holders and creditors may be bound by the action taken. The usual process is for the directors to call a stockholders' meeting, advertise it and notify the stockholders, and give evidence to the state that proper consent has been given to the dissolution. The directors are then given the power to pay creditors and to divide the remaining property among the stockholders. It has been held that a dissolution of a corporation does not destroy the obligation of a corporation's contracts, as the equitable rights of creditors survive the act of dissolution and attach to the assets and property of the corporation in the hands of its liquidators. $77. CONSOLIDATION OF PRIVATE CORPORATIONS. Consolidations of corporations must be made under statutory authority, since no corporation exists otherwise. For most purposes a complete consolidation of the capital stock, franchises, and properties of two or more corporations creates a new corporation. But, notwithstanding, rights of action against the constituent corporations will survive against the new corporation. It is a principle of law that a corporation succeeding a corporation whose property and rights it has acquired, must take the obligations of that corporation along with the benefits. Under some jurisdictions it has been held that a successor corporation is bound to the creditors of a constituent corporation only to the amount of property received from it, and that a creditor may prevent a corporation which owes him money from consolidating. A domestic corporation may consolidate with a foreign corporation, but there must be express statutory authority therefor. Two companies may be united by the directors taking out a new charter and by the formal sale and assignment of the assets of each company to the new company, which may pay for the assets in stock. This is not a consolidation in law, and the new corporation is entirely separate and distinct, and is liable for the debt of the corporation whose assets were conveyed to it only to the extent of the assets received. In most of the states the statutes grant the power to consolidate to certain classes of corporations; and the method of consolidating, as well as the rights and powers of the new corporation thus created, are defined in more or less detail. In Indiana, articles of consolidation are filed with the secretary of state and are treated as the articles of incorporation of the new consolidated corporation and the fee is determined by the amount of capital stock of the new corporation created. The statutes of this state also provide that the consolidation of two corporations does not work the dissolution of either. Connecticut provides that corporations of a similar kind may consolidate into a single corporation which may be either one of the old corporations or a new corporation. It further provides that the directors of the corporations to be consolidated may enter into an agreement prescribing the terms and conditions of consolidation, stating the name of the new corporation, names and addresses of directors, provisions as to stock, etc., the manner of converting the shares of each constituent corporation into shares of the new, together with such other matters as are required in an original certificate of incorporation, and after proper notice to the stockholders of the constituent corporations and an approving vote of two-thirds of the stockholders of each class of outstanding stock, with other procedure as in filing an original certificate, the consolidation is completed. Consolidating corporations must be of the same class or similar classes, and for the same purpose or auxiliary purposes, and the articles of consolidation, like articles of incorporation, must be in accord with the statute under which they are framed. The procedure for consolidation given by a state should be adhered to strictly, so that the resulting organization may be free from defects and the stockholders and creditors of the constituent corporations may be bound by it. § 78. REORGANIZATION OF A PRIVATE CORPORATION. It sometimes happens that the articles of association of a corporation are found to be, or in time become, unsuited to the business for which they were drawn. Further, it may not be possible to amend the articles so as to make them suitable. The statutes under which they were prepared may not permit an amendment in the direction which would place the corporation on the basis desired. Or it may be learned that the laws of the parent state do not give as free scope to the conduct of the business as is desirable, or that they are inhibitory in some other way. Or, the corporation may become insolvent, so that the only way to protect its assets is to sell them to a new corporation, which will continue the same business under the more favorable circumstances of freedom from debt, the old corporation having been dissolved. This is often done when the stock of the old corporation has been issued full paid and non-assessable, and only part of the stockholders were willing to pay a voluntary assessment in order to raise the money to put the corporation on its feet again. The stockholders in the new corporation are usually those who were willing to put more money into the enterprise through an assessment. Or, there may be an attempt to "freeze out" undesirable stockholders. In any of these instances a reorganization of a corporation may be necessary. A transference of the assets of the old corporation is made by voluntary or forced sale to the new, and stock is issued to some or all the stockholders of the old corporation upon an agreed plan of distribution. As was said under the subject of consolidation, the successor corporation in the case of reorganization is a new corporation, but the assets it receives from the old corporation may be followed by creditors and be subjected to the payment of creditors' claims, unless it has acquired the assets at forced sale, as a receiver's sale, in which case the proceeds of the sale will have been distributed in payment of creditor's claims and there is no liability on the part of the successor corporation. Where, however, a corporation takes advantage of a statute which permits a corporation organized under a previous statute to reincorporate under the statute superseding it, its identity continues, and its liabilities continue. The procedure for reorganizing by voluntary sale is as follows: First, a meeting of the stockholders of the old corporation, authorizing the directors to sell and outlining plans and arrangements; second, meeting of the directors of the old corporation, authorizing the proper officer to communicate the agreed plans and arrangements to the new corporation, and to conduct the sale if the plans are approved; third, communication of plans by officers of the old corporation; fourth, meeting of the incorporators and stock subscribers of the new corporation, who adopt a resolution authorizing their board of directors to accept the proposition of the old corporation; fifth, meeting of directors of the new corporation to accept proposition and to authorize proper officers to purchase the assets of the old corporation; sixth, formal acceptance communicated by officers of new corporation to officers of the old; seventh, payment of creditors of old corporation; eighth, formal transfer of assets; ninth, payment for assets in cash or stock. The same care should be taken that statutory and common law requirements are fulfilled as is taken in consolidations. $79. RENEWAL OF CHARTER. If a charter expires, a corporation may have it renewed according to statutory provisions. The renewal of a charter does not create a new corporation, but continues the existence of the old one. It has been held that a delay in application for renewal on the part of a careless officer did not permit a reverter of property, but that the renewal, when granted, related back to the time when the charter expired. Rights of action, of course, continue under the renewal. |