the Hamilton Machine Company of Philadelphia, Pennsylvania, to conduct the election of directors of said Company held this 14th day of November, 1908, at 3 o'clock p. M.. in the office of the Company, No. 15 Exchange Place, Jersey City, New Jersey, do hereby certify and report that said election was conducted by us in due and proper form, and that the result of the vote taken thereat by ballot was the election by the plurality vote set opposite their respective names of the following directors : names. votes received. E. L. Lambert 200 John C. Robinson 200 Walter S. Hall 200 William H. Sloane 200 Alvah H. Marshall 200 In Witness Whereof, we hereunto affix our respective sig- natures this 14th day of November, 1908. Arthur T. Newman. George Haywood. A simple form of ballot for the annual meeting is as shown below. This is prepared before the time of the meeting, complete — when the candidates' names are known in advance — save as to signature and the number of shares voted. 310 FORMS RElvATING TO MEETINGS. Form 107. — Ballot. Annual Meeting. Ballot. MAXIM WATCH COMPANY. Annual meeting, November 5, 1908. I, the undersigned, hereby vote 125 shares of stock for the following named persons to serve as Directors for the ensuing year: John H. Brown. Frank T. Jones. Howard McCall. Fowler McVeigh. Marvin H. Smith. Signature, Harold McKain, Proxy for Samuel H. Hilton. Where a more formal ballot is desired the following will serve: Form 108. — Ballot. Annual Meeting. Formal. UNITED STATES STEEL CORPORATION. Seventh Annual Meeting, April 20, 1908. Ballot. The undersigned votes the number of shares noted in the subscription hereto as follows : (1) In favor of approving and ratifying all purchases, contracts, acts, proceedings, elections and appointments by the Board of Directors or the Finance Committee, since the sixth annual meeting of the stockholders of the Corporation on April 15, 1907, including the purchase of the stock of the Tennessee Coal, Iron and Railroad Company, as set forth in the minutes of the Board of Directors, or of the Finance Committee, or in the Sixth Annual Report. (2) For the following named persons, as Directors for the three years ending in 191 1 : George F. Baker, Marvin Hughitt, William E. Corey, Daniel G. Reid, John F. Dryden, John D. Rockefeller, Jr., Clement A. Griscom, Nathaniel Thayer. (3) For the firm of Price, Waterhouse & Co., as independent audi- tors, to audit the books and accounts of the Corporation at the close of the fiscal year ending December 31, 1908. Name. Number of Shares. Preferred. Common. .m person proxy for i CHAPTER XXXIII. MINUTES OF CORPORATE MEETINGS. The general form in which minutes are kept is a mat- ter of custom. The details are determined by the secre- tary of the particular company. The headings should, however, always be sufficiently full and explicit to show at a glance whether the meeting is of stockholders or di- rectors and whether it is a regular, special or adjourned meeting. The date of the particular meeting, though al- ways stated in the body of the minutes, should also appear in the heading as a matter of convenience. (See Ch. XIX.) The name of the corporation is frequently brought in at the head of every set of minutes. When this is not done the minute book should itself be very plainly stamped or marked with the name of the company, which should also appear on the title page of the book and again at the top of the first written page of minutes. (a) Stockholders' Meetings. Form 109. — Annual Meeting of Stockholders. MIDVALE FOUNDRY COMPANY of New Jersey. Minutes of Regular Meeting of Stockholders. Held November 2nd, 1908. The stockholders of the Midvale Foundry Company met in annual meeting in the office of the Company at Midvale, New Jersey, at 10 o'clock in the forenoon, November 2nd, 1908. The meeting was called to order and presided over by Mr. Frederick H. Colgate, President of the Company. The Secretary of the Company, Mr. W. A. Thompson, acted as Secretary of the meeting. The Secretary after noting the stockholders present, reported that out of a total of 5,000 shares of stock outstanding and entitled to vote at the 311 312 FORMS RELATING TO MEETINGS. meeting, 4,900 shares were represented at the meeting; 3,500 shares in person and 1,400 shares by proxies tiled with the Secretary. The Secretary then read a copy of the notice of the meeting, with his certificate attached showing that a copy thereof had been mailed to each itockholder of record on or before the 17th day of October, 1908. He also presented copies of the ''Newark Advertiser" and the "Jersey City Journal" under date of October 19th and October 26th, containing due advertisement of the meeting. The proof of notice as presented was or- dered received and filed. The Secretary produced the stock and transfer books of the Company, together with an alphabetical list giving the name, residence and number of shares of stock held by every stockholder entitled to vote in the elec- tion of directors. This list remained open to inspection during the elec- tion of directors and for the entire time of the meeting. The minutes of the preceding annual meeting were then read and ap- proved. The minutes of the special meeting of stockholders held Sep- tember 10th, 1908, were also read and approved. Upon motion duly seconded and carried, Messrs. W. B. Johnson and D. L. Boyd were appointed Inspectors of Election, were duly sworn, and the meeting then proceeded to the election of directors. The election was held by ballot and the polls were opened at 10:15 o'clock A, M. and closed at 11:15 o'clock A. M. The Inspectors thereupon presented their report in writing showing that Frederick H. Colgate, Benson R. Vale, William R. Buchanan, Mal- colm R. Rigby and Robert H. McCarter had received a plurality of all the votes cast, and the said parties were thereupon declared to be the duly elected directors of the Company for the ensuing year and until the elec- tion of their successors. The annual report of the President was then presented and upon re- quest was read by him. The report was by motion unanimously carried, ordered received and filed. The Treasurer's annual report was submitted, and, no objection being ofifered, was ordered received and filed. The report of the committee appointed at the special meeting of stock- holders held September 10th, 1908, to examine the accounts of the Com- pany, was received, and by motion its findings were approved and the report ordered received and filed. There being no further business before the meeting, it was adjourned. Frederick H. Colgate, W. A. Thompson, President. Secretary. (See "Annual Meeting" Ch. X.) Form no. — Special Meeting of Stockholders. MIDVALE FOUNDRY COMPANY of New Jersey. Minutes of Special Meeting of Stockholders. Held November 19th, 1908. The stockholders of the Midvale Foundry Company assembled in spe- cial meeting in the office of the Company at Midvale, New Jersey, at 10 o'clock in the forenoon on the 19th day of November, 1908, pursuant to call of the President followed by due notice thereof to the stockholders. 7 ! I I 1 h MINUTES. 313 The meeting was called to order by Mr. Frederick H. Colgate, Presi- dent of the Company, the Secretary of the Company, Mr. W. A. Thomp- son, officiating as recording officer. The entire capital stock of the Company was represented at the meet- ing, either in person or by proxy filed with the Secretary. The Secretary presented the Call and Notice pursuant to which the meeting was held, with his certificate that said notice had been sent out not less than twenty days before the date of meeting. The Call and Notice were ordered spread upon the Minute Book immediately following the minutes of the meeting. The President then stated briefly that the meeting was assembled to consider a proposition from the Midvale Steel Company for the con- solidation of the two companies under the general name of the New Jer- sey Foundry Company, the new company to have a capitalization of One Million, Five Hundred Thousand ($1,500,000) Dollars and stock in both companies to be exchanged for stock of the new company, share for share. A discussion of the proposition disclosed considerable opposition, mainly on the ground that the financial conditions of the Midvale Steel Company were not such as to make the desired consolidation advantageous. Replying to this objection, the President stated that the financial statement of the Midvale Steel Company as presented in the proposition from that Company, apparently misrepresented its real condition, and suggested that an adjournment of the meeting be taken until 10 o'clock A, M. on the following day, in order to permit the officers of the Midvale Steel Company to furnish authoritative information on this point. No objection being offered to this suggestion, the President declared the meeting adjourned to assemble again in the office of the Company at 10 o'clock A. M., November 20th, 1908. Frederick H. Colgate, W. A. Thompson, President. Secretary. Call and Notice of meeting appended hereto in accordance with the requirements of the foregoing minutes. W. A. Thompson, Secretary. (See '""Special' 'Me'etings'"' 'Ch.' XL) Form III. — Adjourned Meeting of Stockholders. MIDVALE FOUNDRY COMPANY of New Jersey. Minutes of Adjourned Special Meeting of Stockholders. Held November 20th, 1908. (Adjourned from meeting of November 19th, 1908.) The stockholders of the Midvale Foundry Company met in adjourned meeting in the office of the Company at Midvale, New Jersev, at 10 o'clock in the forenoon on the 20th day of November, 1908. Mr. Frederick H. Colgate called the meeting to order and presided. Mr. W. A. Thompson acted as Secretary of the meeting. The stockholders of the Company were all present in person or by proxy. t5l 114% itf-r. ft« 314 FORMS REI.ATING TO MEETINGS. The minutes of the special meeting of stockholders held on the pre- ceding day and from which the present meeting was adjourned, were read for the information of those present. The President then presented and read to the meeting a letter from the Treasurer of the Midvale Steel Company, explaining satisfactorily the financial conditions of that Company. The President further stated that the proposed consolidation had al- ready been authorized, on the terms set forth, by the stockholders of the Midvale Steel Company and that if it were also authorized by the Mid- vale Foundry Company, the proper action would be taken by the Boards of Directors and officials of the respective companies to comsummate the consolidation at the earliest possible moment. The following resolution was then offered by Mr. Charles H. Curtis : (See Form 82.) After a short discussion, Mr. D. V. Jackson moved that the resolu- tion be adopted. The motion was seconded by Mr. Henry B. Vale, and was carried by unanimous vote. There being no further business before the meeting, the President de- clared it adjourned. Frederick H. Colgate, W. A. Thompson, President. Secretary. The proposition for consolidation presented at the spe- cial meeting of the stockholders of the Midvale Foundry Company does not appear appended to the minutes of that meeting as it would properly appear in the minutes of the directors' meeting at which final action upon it is taken, and does not require to be brought into both minutes. (b) Directors' Meetings. The general form of directors' minutes is the same as for those of stockholders' meetings. It is, however, cus- tomary to enter the names of those present, which is not usually done in the case of stockholders' meetings. Form 112. — Regular Meeting of Directors. FAIRFIEI.D CEMENT COMPANY of New York. Minutes of Regular Meeting of Directors. Held October 14th, 1908. The Board of Directors of the Fairfield Cement Company of New- York assembled in regular meeting in the office of the Company, Fair- field, New York, at 3 o'clock in the forenoon on Wednesday, October 14th, 1908. MINUTES. 315 The meeting was called to order and presided over by William A. Pierce, President of the Company. Mr. Morris H. Goodrich, Secretary of the Company, acted as Secretary of the meeting. Present : Messrs. William A. Pierce, John H. Pickering, Walter S. Laighton, John K. Bates, Fred N. Barney and Morris H. Goodrich, con- stituting a quorum of the Board. The minutes of the preceding meeting of September 9th, 1908, and of the meetings of September 15th, and of September 18th and September 25th adjourned therefrom, were read and approved. The President reported that the new plant of the Company at the West Valley marl beds was progressing rapidly and should be completed on or before December 15th. He also stated that arrangements had been made for the installation of the necessary machinery and for the general equipment of the plant, and that it was hoped it would be in full operation before the close of the year. The President also reported that the Deering Construction Company was about to contract for a large amount of cement, aggregating nearly One Hundred Thousand (100,000) barrels, with deliveries extending ove-r a year, and that he felt confident that if the Company would make the proper concessions as to price that the contract could be secured, and asked that the Board authorize him to make such concessions — not ex- ceeding fifteen cents per barrel — as might be necessary to secure said con- tract. The President further reported that additional funds amounting to about Forty Thousand ($40,000) Dollars would be required for the com- pletion of the West Valley plant not later than December 15th, 1908, and asked the Board to take such action as might be necessary to secure these needed funds. The Treasurer then submitted a report giving the receipts and ex- penditures for the pasi month and showing a present cash balance on hand of $5,525.25. Mr. Arthur Hurd, Counsel for the Company, reported that his in- vestigations of the titles of the marl beds lying to the north of the Com- pany's West Valley beds had disclosed some apparent imperfections, and he therefore advised the Board to postpone the consummation of the purchase of these beds until the titles were put in satisfactory shape. The President's recommendations were then taken up, and after some discussion the President was authorized by motion unanimously carried, to make such discounts to the Deering Construction Company — not ex- ceeding fifteen cents per barrel — as might be necessary to secure the contract mentioned. The matter of finance for the West Valley plant was by unanimous consent deferred until the next meeting of the Board. The report of the Company's Counsel in regard to the marl beds north of the West Valley beds was then taken up for discussion. Mr. Walter S. Leighton urged that no lengthy delay should be permitted, stating that he was personally cognizant of the fact that other parties were desirous of securing these same marl beds and that the present option under which the beds were held would expire in three weeks from date and he was positive could not be renewed at anything like the present option price. Mr. Arthur Hurd, Counsel for the Company, thereupon stated that his investigations could be completed inside a week, and on motion duly carried, the meeting was adjourned to assemble again in the office of the Company, October 21st, at 3 o'clock P. M. William A. Pierce, Morris H. Goodrich, President. Secretary. (See "Meetings of ' Directors,"' ChV XV.) Hi 316 FORMS RELATING TO MEETINGS. Form 113. — Adjourned Meeting of Directors. FAIRFIELD CEMENT COMPANY of New York. Minutes of Adjourned Meeting of Directors. Held October 21st, 1908. (Adjourned from regular meeting of October 14, 1908.) The Board of Directors of the Fairfield Cement Company met in adjourned meeting in the office of the Company at Fairheld, New York, at 3 o'clock in the afternoon, Tuesday, October 21st, 1908. , , „ . The meeting was called to order and presided over by the i:^resi- dent Mr. William A. Pierce. The Secretary of the Company, Mr. Morris H. Goodrich, acted as Secretary of the meeting. „ o- 1 • There were present Messrs. William A. Pierce, John H. Pickering, Walter S. Laighton, John K. Bates, Fred N. Barney, Silas H. Harvey and Morris H. Goodrich, constituting a quorum of the Board. The minutes of the board meeting of October 14th, 1908, were read for the information of those present. u . r- ^ f^. *u. After the reading of the minutes, Mr. Arthur Kurd, Counsel for the Company, reported that his investigation of the titles of the marl beds Ivine north of the W^est Valley beds had been completed, that the defects to which he had referred in his previous report had been overcome, that the titles were now in good shape, and that the purchase of the beds could be safely consummated. ,^ „. , . j j u at.. Thereupon on motion of Mr. John H. Pickenr.g seconded by Mr. Waher S. Laighton and carried by unanimous vote, the following reso- lution was adopted: (See Form 94.) , . There being no further business before the meeting, it was ad- ^^"'^Vruam a. Pierce, Morris H. Goodrich President. Secretary. Form 114. — Special Meeting of Directors. FAIRFIELD CEMENT COMPANY. of New York. Minutes of Special Meeting of Directors Held December 7th, 1908. The Board of Directors of the Fairfield Cement Company of New York met in special meeting pursuant to due call and waiver, in the office of [he Company at Fairfield. New York, at 3 o'clock in the afternoon on the 7th day of December, 1908. u -kit w;ii;orr. The meeting was called to order and presided over by Mr^ William A Pierce, President. The Secretary of the Company, Mr. Morns H. Goodrich, recorded the proceedings of the meeting. „ ^d- 1 • There were present Messrs. William A. Pierce, John H. Pickermg, MINUTES. 317 Walter S. Laighton, John K. Bates, Fred N. Barney, Silas H. Harvey and Morris H. Goodrich, constituting a quorum of the Board. The Secretary presented the call and waiver signed by every mem- ber of the Board, pursuant to which the meeting was held. In the ab- sence of objection, the President ordered the call and waiver to be spread upon the Book of Minutes immediately following the minutes of the pres- ent meeting. . -j . u ^ The President then reported that a very serious accident had oc- curred at the Fairfield plant, the boilers in the power house having ex- ploded, tearing out one side of the power house and seriously injuring three of the employees of the Company. He further stated that new boilers for the Fairfield plant had been ordered at least two months ago and that the old boilers were only being used until they could be replaced with these new boilers. * * * He then called upon Mr. Arthur Hurd, Counsel for the Company, for a statement as to the legal situation. Mr. Hurd said that in his opinion the injured employees had a clear case against the Company for damages, which might be heavy as the boilers were known to be in defective condition, and suggested that a settlement out of the courts would probably be politic as well as econom- ical. J J u After some discussion the following resolution was adopted by unani- mous vote: (See Form 95.) There being no further business before the meeting, it was declared adjourned. William A. Pierce, Morris H. Goodrich, President. Secretary. Call and Waiver of Notice appended hereto. Morris H. Goodrich, Secretary. (See "Meetings of Directors," Ch. XV.) -?,! CHAPTER XXXIV. ANNUAL REPORTS. Under the laws of most of the states corporations are compelled to make certain reports to the authorities, main- ly for purposes of taxation. Blanks for such reports are supplied by the state or local authorities and may usually be filled with but little trouble. A knowledge of the tax laws is, however, necessary at times in order to avoid ex- cessive taxation, and in all cases where the amounts in- volved are material, legal advice should be employed in the preparation of these reports. On account of their wide variation in form in the different states, these tax re- ports are not presented here, the present chapter being entirely confined to the reports made to the stockholders at their annual meeting. The forms given are merely sug- gestive, as reports will necessarily vary with the condi- tions. The usual reports submitted to the stockholders at their annual meeting are those of the president and treas- urer. If matters of special interest or importance have occurred within the province of other officials, they may be called upon for reports. If any stockholders' committees have been appointed for special investigations or other purposes, they will also usually report to the annual meeting. The president's report is intended to give a general re- view of the company's operations during the preceding year and a statement of its condition at the time of the report. (See §§ 89, 151.) 318 , ANNUAL REPORTS. 319 Form 115. — President's Annual Report to Stockholders. FREEMAN HARDWARE COMPANY. President's Annual Report. To the Stockholders of the Freeman Hardware Company. : Gentlemen : — It gives me pleasure to report that notwithstanding adverse financial conditions, the present status of the Company is thor- oughly sound and at least reasonably satisfactory. Our profits have not been as large as for the preceding year, the Treasurer's report showing a net profit of $28,408.87 for the present year as against $56,704.83 for the year ending January 10, 1907, but this difference, though material, is fully accounted for by the general financial disturbance which so seriously affected the business of the Company during the latter portion of 1907, and by a series of strikes which occurred among the employees of the Company in the early part of the same year. The details of the strikes referred to are already familiar to most of you. They were primarily brought about by a demand that none but union workers should be employed in the factories of this Company, — a demand which was refused, as it would have resulted in the discharge of old and tried employees of the Company with whom no other fault was found than that they were not members of the union. In this posi- tion we believed then and still believe that we had the full and hearty support of the stockholders of the company. The result was, however, as stated, a strike which seriously crippled the producing power of the Company and which when settled broke out again on various pretexts, no less than three separate times. The strikes were, however, finally brought to a termination with some concessions to the men as to hours but without relinquishment of the principle on which the Company took its stand, i. e. the right to employ any capable workman regardless of membership or lack of membership in a union. The effect of the strikes was to reduce the net earningrs of the Companv for the first half of 1907 to $15,275.25 as against $24,762.24 for the first half of 1906. The financial conditions which have existed for the larger part of the last six months of the fiscal year are too recent and too familiar to require more than a passing reference. The stagnation in the hardware trade generally has been pronounced and continued and we believe that the showing made by this Company will surpass that of any other manu- facturing hardware company of the United States. Advantage was taken of the enforced leisure caused by the depres- sion of business during the latter part of 1907, to thoroughly overhaul the Company's entire plant nnd equipment, and these ?re now in better shape than they have been for years. Also some few additions have been made to the plant, giving additional and much needed room for our finishing and assembling work. In conclusion I would state that the present outlook for the Company is exceedingly favorable. Notwithstanding the depression which still ex- ists, orders are coming in at a satisfactory rate, the Company's plant is now operating on full time and with a full complement of employees, and it is the belief of the officers of the Company that the year ending January 10, 1909, will prove one of the most prosperous in the history of the Company. Respectfully submitted, Henry H. Freeman, New York Citv, N. Y., President. January 10, 1908. ^ '• 320 I^ORMS RELATING TO MEETINGS. If the president's report is read, it gives an opportunity during its reading or at its end for stockholders' questions and the explanation of any points which are not entirely clear in the report. Form 1 1 6.