CHAPTER II.

THE TREASURER AND HIS OFFICE.

§ 10.

Qualifications.

The statutes of the various states concern themselves but little with the qualifications of the corporate officials. In the case of the treasurer the statute requirements are particularly scant. In Arkansas he must be a resident of the state. In Michigan he must reside in the state and transact the corporate business in the principal office which must also be in that state, unless the charter permits its location elsewhere. In Ohio all the executive officers must be stockholders of the corporation and the principal accounting officer must be a resident of the

state.

Beyond these, some few after-qualifications, principally as to bonding,1 are prescribed in a number of states, but in the main the qualifications of the treasurer are left to be determined by the corporation and primarily by its stockholders. Speaking generally, the stockholders may prescribe any desired qualifications for their treasurer. They may, if they see fit, impose a property qualification, or require that he shall be a stockholder or a director of the company, or that he be a resident of the state, or they may authorize the directors to prescribe his qualifications and leave the whole matter to them.

When not otherwise prescribed by the state laws or by the charter or by-laws of the corporation, any person who may

1 See Chap. VIII, "The Treasurer's Bond."

act as agent for another is eligible to act as treasurer of the corporation. Thus in the absence of prohibition, 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 another office in the same corporation in itself disqualify an incumbent to act as treasurer, provided the duties of the two offices do not conflict.

From the practical standpoint it is desirable that the treasurer of a corporation be of strict honesty, unblemished reputation and financial responsibility. In such case the character of the treasurer is in itself an element of strength, giving standing and solidity to the corporation.

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 connected 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 devolve upon subordinate employees or are perhaps relegated to an accounting department, leaving the treasurer free to devote his attention to the general oversight and management of the corporate finances and financial affairs. A knowledge of accounts and bookkeeping, though desirable, is not then so essential as it is in the smaller corporations.

In many of the larger corporations the actual duties of the treasurer are nominal, the usual duties of that official being assigned to other officers or employees of the corporation. The treasurer is then as a rule selected because of his financial responsibility or connections, or for other reasons that make his election desirable.

When qualifications are prescribed for the treasurer of a corporation they usually and preferably appear in the by-laws, though occasionally they are found in the charter. In Utah the statutes require that the qualifications of all corporate officers must appear in the charter.

§ 11. Appointment.

As already stated, the appointment or election of the treasurer in common with that of the other corporate officials, rests primarily with the stockholders. The power to elect officers has, however, been largely regulated by statute provision. Thus in many states the officers may be elected only by the directors. In other states the statutes provide that the stockholders may, if they wish, by proper charter or by-law provision, reserve the election of officers to themselves. Also in any state where no statutory provisions conflict, the stockholders might reserve the right if they so desire to. Such reservation is however, rarely made, the power to elect officers being almost invariably conferred upon the directors.

Occasionally special charter or by-law provisions prescribe that the treasurer shall be elected by a certain class or portion of the stock, or by certain members of the board of directors. Such arrangements are possible only in those states where they are expressly permitted by or do not conflict with existing. statutes. Their purpose is usually to insure official representation to certain classes of stock or to particular interests among the stockholders. Provisions of the kind are not common and but seldom desirable.

Statutory provisions directly affecting the election of the treasurer are rare, and in most cases of but little real importance. As already said, in some states the statutes provide that the treasurer, in common with the other officers of the corporation, must be elected by the board of directors; in others, that he may be elected by the stockholders, if so prescribed. Incidental provisions are also found, as in Florida where the officers of a corporation and the time of their election must be set forth in the charter, or as in Tennessee where the corporate officials may not hold office for more than two consecutive years, a third term being thereby prohibited, or as in Utah where the time and manner of electing the corporate officials must appear in the charter.

§ 12. Assumption of Official Duties.

The procedure and formalities when the newly elected treasurer assumes the duties of his office, are simple. Usually he is required to give bond, and this must be done in accordance with the requirements of the particular corporation before he may enter upon the duties of his office. As soon, however, as he has qualified for his position by giving a satisfactory bond and complying with any other requirements of the corporation, he is ready and entitled to take possession of his office and begin the discharge of his official duties.

The retiring treasurer, on the other hand, retains his position as treasurer of the corporation and has authority to perform all its usual duties until the treasurer-elect has qualified and assumed the duties of his office. Then, however, the authority of the retiring treasurer immediately terminates, he is no longer competent to exercise any of the functions of the office, and, unless otherwise instructed by the board, must at once turn over to the new official all corporate property in his custody, including the books of account.

The retiring treasurer, in preparation for the surrender of his office, usually closes his books and prepares a balance sheet, giving a more or less complete statement of the general financial condition of the corporation. Also an audit of his accounts is customary and desirable, particularly when the corporate assets are material.

The audit of the retiring treasurer's books relieves the incoming treasurer from any responsibility as to their condition. He takes them as they are, but must assure himself that the corporate funds and other property turned over to him by the retiring treasurer accord with the books. If he does not, his negligence in the matter may render him liable for any resulting loss to the corporation.

The incoming treasurer should at once notify the depositaries in which the corporate funds are held of his election and assumption of office. If the corporate funds have been de

posited in the name of the treasurer of the corporation, it will be necessary for them to be transferred to the treasurer-elect by check of the retiring official. If, however, the funds are deposited in the corporate name, no such transfer is necessary. There is then no change in their ownership but merely a change in the officer by whom checks are drawn, and proper certification to the bank of this change is all that is required.2

The corporate accounts must always be surrendered by the retiring treasurer even though the books in which they are kept have been purchased with his private funds.3 Should the outgoing treasurer refuse to turn over to the treasurer-elect any property which belongs to the corporation, the directors, or even the treasurer himself, may bring suit for its recovery.1 As a matter of course, the treasurer will give his predecessor a receipt for the corporate property turned over.

§ 13. Tenure of Office.

In Tennessee the statutes provide that the officers of a corporation may not hold their official positions for more than two years and in that state any provision for a longer term of office for the treasurer would be void. Elsewhere there is no statutory provision which directly limits the period for which the treasurer may be elected, but in common with the other officers of the corporation, a year is his usual term.

In the absence of restraining statutes, the term for which the corporate officials are elected might be extended beyond the usual period by proper charter or by-law provisions. Business policy, however, usually prohibits a longer term than that enjoyed by the directors by whom the officials are elected. That is, if the directors are elected annually, the officers should also be elected annually.

2 See § 211.

$ State v. Goll, 32 N. J. L. 285 (1867); see § 19, infra.

High on Extraordinary Legal Remedies, § 306; State v. Riedy, 50 La. Ann. 258 (1898); Matter of Journal Pub. Club, 30 Misc. Rep. (N. Y.) 326 (1900); Am., etc. Co. v. Haven et al, 101 Mass. 398 (1869).