directors have implied power by virtue of their office to make assessments.1 In any event, shareholders may delegate such power to the directors when the same is given to them by statute or by-law.2 It is questionable, however, whether the directors have power in their turn to delegate the power of making assessments to some ministerial officer. In the making of assessments the utmost care should be observed to see that all the statutory requirements relative to the same are complied with. § 97. Certificates required to be made by Officers or Directors after Organization. In Maine, Massachusetts, Arkansas, and Indiana the statutes require that the board of directors together with certain of the corporate officers shall file a certificate of organization with certain officers. Ordinarily the failure to file such certificate would not affect the legal character of the corporation unless there was a statutory provision to that effect. In Illinois, Missouri, Tennessee, and Utah a certificate of due organization is issued to the corporation by State officials.5 In New York, New Jersey, District of Columbia, Nevada, Indiana, Massachusetts, North Carolina, and Colorado the law requires that after the payment, either in whole or in part, of the capital stock a certificate shall be made and filed in the proper State office setting forth the facts relative to such payment.6 In some of the States, notably New Jersey, failure to file such certificate renders the officers neglecting or refusing to make such certificate for thirty days after written request so to do, jointly and severally liable for all debts contracted before the filing of such certificate." Unless there is a penalty provided, such provisions are merely directory.8 1 Budd v. Company, 15 Ore. 413; 15 Pac. 659; Smith v. Company, 1 How. (Miss.) 479. 2 Rives v. Company, 30 Ala. 92. 6 Also in Delaware upon request of a creditor or stockholder. 7 Nassau Bank v. Brown, 30 N. J. Eq. 478; Waters v. Quinby, 27 N. J. L. 296. * Pike v. Company, 68 Me. 445; S. H. See S. F. N. Bank v. Almy, 117 Mass. 476; Road v. Green, 12 R. I. 164. ▲ In re Shakopee, etc. Co., 37 Minn. 91; 33 N. W. 219; Franklin Bridge Co. v. Wood, 14 Ga. 80; In re Philadelphia Artisans Institute, 8 Phila. 229; A. S. A. & G. Co. v. Whittier, 117 Mass. 451. 6 See Boston Acid Mfg. Co. v. Moring, 15 Gray (Mass.), 251. Chase's Pat. El. Co. v. Company, 152 Mass. 428; 28 N. E. 300; Chase v. Lord, 77 N. Y. 1; Block v. Womer, 100 Ill. 328; Hardman v. Sage, 124 N. Y. 25; 26 N. E. 354; Flash v. Conn, 16 Fla. 428; Austin v. Berlin, 13 Col. 200; 22 Pac. 433. 8 Veeder v. Undgett, 95 N. Y. 295 § 98. Time in which Corporation must organize and commence Business. Over half of the States have provisions upon their statute books requiring corporations to organize and commence business within from one to five years after the issuance of their charter. Usually the penalty for failure to so organize and commence business is the right given to the State to bring proceedings for the forfeiture of the corporation's charter on the ground of non-user thereof during the statutory period. It is undoubtedly true, however, that as against all but the State failure to organize and commence business within the time limited by statute will not prevent it from becoming a corporation de facto.2 § 99. Stock Certificates. Stock certificates are the muniments and evidence of the holder's title to a given share in the property and franchises of the corporation in which he is a member.3 Subscribers to the capital stock upon complying with the terms of their subscription are entitled to certificates of stock showing the number of shares owned by them. These certificates must be signed by the officers designated for that purpose by statute or, in the absence of statutory provision, by such officers as are designated in the by-laws for that purpose. A seal is not necessary to the validity of a corporation of stock in a corporation (although it is customary to affix one), and this, too, even in the presence of statutory requirements.5 Neither is it necessary to the validity of a stock certificate that it should be issued in the State of the corporation's domicile. Generally speaking, however, the stock certificate book, seal, and stock transfer books must be kept within the State unless the statute provides otherwise.7 Statutory provisions exist in nearly all the States providing the minimum and maximum par value of shares of capital stock. In some few States the statute expressly provides that all the stock certificates issued by a corporation shall be of a uniform par value. Even in the absence of such a mandatory provision, it is at least questionable whether the courts would sustain the issuance of stock certificates of more than one designated par value.1 In the absence of statute prohibiting the same, corporations may insert in stock certificates such