— Treasurer's Annual Report to Stockholders. FREEMAN HARDWARE COMPANY. Treasurer's Annual Report. PROFIT AND LOSS STATEMENT. Year ending January 10, 1908. ^235,125.72 Gross Sales -•:", — j Q875 24 Returns and allowances to be deducted ^'°'^ $225,250.48 Cost of Sales, including manufacturing, purchase costs, freight, ^^_ ^^^^^ etc. GROSS PROFITS FROM SALES $90,096.24 Deduct: Selling Expenses: -.m-rennn Salaries of sales force ^ 9 qqc?^ Commissions 7 So'cn Traveling expenses c'^V?? Advertising loenm Miscellaneous items i,z:)U.uu Total Selling Expenses $27,983.50 General and Administrative Expenses: Salaries, officers ^^?'?SS m office employees 'Soc'oe Office supplies ^?r?5 Postage 425.34 Telephone and telegrams 325.40 Depreciation 25U.UU Miscellaneous ^i)U./4 Total General and Administrative Expenses $21,536.73 $ 49,520.23 $40,576.01 Interest, Discounts and Allowances: Interest on bonds ($100,000 at 6%) . $6,000.00 Discount on sales ^^'?oc« -lAi^on " purchases 4,125.35 3,416.90 Net interest charges.. ^'7ln94 $1216714 Allowance for doubtful accounts 2,7bOJ^ ^^l^lOAi^ NET PROFITS, year ending Jan. 10, 1908 $28,408.8? II ANNUAL REPORTS. BALANCE SHEET. January 10, 1908. 321 ^•^ Assets. Real Estate: Land— 20 acres at Mahwah, N. J $7,500.00 Factory buildings at Mahwah, N. J 95,275.84 Store site. New York 80,000.00 ^^^^^^^„^ Building, New York 40,000.00 $222,775.84 Factory Equipment: Machinery ^c'?1o oa Belting, shafting, etc VoUit i^ionf^ Small tools 1>215.55 72,207.66 Store Equipment: New York 5,742.25 ^''New'^'York'^'^ $1,200.00 Mahwah N." J.::.: 250.00 1,450.00 TOTAL FIXED ASSETS $302,175.75 In bank $12,725.25 On hand 336.25 $13,061.50 Accounts Receivable: Trade debtors $35,725.22 ''counts "".".'. . /". . .'"'""'. . I' r 1,250.25 34,474.97 Notes Receivable 16,000.00 Inventories : Finished products and stock on hand $85,242.25 Goods in process 18,924.25 Raw materials 70,262.24 Factory supplies 1,982.25 Fuel 1,250.24 Miscellaneous small items 1,225.35 178,886.58 TOTAL FLOATING ASSETS $242,423.05 TOTAL OF ASSETS $544,598.80 Liabilities. 3,000 shares (par value $100 each) $300,000.00 100 bonds (par value $1,000 each) 100,000.00 TOTAL FIXED LIABILITIES $400,000.00 iSdfcl^lF'i'iSkt "' 322 FORMS RELATING TO MEETINGS. Accounts Payable: Trade creditors $30,724.28 Sundry personal accounts 525.20 Notes payable 28,235.62 TOTAL FLOATING LL\BILITIES $59,485.10 Surplus : Balance, Jan. 10, 1907 $56,704.83 Net profit— year ending Jan. 10, 1908 28,408.87 85.113.70 TOTAL OF LIABILITIES $544,598.80 Respectfully submitted, James H. Wallace, Treasurer. New York City, N. Y., January 10, 1908. The treasurer's annual report should give an accurate presentation of the financial results of the year's opera- tion and of the existing financial condition of the com- pany. To what detail it should extend will depend en- tirely on conditions. Business prudence usually forbids a complete statement even if it were otherwise desirable. (See § 154.) The treasurer's report is presented to the meeting and is usually held open to inspection while the meeting is in progress but is seldom read unless it is short, or is to be specially considered, or the reading is requested. In the larger corporations the report is usually printed for dis- tribution among the stockholders. A committee report, unless of considerable length, is usually presented and read. If too lengthy to perm.it of this, and of sufficient importance to justify the expense, it is printed for distribution. Form 1 1 7. — Report of Committee on By-Laws. TERREBONNE CEMENT COMPANY. Report of Committee on By-Laws. To the Stockholders of the Terrebonne Cement Company: Gentlemen : — Your committee appointed at the last annual meeting of the stockholders to report any needed modification in the By-laws of this Company, begs to submit the following: ANNUAL REPORTS. Z22, 4 (1) We would recommend the addition of a by-law providing for an Executive Committee, to consist of three members of the Board of Di- rectors, such Committee to have full control of the general business affairs of the Company in the interim between meetings of the Board. (2) We would recommend that the present by-law relating to the regular meetings of the Board of Directors be so changed as to provide for quarterly meetings instead of monthly meetings as at present. (3) We strongly disapprove of the suggested amendment to the by- laws whereby the amount of indebtedness which may be incurred by the directors on behalf of the Company at any one time is increased from $10,000 to $25,000, as we believe such change to be not only unnecessary but against the interests of the Company. Respectfully submitted, James F. Gough, Harkness B. Lewis, Oliver H. Simpson, Committee on By-laws. s " t PART VIII.— MISCELLANEOUS FORMS. CHAPTER XXXV. NOTICES.* (a) Assessment Notices. The following form of mailing notice is suitable when subscriptions are payable in instalments on demand of the board. (See Forms 1-12.) Form 118. — Instalment Notice. Instalment Notice. t HILBERT DESK COMPANY, 225 Main St., Grand Rapids, Mich. Mr. Howard Burns, Sparta, Mich. : Dear Sir — You are hereby notified that by due resolution of the Board of Directors, an instalment of Ten Per Cent, on subscriptions to the stock of this Company has been called for, the amount thereof to be paid to the Treasurer of the Company on or before the 15th day of October, 1908. Grand Rapids, Mich., Henry H. Hilbert, October 1, 1908. Treasurer. Shares subscribed, 25. Amount of Assessment, $250. Draw Checks payable to Treasurer. The following form of assessment notice may be used either as a mailing or publication notice. •Notices of corporate meetings are not considered in the present chapter as they have already been discussed in 8S 80, 96, 128 and Ch. XXIX. 324 NOTICES. 325 Form 1 19. — Notice of Stock Assessment. Assessment Notice. BURNS REFRIGERATING COMPANY. Notice is hereby given that assessment No. 2 of Fifteen Per Cent, on the subscribed Capital Stock of this Company has been called for by due resolution of the Board of Directors and is payable to the Treasurer of the Company on or before the 18th day of September, 1908. Newark, New Jersey, Francis H. Wilson, August 15th, 1908. Secretary. Make Checks payable to Treasurer. In some states the directors have statutory power to levy assessments under certain conditions. (See § 76.) In several of the v^estern states the statutes prescribe the form of notice for such assessments. This is substantially as follows: Form 120. — Assessment Notice. RED GULCH MINING COMPANY, Sacramento, California. Notice is hereby given that at a meeting of the Directors held on the 10th day of October, 1908, an assessment of Ten Dollars per share was levied upon the Capital Stock of the corporation, payable on the 12th day of November, 1908, to the Treasurer of said Red Gulch Mining Company at its principal office, No. 584 J. Street, Sacramento, California. Any stock upon which this assessment shall remain unpaid on the 27th day of November, 1908, will be delinquent and advertised for sale at public auc- tion, and unless payment is made before, will be sold on the 12th day of December, 1908, to pay said delinquent assessment together with costs of advertising and expenses of sale. John H. McClelland, Secretary, 584 J. Street, Sacramento, Cal. October 10, 1908. This notice must be served upon each stockholder either personally or by mail, and must also be published. In case assessments are not paid when due, public notice must be given before the delinquent stock can be sold. The statutory form of notice prescribed in several of the western states follows. 326 MISCELLANEOUS FORMS. Form 121. — Notice. Sale of Delinquent Stock. Statu- tory. RED GULCH MINING COMPANY, Sacramento, California. Notice. There is delinquent on the following described stock on account of an assessment levied on the 10th day of October, 1908, the several amounts set opposite the names of the respective shareholders as follows : NAME NUMBER OF NUMBER OF AMOUNT CERTIFICATE. SHARES. DUE. Henry Jones 85 25 $250 William Elkins 97 50 $500 Howard Stanford 125 30 $300 And in accordance with law and an order of the Board of Directors of this Company made on the 27th day of November, 1908, so many shares of each parcel of said stock as may be necessary will be sold at the prin- cipal office of the Company, No. '584 J. St., Sacramento, California, on the 12th day of December, 1908, at 10 o'clock in the forenoon, to pay de- linquent assessments thereon, together with costs of advertising and ex- penses of sale. John H. McClelland, Secretary, 584 J Street, Sacramento, Cal. A general form of assessment notice to be used where the specific form is not prescribed by statute, is as follows : Form 122. — Notice. Sale of Delinquent Stock. General. BURNS REFRIGERATING COMPANY. Notice of Sale of Delinquent Stock. Notice is hereby given that the undersigned. Treasurer of the Burns Refrigerating Company, will on order of the Board of Directors and pursuant to the statutes in such case made and provided, sell at public auction on the 2nd day of November, 1908, at 2 o'clock in the afternoon at the office of the Company, 345 Broad St., Newark, New Jersey, Twenty (20) Shares of the stock of said Company now standing in the name of Howard T. Carleton, or so many of said shares as may be sufficient to satisfy the unpaid assessment on said shares amounting to Three Hun- dred ($300) Dollars, and also the interest thereon from the 18th day of September, 1908, to the date of sale, and all necessary incidental charges. Fifty ($50) Dollars per share has already been paid the Company on said stock. Howard W. Bronson, Treasurer. Newark, N. J., October 1st, 1908. t < NOTICES. 327 (b) Notices of Dividends. In the smaller corporations dividend notices are usu- ally sent by mail but are not published. In the larger cor- porations they are almost invariably published and are usually also sent by mail. (See § 169.) Form 123. — Dividend Notice. Mailing. CHARLESTON MILLING COMPANY, 785 Grand St., New York. December 1, 1908. Dear Sir— You are hereby notified that the Directors of the Charles- ton Milling Company have this day declared the regular semi-annual divi- dend of Three Per Cent, on the Capital Stock of the Company, payable December 15th, 1908, to stockholders who appear of record at the close of business December 14th, 1908. PIarry H. McCallum, Treasurer. If the transfer books are closed preparatory to pay- ment of dividends, the dates of closing and reopening should appear as in the following notice, which may be used either for publication or for mailing. Form 124. — Dividend Notice. Publication. MARTIN FOUNDRIES COMPANY. New York, October 1, 1908. DmDEND No. 25. The Directors of the Martin Foundries Company have this day de- clared a quarterly dividend of One and One-half Per Cent, on the Capi- tal Stock of the Company, payable October 30th, 1908, to stockholders of record at the close of business October 10th, 1908. Transfer books will close October 10th, 1908, and reopen October 19th, 1908. Checks will be mailed. John H. Martin, Treasurer. When notice of dividends is by publication alone, an explanatory statement usually accompanies the dividend check. An announcement of this nature used by some of the larger corporations is given in the following form. 328 MISCELLANEOUS FORMS. Form 125. — Notice Accompanying Dividend Check. MARTIN FOUNDRIES COMPANY. New York, October 30, 1908. On October 1st, 1908, the Directors declared quarterly dividend No. 25 of One and One-half Per cent, upon the Preferred Stock of the Com- pany, payable this day to stockholders of record of October 10th, 1908. In accordance with permanent order on file, enclosed please find check for above dividend on the Preferred Stock standing in your name. No acknowledgment is necessary. Kindly advise John J. Hart, Assistant Secretary, No. 575 Broadway, New York, of any change in your address, giving your old address as well as the new. John H. Martin, Treasurer. Dividend Check enclosed which please cash immediately. The following publication notice is somewhat informal but sufficient. Form 126.— Dividend Notice. (U. S. Steel Corp'n.) UNITED STATES STEEL CORPORATION. Dividend No. 19 of V2 of 1% on the Common Stock, for the quarter ending June 30, 1908, was declared July 28, payable September 30, to stockholders of record September 9. Transfer books close at 3 P. M. September 9 and reopen at 10 A. M., October 1, 1908. Richard Trimble, Secretary. This notice is signed by the secretary of the corpora- tion — who in this case is also its treasurer. Usually, though not necessarily, dividend notices are signed by the treasurer. Form 127. — Dividend Notice. Common Stock. Office of AMERICAN SMELTERS COMPANY. No. 145 Broadway, New York City, September 4, 1908. Quarterly Common Stock Dividend No. 17. The Directors of the American Smelters Company have this day de- clared a dividend of Two Per Cent, on the Common Capital Stock of the Company, payable October 15th, 1908, to stockholders of record Sep- NOTICES. 329 1 \ ] tember 28th, 1908. The books of the Company for the transfer of Com- mon Stock will be closed at 3 o'clock P. M., September 28th, 1908, and will be reopened October 2nd, 1908. M. W. Erickson, Secretary. The following publication notice covers the dividend on both common and preferred stock. This inclusion is not in any way objectionable, but at times, for the sake of greater emphasis and publicity, a separate notice for each dividend is preferred. Form 128. Dividend Notice. Common and Preferred Stock. McKINNEY COMPANIES. The regular quarterly dividend of One Per Cent, on the Preferred Shares and the regular quarterly dividend of One Per Cent, on the Com- mon Shares in the McKinney Companies will be paid January 2nd, 1909, to shareholders of record as they appear at the close of business Decem- ber 14th, 1908. The transfer books will be closed for four days only, December 15th, 16th, 17th and 18th, 1908. Horace C. King, Secretary. Dated November 27, 1908. Form 129. — Dividend Notice. Mailing Orders Requested. SOUTHERN PACIFIC CO., 120 Broadway, New York, November 11, 1908. Dividend No. 9. A dividend of Three and a Half Per Cent. ($3.50 per share) was this day declared on the Preferred Stock of the Southern Pacific Company, payable on demand on and after the 15th day of January, 1909, to the stockholders of record at 3 o'clock P. M. on Thursday, December 31, 1908. The stock transfer books will not be closed for the payment of this divi- dend. Stockholders who have not already done so are requested to file mail- ing orders for dividends with the undersigned, from whom blank orders can be had on application. A. K Van Deventer, Treasurer. The mailing order referred to in the foregoing divi- dend notice is shown on the follov^ing page. The form as given is an exact reproduction of the original. 'Wmf^:^ 330 MISCELLANEOUS FORMS. Form 130a. — Mailing Order for Dividends. Face. i, O «: e o 00 o • Z o W U O C >s Z b. ■*« H O " « e To t£eTreMtfrerx>/ SOUTHERN PAt^HC COMPANY, i«0 Broadwmr. Kew CVtJfc. m r.i Until thi$ order $kallbt revoked in vrriting, pUase fend by mail, in cheque vayabU to the order of -»-~— i*4»««*«****(l ic TO ae ON cnrauK. o E ji a "O w o u ■3.5 _-3 C >> OX £1 in envelope addressed at follows : (Please write distinctly.) J NAItr TO OO CM KNVCiOPK. MOWSI NO. AND OTNttT. OH P. a BOX. ■.4«ipt. •.« >•■*••«• CITY OH TOWN ANO OTATC all dividends now due, or which may hereafter become due, on all stock now ttandinf, QP which m^y hereafter stand, on the book* of your Company in..- name. (Date) Sign here exActlj^ aa name ap- pears on certiAcate. ZS' When cheque is to be made pajrmble to other th«n the signer, signature of the Utter JtVST be acknowledged before a Notary Public on the back of this order, and, if signed by an Attorney, Administrator, Executor, Giu^ian or Trustee it MUST be accompanied by satisfactory evidence of the signer's capacity. (OV^Rj On the back of this mailing notice appears form for notarial acknowledgment as follows: Form 130b. — Mailing Order for Dividends. Reverse. NOTARIAL ACKNOWLEDGMENT OP SIGNATURE IS REQUIRED ONLY WHEN CHEQUE IS TO BE MADE PAYABLE TO OTHER THAN THE SIGNER. ^taUtff.. VotH^tjf of ....... 1 $s.: Notarial acknowledgment will not be required on dividend orders request- ing cheque* to be made payable to any wel^knov^i Trust Company, Bank or Bankers, M follow*: «' (Name of Bank) tor a/c of. (Name of StockhoMer).. " Ontkii..-'. day of in the year 4m4 thouaand nine hundred and Jbefore me personally came _. _ - _, ,_ , ..„,_ ...«__»—. to me knoifin, and known to me to be th$ individual described in, and whoexeeuted tjie within instrument and _ acknowledged '^fkdt: .txeeuted the same. «TT»9Tmc ornctn MOST WfUM HIS SSAU M. tf. 17 MWMVUPaCD OWT OT tNl UHlTte rfATt* tUCH «CKN0WH00I«CNT liOtT ft MAOC •VMRK AN AMCHICAN etnoMAne ok consular ornccH. ^O^jQgjg^ (c) Notices of Appointment. When an election is held, it devolves upon the secre- tary to notify the officials-elect. - NOTICES. 331 Form 131. — Notice of Election as Director. ORVELLE MACHINE WORKS, Trenton, New Jersey. ,, ^ „, „ December 10, 1908. Mr. George W. BromlEigh, 236 Greenwood Ave., Trenton, N. J.: Dear Sir— You are hereby notified that at the annual meeting of the Orvelle Machine Works held this day, you were elected a member of its Board of Directors. The next regular meeting of the Board will be held in the office of the Company, January 5, 1909, at 3 o'clock P. M., for the election of offi- cers and for the transaction of such other business as may come before the meeting. You are requested to be present and participate in that meeting. Respectfully, Martin B. Hereford, Secretary. Usually before the election of a director those inter- ested assure themselves that he will serve if elected. In such case the notification need not ask his acceptance of the position. If, hov^^ever, there is any uncertainty the notification of election should request a formal acceptance of the position. If the director-elect refuses to accept, his election is void, as he cannot be forced into office against his w^ill. Form 132. — Notice of Election as Director. Acceptance Requested. BLACK DIAMOND DRILL COMPANY, 23 State St., Boston, Massachusetts. October 10th, 1908. Mr. Horace H. Fleming, 1716 State St., Boston, Mass. : Dear Sir— At a meeting of the Directors of this Company held this 10th day of October, 1908, you were elected a member of the Board to fill the vacancy caused by the death of Mr. Frederick Colwell. Will you kindly indicate your acceptance of the position at your early convenience. Respectfully, Simreli. B. Ives, Secretary. ■•■P 332 MISCELLANEOUS FORMS. As a rule when corporate officials are elected, either the officers-elect are present at the meeting at which their election occurs, or are in such close personal touch with the corporate proceedings that formal notice of their elec- tion is unnecessary. If, however, a stranger is elected to an official corporate position, notice must be given. Form 133. — Notice of Election as General Manager. WILLIS OIL WELL COMPANY, 265 Madison Avenue, New York. October 1st, 1908. Mr. Henry P. Simpson, 445 Greenwood Ave., Newark, New Jersey: Dear Sir — At a meeting of the Board of Directors of this Company held this day, you were elected General Manager of the Company at a salary of Twenty-four Hundred Dollars per annum, payable in monthly instalments of Two Hundred Dollars each, your employment and duties to begin on the 15th day of October, 1908, and the first instalment of your salary to be due and payable on the 15th day of the following month. Will you kindly notify me without delay of your acceptance of the position and report for duty on the day above designated. Yours very truly, Gerald E. Conway, Secretary. If it is doubtful if the party elected will accept the posi- tion, his appointment and notice thereof are usually made tentative as in the following example. Form 134. — Tender of Position. Sales Manager. HOWARD DESK COMPANY, 25 Stone St., New York. October 30, 1908. Mr. Willis H. Walters, 225 Broadway, New York: Dear Sir — I am instructed by the Board of Directors to tender you the position of Sales Manager of this Company at a salary of $1,800 per annum, payable in monthly instalments of $150 each, your employment and duties to begin in case of your acceptance, on the 10th day of No- vember, 1908. Your early action in the matter will greatly oblige, Yours very truly, Sherwin F. Hamilton, Secretary. CHAPTER XXXVI. FORMS OF RESIGNATIONS, Resignations may be divided into two general classes — those which are so phrased as to be completely effective without an acceptance, which may be termed peremptory resignations, and those which are tentative in their nature and therefore not effective until accepted. (See §§ 113, 149.) The following form is of the latter nature. Form 135. — Resignation of Director. To the Board of Directors of the Howard Scale Company: Gentlemen— On account of my continued ill health, which prevents my proper attention to the duties of the position, I hereby tender my resignation as a member of your body. Very respectfully, Henry H. Gale. New York City, September 30, 1908. If a resignation of this kind is accepted without quali- fication, its effect is immediate and the resigning director though present at the meeting, ceases to be a director at the moment the resolution or motion of acceptance is adopted. If it is desired to avoid this, acceptances may be phrased "to take effect at the close of the meeting." It may be noted in this connection that a director retiring by resignation can not legally vote on his own successor. The vacancy does not exist until his resignation is effec- tive and thereafter he is not a director. Dummy directors are sometimes elected to fill a posi- tion or vacancy in the board until a permanent incumbent 333 334 MISCELLANEOUS EORMS. is elected. In such case the dummy director's resignation in tentative form is usually secured at the time of his elec- tion and is placed on file. Then when a suitable person for permanent director has been found, the resignation on file is accepted and the successor is at once elected. The following form of resignation is commonly used under such circumstances. Form 136.— Resignation of Director. Effective on Ac- ceptance. To the Board of Directors of the Harvard Publishing Company: Gentlemen— I hereby tender my resignation as a member of your body, to take effect upon acceptance. Respectfully, Frank McClelland, New York City, September 1st, 1908. This resignation holds good until acceptance or until the party's term as director expires, unless sooner with- drawn. If the party is again elected as a director, his old resignation is of no further effect and must be renewed if his same uncertain tenure of office is to be maintained. It must be remembered, however, that a party tenderinc; such a resignation has the right to withdraw it or to re- voke it at any time prior to its acceptance. The final clause of the foregoing resignation, while con- ventional, is of no direct effect. A "tendered" resignation cannot take effect until accepted. Form 137. — Resignation of Director. Peremptory. To the Board of Directors of the Franklin Electric Corporation: r u 1? 1 Gentlemen— I hereby resign my position as a director of the frank- lin Electric Corporation, my resignation to take immediate effect. Respectfully, William H. Collins. New Brighton, Pa., October 22, 1908. RESIGNATIONS. 