§ 16. Power to sue and be sued. It has been the rule of the courts from time immemorial to recognize and enforce the power of corporations to sue and be sued under and by their corporate name as incident to such ccrporate existence.1 § 17. Express Powers, Definition of; Enumeration of. Express powers are those which are either granted to all corporations alike by statute, whether inserted in the charter or not, or else are those which are permitted by statute to such corporations as may see fit to take advantage of them, by reserving such powers in the charter itself. Statutes of the character first referred to are construed by the courts to be ipso facto read into the charter, thereby becoming part and parcel of it. On the other hand, the last-named powers can only be availed of by the corporation when, as has been stated, they are specifically reserved or set forth in the articles of incorporation. Express powers relate not only to the right to engage in a special line of business as set forth in the statement in the articles of the object or purposes for which the corporation is formed, but they relate as well to other powers which are here termed "express," inasmuch as they depend upon the existence of specific statutes authorizing their exercise by such corporations as desire to avail themselves thereof. These express powers may be divided into twenty-eight classes, enumerated as follows: (1) power to purchase its own capital stock; (2) power to subscribe for, purchase, and hold stock in other corporations; (3) power to consolidate with other corporations; (4) power to transact all or any part of its business outside of the State of its origin; (5) power to extend its corporate existence; (6) power to change its corporate name; (7) power to increase or decrease its capital stock; (8) power to issue preferred stock; (9) power to change the corporate purposes; (10) power to change the number of directors; (11) power to change its domiciliary office or place for the transaction of its business; (12) power to acquire and enforce a lien upon stock of the corporation to secure the payment of debts due the corporation from stockholders; (13) power to levy assessments against the stockholders with the right to forfeit the stock for non-payment thereof; (14) power to authorize voting at stockholders' meetings by proxy; (15) power to allow cumulative voting at the election. of directors; (16) power to issue stock as full paid and non1 S. W. Co. v. Armstrong, 17 Me. 34. assessable in exchange for property or services; (17) power to sell the corporate assets; (18) power to voluntarily dissolve the corporation without recourse to the courts; (19) power to insert in the charter provisions for the regulation of the internal affairs of the corporation; (20) power to authorize directors to adopt bylaws; (21) power to authorize appointment of executive committee from board of directors; (22) power to enlarge or diminish corporate powers; (23) power to change par value of shares; (24) power of bondholders to vote at elections of directors; (25) power to classify directors; (26) power to amend articles before organization; (27) power to surrender charter before organization; (28) power given to minority stockholders to compel purchase of their holdings upon consolidation. Of the foregoing enumerated powers, the following when expressly authorized by statute are applicable to all corporations alike, whether reserved or enumerated in the articles of incorporation, to wit: The power to consolidate with other corporations; to perform constituent acts outside of the State of its origin; to extend its corporate existence; to change its corporate name; to increase or decrease its capital stock; to change the corporate purposes, the number of its directors, its domiciliary office or place for the transaction of its business; to acquire and enforce a lien upon stock of the corporation to secure the payment of debts due the corporation from stockholders; to levy assessments against the stockholders with the right to forfeit stock for non-payment thereof; to authorize voting at stockholders' meetings by proxy; to permit cumulative voting at election of directors (unless such right is merely made permissible by statute); to issue stock as full paid and non-assessable in exchange for property or services; to sell the corporate assets in their entirety; to voluntarily dissolve the corporation without recourse to the courts; to authorize the directors to adopt by-laws (unless such authority is by statute required to be reserved in the articles of incorporation); to appoint an executive committee; to enlarge or diminish the corporate powers; to change the par value of shares; to amend articles. before organization; to surrender charter before organization; power given to minority stockholders to compel purchase of their holdings upon consolidation. Of the remaining express powers it is probably in accord with the general current of authority in this country to say that to be available to the corporation they must be reserved or specified in the articles of incorporation. The powers to which reference is here made may be enumerated as follows: To subscribe for, purchase, and hold stock in other corporations; to transact all or any part of its business outside of the State of its origin; to issue preferred stock; the power to insert in the charter provisions for the regulation of the internal affairs of the corporation; power of bondholders to vote at election of directors; power to classify directors; and possibly power to purchase its own capital stock. § 18. Power of Corporations to purchase their own Stock. There is considerable conflict of opinion in this country relative to the question whether a corporation may purchase its own stock without express statutory authority so to do. One line of decisions holds to the view that such power exists only when expressly conferred by statute no matter what the purpose may be. Other courts of equally high standing take the view—and this we believe to be the true one-that every corporation has implied power to purchase its own stock provided it does so in good faith and without prejudice to the rights of creditors. It has been said that, "generally speaking, a corporation, when acting within the scope of the purposes of its organization, has the same power to contract with reference to such powers as an individual. We believe the rule to be well settled in the United States by the overwhelming weight of authority and reason that a private corporation may purchase its own stock if the transaction is fair and in good faith; if it is free from fraud, actual or constructive; if the corporation is not insolvent and in process of dissolution, and if the rights of creditors are in no way affected thereby." 