c. Must be reasonable. By-laws must be reasonable and in conformity to common law, the Constitution and statutes of the State, and to public policy.505 Whether a by-law is reasonable is a question of law for the court.506 By-laws cannot enlarge the powers granted by the statute or charter,507 and, of course, cannot be adopted by or for a corporation until the latter is completely organized, so that they cannot govern the first meeting of the incorporators. 508 In accordance with the principle that by-laws must be reasonable and in conformity with public policy, the following have been held void: (1) Providing that a suit against the corporation must be brought in a particular jurisdiction.509 (2) Uuduly restraining trade.510 (3) Unduly restraining the transfer of shares or the conveyance of property. 511 (4) Imposing an additional liability to creditors. 512 (5) Providing for the expulsion of members of the corpora tion.513 505 Sargent v. Franklin Ins. Co., 8 Pick. 90; Com. v. Worcester, 3 Pick. 462; Nute v. Hamilton Mutual Ins. Co., 6 Gray, 174; Traders', etc., Ins. Co. v. Brown, 142 Mass. 403; Kennebec, etc., R. Co. v. Kendall, 31 Me. 470; Jay Bridge v. Woodman, 31 Me. 593; Matthews v. Associated Press, 136 N. Y. 333; State v. Overton, 24 N. J. L. 435. 506 Lowell on Transfer of Stock, § 48; Com. v. Worcester, 3 Pick. 462; State v. Overton, 24 N. J. L. 435. 507 Traders, etc., Ins. Co. v. Brown, 142 Mass. 403; Andrews v. Mutual Ins. Co., 37 Me. 256; Stewart v. Odd Fellows', etc., Ins. Co., 12 N. J. L. J. 110; State v. Utter, 34 N. J. L. 489. 508 Boston Acid Mfg. Co. v. Moring, 15 Gray, 214. 509 Nute v. Hamilton Ins. Co., 6 Gray, 174; Amesbury v. Bowditch, etc., Ins. Co., 6 Gray, 596. As to a similar provision in a charter, see Boynton v. Middlesex Ins. Co., 4 Met. 212. 510 Matthews v. Associated Press, 136 N. Y. 333. 511 Sargent v. Franklin Ins. Co., 8 Pick. 90; Morgan v. Struthers, 131 U. S. 246, 253; Chouteau Spring Co. v. Harris, 20 Mo. 382; Moore v. Bank of Commerce, 52 Mo. 377. 512 Trustees of Free Schools v. Flint, 13 Met. 543; Flint v. Pierce, 99 Mass. 68; Gamwell v. Pomeroy, 121 Mass. 207. 513 People v. Cotton Exchange, 8 Hun, 216. See Gregg v. Mass. Medical Society, 111 Mass. 185, 192, where authority was given by the charter. (6) Providing that members of a corporation shall submit all controversies to arbitration.514 (7) Providing that the members of the corporation shall be liable individually and collectively for money borrowed, where there is nothing in the statutes or charter authorizing such a by-law. 515 (8) Disturbing the vested rights of stockholders.516 On the other hand, the following by-laws have been held valid: (1) Limiting the time within which an action against the corporation must be brought.517 (2) Prescribing the time and place of stockholders meetings, and regulating the mode of calling them.518 (3) Regulating the voting at meetings.519 (4) Prescribing the duties of officers. 520 (5) Prescribing certain qualifications for membership in the corporation.521 (6) Providing that voluntary contributions shall be refunded.522 Cf. Cook v. Kent, 105 Mass. 246. In New Jersey, however, a by-law authorizing the removal of officers of the corporation has been held valid. Re Griffing Iron Co., 63 N. J. L. 168. 514 State v. Merchants' Exchange, 2 Mo. App. 96; Miles v. Schmidt, 168 Mass. 339; White v. Middlesex R. Co., 135 Mass. 216. A by-law that damages shall be ascertained by arbitration may, however, be valid. Miles v. Schmidt, 168 Mass. 339. 515 Trustees of Free Schools v. Flint, 13 Met. 539. Cf. Flint v. Pierce, 99 Mass. 68, 71; Gamwell v. Pomeroy, 121 Mass. 207. In the latter case all the stock holders agreed in writing to be responsible as partners to creditors. 516 Kent v. Quicksilver Mining Co., 78 N. Y. 159 (issue of preferred stock). 517 Amesbury v. Bowditch, etc., Ins. Co., 6 Gray, 596. 518 Re Long Island R. Co., 19 Wend. 37; Taylor v. Griswold, 14 N. J. L. 222. If there is no by-law, the general agent of a manufacturing corporation may call a meeting. Stebbins v. Merritt, 10 Cush. 31. See also Stephens v. Taft, 3 Gray, 488. 519 State v. Tudor, 5 Day (Conn.) 329. 520 Hale v. Mechanics', etc., Ins. Co., 6 Gray, 169; Burden v. Burden, 159 N. Y. 287. 521 Taylor v. Edson, 4 Cush. 522. 522 Davis v. Lowell Meeting House, 8 Met. 321. (7) Giving cumulative remedies.523 (8) Imposing fines for non-attendance or refusal to accept office. 524 (9) Authorizing assessments upon members for general expenses, 525 (10) Requiring bonds of officers.526 (11) Determining the quorum of directors. 527 d. By-laws regulating stock transfer. Even where a power is expressly given by the charter to regulate stock transfers, this does not include authority to prohibit transfers altogether, for that would be in restraint of trade; 528 nor to provide that transfers shall be approved by the president.529 And an express power given in the by-laws to directors to refuse to assent to transfers must be exercised honestly, in a reasonable manner and for some valid reason." It may be noted, however, that, if a stockholder or purchaser of shares expressly agree to abide by the provisions of such a by-law, the agreement may be valid, although the by-law as such may be invalid.531 530 The charters of some corporations give authority to make by-laws regarding stock transfers; 532 and by-laws intended to keep the control of the corporation in certain hands or to continue a certain line of policy, by giving the corporation an option to take the shares at a certain price if the holder dies 523 Connecticut R. Co. v. Bailey, 24 Vt. 465. 