335 This resignation terminates the official status of the party signing same as soon as the document is filed with the secretary of the company. No action of the board is required nor can the board in any way prevent its effect. This peremptory form of resignation is often employed in cases where a director wishes to escape responsibility for some proposed action of the board or wishes to express his disapproval of some board action. It does not relieve him from any responsibility for past actions but does re- lieve him from responsibility for any future board actions. A resignation may be made effective at a future date as in the following form. The object of such a deferred resignation is usually to give time for the selection of a suitable successor. Form 138. — Resignation of Director. Future Date. To the Board of Directors of the CooPERSTowN Tannery : Gentlemen— I hereby resign my membership in your body, such resignation to be effective October 21, 1908. Respectfully, Howard McCall. Cooperstown, New York, October 1st, 1908. When, as occasionally happens, some difficulty has arisen between the directors and an official, and this latter wishes a vote of confidence or an expression of the feel- ing of the board towards him, he will hand in a tentative resignation as in the following form. Form 139.— Resignation of President. Conditional. To the Board of Directors of the Standard Milling Company : Gentlemen— I hereby tender my resignation as President and Di- rector of your Company and request your immediate action thereon. Very respectfully, - , ,. „ Henry H. Maxwell. Franklm, Pa., November 2nd, 1908. •^^v 336 MISCELLANEOUS FORMS. If a majority of the board wish to retain the president, they either vote that the resignation be not accepted or vote against a motion for its acceptance. In either case the president's resignation is of no effect and the incident is merely an endorsement of him and his position. If, however, those opposed to the president are a majority and accept the resignation, his official connection with the company is peremptorily terminated. A more friendly resignation is given in the following form. Form 140. — Resignation of Treasurer. New York, October 28th, 1908. To the Board of Directors of the Otis Machine Company, 43 Dey St., New York: Gentlemen— I am offered the position of Treasurer of the Los Angeles Fruit Company of Los Angeles, California, and on account of the condition of my health am very desirous of acceptmg the same I therefore hereby tender my resignation as Treasurer of the Otis Machme Company and ask your acceptance of same at the earliest possible date. I would' also request the early appointment of a committee to audit my accounts and the due authorization of my successor to take over and receipt for the moneys and other property of the Company now in my Regretting the termination of my pleasant official relations with the Company and thanking you for the uniformly kind consideration ac- corded me by your body, I remain, Respectfully, James H. McDonald. Resignations and other communications for the board of directors are frequently addressed to the secretary or even to the president of the company. The better practice is to address the communication to the board enclosing it in an envelope addressed to the secretary or the president of the company, as the case may be. It is then the duty of the officer receiving the communication to present it to the board. Such service on or delivery to the president or secretary is legally sufficient. (See §§ 113, I49-) CHAPTER XXXVII. FORMS OF CORPORATE AND OFFICIAL SIGNATURES. The signature of a corporate official followed by his official designation is usually referred to as an "official" signature. (Forms 141, 142.) The name of a corpora- tion duly affixed and evidenced by the signature of the affixing officer or officers is known as a ^'corporate" sig- nature. (Form 143.) Speaking generally, the corporate signature is affixed to all important instruments by which the corporation it- self is to be directly and legally obligated, while the offi- cial signatures are employed by the corporate officials in matters pertaining particularly to their respective depart- ments, in which the contract relations of the corporation do not enter in, or, if otherwise, the authority of the officer signing is sufficient to sustain his action. Thus the president signs reports, letters, instruments, etc., with his official signature ; the treasurer signs notices of dividends or assessments, financial statements and even corporate checks and reports in the same manner; while the secretary affixes his official signature to the minutes of meetings, to reports, notices, certificates, etc. In regard to letter signatures, practice varies widely. In perhaps the majority of corporations the corporate sig- nature is attached to every letter pertaining to the busi- ness of the corporation unless there is some special reason for a different signature. In many corporations, however, 337 -mmm^ 338 MISCELLANEOUS FORMS. CORPORATE AND OFFICIAL SIGNATURES. 339 this practice is exactly reversed, the official signature of the writer being always employed unless there is some special reason for the corporate signature. The former is the preferable plan. Form 141.— Official Signature. Informal. Joseph H. McPherson, President. This is the simplest form of official signature. It should only be used when the letter or other instrument to which it is appended, shows plainly and unmistakably, by heading or subject matter, of what company the person signing is an official. If this is not the case, the official signature should be written in full as in the following form. Form 142. OfHcial Signature. Formal. Joseph H. MacPherson. President Holland Typewriter Co. The following corporate signature is in its simplest form. Form 143. — Corporate Signature. (0 Ramsay Water Company. By President. (2) Ramsay Water Company, By Howard Ramsay, President. The first of these forms shows a partial corporate sig- nature — usually affixed by means of a rubber stamp- awaiting completion by the insertion of the president's signature as shown in the second form. The word "By" as given in the preceding form is sometimes omitted from the corporate signature. The word is, however, employed by a majority of the best con- ducted corporations of the country and its omission may,' under some circumstances, involve the officer whose name is affixed in a personal liability. (See comment preced- ing Form 161.) The form as given is therefore regarded as distinctly preferable. When the corporate signature is affixed to important instruments, usually, though not necessarily, two or more official signatures are employed. The seal is also usually affixed even when not legally necessary, (See § 153.) Form 144. — Corporate Signature. Formal. f corporate I SEAL. } Western Chemical Company, By Joseph H. McCuary, President. Frederick Wellman, Secretary. The corporate signature may be legally affixed by any corporate official or agent authorized thereto by the di- rectors or by-laws. In all current business, however, where but one signing officer is desired, the president is usually designated, unless the transaction pertains spe- cially to the department of some other official. When the secretary's name is employed in a corporate signature, as in the foregoing form, no specific attestation of the seal is usual or necessary. If otherwise the seal should be formally attested as in the following form which gives the corporate signature usually employed. Signatures affixed to formal instruments are customar- ily preceded by an explanatory statement termed a "tes- timonium clause." Form 145. — Testimonium Clause. Corporate Signature. Seal Attested. In Witness Whereof, the said Powell Steel Company has caused its corporate name to be hereunto sub- 340 MISCELLANEOUS FORMS. f CORPORATE 1 \ SEAL. j Attest seal: Franklin B. scribed by its President and its duly attested corpo- rate seal to be hereunto affixed by its Secretary, all in the City of Hartford, State of Connecticut, on the 25th day of August, 1908. Powell Steel Company, By Alexander H. McDowell, President. Lord, Secretary. The following is a convenient form of testimonium clause when the instrument is to be signed by two or more corporations. Form 146.— Testimonium Clause. Two Corporate Sig- natures. In Witness Whereof, the said parties of the first and second parts have caused their respective corporate signatures and seals to be hereunto affixed by their duly authorized officers, in the City, County and State of New York, on the day and year first above written. "( Arlington Brass Works. j" By Henry BriErly, President. f corporate \ seal. Attest seal: John H. Savage, Secretary. (corporate \ seal. } Newark Castings Company, By Horace D. Powers, President. Attest seal: Henry M. Sunthein, Secretary. A more formal testmonium clause for a corporate and individual signature is as follows : Form 147. — ' Testimonium Clause. Corporate and Indi- vidual Signatures. In Witness Whereof, the Little Falls Carpet Company, said party of the first part, has caused its corporate seal to be affixed to this indenture and its corporate signature to be subscribed hereunto by its President and Secretary duly authorized thereunto, and the said CORPORATE AND OFFICIAL SIGNATURES. 341 f corporate \ seal. } Harrison H. Spellman, party of the second part, has affixed his signature and seal hereunto, all being done in the City of Trenton, State of New Jersey, on the day and year first above written. Little Falls Carpet Company, By Willis H. Shelley, President. James H. McClelland, Secretary. Harrison H. Spellman. [L. S.] If a contract is signed by an agent, the corporate seal is not usually affixed. The testimonium clause in such case might be as follows: Form 148.— Testimonium Clause. Signature Affixed by Agent. In Witness Whereof, the said Milton Smelting Cor- poration, party of the first part, acting through its duly appointed agent, Mortimer H. Shepherd, au- thorized thereunto by resolution of its Board of Di- rectors (certified copy of which resolution under the corporate seal is hereunto annexed), has caused its corporate signature to be hereunto affixed, and Samuel Jaros, party of the second part, has here- unto affixed his signature and seal, all on the day and year first above written. Milton Smelting Corporation, By Mortimer H. Shepherd, Agent. Samuel Jaros. [L. S.] A copy of the resolution which authorizes the agent to execute the instrument on behalf of the corporation, duly certified under the corporate seal, should be attached to the instrument, thus making the evidence of its proper execution complete. (See also testimonium clauses of Forms 163, 164, 179-189.) ? ?i »*«'t»,ls»^ S»r,^-t,..l CHAPTER XXXVIII. FORMS OF CHECKS, RECEIPTS AND NOTES. (a) Corporate Checks. The form of signature to a corporate check is not material. Its purpose is merely to identify and authenti- cate the instrument, and any signature duly prescribed by the by-laws or by resolution of the directors and recog- nized by the company's bank is sufficient. Consequently — while the corporate signature is usually to be preferred — there is in practice much variation as shown in the forms which follow. The corporate seal is seldom if ever used on corporate checks, though its use does not affect the check in any way. When the corporate funds are material in amount, the name of two officials are usually required upon the check. The forms of check which follow are in common use. Form 149. — Check. Corporate Signature. > < O U OS o < o < Oi o PS < a < i- c/2 No. 1754 New York, August 1, 1908. SEABOARD NATIONAL BANK of the City of New York. Pay to the order of John H. Wilkins $425.75 Four Hundred and Twenty-Five 75/100 Dollars. Standard Radiator Company, Samuei, S. Steigel, President. Stewart H. Wilson, Treasurer. 342 I f CHECKS, RECEIPTS AND NOTES. 343 Frequently the number is placed in the upper right- hand corner of a check, the date line coming in above or below. Such an arrangement, with the other details as shown in the form given, is highly approved by bank offi- cials, as it brings the essential features of the check — num- ber, date, amount, payee and signature — all well over to the right-hand side of the check in the most convenient position for rapid reference. If the by-laws or a directors' resolution require that the corporate name be affixed by the treasurer and the check be countersigned by the president, as is frequently the case, the following form is approved. Form 150.— Check. Countersigned. No. 244. New York, September 8, 1908. STANDARD NATIONAL BANK of the City of New York. Pay to the order of Howard P. Huntington $475.00 Four Hundred and Seventy-Five no/100 Dollars Countersigned: MerrivalE Coal Company, James J. McLane, By Horace P. Wisner, President. Treasurer. Where the official signatures of the treasurer and the president are affixed, the form is usually as follows: Form 151. — Check. Official Signatures. :No. 1582. New York, October 1, 1908. ; THE PEOPLE'S NATIONAL BANK • of New York. Pay to the order of Jesse Claire $125.45 : ^^' :One Hundred and Twenty- Five 45/100 Dollars Perry H. Ducroix, Treasurer. S> ; Wallace McComb, N^io : President. •^ .#fft*»y- 344 MISCELLANEOUS FORMS. Form 152. — Check. Official Signatures. Purpose Stated. : ^ :'No. 745. New York, October 1, 1908. ; cSjS : BANK OF MANHATTAN : o ^ : of New York City. . S J2; : Pay to the order of James & Oliver $125.75 : g*j -One Hundred and Twenty-Five 75/100 Dollars. : £ I Rudolf Hessler, : §J ^In full for President. : w^ i September printing. Jasper H. McMeis, : ^^ : Treasurer. CO • ^ ^ ; . There is no objection, legal or practical, to the entry on a check of the purpose for which it is issued, if so placed as not to obscure or interfere with its essential details. The advantage in the use of such a check is ap- parent. Duly endorsed, as it must be before payment is made, the check itself affords the best possible evidence of the settlement effected thereby, and saves the expense and trouble of a more formal receipt. Checks of this nature range from the very simple form of receipt check given, up to elaborate voucher checks of blanket sheet dimensions, containing a detailed statement of the entire account in payment of which the check is drawn. A form of check much in favor because of the promi- nence given to the name of the issuing corporation, is as follows : Form 153. — Check. Draft Form. ALUS-WILKINS COMPANY, 1675 Broadway, New York. No. 1728. August 15, 1908. Pay to the order of Jesse H. Sinclair $35.25 Thirty-Five 25/100 Dollars. Allis-Wilkins Company, By Francis H. Whitman, To the Treasurer. Seaboard National Bank, New York. CHECKS, RECEIPTS AND NOTES. 345 In the smaller corporations dividends are usually paid by means of the ordinary corporate check, the words "Dividend Check" being stamped or written across its face. (See § 168.) In the larger corporations special checks are employed for the purpose, as in the followino- form : *^ Form 1 54-— Dividend Check. Q w Q Q W w w AMERICAN WOOL EXPORT COMPANY, New York, August 31, 1908. No. 1482. AMERICAN NATIONAL BANK of New York. u TT ^T r. ,1 Pay to the order of Henry H. McCall One Hundred and Twenty-Five.*. ...... ...'....! Countersigned : Stock Transfer Department John Frenckel, Transfer Agent. Frank S. Jordan, Treasurer $125.00 00/100 Dollars. No receipt is usually required when this form of divi- dend check is employed, the duly endorsed check in itself affording the best possible evidence of payment of the dividend. The ordinary endorsement of a corporate check is given in the following form. Form 155.— Endorsement of Corporate Check. < ^> s5 £: « « s s a> «< I m I yj^ft*fci^»*r^ m:^'.' 346 MISCELLANEOUS FORMS. This endorsement is usually affixed by the treasurer or cashier, though the president is frequently authorized thereto. The following form of endorsement is usually affixed in its entirety— corporate name, official signature and all — with a rubber stamp. Such an endorsement is ap- proved by the banks and, on account of the rapidity and convenience with which it may be affixed, is generally employed. Form 156. — Endorsement of Check for Deposit. .c S4 a. t- ^^ 55 S 3 ^ < o ^ u ^ 'O < es ^ 2 < •> S Oo^g f *- «5 J S5 rt fc w O o K The following is a common form of corporate draft. Form 157. — Corporate Draft. JJq*745 New York, October 1, 1908. Three days after sight pay to the order of Seaboard National Bank of New York $1,245.25 Twelve Hundred and Forty-Five 25/100. : • ' ' ;T Vo^« ' payment of account as per our statement of September 1st, iyu«. Value received. Charge same to account of Car Equipment Company, By Howard James, To North Wheeling Car Co., Treasurer. Wheeling, West Virginia. (b) Corporate Receipts. A common form of corporate receipt is as follows: . CHECKS, RECEIPTS AND NOTES. 347 Form 158. — Corporate Receipt. < xn •-} o u, w \n <\ CO $250.00 New York, July 15, 1908. Received from Edward M. Blair Two Hundred and Fifty Dollars, rental of Store at No. 65 Vesey St. for September. Metropolitan Realty Company, By Samuel F. Watkins, Treasurer. It would seem preferable that all receipts for money received by a corporation should be given in the corporate name. In practice, however, corporate receipts are com- monly signed by the treasurer. In such case the name of the corporation should appear prominently. Form 159. — Corporate Receipt. Official Signature. $725.25 September 15, 1908. WELLMAN SUPPLY CORPORATION, 265 Chambers St., New York. Received from the Jackson Hardware Company Seven Hundred and Twenty-five 25/100 Dollars in full of account. H. J. ASHTON, Treasurer. The larger corporations, when dividends are to be paid, employ dividend checks (See Form 154), which when properly endorsed and deposited, are usually regarded as all sufficient receipts. If, however, formal receipts are de- sired, the following form will serve. Form 160. — Dividend Receipt. 55 o < . < o $25.00 Boston, Mass., October 1, 1908. Received of the Howard Foundation Company Twenty-Five Dollars, payment in full of the regular quarterly dividend of One and One-half Per Cent, on the stock of said corporation standing in my name. Henry J. Pollock. ■**« ■ •m^^mmmimi :JMiJ«fe«Ufe.i|fe;.»J hi«rTTl'*r%<[li.ffflOT1riilJ|^Ti.^ jVln i i^ A;^^_ .^v h±.M. 348 MISCELLANEOUS FORMS. I This receipt is sent out with the dividend check to be signed and returned by the recipient. When payment of dividends is made at the office of the company or at the office of some specified trust company or bank, the parties receiving payment usually sign the dividend register (See Form 195) and no other receipt is necessary. Receipts for instalment payments on stock are given in Forms 8 to 11. (c) Corporate Notes. A corporate note does not require to be sealed. It may be signed by any officer or officers properly authorized thereto. Such authority is usually conferred by by-law provisions or by resolution of the board of directors, but otherwise may be given by custom. For large amounts or special transactions outside the usual routine, the offi- cer's authorization should always be specific and usually by resolution of the board of directors. The signature of a corporate note should always be the corporate signature. Any other signature may not only fail to bind the corporation, but has been held in soma states to involve the official signing the note in a personal liability as its maker or endorser. Form 161. — Corporate Note. By President. $500.00 New York, October 1, 1908. Ninety days after date the Hillman Dredging: Company promises to pay to the order of Howard P. Hunt the sum of Five Hundred Dollars. Valued Received. H11.LMAN Dredging Company. By Nathaniel Potter, President. Payable at Seaboard National Bank, New York. Form 162. — Corporate Note. By Treasurer. • -••••••••••••••••••••••••••••••••■•••••••••••••••■•••••••••••••••••••••a $2,500.00 Boston, Mass., September 1, 1908. Four months after date the Hanover Securities Company promises to pay to the order of James C. Bennett the sum of Twenty-Five Hun- CHECKS, RECEIPTS AND NOTES. 349 dred Dollars, with interest from date until paid, at the rate of Six Per Cent, per annum, at the Sedgwick National Bank of Boston. Value Received. _ Hanover Securities Company, ■^Q 725 By William Curtiss, Due January 1, 1909. Treasurer. The preceding notes are in the simplest form. The corporate signature is affixed by one officer or by two as may be customary or required by by-law provision or di- rected by the board. Collateral notes vary greatly in formality and severity of terms. (See § 42.) The following form is simple and is used by some of the larger New York banks. Form 163.— Collateral Note. On Demand. Collateral Note. $4,000.00 New York, N. Y., October 3, 1908. On Demand the Hanover Power Company promises to pay to the Seaboard National Bank of the City of New York, or order, at its Bank- ing House, No. 18 Broadway, New York, N. Y., Four Thousand Dollars for value received, with interest at the rate of Six (6%) Per Cent, per annum from the date hereof, said corporation having deposited with said Bank as collateral security for payment of this or any other liability or liabilities of the undersigned to said Bank, due or to be due or which niay be hereafter contracted or exist, the following property or securities, viz. : Sixty-five (65) Shares of the Preferred Stock of the United States Steel Corporation of the par value of One Hundred ($100) Dollars each, the certificate for said stock standing in the name of John H. Howard, Treas- urer of the said Hanover Power Company, and being endorsed by him in blank on the back of said certificate. , ^^^^^^ , . „ , The market value thereof is to-day $7,085.00, and full power and authority is hereby given to said Bank to sell, assign and deliver the whole or any part thereof, or any substitutes therefor, or any additions thereto, at any Brokers' Board, or at public or private sale, at the option of said Bank or its assigns on the non-performance of this promise or the non-payment of any of the liabilities above mentioned, or at any time or times there- after without advertisement or notice, which are hereby expressly waived ; and upon such sale the holder hereof may purchase the whole or any part of such securities discharged from any right of redemption, and after de- ducting all legal or other costs and expenses for collection, sale and de- livery, shall apply the residue of the proceeds of such sale or sales so to be made to pav any, either or all of said liabilities to said Bank or its assigns, as said Bank or its assigns shall deem proper returning the overplus, if any, to the undersigned. And the undersigned gives to said Bank a lien to secure this note and all said other liabihties now existing or hereafter arising, and whether at any time due or not, upon all prop- erty and securities of the undersigned now or hereafter deposited with or ■;j- ft^^^f^mf 350 MISCELLANEOUS FORMS. left in the possession of said Bank, either as collateral for any other obli- gation or otherwise, and also upon any balance at any time of the deposit account of the undersigned with said Bank. Other collaterals may be substituted or added from time to time with the bank's consent, all repre- sentations, conditions and agreements as to original collaterals applying to those so substituted or added. In Witness Whereof, the said corporation has hereunto affixed its corporate signature and seal, acting through its President and Treasurer duly authorized thereunto. i CORPOR.ATE I Hanover Power Company, } SEAL f By John H. Henderson, President. Harry F. Sinclair, Treasurer. Another form of collateral note is as follows: Form 164. — Corporate Note. Collateral Security. CoLLATERAi. Note. $10,000.00 New York, October 1, 1908. Ninety days after date the Berwick Mercantile Company promises to pay to the order of the Guardian Trust Company of New York City, at No. 170 Broadway, New York City, the sum of Ten Thousand Dollars, with interest from date until paid at the rate of Five (5%) Per Cent, per annum, and the said Berwick Mercantile Company doth here- with deposit with the Guardian Trust Company as collateral security for the due payment of the foregoing promissory note. Two Hundred (200) Shares of its stock in one Certificate No. 325, said Certificate standing in the name of Mark Baldwin, Treasurer of the said Berwick Mercantile Company, and endorsed by him in blank. And in the event that this note or the interest thereon shall not be paid when due. the said Berwick Mercantile Company hereby appoints and constitutes the said Guardian Trust Company its attorney in fact and irrevocably, with power of substitution, to sell at any time after this said note or any interest thereon is due and unpaid, with or without notice, and either at public or private sale, the whole or any part of said securi- ties, the proceeds thereof to be applied to the payment of the said prom- issory note, any interest due thereon, and any commissions properly pay- able on the sales of said securities so sold, and any surplus remaining thereafter, either of cash or of the said securities to belong to and be subject to the order of the said Berwick Mercantile Company; and should said securities not bring the full amount of this present note, together with any interest accrued thereon, said Berwick Mercantile Company undertakes and agrees to pay the amount still due to the holder hereof on demand. Should any such sale be made, the holder hereof shall directly or in the name of any other person, have the right to purchase the security aforesaid. In case the market value of. the same shall decrease, the said Berwick Mercantile Company hereby promises and agrees to proportion- ately reduce the amount of its indebtedness hereunder, or otherwise in- crease the security in proportion to said decrease of value. In Witness Whereof, the said Berwick Mercantile Company has caused its name to be subscribed hereunto by its CHECKS, RECEIPTS AND NOTES. 