cate book, either of which "serves as a journal to this ledger, as it shows the names of parties to be charged and those to be credited for the shares sold or transferred." The fore part of this ledger should contain a capital stock account, and all instalments paid or full stock payments made should be debited to capital stock. The stockholders are credited with the amounts paid, so that the two accounts should balance and show the paid up capital.

§ 69. The Book of Stock Certificates.

This book contains the blank engraved certificates of stock and the stubs thereto attached. These certificates are issued to the stockholders when the full amount of their subscription to the capital stock has been paid. If there is an instalment scrip book, the certificate is exchanged for the scrip when all the instalments have been paid. The certificate book should contain as many certificates as it is thought will be needed, taking into consideration the likelihood of several transfers of stock. In "close" corporations, a corporation in which the stock is held closely, not transferred, only a few more certificates than there are stockholders will be necessary, while in a corporation whose stock is actively traded in, a great many certificates will be needed. The certificates are issued serially and are so numbered. The stubs are numbered to correspond with the certificates, and contain such information as the number of shares issued, the date of issue, to whom issued, from whom transferred (if so), and receipts for the certificates to be signed by those to whom shares are issued. Certificates are made out, seals are attached, stubs are filled by the secretary, and the certificates are signed, as statute or by-laws provide, by the president and secretary or the president and treasurer. If the engraved certificates are not ready for distribution when the company is organized, receipts for money paid are given, or temporary written or printed certificates are issued which are worded as the permanent certificates are to be worded. These receipts or certificates are exchangeable for the permanent ones. Attached to them are slips

*

showing the circumstance under which they were issued and stating that they are to be exchanged. Common and preferred stock certificates are worded differently and are usually bound separately, especially if there are many of each. They should always be numbered separately. When a stockholder transfers all or any part of his stock, the certificate must be returned to the secretary of the corporation. On the back of the certificate is a blank form of assignment and power of attorney which must have been properly filled and signed by the transferrer, whose signature must be witnessed by a competent witness. The secretary pastes the certificate to the stub from which it was detached, and writes or stamps across the face of the certificate "Cancelled * (date)." He also notes on the stub to whom the transfer was made and issues a new certificate or new certificates to the person or persons designated as transferee or transferees. If the owner of the certificate retain part of the shares, a new certificate is issued to him for the part he keeps. In this case there should be noted on the old stub "Renewed by No. "inserting the number of the new certificate, and on the stub of the new certificate, "For No., Cancelled," inserting the number of the old certificate. The account of the transferrer should then be debited on the stockholders' ledger for the shares transferred. In making this partial transfer, the transferrer will probably bring in his certificate and get two certificates for it, one for the number of shares to be transferred in the name of the transferee and one for the balance of his own shares made in his name. If for any reason the sale should not be made, the transferrer has to get the transferee of the shares meant to be sold and already transferred to reassign them. So a better way, where there is any doubt at all of a prospective sale, is for the transferrer to exchange his original certificate for two certificates made out to himself for the amounts respectively to be sold and to be retained, and, if the sale occurs, simply to assign the certificate with the shares sold, leaving the new owner to get a certificate in his own name.

Sometimes shares are transferred in blank, i. e., the transferee signs and has his signature witnessed, but does not put in the

name of the assignee. The secretary of a corporation has nothing to do with stock so assigned till some holder of the certificate wishes to perfect his title by inserting his own name and sending the certificate to the secretary in order to become a stockholder of record. If the secretary has any doubts as to the validity of an assignment of stock, he has a right to investigate the transfer by communicating with the former owner or owners before making the transfer. He may require a stranger presenting a certificate for transfer to be identified and he may demand proof of ownership of any one so presenting a certificate. If, finally, after investigation there be any doubt of ownership, the secretary may refuse to make the transfer till authorized by the board of directors, who, in turn, if there are several claims to ownership of a certificate, may wait till the contested matters are adjusted by the parties themselves or are settled by the courts. If there is no reasonable doubt as to ownership and as to the correctness of the transfer, the secretary is bound to make a transfer on request.