3 Where there is no formal corporate action taken, authorizing the purchase of the company's own stock, a purchase made thereof, even though all the stockholders separately consented thereto, would be invalid as against creditors. 1 Crandall v. Lincoln, 52 Conn. 73; Currier v. Company, 56 N. H. 262; Morgan v. Lewis, 46 (. St. 1; 17 N. E. 558. 2 City Bank Columbus v. Bruce, 17 N. Y. 507; N. E. T. Co. v. Abbott, 162 Mass. 148; 38 N. E. 432; Clapp v. Petersen, 104 Ill. 26; Hall & Farley v. Henderson, 126 Ala. 449; Bank v Company, 18 Vt. 131; Chapman v. Company, 62 N. J. 938. 4 De La Vergne Refrigerator Machine Some of the States expressly authorize corporations to purchase shares of their own capital stock, while others expressly forbid it.1 The rule of course does not apply to those cases where statutes exist expressly authorizing the forfeiture of stock for non-payment of assessments.2 The purchase by a corporation of its own stock does not extinguish it. Many of the States have statutes. expressly forbidding corporations to vote their own stock when held or owned by them. Even in the absence of such statute, it is probable that the courts would enjoin corporations from voting their own stock. By statute in a number of States corporations are forbidden to purchase their own stock.5 § 19. Power to subscribe for, purchase, and hold Stock in other Corporations. The prevailing rule in this country is that unless the power is expressly given by statute or by reservation of such right in the charter, corporations have no implied power to subscribe for, purchase, or hold stock in other corporations. An attempt has been made in some States to establish the rule that where the statute does not expressly prohibit such act, the corporation may purchase stock in other corporations without any express authority so to do, provided the circumstances are such as to render the transaction a necessary and proper means for accomplishing the objects of its creation." If, however, there is no statutory prohibition in the matter and the State officials permit the insertion in the articles of the power to purchase and hold stock in other corporations, the exercise of such power is unquestionably valid.8 In the same connection it may be observed that a corporation cannot organize subsidiary companies unless such power is given in express terms in the charter or by necessary implication from the powers thereby conferred.9 Co. v. German Savings Institution, 175 1 See Part III. Table 15, page 585; also Tolman v. Company (Dak.), 22 N. W. 505. 2 Taylor v. Company, 6 Ohio, 83; State v. Association, 35 O. St. 258. 8 Bank v. Wickersham, 34 Cal. 444; Clapp v. Peterson, 104 Ill. 26. See McNeely v. Woodruff, 13 N. J. Law, 352; Brewster v. Hartley, 37 Cal. 15. 5 See Tolman v. Company (Dak.), 22 N. W. 505. 6 Franklin Bank v. Commercial Bank, 36 O. St. 258; Central Ry. Co. v. Collins, 40 Ga. 582; First Nat. Bank v. Nat. Exchange Bank, 92 U. S. 122; Knowles v. Sandercock, 107 Cal. 629; 40 Pac. 1047. 7 Hill v. Nisbet, 100 Ind. 341; Peshtigo Co. v. Company, 50 Ill. App. 624; S. P. T. Co. v. Company, 50 Minn. 93; 52 N. W. 274; Steamship Co. v. Company, 28 La. An. 173. 8 N. S. Co. v. Horton (Neb.), 93 N. W. 225; De La Vergne Refrigerating Machine Co. v. German Savings Institution, 175 U. S. 38; 20 S. Ct. 20. 9 Lagrone v. Timmerman, 46 S. C. 372; 24 S. E. 290. In Alaska, District of Columbia, and Georgia corporations are forbidden by statute to hold stock in other corporations. § 20. Power to consolidate with other Corporations. Corporations cannot consolidate as against dissenting stockholders, however desirable or beneficial the consolidation may be, unless legislative authority is granted to that end. In the exercise of the police power of the State it may lawfully prohibit the consolidation of corporations.2 Consolidation of corporations to a greater or less extent is permitted by statute at the present time in the States of Alabama, California, Connecticut, Delaware, Illinois, Kentucky, Maine, Montana, Nevada, New Jersey, New York, North Carolina, Virginia, and West Virginia. An attempt has been made to lay down the rule that in order to effect a lawful consolidation as between two corporations, the power to so consolidate must be conferred by each of the States under whose laws they were created. A better rule, however, and the only practicable one seems to be this: That either statutory power to dispose of all the assets of the corporation, or in the absence thereof, the consent of all the stockholders inust be obtained to the sale of the assets of one corporation to another. Consolidation in this way then takes the form of a selling out and of accepting money or shares in the new corporation in return for the assets of the old.4 § 21. Power to transact all or any Part of the Corporate Business outside of the State of its Domicile. If there are no statutory restrictions, a corporation has implied power to carry on its business at any place within the State in which its charter is procured.5 The statutory requirement requiring the corporation to fix in the articles its principal place of business does not prohibit under ordinary circumstances the transaction of other business within the State. Long ago in Bank of Augusta v. Earle 1 Pearce v. Ry. Co., 91 How. 341; Hill v. Nisbet, 100 Ind. 341; People v. Company, 121 N. Y. 582; 24 N. E. 834; L. & N. Ry. Co. v. Kentucky, 161 U. S. 677. 677. 331. Chief Justice Taney, Ry. Co. v. Company, 49 Ill. 5 Ashley Wire Co. v. Company, 60 Ill. App. 179; City Bank v. Beech, 1 2 L. & N. Ry. Co. v. Kentucky, 161 U. S. Blatchford, 425; Stickle v. Company (N. 8 Id. 4 Matter of Prospect Park, etc. Ry. Co., 67 N. Y. 371; Toledo, etc. Ry. Co. v. Company, 95 Fed. 497; 36 C. C. A. 155; Lanman v. Company, 30 Pa. St. 42; J. Eq.), 32 Atl. 708; Underwood v. Waldron, 12 Mich. 73; Berthin v. Company, 28 La. An. 210; Lane v. Bank, 9 Heisk. (Tenn.) 419. Potter v. Bank, 5 Hill (N. Y.), 490. 7 13 Peters, 519. |