351 President, and its duly attested seal to be affixed hereto by its Secretary, on the day and year first above written. j CORPORATE j. Berwick Mercantile Company, I seal S By Henry S. Corbin, President. Attest Seal : Amos C. Hallock, Secretary. When the corporate officials are not expressly author- ized to execute notes by due resolution deposited with the bank in whose favor the notes are drawn, a certified reso- lution evidencing their authority is usually required. (For resolution see Forms 84-98; for certification see Form 169.) # ,^:.i»i»«s CHAPTER XXXIX. FORMS FOR CERTIFICATIONS. The certifications so frequently required in corporate procedure are never made in the corporate name. Cer- tificates and affidavits to corporate instruments are made over their own names by the officers directly interested or concerned. Acknowledgments are made for and on be- half of the corporation — but not in its name — by such cor- porate officials or agents as may be prescribed by statute or be authorized thereto by the by-laws or resolutions of the board. Form 165. — Certificate to Service of Notice. I, the undersigned, Secretary of the Atlantic Machine Works, do hereby certify that in accordance with the by-law requirements of said Company, a copy of the foregoing notice, properly enclosed and directed, and with postage prepaid, was by me on the 3rd day of October, 1908, mailed to each stockholder of record of said Company at his address as it appeared on the books of the Company. Henry H. Linden. New York City, October ISth, 1908. This certificate usually appears on the same sheet with and below a copy of the notice, though sometimes written separately and attached to a copy of the notice. (Sec §§ 87, 97.) In this latter case the wording of the cer- tificate must be changed to correspond with the facts. An affidavit, as in the case of the certification, may appear on the same sheet as the copy of the notice, or be attached thereto. 352 CERTIFICATIONS. 353 Form 166. — Affidavit to Service of Notice. ss. State of New York, ) County of New York, ) On this 15th day of October, 1908, before me personally appeared Henry H. Linden, Secretary of the Atlantic Machine Works, who, being duly sworn, did depose and say that on the 3rd day of October, 1908, a copy of the attached notice of meeting, properly enclosed and directed and with postage prepaid, was by him mailed to each stockholder of record of said corporation at his address as shown by the books of the Company. Henry H. Linden. Sworn to and subscribed before me the day and year aforesaid. John H. Anderson, j notarial I Notary Public for the State ■j SEAL. ) and County of New York. The best evidence of notice by publication is furnished by complete copies of the papers in which the notice ap- peared. When these are supplied, no certification as to publication of the notice is usually required. If, however, the notice is clipped from the paper and so preserved, an affidavit is sometimes considered desirable. The larger city papers furnish such affidavits on request for notices published in their columns. If the affidavit is made by the secretary it may be in the following form. Form 167. — Affidavit to Publication of Notice. Affidavit. ss. State of New York, ) County of New York, f On this 15th day of October, 1908, before me personally appeared Henry H. Linden, Secretary of the Atlantic Machine Works, who being duly sworn, did depose and say that the annexed notice was published in the "New York Times" on the 3rd and 10th days of October, 1908. Henry H. Linden. Sworn to and subscribed before me the day and year aforesaid. notarial ) John H. Anderson, SEAL. S Notary Public for the State and County of New York. { In the following form of certified resolution the reso- i*t*»« '^ V -^ 'S '5 . >...,*«(i-.^f^^^W!^ ■'»«l«*7»'^#*|«%fff *|^*^r»««l* ' 354 MISCELLANEOUS FORMS. lution appears on the upper part of the sheet followed by the certification, the general arrangement being the same as in Form 172. Form 1 68.— Certified Resolution Designating Bank. {For Resolution see Form 84.) I, Sherman H. Rogers, Secretary of the Allis Drug Company, do hereby certify that the foregoing is a full and true transcript of a resolu- tion duly adopted at a regular meeting of the Board of Directors of the said Company held in the City of New York on the 10th day of Novem- ber, 1908, as it appears on the minutes of said meeting, and I do further certify that Charles Allis is the duly elected President of said Company, and Jasper T. Huntington is its duly elected Treasurer. In Witness Whereof, I have hereunto affixed my otticial signature and the corporate seal of said Company, this 25th day of November, 1908. I CORPORATE I Sherman H. Rogers, 1 SEAL. \ Secretary. The following certification is employed in connection with the resolution given in Form 84a: Form 1 68a.— Certification of Resolution Designating Bank. I John H. Farwell. Assistant Secretary of the Standard Milling Company, do hereby certify that the foregoing resolution was duly adopted at a regular meeting of the Board of Directors of said Company held on Tuesday, November 10, 1908, in the office of the Company, 225 Fifth Avenue New York, all as shown by the minutes of said meeting, and that the transcript of Section 3, Article VII of the By-laws of said Company appearing in the preamble of said resolution is a true and accurate trans- cript thereof from the duly adopted By-laws of the Company, and I do further certify that Henry F. Farrand is the duly elected Treasurer of said Companv and Howard C. Malcolm is its duly elected President Witness my official signature and the corporate seal of said Company, this 18th day of November, 1908. John H. Farwell, < CORPORATE \ ' Assistant Secretary. ( SEAL. { If the bank requires certified signatures of the signing officials, these signatures might be written on the same sheet between the resolution and certification, and the fol- lowing phrase be added to the certification : "and that the CERTIFICATIONS. 355 signatures above written are respectively the signatures of the said Henry F. Farrand and Howard C. Malcolm." A different form of certification employed in connec- tion with the resolution of Form 85 is as follows: Form 169. — Certification of Resolution. The undersigned Secretary of the American Textile Company, does hereby certify that the foregoing resolution was duly adopted on the 10th day of December 1908, at a meeting of the Board of Directors of aid reTent"^ regularly called and duly constituted and at which a quorum was Witness my hand and the seal of said corporation this 12th day of December, 1908. , ^ Alfred Dil worth, f CORPORATE ) - \ SEAL. J 7 Secretary. Form 170.— Certificate of Election of Treasurer. I, Horace B. Elkins, Secretary of the Ellwood Creamery Company, hereby certify that at a regular and duly constituted meeting of the Board of Directors of said Company held in the City of Albany on the 1st day of Deceniber 1908, Henry Howells was elected Treasurer of said Com- pany to fill the vacancy m said office caused by the death of J T Mc- Al en, and that the said Henry Howells is now the duly qualified and authorized Treasurer of the said Ellwood Creamery Company Witness my hand and the seal of the Company this 10th dav of December, 1908. , ^ «- > Horace B. Elkins, {----^} Secretary.. The following certificate of the election of corporate officials may be used when greater formality is desired. Form 171.— Certificate of Election of Officers. I, Emory Hardin Secretary of the Dyett-King Leather Company, do hereby certify hat the directors of said Company being duly assembled in lawful meeting in the office of the Company, No. 75 Dey St New J A^A^YC """ ^^f ^}^ ^^y. °^ November, 1908, and a quorum being pres- ent did then and there elect Frederick Myers President and Walter C •'^^M ?u V^^surer of said corporation, to serve for the ensuing year and until the due election and qualification of their successors, and that Fred- erick Myers and Walter C. Jackson are now duly and fully qualified and empowered to act for said corporation in their respective official capacities i'-si ^'m /*ii»'W«^'«"»*«e t 1 356 MISCELLANEOUS FORMS. In Testimony Whereof, I have hereunto affixed my official signature and the corporate seal of said Company this 15th day of November, 1908. Emory Hardin, •^ -» Secretary. j CORPORATE \ \ SEAL. i The following are convenient forms for certification!^ of transcripts. Form 172.— Certification. Transcript from By-laws. CONSOLIDATED CRACKER COMPANY. Transcript from By-Laws. "Article IV.— Officers. 'Ih'e Preliden^whlu'Vesent shall preside at .all n^e^ting^^ ofjhe stockholders and of the Board of Directors ; shall sign all certificates of sock shall si^n or countersign as may be necessary all such bills, notes checks dra ts and other instruments as may pertain to the ordinary course of the Comoanv's business, and shall sign when duly authoried thereto all c1n\'r:cts!3er's: deeds, licenses and other instruments of a spe-al nature^ "He mav also in the absence or disability of the 1 reasurer, enaorse checks d^fts and other negotiable instruments for deposit or collection and sh^l^l^^^^^ Secretary sign the minutes of all meetings over which he presides." I lames T Howard, Secretary of the Consolidated Cracker Com- nanv do hereby certify that the above is a true and correct copy of Sec- pan>, do nereoy ceri y adopted by-laws of this Company, and in ber. 1908. James T. Howard. Secretary. f CORPORATE \ \ SEAL. J Form lys.—Certification. Transcript from Minutes. Transcript from Minutes. WESTON MANUFACTURING CORPORATION. Regular Meeting of Di rectors H eld September 15, 1908. (Transcript from minutes appears here.) T u A ..c-^^H cjprretarv of the Weston Manufacturing Corpora- CERTIFICATIONS. 357 tors of said Company held in the office of the Company on the 15th day of September, 1908, and recorded on pages 85 to 87 of the Minute Book of said Company. Witness my hand and the seal of the Company this 14th day of November, 1908. Horace Potter, corporate \ Secretary. seal. { } The president occasionally joins with the secretary in the certification of any special important transcript. In such case the certificate is changed as follows: Form 174. — Certification of Minutes. President and Secretary. We, the undersigned. President and Secretary respectively of the Weston Manufacturing Corporation, do hereby certify that the above and foregoing is a true and accurate transcript from the minutes of a regular meeting of the Board of Directors of said Company held in the office of the Company on the 15th day of September, 1908, and recorded on pages 85 to 87 of the Minute Book of said Company. In Witness Whereof, we have hereunto affixed our official signatures and the seal of the Company in the City of New York on this 14th day of November, 1908. j corporate 1 Henry J. Randall, J President. Horace Potter, Secretary. SEAL. Affidavits take the place of the secretary's certificate when corporate records or transcripts therefrom are re- quired for use in legal proceedings. Form 175. — Secretary's Affidavit to Minutes. ss. County of New York, ) State of New York, f On this 14th day of November, 1908, before me personally appeared Horace Potter, who being duly sworn, did depose and say that he is the Secretary of the Weston Manufacturing Corporation ; that he was present at the regular meeting of the Directors of that Company held on the 15th day of September, 1908; that he recorded the proceedings of said meeting in the Minute Book of the corporation, and that the above and forego- ing is a true and correct transcript from the minutes so recorded. Horace Potter. Sworn to and subscribed before me on the day and year above stated. {Notarial signature and seal.) '-•5- f *<.. 'j.r.Jl^l^ %44*i^^*ms*imi4'i 358 MISCELLANEOUS FORMS. Notarial exemplifications of certified transcripts from the corporate records are sometimes required as illustrated by the following form. Form 176. — Notarial Exemplification of Minutes. ss. State of New York, ) County of New York, f t u inno Personally appeared before me this 20th day of November, 190o, Horace Potter, to me well known, and acknowledged that he signed the foregoing certification of a transcript from the minutes of the Weston Manufacturing Corporation, and affixed the seal of said Company thereto as Secretary of the said Company for the purposes therein set forth, and I have personally examined the minutes of said Company under date of September 15th, 1908, and certify that the foregoing transcript is correctly transcribed therefrom. Morris Manning, < NOTARiAi, ) Notary Public for the State j SEAL \ and County of New York. ^ ' ^ No. 765. Term expires December 1, 1908. The treasurer's certifications to matters relating to the corporate finances are usually in the form of affidavits. Form 177. — Treasurer's Affidavit. Corporate Statement. State of New York, \ ^^ , County of New York, ] • On this 19th day of October, 1908, personally appeared before me, a Notary Public in and for the County of New York, Walter L. Hood, Treasurer of the Hood Scale Company, who, being duly sworn, did depose and say that he has full charge and control of the books and accounts of the said Company ; that the above and foregoing statement is taken from said books and accounts; that it is a true and accurate transcript there- from, and that to the best of his knowledge and belief it is a just and correct presentation of the financial condition of said Company on this Walter L. Hood. Sworn to before me the day and year aforesaid. James H. Steele, j notarial ) Notary Public for \ SEAL. f New York County. No. 994. Term expires Feb. 15, 1909. This affidavit follows the statement on the same sheet, or on the last sheet if the statement extends over several pages. In the affidavit which follows the statement of ac- count is included with the form. ' CERTIFICATIONS. 359 Form 177a. — Treasurer's Affidavit. Individual Statement. New York, December 1, 1908. Howard J. Elkins, Dr. To Fielding Desk Company. 1908 Nov. 14 To 1 Standard Roll Top Mahogany Desk, 54"... $75.00 1 Bookkeeper's Desk, 48" 35.00 $110.00 ss. State of New York, ) County of New York, ) On this 1st day of December, 1908, appeared before me, a Notary Public in and for the County of New York, John J. Fielding, Treasurer of the Fielding Desk Company, who, being duly sworn, did depose and say that he has full charge and control of the books of account of said Company; that the above statement of indebtedness of Howard J. Elkins to said Fielding Desk Company is taken from said books of account, and that it is a true and accurate statement of said indebtedness of said Howard J. Elkins on this date. John J. Fielding. Subscribed and sworn to before me the day and year aforesaid. (Notarial signature and seal.) When corporate acknowledgments are taken the notary- should not be an officer or stockholder of the corporation. The form of acknowledgment is usually regulated by stat- ute and therefore varies in almost every state of the Union. The following form of corporate acknowledgment is that prescribed by the statutes of New York. Form 178. — Notarial Acknowledgment. New York. State of New York, ) County of New York, ) On this 16th day of November in the year 1908, before me personally came John J. Kerry, to me known, who, being by me duly sworn, did depose and say that he resided in the City of New York; that he is the President of the Kerry Machine Works, the corporation described in and which executed the above instrument; that he knew the seal of said corporation; that the seal affixed to said instrument was such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. John J. Kerry. Sworn to before me the day and year aforesaid. (Notarial signature and seal.) ■HS I "I* h ' 1; i' ■ ■ ^;i iM*S«*K-f*«S«i**l li CHAPTER XL. POWERS OF ATTORNEY, CONTRACTS AND ASSIGNMENTS. (a) Powers of Attorney. The execution of a power of attorney varies according to the powers conveyed and the conditions under which it is given. The instrument which follows does not re- quire acknowledgment wdien the parties are know^n to the corporate officials. If otherwise acknowledgment is usu- ally required. (See Forms 130a, 130b.) Form 179. — Power of Attorney. To Receive Dividends. Power of Attorney. I, the undersigned, do hereby constitute and appoint George H. Wil- liams of New York City, my true and lawful attorney, for me and in my place and stead, to receive any and all dividends that may be declared upon Fifty Shares of Preferred Stock of the Howard Bank Note Com- pany now standing in my name on the books of said Company, and to receipt for the same, and to do all other things that may be necessary to carry into effect the intent of this power of attorney; and I hereby ratify and confirm all that my said attorney may properly do by virtue of the authority herein conferred. In Witness Whereof. I have hereunto affixed my signa- ture and seal this 7th dav of December, 1908. George H. Lane. [l. s.J Witnessed by Howard Lansing. A corporate power of attorney differs from the or- dinary form only in those details directly incident to its corporate origin. 360 POWERS OF ATTORNEY AND CONTRACTS. Form 180.— Power of Attorney. To Collect Money. Power of Attorney. 361 Know Ali, Men by These Presents : That the Tucson Cattle Company, a corporation duly organized under the laws of Arizona, does hereby make, constitute and appoint Howard H. McComb of the State of New York, its true and lawful attorney, for It and m its name, place and stead, to collect and receive from the New 7^I?^^^X^\f Association of New York City the sum of Three Thousand ($J,000) Dollars with interest thereon at the legal rate from the 1st day of January, 1908, said amount being due and payable to the Tuscon Cattle Company for and on account of cattle shipped the said New York Drovers' Association during the month of December, 1907, and the said Howard H. McComb is hereby fully authorized and empowered for and on account of the said Tuscon Cattle Company and in its name, to collect, receive and receipt for the said Three Thousand ($3,000) Dollars, and the in- terest thereon as aforesaid, in whole or in part, but without prejudice to any portion thereof unpaid, and to incur and pay on behalf of the said Tucson Cattle Company all reasonable expenses incident to the collection of said amount, including all proper cost of any suit or other legal pro- ceedings necessary thereto, and generally to do all such other things in connection therewith as may be necessary and proper in the premises In Witness Whereof, the said Tucson Cattle Company has caused its corporate name to be signed hereunto by its President and its corporate seal to be affixed and attested by its Secretary, all being done in the City of Tucson, Arizona, on this the 25th day of November, 1908. Tucson Cattle Company, By George M. Price, President. ] corporate seai. } ATTEST seal: Wilson M. Burney, Secretary. The foregoing power of attorney would usually be ac- knowledged in order to give it greater weight and more ready recognition. For the same reasons the power of at- torney which follows should either be accompanied by a certified copy of the resolution by which it was authorized, or otherwise be acknowledged. Form 181.— Power of Attorney. To Make Delivery of Deed. Power of Attorney. Know All Men by These Presents : That the Albany Flouring Mills, a corporation dulv organized under the laws of the State of New York, and having its principal office and place of business in Albany, New York, has made, constituted and ap- 11" i t. •?» ' K f I j:ii-*a»*.aM»*Sy^ 362 MISCELLANEOUS EORMS. «r.intprl and bv thcsc oreseiits does make, constitute and appoint, George ?I McCall of kih^^^ >ts true and lawful attorney for "and its name and stead,' to deliver to the Adams F«""f^f >°" ^.?^^P^J^^ l!f Philridelnhia Pennsylvania, a certam deed duly executed b^ the saia Albanyl&'rfn/Miuf and. transferring ,o the said Ad-s Foundat.on rnmnanv the orooertv there n described at Ncs. 1534, 1530 ancl IDJO vvebi Adams Foundation Company the sum of N met een Thousand, A wo nun dred and F"\ty $19,250) Dollars in cash, payment for the property trans- ferred by sdd deed and to receipt for said payment, and to do all such ^ILrthiWasm^yben^^^^^^^^^^^^ Mills has caused its corporate seal to be affixed hereunto by is Secretary and its name to be subscribed hereto by is President, all being done in the City of Mbany and State of New York, on this first day of December, 1908. Albany Flouring Mills, By Jesse H. Blanchard, President. f CORPORATE { \ SEAL S ATTEST seal: Julian Hurndon, Secretary. The power of attorney which follows authorizes the sale of land and the execution and delivery of the deeds, and therefore requires the same formal execution as a deed Without this it is ineffective. The form of execu- tion must comply with the law of the state in which the land to be conveyed is located. Form i82.-Power of Attorney. To Manage, Sell and Deed Land. Power of Attorney. ^''°?h^t^2'l':rw\,TlnTesrrrSn,pan. a corporation du.,r,an^^^^^ and existing under and by virtue of the laws of the gt^t^^J^Tg^^Jg'; place and stead, to bond grant, bargain sell contract, lease excna g g^^^ Options on, sell timber ^^^^.^^'fj-^'^^^^^^^^^ by him^ be in or on, or handle or dispose of in ^"^'\°J''^^^h consideration and on deemed advantageous and advisable, ^"^J^'^^'^n .^nthat certain tract such terms as he mav ^PP^^°^^^ .^"i^" .^i^f^'^eJtmenTcom^^^^^^ in Brazos or parcel of land, owned b> ,said Ber dl TnvestmentJ^o P^^ y.^^ ^^^^^ County, Texas, consisting of the east naii oi uic ic ^ POWERS OF ATTORNEY AND CONTRACTS. 