$70. The Transfer Book.

Smaller companies do not always have transfer books, as the assignment on the back of a certificate is legally sufficient to authorize the secretary to make a transfer of record and to issue a new certificate to the purchaser. Some states, however, require a transfer book to be kept by a corporation. Every large corporation whose stock is active should have a by-law which requires that shares shall be transferable only by entry on the books of the corporation, for then it is possible for the corporation officers and directors to know who are entitled to vote, who are entitled to receive dividends, and who are liable as stockholders to the corporation and its creditors. The transfer book kept separate from the stock ledger and certificate book is a great convenience and a more accurate and permanent record of the history of stock transfers. In instances when there has been a dispute as to which book is primary evidence of transfer, it has been held that the transfer book must control over the stock certificate book and the stock ledger.

The stock transfer book is merely a book to record the transfer of stock from one ownership to another, with the number of the stock certificate taken in set against the number of the stock certificate issued, and with a further provision for the name of the person who has been authorized to make the transfer, if the owner himself does not present the stock. The form of such a book would be two columns on one side, with the number of the stock certificate taken in and the name of the owner delivering it, and two columns on the other side for the number of the new stock certificate issued, with the name of the person to whom the stock is issued, with yet another column for the name of the person who made the transfer as an agent for the owner, if the owner did not personally present the stock. One line is used for each stock certificate either received or delivered, and the transaction therefore runs across the page as a complete record of the stock taken in, the person who transferred it, the person to whom it was transferred, and the number of the new certificate. There will also be references to the pages of the stock ledger where the stock accounts of the transferrer and transferee are recorded.

There are various kinds of transfer books, made to suit various needs. There is one form which is a detached assignment, the same form of assignment as is printed on the back of the stock certificate, except that the power of attorney is omitted. It is merely a device for signing an assignment when the stock certificate is not in hand.

Another kind of transfer book consists of forms of assignment, bound together and numbered, which are filled out when a stockholder makes a transfer. The following is representative of this kind of form:

Transfer No. ....

......

Ledger Folio

.....

For value received, I hereby assign and transfer to Robert Bell all my right, title and interest in one hundred shares of the capital stock of The McRay Publishing Company, of Indianapolis, the said stock standing in my name on the books of said company and represented by certificate No. .... this 9th day of February, 1906. JAMES REED, Witness. SAMUEL MINNICK. New Certificate, No.

......

.......

Issued to Robert Bell, Ledger Folio

When such transfer is made by an agent, his power of attorney should be filed away by the secretary of the company, unless the power is granted on the cancelled certificate, which is sufficient. The secretary fills in the blanks Transfer No., Ledger Folio New Certificate No. and [Assignee's]

Ledger Folio

The last form is more protective of the transferrer of stock, for a stockholder is liable to the creditors of his corporation until the transfer is formally recorded, personally or by attorney, on the corporation's books. This form gives the signature of the transferrer, with date and witness, so that he is relieved from the risk incident to delay on the part of a transferee who has not surrendered an assigned certificate.

§71. The Dividend Book.

The dividend book, when one is used, is usually kept by the treasurer of a corporation. It is a record of the stockholders, with the number of shares held by each set in a column after the name, followed by a column in which is given the amount of the dividend. After this comes a column in which is set down the date of payment, and last, a column in which the stockholder signs his name in receipt for the dividend. In large corporations, where there are many scattered stockholders, payment is made by voucher.

§ 72. The Subscription Book.

As subscriptions to stock are a contract as between the subscribers, and are binding from the time they are made, a subscription book has the nature of contract as well as of a record. The contract does not go into effect, of course, till the corporation is fully organized and created. Such mutual contracts to become stockholders in a prospective corporation are binding at common law, but they are not binding and enforceable until the proposed capital stock is subscribed, unless there is a special agreement to that effect in the subscription contract. Under the statutes of most of the states, however, corporations are not