524 Tobacco Pipe Makers v. Woodraffe, 7 Barn. & C. 838. 527 Hoyt v. Thompson, 19 N. Y. 207. in the present act. See infra, § 18, g to n. This is also especially mentioned 528 Morgan v. Struthers, 131 U. S. 246, 253; Sargent v. Franklin Ins. Co., 8 Pick. 90; Chouteau Spring Co. v. Harris, 20 Mo. 382; Moore v. Bank of Commerce, 52 Mo. 377. 529 Sargent v. Franklin Ins. Co., 8 Pick. 90. See 530 Johnson v. Laflin, 5 Dill. 65; Ex parte Penny, L. R. 8 Ch. 446. In Farmers Bank v. Wasson, 48 Iowa, 336, such a by-law was held void. Hubbard v. Manhattan Trust Co., 30 C. C. A. 520, 87 Fed. Rep. 51 (2d Circ.); Walburn v. Ingilby, 1 Milne & K. 61. 531 New England Trust Co. v. Abbott, 162 Mass. 148. 532 E. g. Boston Safe Deposit & Trust Co., St. 1875, c. 123. or wishes to part with them, have been held valid, at least if agreed to.533 534 But it has been held that such a by-law does not prevent a contract to transfer to some one else than the corporation.' A contract between all the stockholders in a corporation and the corporation itself, not to sell their stock during the term of the contract without the written assent of a majority of the stockholders, has also been held not void as against public policy. 535 By-laws requiring registration of stock transfers have been nearly universal, and the matter is now covered also by statute. 536 A by-law giving the corporation a lien on his shares for debts due from a stockholder is probably valid.537 e. Waiver of by-laws. By-laws may be expressly or impliedly waived by the corporation,538 but not by its officers, unless authorized to do so. f. Change in date of annual meeting. 539 Whenever any change is made altering the date fixed in the by-laws for the annual meeting of a corporation, it must file 533 New England Trust Co. v. Abbott, 162 Mass. 148; Price v. Minot, 107 Mass. 49; Whiton v. Batchelder & Lincoln Co. 179 Mass. 169; Barrett v. King, 181 Mass. 476; Lindsay v. Arlington, etc., Ass'n, 186 Mass. 371, 374; Ireland v. Globe Milling Co., 21 R. I. 9; Margate v. Shortridge, 5 H. L. C. 297; Moffett v. Farquhar, 6 Ch. D. 591. See Bond v. Mount Hope Iron Co., 99 Mass. 505; Tuttle v. Batchelder & Lincoln Co., 170 Mass. 315; Jones v. Brown, 171 Mass. 318. Cf., as to Pews, French v. Old South Society, 106 Mass. 488; Davis v. Lowell Meeting House, 8 Met. 325. Cf., as to by-laws of banks to the effect that shares shall be deemed hypothecated to the banks for debts, Nesmith v. Washington Bank, 6 Pick. 324; Plymouth Bank v. Bank of Norfolk, 10 Pick. 454; Massachusetts Iron Co. v. Hooper, 7 Cush. 183. 534 Price v. Minot, 107 Mass. 49, 60. 535 Central Roller Shade Co. v. Cushman, 143 Mass. 353. 536 Infra, § 28. Cf. Central National Bank v. Williston, 138 Mass. 244, 247. 537 See infra § 28, f (12). 538 Clarke v. New England, etc., Ins. Co., 6 Cush. 342. 539 Hale v. Mechanics', etc., Ins. Co., 6 Gray, 173. in the office of the Commissioner of Corporations a certificate of such change, signed and sworn to by its clerk. 540 § 14. Issue of stock. "Capital stock may be issued for cash, property, tangible or intangible, services or expenses. Stock which is issued for cash may be paid for in full before it is issued or by instalments. If it is paid for by instalments, the stock certificate shall be legibly stamped with the words " per cent paid up, balance payable [stating manner and time of payment] and shares subject to forfeiture if unpaid ", the proportion and terms of payment being stated to agree with the facts; and, as each instalment is demanded and paid, the certificate shall be stamped accordingly. Stock may be issued subsequent to the issue of stock certified by the articles of organization if a certificate is prepared within thirty days after the date when the issue of such additional stock has been authorized, and is signed and sworn to by the president, treasurer and a majority of the directors setting forth: (a) the total amount of capital stock authorized; (b) the amount of stock already issued for cash payable by instalments and the amount paid thereon; also the amount of full paid stock already issued for cash, property, services or expenses; (c) the amount of additional stock to be issued for cash, property, services or expenses respectively; (d) a description of said property, and a statement of the nature of said services or expenses, in the manner required by the provisions of section eleven. Such certificate shall be submitted to the commissioner of corporations, who shall examine it in the same manner as the original articles of organization. If he finds that it conforms to the requirements of law, he shall so certify and indorse his approval thereon, and it shall thereupon be filed in the office of the secretary of the commonwealth who, upon payment of the fee hereinafter provided, shall cause it and the indorsement thereon to be recorded. No issue of stock subsequent to the issue of stock certified by the articles of organization shall be lawful until said certificate shall have been filed in the office of the secretary of the commonwealth as aforesaid. No stock shall be at any time issued unless the cash, so far as due, or the property, services or expenses for which it was authorized to be issued has been actually received or incurred by, 540 St. 1905, c. 222, in effect March 27, 1905. |