363 j CORPORATE ( SEAL as the J. J. Oliver League, and containing Two Thousand, Two Hundred and Fourteen (2,214) Acres, more or less, said land being part of the Headright granted to J. J. Oliver by the Mexican Government and sur- veyed by the County Surveyor in 1838, and conveyed to the Berwell In- vestment Company by deed from the said J. J. Oliver, dated July 1st, 1856, and recorded m the office of the County Clerk of Brazos County, D. B. 15, page 225; and the said Berwell Investment Company grants to its said attorney full power and authority to collect and receive for said Company all rents, royalties and other considerations or payments de- rived from the said property in any way; and for the said Berwell In- vestment Company and in its name and stead, either alone or jointly with others, as may be requisite and necessary, to make, execute, acknowledge and deliver good and sufficient deeds, conveyances, option contracts or leases for the said property, or for any parts thereof, or for any rights therein or thereon, giving and granting its said attorney full power and authority to do and perform any and every act and thing whatsoever requisite and necessary to be done in the premises, the said Company hereby ratifying and confirming all that its said attorney shall lawfully do or cause to be done by virtue of this present indenture. In Witness Whereof, the said Berwell Investment Company has caused its corporate name to be signed by its Presi- dent and its corporate seal to be affixed by its Secretary, all being done in the City of New York on this the 18th day of August, 1908. Berwell Investment Company, By James Warren, President, ATTEST seal: Willis Baker, Secretary. This instrument is sweeping, giving the agent prac- tically every power over the lands affected that the com- pany has itself. The acknowledgment must in this case follow the Texas form. When a corporate power of attorney is given for some special act, it expires automatically as soon as that act is performed. When, however, it is desired to terminate the powers prior thereto, or where the power is a continuing one, a formal revocation is necessary. Notice of this re- vocation should be sent to the parties directly interested, and, in case of a general power of attorney, should also be published. Form 183. — Revocation of Power of Attorney. Know All Men by These Presents : That the Berwell Investment Company, a corporation duly organized and existing under and by virtue of the laws of the State of New York, ,s:».-ilil%^i #*^2»% 364 MISCELLANEOUS FORMS. I and having its office and principal place of business at No. 30 Broad Street in the Citv of New York, has for good cause and consideration revoked, recalled,' annulled and made void, and by these presents does revoke, recall, annul and make void a certain power of attorney given under date of August 18th, 1908, under the corporate signature and seal, to Horace M. Maxwell of Houston, Texas, and does hereby withdraw, deny and cancel any and all powers and authorities whatsoever therein expresse an ^ ^Witness Whereof, the said Berwell Investment Company has caused its corporate signature and seal to be here- unto affixed by its President and Secretary in the Uty of New York on this 19th day of November, 1908. Berwell Investment Company, By James Warren, President. Willis Baker, Secretary. ( corporate I \ seal. ) (b) Corporate Contracts. Corporate contracts differ in nowise from contracts between individuals, save in the verbiage necessary to adapt them to the corporate form. The forms which fol- low are included merely to illustrate this adaptation. Form 184. — Corporate Contract. Contract. An Agreement, made and entered into this 25th day of November, A D 1908 bv and between the Atlas Lithographing Company, a corpora- tion dulv organized under the laws of the State of Mame and having its usual pl'ace of business in Boston, Massachusetts, party of the first part and the Selby Lithographing Company a corporation ?rganized under the laws of the State of New York, and having its principal office and place of business at No. 20 Broad Street in the City of New York, party of the '"'"ptr^^'nd in consideration of the sum of One Dollar and of other valuable considerations passing between the parties hereto, the receipt whereof is herebv respectively acknowledged, it is agreed as follows ^ (1) That the said party of the first part shall employ one John H. Bernard of Boston, Massachusetts, for account of both the parties here- unto to work upon and perfect as far as may be, a certain improvement "n li'thography k^^^ as^he "Silver Plate Process," said process bemg now the^jofnt property of the said parties to this present agreement (2) That said narty of the first part shall pay the said John R Bernard a monthly salary not exceeding Three Hundred ($3(X)) Dol a s and shall also furnish such materials, supplies and assistance as the saia John H. Bernard may reasonably require in the P^gress of his work (3) That at the end of each quarter said party of the first part shall render a sTatement of the expenses incurred by reason of the em|)loymem of the said John H. Bernard for the perfection of the said biiver riaie POWERS OP ATTORNEY AND CONTRACTS. 365 Process, and said party of the second part shall within ten days of the receipt of said statement remit one-half thereof to the said party of the first part. (4) That all improvements in said Silver Plate Process or in con- nection therewith that may be made or discovered by the said John H. Bernard, shall be the joint and equal property of the two parties to this present agreement, and patents therefor shall be taken out in the names of the said parties of this present agreement and at their joint expense. (5) That said employment of said John H. Bernard shall continue for one year from date, unless sooner terminated by mutual agreement or by circumstances beyond the control of the parties hereto. (Testimonium and signatures as in Form 146). This agreement might or might not be acknowledged at the discretion of the parties. The contract as executed is legally sufficient. The only advantage to be gained by an acknowledgment is the greater ease of proving the au- thenticity and due execution of the instrument in case of litigation. Form 185. — Corporate Bill of Sale. Bill of Sale. Know All Men by These Presents : That the Standard Laundry Machine Company, a corporation duly organized under the laws of the State of New York, with its principal office and place of business at No. 50 Dey St., in the City of New York, in consideration of the sum of One Thousand Dollars to it paid by the Clipper Laundry Company of No. 71 East 21st St., New York City, the receipt whereof is hereby acknowledged, does hereby sell, transfer and assign to the said Clipper Laundry Company the following goods and chattels, viz. : All of the laundry machinery, tools, and apparatus of every kind now in the premises at No. 365 West 19th St., formerly occupied by the Union Laundry Company, all as set forth and specified in the annexed schedule: to have and to hold all and singular the said goods and chattels to the said Clipper Laundry Company, its successors and assigns to their own use and behoof forever, and the said Standard Laundry Machine Company does hereby covenant with the said grantee that the said Standard Laundry Machine Company is the lawful owner of said goods and chattels; that they are free from all liens; that it has good right to sell the same as aforesaid; and that it will warrant and defend the same against the law- ful claims and demands of all persons. In Witness Whereof, the said Standard Laundry Machine Company has caused its corporate name to be signed hereunto by its President, and its corporate seal to be affixed and duly attested by its Secretary, said corporate seal being affixed both to these presents and to the schedule hereunto annexed, all being done in the City of New York, on this 10th day of October, 1908. (Signature and attested seal as in Form 188.) ...n *:■ • <» ■ 366 MISCELLANEOUS EORMS. The inventory or schedule of the goods conveyed by this bill of sale should be attached to it, and, in accordance with the provisions of the conveyance, be identified by the duly attested seal of the company. (c) Assignments. Form 1 86. — Assignment of Contract. Assignment. Know All Men by These Presents : ,_ , r- *• „♦ That for and in consideration of the payment by the Connecticut Valley Paper Mills, a corporation organized under the laws of the btate of Connecticut and having its principal office and place of business at 525 Main Street New Haven, Connecticut, of Twenty-five Thousand, Seven Hundred and Forty-five ($25,745) Dollars to the Holda. Chemical Com- pany, a corporation duly organized under the laws of the State of New York and having its principal office and place of business at 152 Warren Street New York City, the receipt of which payment is by the last-named corTor'aiioT hereby acknowledged, said Holden Chemica Company does hereby assign, transfer and convey to the said Connecticut Valley Paper MHls all and singular, its right, title and interest of ^ve^X .^^nd in and to f certain contract (copy of which is hereunto annexed ^"^ rn^^^ P.^^\f this present instrument) entered mto on the 3Jst day of July, 19U8, be- tween Martin S. Coleman of Brooklyn, New York and the said Holden Chemical Companv, said contract vesting in the ^aid last-named company, hs successors and' assigns, under the conditions set forth in said contract The exclush-e right to acquire and use all the inventions and processes that rSav hereafter be made, discovered or devised by the said Coleman for the manufrcture of paper ir to be used in connection therewith, said contract S conveved to and accepted by the said Connecticut Valley Paper Mills vlXains' rights, privileges and obligations as herein set forth and as lipretinto held bv the said Holden Chemical Company. . , ^ hereunto ^^'^^^^^^^^^^^ WnEREor, the said Holden Chemical Company has hereunto caused its corporate name and seal to be affixed by its President and Secretary al being done in the Citv Countv and State of New York, on this 28th day of October, 1908. Holden Chemic.\l Company, By James Holden, President. Harold Sheldon, Secretary. i CORPORATE 1 SEAL. \ Acknowledgment is not essential to this assignment but is advisable. The instrument as given does not relieve the assigning company from liability under the assigned con- tract. To secure this, a specific release from the other POWERS OF ATTORNEY AND CONTRACTS. 367 party to the assigned contract is essential. A simple form of such release to follow the foregoing contract or to be attached to it is as follows: Form 187. — Assent to Assignment of Contract. I, Martin S. Coleman of Brooklyn, New York, party of the first part to a certain contract entered into on the 31st day of July, 1908, with the Holden Chemical Company of New York City, do for good and valuable considerations, the receipt of which is hereby acknowledged, consent and agree to the transfer of said contract to the Connecticut Valley Paper Mills as set forth in the foregoing assignment, and to the substitution of the said Connecticut Valley Paper Mills for the Holden Chemical Com- pany in said contract, and do hereby release, relieve and discharge the said Holden Chemical Company from any claim, liability or other obliga- tion for, on account of or by reason of said contract. Witness my hand and seal this 28th day of October, 1908. Martin S. Coleman. [L. S.] The assignment of contract which follows is informal but sufficient where the whole transaction is well under- stood. In practice it is usually endorsed on the back of the contract to be assigned or, with the word "within" changed to "above and foregoing," is placed on the last page of the contract. Form 188. — Assignment of Contract. Endorsement Form. For and in consideration of One Dollar and of other sufficient con- siderations, the receipt of all which is hereby acknowledged, the Sterling Power Company does hereby sell, assign and transfer to the Cohoes Light and Power Company the within contract with all the rights, privileges, obligations and undertakings thereof as therein set forth. In Witness Whereof, the signature and the attested seal of the said Sterling Power Company are hereunto affixed by its duly authorized officers this 16th day of November, 1908. j corporate ) Sterling Power Company, / seal. ) By Miller Sterling. President. Attest seal: Henry Welling, Secretary. The patent assignment which follows is in general ac- cord with the forms approved by the Patent Office. n Iff T .^ww>«y I^^<#^»^.- ^^^j«sr*^^'itaiKj ^^IfcMi'l*?**^*!*?.- 368 MISCELLANEOUS FORMS. Form 189.— Assignment of Patent. Individual to Cor- poration. Assignment of Patent. Whereas, I, Alan Hudson, of Newburgh, County of Orange, State of New York, did obtain letters patent of the United States for an improve- ment in Car Couplings, which letters patent are numbered 605,948, and bear date the 6th day of November in the year 1908; and Whereas, I am now the sole owner of said patent, and of all rights """^ WHEREA^^ihT Montauk Car Coupler Company, a corporation duly organized under the laws of the State of New Jersey, and having its prin- cipal office and place of business at No. 15 Exchange Place, Jersey City, New Jersey, is desirous of acquiring the entire interest m the same to- gether wit? all claims for profits and damages arising from past mfringe- ments thereof, and the right to sue for and recover in its own name on all ^^""4w,'TTEUoltTTdl'w^ it may concern, be it known that for and in^insideration'of the issue to my order by the ^^^^ Mon^^^^^^^ Couoler Companv of its entire capital stock, excepting Ten (10) bhares here?ofore "sued' to the incorporators of said Company the receipt^! which aforesaid stock, amounting to Ninety-nine Thousand ($99,000) SolLrs,irhereby acknowledged, I, the said Alan Hudson, have so d as- ^^ed knd transferred, and by these presents do sell, assign and transfer unto the said Montauk Car Coupler Company the ^^oleri^ht title and Tnterest for the United States its colonies ^"^ ^,^PJ"f "J^ ' '" fem there- said improvement in car couplmgs, and in and to t^e letter^^^^^^ for aforesaid, and the inventions covered thereby, together with all claims for profits and damages arising from past ^"^""g^"^^^"^^,^^ !\'n'' fi^f fo? nr^tfmt and the right to sue and recover, in its own name on all claims lor L T nWngemen'fs the same to be held and -ioye'l by the sa^ Montauk rTr Poiinlinff Comoanv for its own use and behoof, and for the uses ana beho W ifs W^^^^ successors and assigns to the end of the term for which said letters patent are or may be granted, as fully and entireTy as the same would have been held and enjoyed by me had this assignment and sa^^^^^^^^ ^ ,,,, , affixed my seal at Newburgh, County of Orange, State of New York, this 4th day of December, 1908. Alan Hudson. lL,. o.J In presence of Jacob Ellis. Hendrick N. Enslow. An assignment of patent does not require notarial ac- knowledgment under the rules of the Patent Office, but, as an acknowledgment, as already stated, is prima fane evi- dence of the due execution of the instrument, it is usually affixed. CHAPTER XLI. BOOKS OF RECORD. (a) Transfer Book. The transfer book contains blank forms of assignments, which when properly filled effect the specified transfers of stock, and also afford a formal record of these transfers. (See §§ 33, 34, 36-39.) The following form of transfer book is generally used by corporations in which stock transfers are not frequent. Form 190. — Transfer Book. NEWARK TRANSPORTATION COMPANY. Ledger Folio 35. Transfer No. 125. For Value Received, I hereby sell, assign and transfer to John H. Sheldon of New York City, Fifty (50) Shares of the Capital Stock of the above-mentioned Company now standing in my name on the Company's books and represented by surrendered certificates Nos. 62, 63. Witness my hand and seal this 15th day of August, 1908, at Newark, New Jersey. Harold Fiske, [L. S.] By Leonard Gorham, Attorney. New Certificates Nos. 135, 136, 137 Issued to John H. Sheldon. Ledger Folio 64. (See § 36.) The ledger folio in the upper left-hand corner of the form given indicates the stock ledger page on which ap- pears the account of the party assigning the stock. The ledger folio below gives the stock ledger page on which the account of the assignee appears. As the numbers of both the surrendered and issued certificates also appear, reference is easy to the stock certificate stubs on which the transaction is again recorded. 369 •<#. '»««' j^#**Miid«lWW*'4»:'* |ili 370 MISCELLANEOUS FORMS. Form 1 9 1. —Transfer Book. Condensed Form. We, the transferrers hereunder, owners of record of the Capital Stock entered 'below, do by attorney undersigned, hereby respectively sell, assign said Company set opposite our respective names, all as set forth below. Date. Certificates Surrendered. Transferrer. Ledger Folio. Certificates Issued. Numbers Shares Numbers Shares. 1908 Oct. 1 2 175 365 50 75 Henry H. Brown Farrell T. Smith. 48 400 862 (863 (864 50 50 25 Frequently the transfers of this form of transfer book are provided with stubs, upon which also appear the data relating to the transfer. As the transfers remain in the book, and are available at any time for reference, such stubs are entirely unnecessary. Another form of transfer book used by the larger cor- porations is given in Form 191. This shows the upper por- tion of a page. The blanket assignment at top enables the record of each transfer to be made on a single line. (See §36.) In the entries shown, the second transferrer has sur- rendered a single certificate for seventy-five shares to be issued to two different parties, and two partial entries are therefore necessary. If a single party surrendered several certificates to make up the total number of shares to be transferred, each certificate may be entered on a separate line, or, if not too numerous, the certificate numbers and amounts may be interlined so that the entire transaction appears on a single line of the record. BOOKS OF RECORD. 371 of the Harris Smelting Company represented by the surrendered certificates and transfer to the transferees indicated, the number of shares of stock of Transferee. Ledger Folio. Address. Signature of Attorney. Frank T. Lord... John H. McLane. H. T. Maxwell.. 150 170 162 170 Broadway, N. Y Bound Brook, N. J 185 West End Ave., N. Y. Howard H. Benson Howard H. Benson Howard H. Benson (b) Stock Book and Stock Ledger. The following forms of stock book and stock ledger comply with the requirements of the statutes in almost every state of the Union. (See § 35.) Form 192 (page 372) represents the upper portion of a page from the combined stock book and stock ledger. The leaves of the book are usually indexed, and the accounts arranged in alphabetical order — in New York and some few other states as a matter of statutory requirement ; else- where as a matter of convenience. If the stock is not ac- tive, more than one account may appear on a page, each account being separated from the one that follows by a heavy single or double line. One line across the entire page of this ledger is devot- ed to each transaction whether a purchase or a sale. In the second column, if stock is purchased, is entered the name of the stockholder from whom the stock is trans- ferred, but if stock is sold, the name of the party to whom the certificate is issued. The third column, "Amount Paid t^i ^#-1^ i^ ■**k*-;-*M* I m 372 u to o ■*-> CO -o c (d o o PQ u o CO o . o Q I O « o i; < o MISCELLANEOUS FORMS. to w M •< a: fa o n D o w M P < ea H •< O Q W 2 en b4 O •^ o o Q o s to to to to to CM o to to ^0 I tn en C o c *« K c o c M 6 ^ •r o O fe o W3 c O tn en O to to r— 00 s = < a; c 3 ■?f. BOOKS OF RECORD. 373 Thereon" — has no reference to the amount paid for the stock by the party purchasing save in case of original issue. It is merely intended to show the amount received by the corporation on the stock transferred, thereby indicating the amount, if any, still due to the corporation. The rec- ord of this column is ordinarily of little or no value. It is included in the present form merely in compliance with the statutory requirements of some few of the states. The fourth column shows the number of the certificate issued to the party when he acquires stock; the fifth col- umn the numbers of the certificates surrendered by him when he disposes of stock. If he sells but a portion of the stock represented by a certificate — as in the third entry of the form given — the number of the new certificate issued to him for the balance of the unsold stock is entered in the fourth column. In the sixth column is entered the number of shares dis- posed of when sales are made, and in the seventh column the number of shares acquired when stock is purchased. These two last columns constitute the stock ledger proper, and the amount of stock belonging to the party with whom the account is kept may be found by taking the difference between the footings of these columns. It sometimes happens that a party acquiring stock, in- stead of directing its issue to himself in a single certificate, will have it issued in a number of certificates. The entry in the stock book then varies. Sometimes a separate line is devoted to each certificate issued, but the method is cum- brous. If the number of certificates issued is small, the transaction may be entered on a single line, all the certif- icate numbers appearing in the proper space in the fourth column in small figures; or two or more lines might be accorded the transaction in order to allow room for the entry of these numbers. Where the number of certificates issued is very large, the transaction may be entered on a i •■ ^i^mi-^Mm^^, ^•■:S^- fff 374 MISCEl^IyANEOUS FORMS. single line, and the certificate numbers be noted at the foot of the page, reference thereto appearing in the fourth column where the numbers would otherwise have been entered. The same conditions obtain, and the arrangement of the entry is similar when a number of certificates are surrendered for cancellation on a single sale. §.^mm^' 'm'^f^ni»%im:f^w^u^**mim- BOOKS OF RECORD. 375 On the left or sales side of the account the third column shows the numbers of the surrendered certificates, the fourth the number of the certificates reissued to the trans- ferrer in case but a portion of the stock represented by a surrendered certificate is sold. The fifth column shows the number of shares sold. On the right-hand or credit side. 0MSimj*ufi^^i ^^ Form 193. — Stock Book and Ledger. Date. 1908. July 10 Aug. 15 Sept. 1 Dec. 5 *• 31 To Whom Transferred. Albert D. Rogers. W. C. Baker M. P. Frazer Geo. Kelley Balance NAME, Joseph C. Campbell. Certificate Nos. Surren- dered. 65 45 135 ) 65 f 125 Reis- sued. 135 180 Number of Shares. 50 40 90 40 100 320 RESIDENCE, Ridgewood, New Jersey. Date. 1908. June 1 " 15 July 18 Aug. 1 Sept. 15 From Whom Transferred. Original Issue. J. G. Cameron, H. C. Dewey.. J. B. Stewart. H. C. Cornell. Amount Issued Paid Certifi- Thereon. cate Nos. Full-paid 45 « 65 « 75 « 125 « 175 Number OF Shares. 100 50 80 40 50 320 The stock book and stock ledger given in Form 193 combines in compact form all the requisites of the usual stock ledger, while likewise complying with the statutory requirements of almost every state of the Union. The form as given shows the upper portion of a page. The leaves of this book are indexed to facilitate alphabeti- cal arrangement of the accounts. On the right-hand side of the account the party is credited with stock acquired, and on the left-hand side is debited with any stock dis- posed of by sale or otherwise. The difference between the two sides shows at any time the amount of stock standing in his name. the second column gives the name of the party whom the purchased stock was transferred. The fourth shows the number of the certificates issued to the party in whose name the account stands, and the last column shows the number of shares acquired. The third column on the right-hand side — "Amount Paid Thereon" — is put in solely in compliance with the requirements of New York, and some few other states, as explained in connection with Form 192. Its record is of but little importance, and the column may be omitted to advantage when not required by statute. Should a number of certificates be issued or surren- I ; '^^*m»mmfU^^. i-iimk»- .^<*te*;».fe«,i*l«rt*» ■ ^^; iii 11 ^ii 376 MISCELLANEOUS FORMS. dered in a single transaction, the entry or entries may be arranged as explained for the preceding form of stock book and stock ledger, and as shown in the third entry on the sales side of the present form. In some few states when stock is subscribed for and the subscription price is to be paid in instalments, the in- stalments due and paid must be shown by the stock ledger. Two ledger columns must then be added to the stock book and stock ledger. Instalments coming due are then debited in the left-hand column and payments are credited in the right-hand column, all in usual ledger form. (c) Financial Records. Form 194. — Instalment Book. INSTALMENT BOOK. Instalment No. 3 of 10 per cent. Due Nov. 1, 1908. Subscribers' Names. • « • « Shares. Amount. Interest. Paid. When Paid. Abbott, John Benton, William H Brown, Howard 75 50 60 $750.00 500.00 600.00 • • • • $1.25 • • • • $750.00 501.25 600.00 Nov. 1 Nov. 15 Oct. 27 (See § 167.) The purpose of the mstalment book is to record each instalment of subscriptions as it becomes due. According- ly the page or pages on which an instalment is entered must be headed in accordance with the facts. In the first column appear the subscribers' names arranged alphabet- ically. The second column is intended for the ledger folio which need only be entered when, as is the case in some states, instalment payments must be posted to the stock ledger. The third column gives the number of shares sub- scribed for; the fourth column the amount of the particu- lar instalment; the fifth column any interest due in case BOOKS OF RECORD. 