Second, The securing of the element of perpetuity for the life of the enterprise in hand, so that the death of any of the parties interested does not interfere with the conduct of the business. Third, The good-will and prestige of the business is not then the property of an individual, but belongs to the corporation. Fourth, The ease with which capital is obtained for the use of the business through the sale of stock, thus doing away with the danger or necessity of admitting general or special partners into the concern. Fifth, The facility with which money can be obtained by the sale of bonds or preferred stock. Sixth, The ease with which individual interests in a business may be sold or transferred, without the necessity of obtaining the consent of a third party to the sale. Seventh, The removal of the danger of being ruined through the dishonesty or extravagance of a partner. Eighth, The small expense connected with the incorporation of an enterprise. Ninth, The wide and far reaching extension of the powers of a corporation as compared with that of individuals and copartners. But the advantages of corporate management being stated, the question then arises: Where should the business man of to-day go to procure a charter for the enterprise he may have in hand? With forty-five States, five Territories, and the District of Columbia all offering facilities for incorporation, the task of selection therefrom is by no means an easy one. Where the capitalization is small or the corporate purposes simple, it is sometimes, though not always, best to procure a charter from the State where the principal prospective incorporators reside or where they propose to carry on the company's business. On the other hand, if the capitalization is to be sought in other localities, the proposed corporate business interstate in character, or the prospective capitalization large, and the corporate purposes sought for broad in character, then it may be of great advantage to procure a charter in some outside State. Under such circumstances recourse is usually had to what are recognized as the leading incorporating States already referred to. But to go further, it may be stated that a proper investigation into the question as to where to look for a charter best suited to the immediate purposes of the proposed corporation must necessa rily entail an investigation among many others into the following matters: 1. Nature of the business corporation act of the State wherein it is proposed to incorporate. 2. Policy of such States towards corporations, domestic and foreign. 3. Publicity required as to the condition of corporations organized under the laws of that particular State. 4. Extent of legislative control over private corporations. 5. Nature of corporate powers desired. 6. Initial expense. 7. Amount of annual franchise tax, if any. 8. Amount of capitalization permitted, and the par value of shares allowed. 9. Time within which the capital stock must be paid up. 10. Question as to whether stockholders' and directors' meetings must be held within the State in which the charter is procured. 11. Question as to whether the principal office of the corporation may be maintained outside of the State of its organization. 12. Ascertainment of the question as to whether stock can be legally issued for property or services instead of for cash. 13. Inquiry as to what extent the appraisal of the board of directors of the property or services paid for by the issuance of stock is conclusive upon the creditors of the corporation seeking, in case of insolvency, to enforce an alleged liability for unpaid stock. 14. Power to issue preferred stock. 15. Par value of the corporate shares desired. 16. Power to create debts. 17. Ease or difficulty with which the charter may be amended. 18. Amount of stockholders' liability, if any. 19. Extent of directors' liability, if any. 20. Ease or difficulty with which the corporation may be dissolved. 21. Nature of the laws of the various States with reference to the terms and conditions under which foreign corporations may do business therein. Each of the foregoing questions has its proper bearing when it comes to deciding where to go for a charter for some particular business enterprise which it is proposed to prosecute under the form of corporate organization. A discussion of each of these matters will be found in Part I. of the present treatise. Turning now to the character of the business corporation acts passed by the legislatures of the various States and Territories, it will be apparent to all that many of them are "wonderfully and fearfully made." If one were to attempt to characterize and compare the various incorporation acts of the several States and Territories, it would be found a task of great difficulty, for the reason that it is almost impossible to find a logical basis for classification. Any number of arbitrary classifications might be adopted, but these would be of no value to either the practitioner or the public at large. Whatever attempt may be made here along this line must be based solely upon the most general lines of similarity of the incorporation acts of various States. As a preliminary to this, it has been noted that certain States and Territories are known and recognized as "leading incorporating States." The ones to which reference is made are New Jersey, New York, Delaware, West Virginia, Maine, South Dakota, Connecticut, Massachusetts, Arizona, Nevada, District of Columbia, and Virginia. The great majority of charters taken out annually in this country are procured in the foregoing enumerated States and Territories. By many the New Jersey act is considered to be a model of what a business corporation act should be. This fact, coupled with the large revenue secured by the State of New Jersey through this medium, has resulted in the passage in other States of statutes modelled more or less closely after the New Jersey act. This fact prompts the first classification that will be attempted here, which will be termed the "New Jersey Class." Within the limits thereof may be properly included not only New Jersey, but New York, Delaware, West Virginia, Alabama, Nevada, North Carolina, New Mexico, and Virginia as well. Another classification would embrace a large number of Western States and Territories, which to a greater or less extent have modelled their corporation acts along the same general lines as that of California. This class may properly be referred to as the " California Class," and included therein will be found Colorado, North Dakota, South Dakota, Oklahoma, Idaho, Montana, Oregon, Washington, Utah, Wyoming, Texas, and Arizona. Another group will be known as the "Maine Group," for the reason that the plan has been therein adopted of having the corporation organized before a certificate of incorporation or organization is filed with or issued by the State officials. In this class belong Maine, Massachusetts, Connecticut, Illinois, Missouri, Arkansas, and Indian Territory. Iowa and Nebraska have acts very closely resembling each other, and may be grouped as the "Iowa Class." In another group, which we shall call the "Pennsylvania Class," are to be found Pennsylvania, South Carolina, Florida, Mississippi, and Kansas. The distinguishing feature of this class is that the incorporation scheme adopted embraces a petition for incorporation by the incorporators addressed to State officials, to be followed by the filing of a certificate of incorporation if the petition is favorably acted upon. Another group may be known as the "Kentucky Group," in which belong Kentucky, Ohio, New Hampshire, Rhode Island, and Vermont. The resemblance here, it must be admitted, is more fancied than real, and probably does not depend upon any actual intent to copy the first Kentucky act. In the "Michigan Class" are to be found Michigan, Wisconsin, and Minnesota, all of which possess acts resembling each other in certain features. It is impossible to place Georgia, Indiana, Louisiana, Maryland, and Tennessee in any specified class. They all possess inadequate and certainly unique business corporation acts, which are not likely to be copied by any other State in this day and generation. PART I. INCORPORATION AND ORGANIZATION OF CORPORATIONS. CHAPTER I. DRAFTING THE CHARTER. § 1. General Remarks on Corporate Charters. Incorporation is a form of expression of the sovereign political power of the State in the creation of a juristic person possessing such limited powers as may be granted to it by the legislative branch of our State or national government. The growth of the corporate form of organization affords an example of the rapid evolution from a somewhat circumscribed beginning to proportions that can only be described in this age of industrial trusts and combinations as colossal in character. Even the courts have not infrequently called attention to the modern disposition to incorporate everything.1 Much of this is due no doubt to the passage by the various State legislatures of what are commonly known as "business corporation acts." The phrase "business corporation," in this connection, is a broad term, and includes all corporations engaged in business for profit, as distinguished from municipal and eleemosynary corporations.2 The creation of corporations organized for profit by special act is now forbidden by constitutional provision in all but seven of the States. The existence throughout the country of general incorporation acts has fully reversed the old policy of granting exclusive privileges of any kind to corporations.1 1 See In re Italian Mut. Ben. Ass'n, 4 Pa. Dis. Rep. 357. 2 Adams v. Company, Fed. Cases No.47. * Connecticut, Florida, Massachusetts, New Hampshire, Rhode Island, South 4 People v. Company, 130 Ill. 268; 2 N. E. 798. |