stipulations as they choose relative to the rights of the holders of such certificates, and these constitute valid contracts between the stockholders and the corporation.2 1 See In re Cressona Building Ass'n, I Legal Register (Pa.), 177. As to meaning of par value, see Commonwealth v. Com pany, 129 (Pa.) St. 405; 18 Atl. 414; Dela- CHAPTER IV. ISSUANCE AND PAYMENT OF CAPITAL STOCK. § 100. General Remarks as to the Issuance and Payment of Capital Stock upon the Organization of a Corporation. - In connection with the issuance and payment of capital stock following the organization of a corporation, several important matters should be considered, such, for example, as the time within which the capital must be paid in; the question as to how the capital must be paid in with reference to whether in cash, in property, or in services; and, finally, consideration of the safest and most convenient method to be adopted by the corporation so that it can sell a portion of its capital stock at less than par, if necessary, for the procuring of working capital for the corporation; and this, too, without subjecting the purchasers of such stock to any liability to creditors for alleged unpaid stock subscriptions thereon. It appears that in certain of the States, notably South Dakota and Tennessee, it is not necessary that any of the capital stock be either subscribed or paid in, in order that the corporation may transact business.1 In the several States provisions of the several incorporation acts in force therein differ greatly in regard to the matter of the time within which capital stock must be paid in. New York requires that half of the authorized capital be paid in within one year; Missouri, fifty per cent thereof immediately; Maryland, one-fourth of the capital must be paid in each year; in Indiana, manufacturing corporations must pay in all their capital within eighteen months. Twenty of the States require a certain percentage of the capital to be paid in, in order to commence business; while in twenty-five a certain percentage of the authorized capital must be subscribed. As a general rule the effect of the provisions of law here referred to when they are not complied with has been held not to affect the existence of a corporation as a corporation de jure, but merely afford ground for a 1 See ante, § 2. judgment of ouster in a proper action brought by the State for that purpose.1 Sometimes the statutes go further and require certificates as to the payment of the capital stock to be filed in designated offices.2 § 101. Manner of Payment of Capital Stock. - Probably no subject of corporation law is more involved in apparently hopeless confusion than that growing out of the question of the payment of capital stock of corporations where the rights not only of stockholders, but creditors as well, are involved. Frequent attempts have been made from time to time by both State legislatures and the courts looking to the enactment or declaration of rules which will remove the question from its present vague and unsatisfactory form into the realm of certainty and security. It may not be without its practical value to trace here the sporadic development of the various doctrines that have been advanced from time to time relative to both how the capital stock of a corporation may be paid in, and when so paid in whether the valuation placed upon the property accepted by the corporation in exchange for stock, shall be conclusive alike upon stockholders and creditors. The common law rule with reference to the manner of payment of the capital stock of a corporation appears to have been from time immemorial that it must have been paid for either in money or money's worth.3 In this country such a rule seems to have obtained at an early date. Even when required, by constitutional provision or statute, that stock should be paid for in cash, nevertheless the courts early adopted the view that the same might be paid for in money or money's worth. Otherwise it would simply put the corporation to the necessity of issuing stock in the first instance for money, and then ordering it to be immediately paid out for necessary labor, property, or services.1 The next step in order of development was the enactment of either constitutional or statutory provisions expressly authorizing 1 Baker v. Backus, 32 Ill. 79; Fargason v. Company, 78 Miss. 65; 27 So. 877; Hammond v. Strauss, 53 Md. 1; People v. Chambers, 42 Cal. 201; People v. Bank, 7 Col. 226; 3 Pac. 214; Palmer v. Lawrence, 3 Sandf. N. Y. 161; Lake Ontario, etc. R. Co. v. Mason, 16 N. Y. 451; Spartenburg, etc. R. Co. v. Ezell, 14 S. C. 281; State ex rel. v. Webb, 97 Ala. 111; 12 So. 377. 2 See Quinby v. Waters, 28 N. J. L. 533. See ante, sec. 97. 8 Drummond's Case, L. R. 4 Chan. Ap. 772. 4 Liebe v. Knapp, 79 Mo. 22; Camden v. Stuart, 144 U. S. 104; 12 S. Ct. 585; Kronert v. Johnston, 19 Wash. 96; 52 Pac. 605. |