377 payment of the instalment is delinquent; the sixth column the amount paid, and the seventh the date of payment. An additional column is sometimes added for comments. The cash received on instalment payments will also ap- pear on the stubs of the instalment scrip book as the cer- tificates are issued (See Form 8), and the footing of column six of the stock instalment book should therefore agree with the sum of the similar payments shown on the stubs of the instalment scrip book. Form 195.— Dividend Book. DIVIDEND BOOK. Dividend No. 5 of 2%. Declared Nov. 1, 1908. Payable Dec. 15, 1908 to btockholders who appear of Record Dec. 1, 1908. Stockholders' Names. Shares. Amount. Paid. Received By. Alsop, John H Barrington, Harvey. 50 25 $100.00 50.00 Dec. 18 Dec. 15 John H. Alsop. Howard Jones, Atty (See § 168.) Usually the dividend book is employed only when stockholders are required to call in person and receive and receipt for dividends. Each dividend as declared is re- corded on one or more pages, a statement of the facts ap- pearing at the head of the uages of the particular record. The form is simple and its method obvious. Stockhold- ers' names are arranged alphabetically, and the signatures appearing in the last column serve as a receipt for the divi- dend payment. A signature by an attorney, as in the sec- ond example, is not sufficient unless authorized by due power of attorney filed with the treasurer of the company. (See Form 179.) ■i-^-^^ms^ ^^*»l? ;ii*&*j«ss*j*W**^^B«flMi|j^ iJi! CHAPTER XLII. BONDS OF INDEMNITY. (a) Treasurer's Bond. The treasurer's bond is the formal undertaking of parties named therein and by whom the bond is signed, that in event of loss arising from specified acts, failures or omissions on the part of the treasurer, they will make good the loss up to the amount of the bond. (See § 154.) Formerly bonds of this nature were almost invariably signed by the treasurer and his friends. Of recent years, however, surety company bonds have largely superseded these personal bonds. The following is a common form of personal bond. Form 196. — Treasurer's Bond. Personal. Treasurer's Bond, Know All Men by These Presents : . , , That we, Robert A. Bruce of New York City, as principal, and William H. Cain of Newark, New Jersey, and H. B. McMillan of Brook- lyn, New York, as sureties, are held and firmly bound unto the Sterling Transportation Company, a corporation duly organized under the laws of the State of New York, in the sum of Ten Thousand ($10,000) Dol- lars, to the payment of which to the said corporation, its successors or assigns, we do by these presents jointly and severally bind ourselves, our heirs, executors and administrators. Signed and sealed this 15th day of August, 1908. The condition of the above obligation is that : Whereas, The said Robert A. Bruce has been elected Treasurer of the said Sterling Transportation Company for the period of one year from the 10th day of August, 1908, and may hereafter be re-elected to or continue in such office for a further period : , . « Now, Therefore, If the said Robert A. Bruce shall hereafter in all respects fully, faithfully and honestly perform and discharge the duties of 378 ■^Mm%^mM^^&M^^^ii^^$^0^m0, ^I**^ % BONDS OF INDEMNITY. 379 said office so long as he shall continue therein, both during the term for tTnue the'riJn' ^^'?.'^'^''^ '",^ ^"""^ ^"^^ fukher time a! he may con- tmue therein whether by re-election or otherwise, and shall when properlv so required, fully and faithfully account to the said corporrtion, ^iJs suc- or wi?h whtrTT; %^S jnoneys goods and properties whatsoever, ?or or hThL^n tn i '^!f^ ^°^^'^ ■^- ^'^^^. "^^y ^" ^"y^^^^ be accoun able or beholden to the said corporation, and if at the expiration of his term of or continuance m office, or prior thereto in the event of his death resig- nfnnTrtv' n^Tl ^^^"^.^ffice, all books, papers, vouchers, money and othfr property of whatever kind placed in his custody as Treasurer of said corporation, shall be forthwith restored to the said corporation, i^s sue ^\'fn? °/,f^/'^^' then this obligation shall be void, but otherwise to re- main m full force and effect. Robert A. Bruce. William H. Cain. c- , , J J J ,. , ^- ^- McMillan. oigned, sealed and delivered in the presence of John J. Barr. W. H. Carpenter. [L. S.] [L. S.] [L. S.] The treasurer's bond must be given under seal, and, while not legally necessary, personal bonds are usually ac- knowledged. Personal bonds are usually sweeping in their nature, covering any and all losses arising through any errors, mis- deeds or omissions of the treasurer. When, however, a surety company enters the bonding field, the guarantees are reduced to the lowest possible terms,— usually to losses arising through the personal dishonesty of the employee amounting to "larceny or embezzlement." The forms for these bonds are furnished by the surety companies and vary according to the company and the conditions. The general form employed is too lengthy for reproduction in the present volume. (b) Bond for Lost Stock Certificate. When a stock certificate is lost or destroyed, a bond of indemnity is usually required before the corporate au- thorities will replace the lost certificate. (See § 41.) l'« .£immiu»mm^^i I %*; ^m^ ■m»m^ j<^mmm4ii'^ ■it hi 380 MISCELLANEOUS FORMS. Form 197. — Indemnity Bond. Lost Stock Certificate. Indemnity Bond. Know All Men by These Presents: . . , , That we, John R. McAllister of Yonkers, New York, as principal, and Charles Foster and Henry H. Clark, both also of Yonkers, New York, as sureties, are held and tirmly bound unto the Sterling Transportation Com- pany, a corporation duly organized under the laws of the State of New York, in the sum of Five Thousand ($5,000) Dollars, to the payment of which to the said corporation, its successors or assigns, we do by these presents jointly and severally bind ourselves, our heirs, executors and administrators. Signed and sealed this 18th day of September, 1908. The condition of the foregoing obligation is that : Whereas, The said John R. McAllister is the owner of record, as shown by the stock book of the corporation, of Forty (40) Shares of the Common Capital Stock of the said Sterling Transportation Company each of the par value of One Hundred ($100) Dollars, the ownership of said stock being further evidenced by Certificate No. 375 issued in the name of the said John R. McAllister on the 15th day of August, 1908; and Whereas, The said John R. McAllister has made application to the Board of Directors of the Sterling Transportation Company for the is- sue in his name of a new certificate for the said Forty (40) Shares of stock of the said Company, alleging that original Certificate No. 6/p is lost, stolen or destroyed and that its present whereabouts and condition are unknown to him; and j r t-.- Whereas By due and formal resolution of the said Board of Direc- tors, said application has been granted and a new certificate for said Forty (40) Shares of the stock of the said Sterling Transportation Com- oanv has this day been issued to the said John R. McAllister : Now Therefore, If the said John R. McAllister, his heirs, executors and administrators, or any of them, do and shall at all times hereafter, save defend and indemnify the said Sterling Transportation Company, its legal successors or assigns, of, from and against all demands, claims or causes of action arising from or on account of the loss of said Certit- icate No 375 for Forty (40) Shares of the Common Capital Stock of said Companv and the issue of said new certificate in place thereof, and of and from all' costs, damages and expenses that sha 1 or may arise because of said reissue, and shall also deliver or cause to be delivered up to the said Sterling Transportation Company for cancellation the said missing Cer- tificate No. 375 whenever and so soon as the same shall be found or re- covered, or come into his possession, then this obligation shall be void; otherwise to remain in full force and effect John R. McAllister. Charles Foster. Henry H. Clark. Signed, sealed and delivered in the presence of Daniel T. Baird. John K. Stone. [L. S.l [L. S.l [L. S.] CHAPTER XLIII. THE CORPORATE CALENDAR. The corporate calendar is an orderly statement of the important corporate formalities that must be attended to at fixed periods, so arranged that the secretary may at any time by a mere glance see just what corporate duties re- quire his attention. The amount of detail entered on the corporate calendar will vary according to the preference of the particular sec- retary, from a mere skeleton outline of the reports and notices required by the statutes and by-laws, to a fairly complete digest of corporate procedure. It is advantage- ous to enter reasonably full details, as much subsequent research may thereby be avoided. The corporate calendar is frequently entered in the minute book. More conveniently it is prepared on a spe- cial card or cards, or on a desk calendar, in either case so placed or hung that it is plainly in sight. Or if the min- ute book plan is preferred, a small skeleton calendar or "tickler" may be prepared in addition, which, kept on the desk, will call attention to the dates upon which the cal- endar in the minute book should be consulted. The calendar which follows is given merely to show the general plan and the matter which is usually included. It is arranged for a New York corporation having its prin- cipal place of business in the City of New York and hold- ing its annual meeting of stockholders on the second Tues- day of January at 3 P. M., with quarterly meetings of di- rectors on the second Wednesday of January, April, July and October at 4 P. M. Its by-laws require ten days* 381 --#*»«*\!M»K,...^J Liif1«i!k«£l ♦■i» \k^i&iU«t tm^t*. ww^atrW^^ w^.s^f-'^E j3r"*K^^*"S^',''»'m.^4,f^ : i-J^i \A ^.i .• I - ly I jg. HmJil li i# - ■ ■ mm*mikamaf^iM*MiM0i4^*mi» ['1^.^:' ^ "T^**"* .«*'J^ CHAPTER XLIV. CORPORATE BOND ISSUES. The more important instruments involved in an issue of corporate bonds are the bond itself, which is com- paratively simple in form, and the mortgage or deed of trust, which is lengthy and complex. The corporate bond in its usual form is a promissory note, differing from the ordinary corporate note only in its formality, its more complete statement of the condi- tions under which it is issued, its formal execution and in its being one of a series secured by the same collateral. (See Form 199.) There is practically no difference as to form between the bond and the short term note so frequently issued by corporations of the present day, save as to the length of time for which they run. The short term note, as its name indicates, is usually given for a short period— one to five years— while the bond usually extends over a much longer period, ranging from five to one hundred years or more. Interest on bonds is usually represented and provided for by means of coupons, which are in effect promissory notes, payable to bearer, each calling for the payment of one instalment of interest on the bonds. (See Form 200.) This interest when due is payable only on surrender of the proper coupon and, in the absence of some good rea- son otherwise, such as notice that the particular coupon has been stolen, is payable to anyone who presents the coupon. 384 BOND ISSUES. 385 Interest on bonds is usually payable semi-annually and each of the coupons of a coupon bond calls for the exact amount of one of the semi-annual interest payments on that bond. Thus a bond running ten years with interest payable semi-annually, will have attached to it twenty coupons. Each coupon bears the same number as its bond for purposes of general identification, but also has a serial number or some specific statement indicating the order in which it comes dues, and the particular interest pay- ment for which it calls. Coupon bonds are usually made payable to bearer, and ownership passes by delivery. When it is desired that bonds shall not pass by mere delivery, they are registered, 1. e. issued in the name of some particular person as is a certificate of stock, the bond thereafter being transferable only on the books of the company. Coupon bonds are sometimes registered as to principal, but the coupons are still made payable to bearer. The in- terest then is paid to anyone who presents the coupon, but the principal when due is only paid to the person in whose name the bond stands on the books of the company. Bonds without coupons are always registered, are transferred only by assignment, interest is payable to the registered owner alone, and is usually paid by check sent out to these registered owners. Coupon bonds payable to bearer and registered bonds without coupons are often issued under the same deed of trust. Usually when this is done, the two classes of bonds are made interchangeable, i. e., the holder of a coupon bond may at any time exchange it for a registered bond, or vice versa. The advantage of the unregistered coupon bond is found in the readiness with which it may be trans- ferred. The advantage of a registered bond lies in the difficulty of its negotiation in case the bond is lost or stolen. 1 «..,^» tWrf^ 1. "-f%i 386 MISCELLANEOUS FORMS. BOND ISSUES. 387 li.lt The following form is that of a coupon bond, the owner- ship passing by mere delivery. It may, however, be reg- istered at the option of the owner though this registration does not affect the coupons. (See Form 200.) These pass by delivery alone and are payable to bearer regardless of whether its bond be registered or transferable by delivery. Form 199. — Coupon Bond. United States of America. State of New York. No. 375. $500.00 MAXWELL COMPRESSOR COMPANY. First Mortgage, Six Per Cent., Gold Bonds. Know All Men by These Presents, That the Maxwell Compressor Company, a corporation organized under the laws of the State of New York, for value received, hereby promises to pay to the bearer hereof, or if this bond is registered, to the registered holder thereof, at the office of the Securities Trust Company of the City of New York, on the first day of December, nineteen hundred and thirty-eight, in gold com of the United States of America, of the present standard of weight and fineness, or its equivalent, the sum of Five Hundred Dollars, without deduction from either such principal or interest for or on account of any United States, State, municipal or other tax or taxes which the Maxwell Com- pressor Company, its successors or assigns, may be required to pay or deduct therefrom, and the Maxwell Compressor Company hereby coven- ants and agrees to pay all such tax or taxes, and in the meantime to pay interest upon the said sum of Five Hundred Dollars from and after the first day of December, nineteen hundred and eight, at the rate of six per cent per annum, pavable in like gold coin, or its equivalent, at the same place, semi-annually,' on the first days of June and December in each year, beginning with the first day of June, 1909, on presentation and surrender of the coupons hereto attached as each of them becomes due This bond is one of a series of one thousand (1,000) bonds of the same tenor and date, aggregating five hundred thousand ($500,000) dol- lars numbered consecutively from one to one thousand, both inclusive, for 'the sum of five hundred ($500) dollars each, all of which bonds are secured equally by a deed of trust, which is a first mortgage upon the properties of the Maxwell Compressor Company, executed and delivered by the said Maxwell Compressor Company to the said Securities Trust Company, as Trustee, granting and conveying in trust and mortgaging as security for the pavment of the principal of said bonds at maturity, at par, and the interest on said bonds, payable semi-annually at the rate aforesaid, all the real estate and other property of the said Maxwell Com- pressor Companv mentioned and described in said deed of trust, with full power to use and sell the same in the event of default in payment of the bonds or coupons, or anv of them, and apply the proceeds to the payment of same as in said deed of trust provided. This bond is issued, received and held subject to all and singular the terms and conditions contained in the deed of trust aforesaid. , • . u 11 • . ^* This bond is further secured bv a sinking fund, which shall consist ot and be maintained by the payment to the said Securities Trust Company by the Maxwell Compressor Company on the first day of December, 1913, and on each succeeding first day of December thereafter, until the re- demption of all the bonds issued under said deed of trust, of twenty-five dollars for each thousand dollars of bonds then issued and outstanding, such moneys so paid to be used in the purchase of outstanding bonds at the lowest price at which they may be had, not exceeding, however, one hundred and ten per centum of the face of said bonds plus accrued interest, and if bonds cannot be so purchased, such moneys shall be used in the redemption of the bonds outstanding, as hereinafter provided. This bond shall not become obligatory until the certificate endorsed hereon shall be signed by the Trustee, and when so authenticated by the signature of the Trustee the title to said bond shall pass by delivery, un- less said bond is registered, and, if registered, the title thereto shall pass only bv transfer on the books of said Trust Company, and no transfer except upon said books shall be valid unless the last transfer shall have been to bearer, which shall restore transferability by delivery. This bond is redeemable, at the option of the Maxwell Compressor Company, on any interest day at any time after the first day of December, 1913, at 110 per cent, of its face value, plus accrued interest, provided that thirty days' notice of such redemption shall be given the holder thereof by notice published once a week for four consecutive weeks prior to such redemption, in a newspaper published in New York City. In Witness Whereof, the said Maxwell Compressor Com- pany hath caused these presents to be signed by its Presi- dent, and its corporate seal, duly attested by its Secretary, to be hereunto affixed, and hath hereunto affixed coupons with the name of its Treasurer engraved thereon, and hath caused this bond to be dated the first day of De- cember, A. D. one thousand, nine hundred and eight. Maxwell Compressor Company, By Howard M. Maxwell, President. f corporate I \ SEAL. S Attest ; Frank Paulson, Secretary. The coupon form which follov^^s is as it appears attach- ed to the preceding bond. Form 200. — Coupon. No.'i. *$i'5.o6 MAXWELL COMPRESSOR COMPANY will pay to the bearer at the office of the Securities Trust Company of the City of New York the sum of fifteen ($15) Dollars, in United States Gold Coin, or its equivalent, on the first day of June, 1909, being six months' interest on its First Mortgage, Six Per Cent., Gold Bond No. 375. William H. Powers, Treasurer. The following trustee's certificate is as it appears upon the bond shown in Form 199. l^^^d5yfrwwi5cw7?c3r^vTr^-rc3sac3 ^ 388 MISCELLANEOUS FORMS. Form 201. — Trustee's Certificate. The Securities Trust Company of the City of New York hereby cer- tifies that the within Bond is one of the series of Bonds described in the Deed of Trust therein mentioned. Securities Trust Company of the City of New York, Trustee. By Malcolm McDougald, President. The formalities of a bond issue are usually regulated by the statutes of the particular state in which the corpor- ation is organized. Thus in New York an issue of bonds requires (i) a stockholders' resolution or written consent; (2) a certificate of the corporate officials that the stock- holders' consent has been given; (3) a directors' resolu- tion reciting the facts, authorizing the officers to proceed in the matter, and providing for the details of the trans- action.^ In some states the mere resolution of the board of di- rectors is sufficient to authorize a bond issue. In a large number of states the assent of a prescribed majority of the stockholders is a requisite. As a matter of prudence and good business, a proper stockholders' authorization is al- ways desirable regardless of the statute requirements of the particular state. The following deed of trust, while drawn in compliance with the requirements of the New York statutes, may be readily adapted for use in any other state. Form 202. — Deed of Trust. Deed of Trust. This Indenture, made and entered into this 12th day of November one thousand nine hundred and eight, by and between the Maxwell Com pressor Company, a corporation duly organized and existing under the laws of the State of New York, having its office at No. 170 Broadway, New York City, hereinafter called the Compressor Company party of the first part, and the Securities Trust Company of the City of New York, 1 See Harrison's New York Corporations, Forms, 64-67. jidP^ BOND ISSUES. 389 a corporation duly organized and existing under the laws of the State of New Yorlc, having its principal office at No. 98 Wall Street, New York City, as Trustee, hereinafter called the Trustee, party of the second part. Witnesseth: Whereas, The Board of Directors of the said Compressor Company has, by the authority and with the consent of the stockholders thereof legally given, duly resolved to borrow five hundred thousand dollars for the lawful business purposes of the said Company, and for that purpose to execute and issue its first mortgage, six per cent., thirty years, gold bonds of the par value of five hundred dollars each, dated the first day of December, 1908, and payable on the 1st day of December, 1938, in gold coin of the United States of, or equivalent to, the present standard of weight and fineness, said bonds to bear interest at the rate of six per cent, per annum, payable in like gold coin, semi-annually, on the first days of June and December in each year, from the first day of December, 1908, until the payment of the principal amount thereof; the payment of the principal and interest of said bonds to be secured by a mortgage or deed of trust that shall be a first mortgage on the entire property of the said Compressor Company as hereinafter described, said deed of trust to be in substantially the form of this indenture; and Whereas, The bonds so to be issued are to be in substantially the form following, viz. : {See Form igg.) And Whereas, There are to be attached to each of the said bonds, at the time of the issue thereof, coupons representing the semi-annual instal- ments of interest which are to become due thereon, each of which coupons is to be substantially of the following tenor, the proper coupon number, date of payment, amount of the bond and its number, and the engraved fac-simile signature of the Treasurer of the Compressor Company, having been inserted in the respective blanks therefor, to wit : {See Form 200.) And Whereas, On each of said bonds there is to be endorsed a certifi- cate of the Trustee or its successor appointed hereunder, of the following tenor : {See Form 201.) Now, Therefore, the said Compressor Company, in consideration of the premises and of the sum of one dollar to it in hand paid by the said Trustee, the receipt whereof is hereby acknowledged, and in order to secure the due payment of the principal and interest of the bonds to be issued hereunder, and to insure the faithful performance of the covenants and agreements herein contained, hath granted, bargained, sold, aliened, assigned, conveyed, transferred and set over, and by these presents doth grant, bargain, sell, alien, assign, convey, transfer and set over unto the said Trustee, its successors and assigns ; All of the following described property and franchises of the Com- pany, to wit: {Specific description of the property mortgaged.) To Have And To Hold all and singular the said property, with all real estate, buildings, fixtures, articles and property of every kind, be- longing to or pertaining to the same unto the said Trustee, its successors and assigns forever ; In Trust, Nevertheless, for the equal pro rata benefit and security of any and all persons and parties who may be or become the owners or lawful holders of any of the bonds to be issued hereunder and secured \i »»***'«^-.3t|w'«wwwi»»w^w*miifi L...■L&,1fc^T■■^^-^fe^^-^B*=^^^ •i-— n; .M^^3iaii,s|Jf; i£w %, .- fill' : * *J^.ii ii' ■M.Lt.tfr*k'M >-*1lC-J*4^*tM.tt. i^'^. Hi , I 390 MISCELLANEOUS FORMS. hereby, irrespective of date or priority of issue, without any discrimina- tion, preference or priority of any one bond over another or others, by reason of priority in time of issue, or sale, or negotiation thereof, or otherwise, and to secure the due payment of each of the said bonds to- gether with the interest thereof, and for the uses and purposes and upon the terms and conditions hereinafter declared and expressed; and It Is Hereby Expressly Covenanted And Agreed by and between the parties hereto that all such bonds are to be issued, negotiated and received, and that the said property and franchises mortgaged are to be held by the Trustee upon and subject to the following further trusts, uses, conditions and covenants, that is to say: first. — The bonds to be issued hereunder shall be executed on behalf of the Compressor Company by its proper officers and shall be delivered to the Trustee for certification, and said Trustee shall certify and de- liver said bonds so certified upon the order of the Board of Directors of the Compressor Company. An order purporting to be the order for de- livery of said bonds and believed by the Trustee to be genuine shall be conclusive authority and full protection to the Trustee for the certification and delivery of the bonds. Only such bonds as shall bear thereon endorsed the Trustee's certif- icate, duly executed, shall be secured by this indenture, or entitled to any lien, right, or benefit thereunder, and such certificate of the Trustee upon any such bond executed by the Compressor Company shall be conclusive evidence that the bond so certified has been duly issued thereunder, and that the holder is entitled to the benefit of the trust hereby created. Before certifying or delivering any bond, all coupons thereon then matured shall be cut off, canceled and delivered to the Compressor Com- pany. Second.— AW bonds secured hereunder may be registered in the name of the holder, when so requested by such holder, upon bond transfer books which the Compressor Company shall maintain and keep for such purpose at the office of the Trustee in the City of New York as long as any of the said bonds shall remain outstanding. After such registration such bonds shall be transferable only upon such transfer books, by the registered owner or his lawful attorney, and any such transfer shall be noted on the bonds by the indorsement of the Transfer Agent hereinafter appointed. After registration of any bond, the principal thereof shall be payable only to the registered owner, but the coupons shall be payable to the bearer upon presentation and surrender thereof, and shall be negotiable by de- livery as if such bond was not registered. Any registered bond may at any time be transferred by the registered owner thereof, upon said transfer books to bearer, and such transfer shall be noted upon said bond, and the said bond shall thereupon be negotiable by deliverv as if it had never been registered, and each of said bonds shall continue subject to successive registrations and transfers to bearer at the option of the holder thereof. •, , , u For the purpose of registering and transferring said bonds as above set forth, the Securities Trust Company of the City of New York is hereby appointed and constituted Transfer Agent of the said Compressor Com- pany. . ^ r^ Third.— UntW default shall be made by the Compressor Company, its successors or assigns, in the payment of the principal or interest of the bonds herebv secured, or any of them, or in the performance of any of the covenants, agreements and provisions on its part to be kept and per- formed, as herein set forth, the Compressor Company, its successors and assigns shall be permitted to possess, manage, use and occupy the premises affected hereby, with all their appurtenances and belongings in all re- spects as fully as if this indenture had not been made. BOND ISSUES. 391 Fourth. — If the Compressor Company shall well and truly pay to the holders thereof the principal of the bonds secured hereunder and the in- terest moneys becoming due thereon respectively at the time and in the manner specified in the said bonds and coupons thereto annexed, and shall keep and perform all the covenants, agreements and stipulations on its part in said bonds or in this agreement contained, then these presents and the trust hereby created shall cease and determine, and the said Trustee shall in such event release and discharge this mortgage and the property and premises encumbered thereby. The Trustee may also execute such re- lease and discharge upon production by the Compressor Company or its assigns of all the bonds issued hereunder, together with the coupons thereto belonging, canceled or for cancellation, and the Trustee shall not be under any liability or obligation to inquire into the holding of said bonds by the Compressor Company or its assigns. Fifth. — The said Compressor Company, while it shall be in possession of the mortgaged premises, and while there shall be no existing default in respect of the payment of the principal or interest of any of the said bonds of the Compressor Company, or in the performance of any of the covenants herein, may, with the consent in writing of the Trustee, sell any portion of the premises heretofore granted. If, in the opinion of the Board of Directors of the Compressor Company, such sale or change shall be ex- pedient, said opinion shall be expressed in a resolution of the said Board, and the Trustee may upon delivery to it of a copy of the resolution of the Board of Directors to that effect release from the lien and operation of this indenture any part of the premises hereby mortgaged, provided that the purchase money from such sale or sales shall be paid to the said Trustee for application to the discharge of the bonds and coupons here- under issued, as set forth in Section Fifteenth, or to be set aside to be applied by the Compressor Company in payment for other real or personal property or in betterments of or additions to some part of the premises mortgaged hereby, and until so applied shall be held by the Trustee. Any new property so acquired by the Compressor Company shall ipso facto become and be subject to the lien of this indenture as fully as if specific- ally mortgaged or pledged hereby, but if requested by the Trustee the Compressor Company shall execute special instruments of incumbrance upon such properties. Sixth. — The Compressor Company covenants and agrees that it shall and will promptly pay the interest and the principal of the bonds hereby secured, at the time and in the manner specified in said bonds and the coupons thereto attached, without deduction from either such principal or interest for or on account of any United States, State, municipal or other tax or taxes which the Compressor Company, its successors or assigns, may be required to pay or deduct therefrom, and the Compressor Com- pany hereby covenants and agrees to pay all such tax or taxes. The Compressor Company further covenants and agrees that it shall and will, from time to time, promptly pay and discharge, or cause to be paid and discharged, all taxes, rates, levies or assessments and charges, ordinary and extraordinary, levied or imposed upon the premises and properties mortgaged to the Trustee to secure the payment of the bonds issued hereunder, whereby the lien of this indenture might or could be be held prior or equal to the lien of this indenture, so that the same shall not fall into arrears and so that the priority of this indenture given to secure said bonds shall be preserved. The Compressor Company further covenants and agrees that it will not create nor suffer any mechanic's, laborer's or other similar liens to be created upon the premises and property mortgaged to secure the bonds issued hereunder, whereby the lien of this indenture might or could be ll «.«Hr-»!»»i.»»i»«» , ': ^'ttLf --^-,.^,\ w^mimmmmf^m r*'.^!*^" 'fj^.:--4^00f^ m^^m^ "^1 394 MISCELLANEOUS FORMS. taxes or assessments, or in satisfaction of charges and liens, prior to the lien of the mortgages and deeds of trust to the Trustee thereon, or for insurance, as well as reasonable compensation for its ovm services, the Trustee shall apply the proceeds to the payments of such bonds and the coupons thereon as may be at the time unpaid, without giving preference of priority to one bond over another, but ratably to the aggregate amount of such unpaid principal and accrued and unpaid interest, and if any sur- plus remain after the payment in full of the principal and interest of said bonds, then the Trustee shall transfer and pay over such surplus to the Compressor Company. fifteenth.— It is covenanted and agreed between the parties hereto and any future holders of the bonds that the said bonds are redeemable, at the option of the party of the first part, on any interest day after the first day of December, 1913, at one hundred and ten per cent, of their face plus accrued interest, provided that thirty days' notice of such redemption shall be given the holders thereof, by notice published once a week for four consecutive weeks prior to such redemption, in a newspaper in New York City. If said bonds are registered, then a copy of the said notices shall be sent to the post-office address of the parties in whose names said bonds are registered. Whenever it is desired to redeem any of said bonds, the board ot Directors of the Compressor Company shall pass a resolution setting forth the amount of bonds (at their par value) desired to be redeemed. The President of the Compressor Company shall thereupon draw by lot the numbers of the bonds to be redeemed, and he shall thereupon certify that such bonds were drawn for redemption, which certificate shall be entered upon the minutes of the Compressor Company, and a duplicate copy shall be delivered to the Trustee. Said bonds having been so drawn for redemption shall become due and payable on the succeeding interest payment date, provided that the date of first pubhcation and the date of mailing notice to registered holders of bonds hereinbefore provided for shall have been not less than thirty days prior to such interest payment date, and the said bonds shall from such interest payment date cease to draw interest, and the said Compressor Company may, upon the deposit of the proper amount with the Trustee, be privileged to consider said bonds as paid and canceled. Sixteenth.— ThQ Trustee may resign the trust hereby created upon giving sixty days' notice in writing to the Compressor Company In case of the resignation of the Trustee, or of its dissolution or insolvency, or removal for cause as Trustee hereunder, it shall be the duty of the Com- pressor Company to call a meeting of the bondholders by printed notice, published in two of the public newspapers of New York City, once a week for three consecutive weeks next preceding such meeting, calling such meeting to be held in the said City of New York, and by mailing notice of the same to each of the registered bondholders not less than ten davs before the date of such meeting. At the time and place specified in 'such notice, the holders of said bonds, in such meeting assembled, shall organize and proceed to elect a suitable corporation to act as Trustee un- der this agreement, and a majority in amount of such bonds legally rep- resented at such meeting shall be competent to elect such new 1 rustee, and the corporation so elected shall immediately upon election and on its acceptance in writing of such trust become vested with all the estate trusts, rights, powers and duties of the present Trustee herem, and shall be entitled to receive from the present Trustee or its lega representa- tives all moneys, mortgages and assurances appertaining or relating to this trust and the due execution thereof. , ^ , .• u *^ or,^ Seventeenth.-lt is covenanted and agreed by the parties hereto, and BOND ISSUES. 395 all the holders of bonds hereunder, as conditions precedent to the a.trept- ance of the said trust by the said Trustee, or any successor thereto, as follows : The Trustee shall not be answerable for any act, default, neglect or misconduct of any of its agents or employees, by it appointed or employed, in connection with the execution of any of the said trusts, nor in any other manner answerable or accountable, under anv circumstances what- soever, except for bad faith. The recitals contained herein, or in the bonds, as to priority of lien, or any other matter whatsoever, are made by and on the part of the Compressor Company, and the Trustee assumes no responsibility for the correctness of the same. It shall not be the duty of the Trustee to file or record at any time this deed of trust or any other mortgages or deeds of trust that may be required hereunder, nor to do any other act or acts suitable and proper to be done for the creation or continuance of the lien or liens thereby intended, nor to effect insurance against fire or explosion, nor to renew any policies of insurance, nor to keep itself informed as to the payment of any taxes or assessments, nor to require such payments to be made. The Trustee may, however, in its discretion, do any or all of these things. Neither shall the Trustee be held responsible for the nature or amount of the security mortgaged to it hereunder. The Trustee shall not be compelled to take any action, as Trustee, under this mortgage, unless properly requested and in every respect indemnified to its full satisfaction. The Trustee shall be entitled to reasonable compensation for all services rendered hereunder or in con- nection with the trust. This compensation, together with any and all nec- essary and reasonable expenses, charges, counsel fees and other disburse- ments incurred by the Trustee in the discharge of its duties, as such, shall be paid by the Compressor Company, or out of the trust estate upon which they are hereby made a lien, prior to that of the bonds issued hereunder. The Trustee shall be protected in acting upon any notice, consent, request, certificate, bond or other paper or document believed by it to be genuine and signed by the proper party. The Trustee shall be held responsible for the due authentication by certificate of the bonds issued hereunder, and for the custody and disposition, as herein provided, of the securities and moneys received by it hereunder. Eighteenth. — It is covenanted and agreed between the parties hereto that the words "Compressor Company" when used in these presents mean the party issuing the bonds herein referred to; that the word "Trustee" means the corporation charged with the execution of the trust herein, whether the same be the Securities Trust Company of the City of New York, or any successor or successors in the trust hereby created ; that the word "bonds" means the bonds issued hereunder; and the words "Trus- tee," "bond," "bondholder" and "holder" shall include the plural as well as the singular number and the term "majority" shall signify the majority in amount. Nineteenth. — It is covenanted and agreed that this indenture may be executed in several counterparts, each of which so executed shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument. In Witness Whereof, the Maxwell Compressor Company has caused its corporate name to be hereunto subscribed by its President and its corporate seal to be affixed and attested by its Secretary, and the Securities Trust Com- pany OF THE City of New York, in token of its accept- ance of the trust hereby created, has caused its corporate name and seal to be hereunto affixed by its President, and ^■^'i^fih: '*^mm^^am^' t^p^ I ii 396 MISCELLANEOUS FORMS. attested by its Secretary, on this twelfth day of Novem- ber, one thousand nine hundred and eight. Maxwell Compressor Company, f corporate \ By Howard M. Maxwell, \ sEai^ / President. Attest : Frank Paulson, Secretary. Secxjrities Trust Company oe the City of New York, As Trustee, f corporate) By Malcolm McDougald, \ SEAL, i President. Attest : Frank G. Cooper, Secretary. (Notarial acknowledgment by president of each corporation as given in Form 178.) it will be understood that the preceding form has, on account of space limits, been reduced to its simplest terms. It is, however, a good working model and will afford an excellent basis upon which to build up a more elaborate in- strument when required. GENERAL INDEX. [References are to pages.] (For List of Forms, see Table of Contents.) Acceptance of Official Position, 170, 181. of Resignation, 152, 153, 182, 333-335. of Subscriptions, 48-50, 94, 95. Accounts, Books of, 96, 99-101, 189, 190, 193-195. Acknowledgment, Corporate, 352, 359. Forms, 359. Adjourned Meeting of Directors, 170. Forms, 316. of Stockholders, 134, 142, 314. Forms, 313, 314. Adjournment, 122, 133, 134, 141, 142, 170. Administrators, Transfers to and by, 84-86, 92, 93. Voting by, 97. Adoption of By-Laws, 22, 29, 32-35, 103, 104, 156, 157. Forms, 262. Advantages of Corporate Form, 23, 24. Affidavit, Secretary's, 126, 139, 352, 353, 357. Forms, 353, 357. Treasurer's, 358, 359. Forms, 358, 359. Agent, Transfer, 68-70. Agents, Appointment of, 29, 156, 175, 176, 191-193. Transfers to and by, 81, 83, 84, 91-93. Agreements. (See Contracts.) Amendment of By-laws, 27, 32, 36-38, 41, 103, 104, 197. Forms, 294, 297. of Charter, 25-27,103. of Minutes, 126, 127, 202. Annual Meetings of Stockholders. (See Meetings.) Reports, 127, 128, 184, 190, 318-323. (See also Reports.) Forms, 294, 319-323. 397 'f |S**4^*n ^s?irT'''~'^^^--5?5^^^^^^3^^^^^>?*^"^^'^ ^ !l ?'t^t* ^^*T^f! *^^!^ *^^t ^f*f ~ ^ty ' S'^**:^3S^.. -mf^^^y-^ ' ■'-■ ^-^,m^^mimmM^$^m^mi^^^ m 39i5 GENERAL INDEX. [References are to pages.] Appointment of Committees, 156, 172, 173, 188-194. of Officers and Agents, 29, 156, 175, 176, 191-193. (See also Elec- tion.) Approval of Minutes, 126, 127, 141, 168, 201, 202. Articles of Association, 25. (See Charter.) Assessments, 45, 114, 115. Liability for, 45, 79, 80, 114, 115. Notice of, 324-326. Forms, 324-326, Assets, Distribution of, 96, 99. Sale of Entire, 104, 105, 154, 213. Forms, 296, 309. Assignment of Contract, 366, 367. Forms, 366, 367. of Bonds, 385, 386. of Instalment Scrip, 231, 232. Forms, 231, 232. of Patent, 367, 368. Forms, 368. of Property for Stock, 254-256. Forms, 254, 255. of Stock. (See Transfer of Stock.) of Stock Certificate. (See Certificate of Stock.) of Subscriptions, 231, 232. Forms, 231, 232. Attestation of Seal, 339. Forms, 340. Attorney, Powers of, 78, 83, 84, 91, 92, 123. Forms, 360-364, Transfers to and by, 78, 81, 83, 84, 92, 93. Auditor, 193, 194. B Ballot, Voting by, 97, 128, 129, 169, 309, 310. Forms, 310. Bank, Designation of, 189, 191, 297-299, 354, 355. Forms, 297-299, 354, 355. Bill of Sale, 365. Forms, 365. Board of Directors. (See Directors.) Bond of Indemnity, Lost Certificate, 70-72, 379, 380. Forms, 380. of Treasurer, 190, 191. 378. 379. Forms, 378, 379. '*j GENERAL INDEX. [References are to pages.] 399 Bond Register, 204. Bonds, Issuance of, 154, 384-396. Forms, 386-396. Coupon, 384-386. Deed of Trust, 388-396. Registered, 385. Trustee's Certificate, 387, 388. Books, Corporate, 52-60, 195-204, 369-377. Bond Register, 204. Closing Books, 53, 59, 60, 117, 119, 208. Coupon Register, 204. Custody of, 55, 187, 188. 195, 196. Dividend Book, 204, 377. Forms, 377. Inspection of, 57, 96, 99-101, 180, 186-188, 191, 196. Instalment Book. 203, 204, 376, 377. Forms, 376. Instalment Certificate Book, 203, 226, 228. Forms, 227-229. • Minute Book, 195-198, 311. (See also Minutes.) of Account, 189, 193-195. Secretary's Books, 52-60, 186-188, 195-198, 203. Stock Book and Stock Ledger, 56-57, 66, 67, 130, 371-376. Forms, 172, 374, 375. Stock Certificate Book, 53-56, 58, 64, 68, 69, 130. Forms, 235-238. Subscription Book, 203, 219. Surrender of, 188, 190, 191. Transfer Book, 53, 57-60, 66, 67, 117, 119, 130, 208, 369-371. (See also Forms, 369-371. Transfer Book.) Transfer on, 52, 53, 57-59, 61-70. Treasurer's Books, 189-191, 195, 203, 204. Business Corporations, 20, 25. of Meetings, Order of, 119, 133, 167. Special Meetings, 136-142, 162-166. By-Laws, 21, 22, 31-41, 116, 131, 156, 157, 245-249. Forms, 246-249. Adoption of, 22, 29, 32-35, 103, 104, 156, 157. Amendment and Repeal of, 27, 32, 36-38, 41, 103, 104, 197. Forms. 294, 297. Arrangement of, 35. Certification of, 41, 249. Forms. 249. iiPI«I*>PI*ll ifdi^'it. 'ilif-^ ■V'^^^fW^*. 'l\t i..-»5T* ■''«■» ~"i ■ - -;Jri;i»%«.* jf^.-*j*j»-ii •«w««;M»>- ■sw ..*»i|«#i|*|iiirtl|*tt«;'- *" ^i^ii^i*mm^mmmm:mmtmmMd^i^i*tM*ti^ s^^'- 100 GENERAL INDEX. [References are to pages.] By-Laws — Continued. Certified Extracts from, 89, 356. Forms, 356. Contract Obligation of, 32, 37, 38. Directors', 22, 33, 34, 104, 156, 157. Enforcement of, 39-41. Illegal, 31, 32. Observance of, 32, 38-41. Power to Make, 22, 33, 34, 156, 157. Provisions of, 35, 36, 37, 96, 101, 102. Record of in Minute Book, 41, 197, 245. Relative Authority of, 21. Violations of, 38-41. Calendar, Corporate, 117, 188, 381-383. Forms, 382, 383. Called Meeting. (See Meetings, Special.) Calls and Waivers of Meetings, 138, 140, 141, 163, 165, 257-259, 267, 273- Forms, 258, 259, 268, 273-275. [275. Calls for Assessments. (See Assessments.) Calls for Special Meetings, 136-138, 140, 141, 163-165, 267-273, 275. (See Forms, 269-273, 275, 300, 301. [also Notice.) Cancellation of Stock Certificates, 54, 55, 240. Capital, Corporate, 20, 21, 24, 42, 107, 115, 205, 207, 208. Capital Stock. (See Stock.) Certificate of Incorporation, 25. (See Charter.) Certificate, Inspectors of Election, 128, 307-309. Forms, 307-309. Instalment, 226, 228, 231, 237. Forms, 228, 229, 231, 232. Secretary's, 125, 126, 140, 197, 299, 352-357. Forms, 352-357. Certificates of Stock, 24, 49, 50, 52, 54, 55, 61-93, 130, 233-240. Forms 235, 237, 238. Assignment of, 50-52, 58, 59, 61-68, 82-84, 86, 90-93, 239, 240. (See Forms, 239, 240. [also Transfer of Stock.) In Blank, 59, 61-63, 65, 71, 72, 77, 84, 90, 239. Forms 239. Book of, 53-56, 58, 64, 68, 69, 130. Cancellation of, 54, 55, 240. Common Stock, 236, 237. Forms. 235. Delivery of, 64, 65, 72. GENERAL INDEX. [References are to pages.] Certificates of Stock— Continued. Issue of, 49-55, 373, 374. Fee for, 50, 55. Lost or Destroyed, 66, 70-72, 77, 78, 93, 130. Partly Paid, 50, 228. Forms, 228, 229. Preferred Stock, 236-239. Forms, 237, 238. Preparation of, 233, 234. Receipts for, 54, 64, 84, 236, 240. Forms, 240. Signatures to, 186, 187, 234, 236. Stockholders Entitled to, 49, 50, 70, 95. Stub, 54, 55, 236-238. Forms, 235, 236. Surrender of, 50, 54, 55, 58, 61-66, 72, 240. Temporary, 54, 229, 230. Forms 229, 230. Certifications, 41, 89, 125, 126, 140, 197, 249, 299, 352-359. Forms 249, 352-359. Chairman of Board, 166, 183, 191, 192. of Meetings, 120, 121, 166. Change of Number of Directors, 144, 145. Charter, 21, 22, 25-31, 101, 103, 197, 241-244. Forms, 242-244. Checks, Corporate, 342-346. Forms, 342-346. Dividend, 208, 209, 345, 347. Forms, 328, 345. Classification of Corporations, 20. of Directors, 150. of Stock, 45, 131. Closing Books, 53, 59, 60, 117, 119, 208. Collateral Security, Stock as, 24, 72-75 Combination of Corporations, 215. Commission on Sale of Stock, 110. Committee, Auditing, 194. Report of, 127, 128, 168, 169, 322, 323. Forms, 322, 323. Committees, Standing, 156, 171-174, 198. Common Stock, 45, 46, 236, 237. (See also Stock.) Forms, 235. Company, 21. Joint Stock, 19, 20. 401 I I' I 402 GENERAL INDEX. [References are to pages.] :it- CoMPENSATiON of Directors, 147, 148, 177. Officers, 148, 157, 177, 193. Consent Meetings, 139, 140, 163, 165, 166, 274. Forms, 274, 275. CoNsouDATioN, 105, 211-214, 314. Forms, 296, 297, 312-314. Contracts, 23, 30, 32, 158, 159, 168, 364-367. Forms, 364-367. Between Directors and Corporation, 158, 159, 168. By-laws as, 32, 37, 38. Ultra Vires, 30, 159. Corporate Acknowledgment, 352, 359. Forms, 359. Calendar, 117, 188, 381-383. Forms, 382, 383. Proxies, 289-291. Forms, 289-291. Seal, 28, 187, 339, 342. (See also Seal.) Signature, 337-341, 348. Forms, 338-341. System, 19-41. Corporations, 19-24. Advantages of, 23, 24. As Stockholders, 88-90, 97, 130, 146, 218. Books of. (See Books.) Business, 20, 25. Consolidation of, 105, 211-214, 215, 314. (See also Consolidation.) Forms, 296, 297, 312-314. Creditors of, 30, 79, 80, 107-115, 215-217. De Facto, 112, 113. Directors Dealing with, 158, 159, 168. Directors of. (See Directors.) Dissolution of, 29, 96, 99, 105, 216, 217. Domestic, 21, 57. Duration of, 24. Financial, 20, 21, 25. Foreign, 21, 57, 113, 114. Holding Stock, 88-90, 97, 130, 146, 214, 218. Legal Entity, 23, 24. Liability of, 30, 32, 55, 77, 81, 84 Membership, 20, 81. Organization of, 20-23. Powers of, 21, 28-30. Public Utilities, 20, 21, 25. rjT'.v?-. ",Ws^ I GENERAL INDEX. [References are to pages.] Corporations— Continued. P.ecords of. (See Books; Minutes.) Regulation of, 21, 22. Reorganization of, 215, 216. Stock, 19-21. Stock of. (See Stock.) Stockholders of. (See Stockholders.) Transfers to and by, 81, 88-90, 93. Ultra Vires Acts, 30. Voting by, 89, 97, 130, 289-291. CouNSEi,, 193. Coupon, 384-386. Forms, 387. Coupon Bond, 384-387. Forms, 386, 387. Register, 204. Creditors, Corporate, 30, 79, 80, 107-115, 215-217. Cumulative Dividends, 46. Voting, 32, 131-133. 403 Declaration of Dividends, 159, 205, 206. (See also Dividends.) Deed of Trust, 388-396. Forms, 388-396. De Facto Corporations, 112, 113. De Facto and De Jure Officers, 152, 176, 180, 181. Delinquent Subscriptions, 107-110, 325, 326. Forms, 326. Deposits, Bank, 191, 297-299. Forms, 297-299. Directors, 22, 23, 143-174. Acceptance of Office, 331. Act as Trustees, 155, 156, 158-160. Action without Meeting, 143, 144. By-laws of, 22, 23, 34, 104, 156, 157. Chairman of Board, 166, 183, 191, 192. Classification of, 150. Compensation of, 147, 148, 177. Contracts with Corporation, 158, 159, 168. Declaration of Dividends by, 159, 205, 206. (See also Dividends.) De Facto and De Jure, 152. Dissent from Illegal Action, 160, 199, 200. Dummy. 146. 147. 214. 11 •I *? » #-»<• •■*%\ 5«K,?<#0.% ^^mi ■i itp^ m 404 GENERAL INDEX. [References are to pages.] Directors — Continued. Duties of, 155, 156. Election of, 22, 29, 59, 60, 97, 103, 104, 128-133. 149-152. (See also Forms, 307-310, 331. [Meetings.) Failure to Elect, 128, 149, ISI, 152. First, 147, 149. Function of, 143, 154, 155. Holding Over, 128, 149, 151, 152. Liabilities of, 30, 38-40, 159, 160. Managing Director, 192. Meetings, 161-170. (See also Meetings, Minutes, Voting.) Method of Action. 143, 144, 155, 158. Number of, 23, 26, 144, 145. Office-Holding by, 155, 157, 177. Powers of, 22, 23, 105, 143, 154-159, 171, 172, 175, 176, 178, 179, 181, 182, 193. Qualifications, 89, 145-147. Ratification by, 144, 162, 179, 302. Repeal of By-laws by, 37. Removal of, 106, 153. Resignations of, 152, 153, 333-336. Forms, 333-335. Standing Committees, 156, 171-174. (See also Committees, Stand- ing.) Term of Office, 149-152. Vacancies Among, 104, 150, 151. Voting, 167, 168. Dissolution of Corporation, 29, 96, 99, 105, 216, 217. Dividend Book, 204, 377. Forms, 377. Checks. 208, 209, 345, 347. Forms, 328, 345. Dividends, 45, 46, 60, 63, 74, 95, 96, 98, 115, 159, 205-210. Cumulative. 46. Declaration of, 159, 205, 206. Forms, 299, 300. Discretionary with Directors, 205. Form of, 207, 208. Illegal, 115, 159, 205, 210. Impairing Capital, 205, 207, 208. Mailing Order for, 329, 330. Forms, 330. Notice of, 60, 208, 327-330. Forms, 327-330. on Pledged Stock, 74, 209, 219. % ' GENERAL INDEX. 405 [References are to pages.] Dividends— Continued. Preferred, 45, 46, 98. Resolution for, 59, 206, 210. Forms, 299, 300. Right to, 45, 46, 63, 74, 95, 96, 98, 206. Domestic Corporations, 21, 113, 114. Draft, Corporate, 346. Forms, 346. Dummy Directors, 146, 147. Stockholders, 81, 82. Duration of Corporation, 24. Duties of Directors, 155, 156. of Officers, 77, 78, 102, 177-179. (See also President, Secretary, etc.) E Election of Directors, 22, 29, 59, 60, 97, 103, 104, 128-133, 149-152, 382. (See also Meetings of Stockholders, Annual.) Inspectors of Election, 128, 130, 306-309. Forms, 307-309. Proxies for, 73, 97, 123, 124, 282-292. Forms, 284-292. Quorum at, 122-125. Voting at, 97, 128-132, 309, 310. Forms, 310. EucTiON OF Officers, 23, 29, 156, 159, 170, 175, 176, 181, 182. Forms, 300, 355, 356. Employees, Appointment of, 176, 192, 193. Forms, 295, 332. Endorsement of Certificate of Stock, 63, 72, 82-84, 90. (See also Certif- ficates of Stock, Assignment of.) of Checks, 345, 346. Forms, 345, 346. Evidence, Minutes as, 135, 196, 198, 200. Examination of Accounts, 96, 99-101, 190. of Books, 57, 96, 99-101, 180, 186-188, 191, 196. Exchange of Property for Stock, 109, 250-256, 261. Forms, 251-256, 258-260, 263. Assignment of Property, 254-256. Forms, 254, 255. Directors' Action, 250, 253, 261. Forms, 253, 254. Stockholders' Action, 250, 253, 261. Forms, 253. : I. s I- \ 2' r%««"«p*»*«st |i#:| 406 GENERAL INDEX. [References are to pages.] Execution of Corporate Instruments, 337-341. Forms, 338-341. Executive Committee, 171, 172. (See also Committees, Standing.) Officers, 157, 183. (See also President, Secretary, etc.) Executors, Transfers to and by, 81-86, 92, 93. Voting by, 97. EXEMPUFICATION OF MiNUTES, 358. Forms, 358. Expulsion of Stockhou)Ers, 41. F Face VAI.UE of Stock, 43. Fees, Directors', 147. Finance Committee, 172, 173. (See also Committees, Standing.) Financial Corporations, 20, 21, 25. First Meetings, 34, 257-266. (See also Meetings.) Forms, 258-260, 262-266. Foreign Corporations, 21, 57, 113, 114. Forfeiture of Stock, 108, 115. Forms, 326. Forged Transfers, 11, 78. Full-Paid Stock, 23, 44, 45, 48-51, 61, 62, 75, 79, 80, 107-112, 114, 115. Liability in Transfer of, 79-82. G General Manager, 192, 193. Notice of Election as, 332. Forms, 332. Guaranteed Stock, 46. (See also Preferred Stock.) Guardians, Transfers to and by, 81-83, 87, 88, 92. H Holding Corporations, 88-90, 97, 146, 214, 218. Holding Over, Directors, 128, 149, 151, 152. Officers, 170, 176. I Ili^EGal Acts of Officers and Directors, 158-160, 180, 210. By-laws, 31, 32. Contracts, 30, 158. Dividends, 115, 159,205,210. Incorporation, Advantages of, 23, 24. Certificate of. (See Charter.) Defective, 112, 113. \'i^i^%V''"^':^'' ^^^mmm pf^^^f^^^w GENERAL INDEX. [References are to pages.] 407 Incorporators, 42, 94, 149, 250, 251, 253, 266. Increase of Capital Stock, 96, 98, 99. Indemnity Bonds, 70-72, 190, 191, 378-380. Forms, 378-380. Inspection of Accounts, 96, 99-101, 190. of Books, 57, 96, 99-101, 180, 186-188, 191, 196. Inspectors of Election, 128, 130, 306-309. Forms, 307-309. Instalment Book, 203, 204, 376, 377. ! Forms, 376. Payments, 224-229. Forms, 224, 225, 227-229, 324. Scrip or Certificate, 50, 203, 226, 228. Forms, 227-229. Assignment of, 231, 232. Forms, 231, 232. Interim Receipts, 50, 54, 229. Forms, 229. Issuance of Stock for Property. (See Exchange of Property for Stock.) Issue of Bonds, 154, 384-396. Forms, 386-396. of Stock, 47, 49-52, 54, 55, 186, 256. (See also Transfer of Stock.) Issued Stock, 44, 47. \ 1 Joint-Stock Companies, 19. 20. Lease of Entire Property, 213, 214. Ledger, Stock, 56, 57, 66, 67, 371-376. Forms, 372, 374, 375. Liabilities of Agents, Attorneys, Trustees, etc., as Stockholders, 81. of Corporations, 30, 32, 55, 11, 81, 84, 86, 87. of Directors, 30, 38-40, 159, 160. of Officers, 30, 38-40, 85, 179, 180, 188. 210, 217. of Stockholders, 2Z, 44, 45, 49, 79-85, 107-115. as Partners, 112-114. for Assessments, 45, 79, 80, 114, 115. for Illegal Dividends, 115, 205. of Foreign Corporations, 113, 114. on Full-Paid Stock, 114, 115. on Partly Paid Stock, 23, 44, 45, 48, 79-82, 107-112. on Pledged Stock, 73, 82. on Preferred Stock, 112. ""^'l '1 1-T-|iiiiiii>iO|nt j^ 408 GENERAL INDEX. [References are to pages.] Liabilities — Continued. of Stockholders — Continued. to Corporate Creditors, 79, 80, 107-115. to Corporation, 79, 80, 107-112, 114, 115. under Defective Incorporation, 112-113. of Subscribers, 23, 48, 107-110. of Transferee of Stock, 79-85, 110-112. of Transferrer of Stock, 79-85, 87, 110, 111. List of Stockholders, 119-121, 140, 186, 198, 304, 305. Forms, 304. Lists, Subscription, 218-224. Forms, 219-224. Loose-Leaf Minute Book, 196, 197. Lost Certificate, 66, 70-72, 11, 78, 93, 130. Indemnity Bond for, 70-72, 379, 380. Forms, 380. Procedure for Reissue, 66, 70, 71. Manager, 192, 193. Notice of Election as, 332. Forms, 332. Managing Director, 192, 300. Married Woman as Stockholder, 80, 82, 83, 92. Meetings of Directors, 143, 144, 161-170. Adjourned, 170. Forms, 316. Call and Waiver, 163, 165, 257, 259, 268, 273-275. Forms, 259, 273-275. Call for, 163-165, 267, 275. Forms, 275. Committee Meetings, 173, 174. Consent Meetings, 163, 165, 166, 274. Forms, 274, 275. Election of Officers, 156, 169, 170, 175, 176, 181, 182. Forms, 300, 355, 356. First, 34, 257, 259, 261, 264-266. Forms, 259, 264-266. Calls and Waivers, 259, 268, 275. Forms, 259. Minutes, 168, 197-202, 264-266, 311, 314. Forms, 264-266. 314-317. Notice of, 162-167, 170, 267, 275, 276, 281, 382. Forms, 281. Officers of, 166, 170. ^f1i3^■■■ GENERAL INDEX. [References are to pages.] Meetings of Directors— Continued. Procedure at, 166-170, 261. Purposes, 162-166. Quorum, 151, 166-168. Regular, 161, 162, 165-169, 314-316. Forms, 314-316. Reports, 168, 169, 198. Special, 161-169, 273-275, 281, 316, 317. Forms, 273-275, 281, 316, 317. Time and Place of, 161, 162, 164. Voting at, 167, 168. Meetings of Stockholders, 116-142. Adjourned, 134, 142, 314. Forms, 313, 314. Annual, 116-135, 149. Adjournment of, 122, 133, 134. Closing Transfer Book, 53, 59, 60, 117, 119. Election of Directors. 97, 102, 104, 128-133, 149-152. Forms, 310, 332. Inspectors of Election, 128, 130, 306-309. Forms, 307-309. Irregularities in Procedure, 117, 149, 150. List of Stockholders, 119-121, 186, 304, 305. Forms, 304. Minutes, 126, 127, 168, 197-203, 311, 312. Forms, 311, 312. Notice of, 38, 60, 117-119, 125, 126, 276, 278-280. Forms, 278-280, 352, 353. Officers of, 120, 121. Order of Business, 119, 133. Outline Minutes, 120, 305, 306. Forms, 305, 306. Place of, 116. Proxies, IZ, 95, 97, 122-124, 282-292. Forms, 284-292. Quorum, Zl, 122-125. Reports, 127, 128, 198, 318-323. Forms, 294, 319-323. Roll Call, 121-123. Forms, 304. Voting at, 46, IZ, 74, 96, 97, 128-133, 309, 310. Forms, 310. First, 34, 149, 257-264. Forms, 258-260, 262-263. Calls and Waivers, 257-259, 268. Forms, 258. 409 i**^ 4 • 1 410 GENERAL INDEX. [References are to pages.] Meetings of Stockholders— Continued. First — Continued. Minutes, 260-264. Forms, 262, 263. Place, 257, 260. Proxies, 259, 260. Forms, 259, 260. Special, 136-142. Adjournment of, 141, 142. Business of, 136-142. Call and Waiver, 138, 140, 141, 267, 268. Forms, 268. Call for, 136-138, 140, 141, 267-273. Forms, 269-273, 300, 301. Consent Meetings, 139, 140. Minutes, 141, 168, 197-203. Forms, 312-314. Notice of, 38, 136-142, 276, 277, 278. Forms, 276-278. Place of, 116, 136, 137. Proof of Notice, 140, 141, 352, 353. Forms, 352, 353. Quorum, 37, 122-125. Time, 137. Membership Corporations, 20, 81. Minority Stockholders, 31, 32, 131-133. Freezing out, 216. Minors as Stockholders, 80, 87, 88, 92, 93. Minutes, 196-203, 311-317. Forms, 311-317. Amendment of, 126, 127, 202. Approval of, 126, 127, 141, 168, 201, 202. Book of, 195-198, 311. Committee, 174, 198. Correction of, 126, 127, 202. "Cut and Dried," 202, 203. Directors', 168, 197-202. First, 264-266. Forms, 264-266. Regular, 168, 201, 314. Forms, 3!^, 315, 316. Special, 168-201. Forms, 316, 317. Outline, 120, 305, 306. Forms. ?.0S, 306. ''.tm^^JtmiMii^, k'lW iSifii 3ultC»^i#»- 414 GENERAL INDEX. [References are to pages.] Proof of Notice of Meetings, 118, 119, 125, 126, 140, 141, 166, 167. 352, 353. Forms, 352, 353. Property for Stock. (See Exchange of Property for Stock.) Power to Buy, Hold and Sell, 28, 29. Sale of Entire, 104, 105, 154, 213, 214. Forms, 296, 303. Protest in Minutes, Directors, 160, 199, 200. Proxies, 95, 97, 122-124, 167, 259, 260, 282-292. Forms, 259, 260, 284-292. Directors Cannot Give, 167, 284. Revocation of, 282, 283, 286, 292. Forms, 292. Signature to, 283, 290. Voting by, 73, 97, 123, 124. Publication Notice of Dividends, 208, 327-329. Forms, 327-329. of Meetings, 118, 119, 126, 277, 279, 280, 281, 353. Forms, 277, 279, 280, 281, 353. PuBuc Utilities Corporations, 20, 21, 25. Qualifications of Directors, 89, 145-147. of Officers, 177, 185, 188, 189. Quorum at Committee Meetings, 174. at Directors' Meetings, 151, 166-168, at Stockholders' Meetings, 37, 122-125. Common Law, 124, 125. Ratification of Unauthorized or Irregular Action, 144, 165, 179, 180. Forms, 302. Reading of Minutes, 126, 127, 128, 168, 201, 202. Receipts and Drafts, 344, 347, 348. Forms, 344, 347. Receipts for Certificates of Stock, 54, 64, 84, 236, 240. Forms, 240. for Dividends, 209, 347, 348. Forms, 347. for Subscriptions, 50, 54, 203, 224-230. Forms, 225, 227-230. Assignment of, 231, 232. Forms, 231, 232. Record, Stockholders of, 52, 53, 56, 57, 61-65, 80, 95, 146, 147, 208, 209, 239. GENERAL INDEX. 415 [References are to pages.] Recording By-laws, 41, 197, 245. Certificate of Incorporation, 197. Minutes, 135, 197-200, 245, 293-296. Motions, 199, 200, 293-295. Resolutions, 199, 200. Transfers of Stock, 52, 53, 57-59, 61-68, 80. Records. (See Books, also Minutes.) Registered Bond, 385, 386. Registrar of Stock, 68-70. Regular Meetings, 116-135, 149, 161-170. (See also Meetings.) Reissue of Stock. (See Transfer of Stock.) Removal of Directors, 106, 153. of Officers and Agents, 156, 181, 182. Forms, 302. Reorganization of Corporations, 215, 216. Repeal of By-Laws, 32, 36-38, 41, 103, 104 Reports, 127, 128, 168, 169, 184, 186, 190, 198, 199. (See also Annual Re- ports.) Forms, 294, 307-309, 319-323. Committee, 127, 128, 168, 169, 198, 318, 322, 323. Forms, 322, 323. Disposition of, 127, 128, 168, 169, 198, 199. Inspectors', 128. Forms, 307-309. Officers', 168, 169, 184, 186, 190, 198, 199, 318-323. Forms, 294, 319-323. Tax, 318. Resignations, 152, 153, 182, 333-336. Forms, 333-336. Acceptance, 152, 153, 182. How Addressed, 182. Peremptory, 152, 153. Right to Withdraw, 153. Tentative, 152, 153. Resolutions, 31, 137, 199, 200, 206, 210, 293, 296-303. (See also Motions.' Forms, 296-303. Certified, 354, 355. Forms, 354, 355. Restrictions on Transfer of Stock, 75, 76. on Voting Right, 130, 131. Revocation of Proxy, 282, 283, 286, 292. Forms, 292. of Subscription, 48, 49, 218-222. of Powers of Attorney, 363, 364. Forms, 363, 364. :: 5 I SM^K-kAiT^S^SS-it W V V «.^ i v»5,^ 1; -.i-*.. » *-*•♦. -• V*..»« flW'«« n%^'^ f^^jaffr- s\ iiiilBJtt>iiKau&Su6taki«hK£ laa^iiiiliaiiMiiiMMBWH '1 "» v- a.a.&3i4»r#^ u it t( K 416 GENERAI, INDEX. [References are to pages.] Rights of Stockholders, 45, 46, 94-102. Certificate Not Essential to, 49-51, 70, 95, 97, 130. Enforcement of By-laws, 38-41. Holders of Preferred Stock, 45, 46, 95. Membership, 41. Special Charter Rights, 96, 97, 101, 102. Statutory Rights, 96, 97, 100-102, 123, 124. to be Notified of Meetings, 95, 97, 98, 117, 118, 138, 139, 276. be Recorded as Stockholder, 52, 53, 95. Inspect Corporate Books, 57, 96, 99-101, 180, 186-188, 196. Object to Ultra Vires Acts, 30. Participate in Assets, 46, 96, 99. Participate in Dividends, 45, 46, 63, 74, 95, 96, 98. 206 Stock Certificate, 49, 50, 70, 95. Subscribe for Increased Stock, 96, 98, 99. Transfer Stock, 51, 75, 76-79, 95. (See also Transfer of Stock.) Vote, 46, 73, 74, 95-98, 122-124, 130, 131. When Stock Certificate is Lost, 66, 70-72, 130. Roll Call, 121-123. Forms, 304. Rules Regulating Transfers, 77-93. Summary of, 91-93. 8 Salaries. (See Compensation.) Sale, Bill of, 365. Forms, 365. of Entire Assets, 104, 105, 154, 213. Forms, 296, 303. of Pledged Stock, 74, 75. Scrip Dividends, 207. Scrip, Instalment, 50, 203, 226, 228, 231, 232. Forms, 227, 231, 232. Seal, 28, 187, 342. Attestation of, 339. Forms, 340. Secretary, 185-188. (See also Officers.) Affidavit of, 126. 139, 352, 353, 357. Forms, 353, 357. Books of, 52-60, 186-188, 195-198, 203. Certificate of, 125, 126, 140, 197, 299, 352-557. Forms, 352-357. Duties of, 185-188. GENERAL INDEX. [References are to pages.] 417 Secretary — Continued. Duties — Continued. Affixing Seal, 187, 339, 342. Call of Roll, 121-123. Closing Transfer Book, 53, 59, 60, 117, 119, 208. Correction of Minutes, 126, 127, 202. Custodian, 55, 187, 188, 196, 200. Issue of Stock, 54, 55, 256. List of Stockholders, 119-121, 140, 186, 208, 304, 305. Lost Certificates, 66, 70-72, 77, 78, 93, 130. Minutes, Reading and Recording, 120, 126, 127, 135, 168, 197- 202, 293-296, 305, 306. (See also Minutes.) Notice of Meetings. (See Notices.) Officer of Committees, 173. Officer of Meetings, 120, 121, 166, 170. Order of Business, 119, 133, 167. Preparation for Meetings, 119, 120, 186, 304-306. Proof of Due Notice. (See Notices.) Proxies. (See Proxies.) Recording By-laws, 41, 197, 245. Refusal of Transfers, 66, 67, 75, 77-79, 87. Reports, 128, 168, 169, 186, 198, 200. Transfer of Stock, 54, 55, 57-68, 77-79, 240. Qualifications of, 188. Receipt, 240. Forms, 240. Signature, 135, 187, 200, 234, 260, 337. Surrender of Records, 188. Shares of Stock, 42, 43. (See also Stock.) Signature, Corporate and Official, 187, 191, 337-341, 348. Forms, 338-341. to Assignment of Stock, 82, 83, 86, 90-93. " Minutes, 134, 135, 140, 200. " Notes, 348. " Proxies, 283, 290. " Stock Certificate, 186, 187, 234, 236. Special By-law Provisions, 36, 37, 96, 101, 102. Charter Provisions, 27, 37, 96, 101, 102. Charters, 22. Meetings. (See Meetings.) Standing Committees, 156, 171-174. (See Committees, Standing.) Statutory Consolidation, 212, 213. Liabilities of Directors, 159, 160. of Stockholders, 110-115. Rights and Powers of Stockholders, 96, 97, 100-106, 123. 124. ti" J b ri B i i lii'MM HJ: '^- Ufgm^*f*i^m icdP^' 418 GENERAL INDEX. [References are to pages.] Stock, 20, 21, 23, 24, 42-93. Assessment of, 45, 79, 80, 114, 115. Assignment of, 61-93. (See also Transfer of Stock.) Forms, 239, 240. Books, 52-60, 63, 67, 68, 369-376. (See also Books.) Forms, 369-372, 374-376. Certificate Book, 53-56, 58, 64. 68, 69. 130. as Stock Book, 55-57, 130. as Transfer Book, 58, 130. Certificates. (See Certificates of.) Classification of, 27, 45, 131. Common, 45, 236, 237. Forms, 235. Corporation Holding, 88-90, 97, 130. 146, 214, 218. Directors Holding, 145-147. Dividends on. (See Dividends.) Exchange of Property for, 109, 250-256, 261. Forms, 251-256, 258-260. 263, 265. Forfeiture of, 108, 115. Forms, 326. Full-paid, 23, 44, 45. 48-51. 61, 62, 75, 79-82, 107-112, 114, 115. Guaranteed, 46. Increase and Decrease of, 26. 96, 98, 99. Issue of, 47, 49-52, 54, 55. 186, 256. Issued, 44, 47. Ledger, 56, 57, 66, 67, 371-376. Forms, 372, 374, 375. Liabilities. (See Liabilities of Stockholders.) Original Issue, 51, 54. Outstanding, 44, 47. Par, Issue of for Less than, 44. 45. 109, 110. Partly Paid, 23, 44. 45, 47-51. 62, 75, 78-82, 107-112. 130, 224. 226. 231, Pledged. 72-75, 82, 85. 88, 209, 210. Preferred, 45, 46, 95, 112, 236-239. Forms, 237, 238. Shares of, 42, 43. Subscribers to. (See Subscribers.) Subscriptions to. (See Subscriptions.) Transfer of, 61-93. (See also Transfer of Stock.) Treasury, 44, 46, 47, 67, 68, 130. Unissued, 43, 44. Voting Rights. (See Voting.) Watered, 47. Stock Corporations. 19-21. Stock Dividends, 207. 1 GENERAL INDEX. [References are to pages.] 419 Stockholders, 20, 21, 43, 48-51, 94-115. Certificate Not Essential, 49-51, 70, 95, 97, 130. Corporations as, 88-90, 97, 130, 146, 214, 218. Directors as, 145-147. Dummy, 81, 82. Expulsion of, 41. Liabilities of, 23, 44, 45, 49, 79-85, 107-115. (See also Liabilities of.) List of, 119-121, 140, 186, 198, 304, 305. Forms, 304. Married Women as, 80, 82, 83, 92. Meetings of. (See Meetings; also Minutes.) Minority, 31, 32, 131-133, 216. Minors as, 80, 87, 88, 92, 93. Not of Record, 63-65, 80. of Record, 52, 53, 56, 57, 61-65, 80, 95, 146, 147, 208, 209, 239. Powers, ■ 102-106. (See also Powers.) Right to Certificate, 49, 50, 70, 95. Rights, 45, 46, 94-102. (See also Rights.) Subscribers are, 48, 50. Stub, Stock Certificate, 54, 55, 64, 236-238. Forms, 235, 236. Instalment Scrip or Certificate, 226, 228. Forms, 227. Subscribers, are Stockholders, 48, 50. Liabilities of, 23, 48, 107-110. to Stock, 47-50, 94, 95, 218-224, 226, 228, 229, 231, 232. (See also Stockholders.) Subscriptions, 32, 47-50, 94, 95, 107-110. 218-232. Acceptance of, 48-50, 94-95. Agreement, 47-49, 218-224. Forms, 219-224. Assignment of, 231, 232. Forms, 231, 232. Book of, 203, 219. Delinquent, 107-110, 325, 326. Forms, 326. Incorporators', 94. 250, 251, 252, 266. Forms, 251, 252. Instalment Book, 203, 204, 377. Forms, 376, Instalment Certificate Book, 203, 226. 228. Forms, 227-229. Lists, 47-49, 218-224. Forms, 219-224. . m 'I#^' r 420 GENERAL INDEX. [References are to pa^es.] Subscriptions — Continued. Payment, 107-110, 223-229. Forms, 224, 225, 227-229, 324. Receipts for, 50, 54, 203, 224-230. Forms, 225, 227-230. Revocation of, 48, 49, 218-222. Temporary Certificates and Receipts for Subscriptions, 50, 54, 203, 224-230. Forms, 225, 227-230. Tenants in Common, Transfers to and by, 81, 91. Term of Office, 149-152, 176. Testimonium Clauses, 339-341. Forms, 339-341. Transcript from By-laws, 356. Forms, 356. from Minutes, 356-358. Forms, 356-358. Transfer Book, 53, 57-60, 66, 67, 117, 130, 208, 369-371. Forms, 369-371. Transfer of Stock, 24, 50-55, 57-59, 61-93, 231, 232, 239, 240. Forms, 239, 240. Assignment of Certificate. (See Certificates of Stock.) By Attorney, 58, 59, 62, 63, 78. Duties of Officers as to, 54, 55, 58-68, 77-79, 240. Forged, 11, 78. Form of, 82, 83. Fraudulent, 84, 85. Full-Paid Stock. 51, 61-68, 75. In Person, 58, 59, 78. Liability Involved, Corporation, 55, 11, 81, 84, 86, 87. Officers, 85. Stockholders, 79-82, 87, 110-112. Lost Certificates, 66, 70-73, 11, 78, 93. On Books, 52, 53, 57-59, 61-70. Partial, 64, 65. Partly Paid Stock, 50, 51, 62, 75, 78-82, 231, 232. Pledged Stock, 72-75, 82, 85. Precautions in, 55, 11, 78, 82, 86, 90, 92. 93. Procedure, 61-68. Refusal of by Corporation, 66, 67, 75, 77-79, 87. Restrictions on, 75, 76. Rules Regulating, Summary of, 91-93. GENERAL INDEX. [References are to pages.] Transfer of Stock — Continued. Signature to Assignment, 82, 83, 86, 90-93. To and by Agents and Attorneys, 78, 81-84, 92, 93. '* '* " Corporations, 81, 88-90, 93. " " " Executors and Administrators, 81, 84-86, 92, 93. " " " Guardians, 81-83, 87, 88, 92. " " " Married Women, 80, 82, 83, 92. " " " Minors, 80, 87, 88, 91-93. " " " Partnerships, 81, 90, 91. " " " Tenants in Common, 81, 91. " " " Treasurer, 81, 90. " " " Trustees, 81-83, 86, 87, 90, 92, 93. To Dummy Stockholder, 81, 82. " Whom Stock may be Transferred, 79. Transfer Agent and Registrar, 68-70. Treasury Stock, 67, 68. Unpaid Subscriptions, 51, 62, 75-82, 231, 232. Unrecorded, 63-65, 80. Who May Transfer, 78, 79. Without Certificate, 51, 53. Transferee of Stock, 79-85, 110-112. Transferrer of Stock, 79-85, 87, 110, 111. Treasurer, 188-191. (See also Officers.) Affidavit, 358, 359. Forms, 358, 359. Bond of, 190, 191, 378, 379. Forms, 378, 379. Books, 189-191, 195, 203, 204. Duties, 189-191. Qualifications, 189. Receipts, 226. Forms, 227-230. Report, 190, 318, 320-322. Forms, 320-322. Resignation, 336. Forms, 336. Signature, 234, 236, 337. Surrender of Records, 190, 191. Transfers to and by, 81, 90. Treasury Stock, 44, 46, 47, 130. Transfer of, 67, 68. Trust, Deeds of, 388-396. Forms, 388-396. 421 ,f:]'-n