tend shall belong to the corporation, will, of course, be transferred by deed to the corporation, and personal property should be transferred by bill of sale which accurately describes the property transferred and includes an agreement that the corporation assumes the liabilities of the business transferred, if that is the plan. The procedure in changing such a business to a corporation is as follows: If the old name of the business has any particular value on account of prestige and good will, and is adaptable to the new business and is satisfactory to the stockholders, it may be well to use it as it stands or to arrange a recognizable adaptation of it as the name of the corporation.* Then the formal incorporation should be made according to plan. An inventory should be made of all properties which constitute the assets of the business, and then an inventory of all the debts, which constitute the liabilities. Subtract the liabilities from the assets, which shows the net value of the business, and determine what part of this net value belongs to each of the individual partners, if it is a partnership concern. Formally transfer to the corporation all the assets of the business, as the inventory shows

* Corporation names: H. C. McCollum discusses "Protection by Equity of Corporate Names against Unfair Competition" in the Columbia Law Review (V, vi, p. 244). A corporation is protected in the use of its name upon principles very similar to those which govern the protection of trade-marks. An individual as such has the right to the use of his own name in his unincorporated business, even though a previously existing company has acquired a valuable good-will by the use of the same name. In exercising this right, however, the new competitor must act honestly and refrain from any active attempts to deceive the public. In granting relief the circumstances of each case must be considered and the probability of loss must be shown. Most authorities hold that fraud is necessary to support an action based on alleged unfair competition. The question on the cases is, however, still an open one. The strongest argument against the majority of cases is the analogy from trademark cases. The author contends for an extension of those rules to the cases under discussion, and that a corporate name when applied to the services or articles offered by the corporation stamps them as acceptable just like a trade-mark. Since fraud is usual in such cases courts have assumed that it is essential.

them, and issue to the incorporators full paid stock for their interests in the business as previously determined. Finally make the proper entries showing the transaction in the stock book of the corporation.

§ 34. Proper Valuation of Private Business or Partnership Assets, Patents, and Other Property to Safely Constitute Stock Exchanged for Them Full-Paid.

Since it is the rule that stockholders are liable for the amount of unpaid stock subscriptions, it is of importance for those giving property or services in exchange for stock to know when their stock may be considered judicially to be full-paid. The laws of the various states differ to some extent, and the laws of the particular state under which a new corporation was organized will necessarily be a subject of investigation by the persons interested. Usually the appraisal by a board of directors of the property or services paid for with stock is, in the absence of fraud, conclusive upon creditors of the corporation who are seeking in case of insolvency to enforce an alleged liability for unpaid stock. The modifications of this rule in the parental state of any corporation under consideration will be matter for inquiry. In general, any valuation of property or services must be reasonable. Commercial practice may determine to a large extent the reasonableness of valuation of property or services. In the case of the transfer of property of a one-man or partnership business to a corporation, for instance, a reasonable inventory will determine the value of the tangible assets. But stock may also be issued for the good will on the basis of earnings of the corporation and still be within reason. Take a business whose net tangible assets are worth $100,000. Suppose it is earning uniformly from 10 to 15 per cent. annually. Suppose the business is to be transferred to a corporation capitalized at $200,000, $50,000 of which stock is to be paid in in cash and $150,000 in exchange for the business. The holders of the $150,000 stock would be as safe as against the creditors as the holders of the $50,000 stock paid for in cash; for, though the

$50,000 above the value of the tangible assets is "water" in a sense, yet a business that is earning such per cents as those mentioned would be well worth the $50,000 premium. If it is desired to certify the valuation of property and business to the fullest extent, an expert accountant may be employed to do this so far as the books are concerned, and he will probably employ appraisers familiar with the particular kinds of property under appraisement to determine their value. Massachusetts has an admirable arrangement that the president, treasurer, and a majority of directors must swear to a statement giving a description and the value of property exchanged for stock, which the commissioner of corporations shall indorse with his certificate as to its fairness, and file with the secretary of state. Services and patents are subject to a more arbitrary valuation than property. But, in cases of any permitted exchange of property and services for stock, the valuation must be reasonable and without fraud. It is safer to estimate the value of property and services from the standpoint of their value to the corporation rather than ' from the standpoint of the persons who sell or render services. If a valuation is fair and honest at the time it is made, subsequent depreciation, or the fact that the value did not prove to be as much as was estimated, need not concern the one who received stock in exchange for property or services.

§ 35. Stock Subscriptions.

At common law, subscriptions to the capital stock of a corporation are binding as soon as the total amount of capital stock is subscribed and the corporation is created. Previous to the creation of the corporation the subscriptions are a continuing proposition to the corporation to take stock. The creation of the corporation is the acceptance of the contract on the part of the corporation under ordinary circumstances, though a corporation. when organized is not bound to accept a subscription. But when accepted, a subscription is binding, provided the conditions attaching to it, if any, have been fulfilled by the corporation. By statute or by agreement in the subscription contract, when per

mitted, there may be a clause which provides that the subscriptions shall be enforceable when a certain amount, given as the amount with which the corporation will begin business, has been subscribed. Then, although the full capital stock is not subscribed, the subscriptions are due and must be paid as soon as this amount is subscribed and the corporation is created. Subscription contracts should be specific in naming the par value of the shares subscribed, whether they are preferred or common, and should include all matters of moment to the correct execution of a contract.

At common law, a corporation may sue a subscriber on his subscription agreement for non-payment, whole or partial. The statutes in addition generally permit the corporation to declare a forfeiture and to sell stock for non-payment; but the forfeiture must be brought about in accordance with the provisions of the statute or articles authorizing it. When a forfeiture is brought about legally, the subscriber is free from further liability on his subscription contract; but a forfeiture cannot be brought about collusively to relieve the subscriber from such liability. In enforcing the forfeiture remedy for non-payment, the statute should be closely followed in its requirements. The corporation will elect which remedy it will pursue. After a subscription is accepted and valid conditions are fulfilled, a subscriber is a stockholder whether he has paid his subscription or not, and remains so until his stock is legally forfeited by the corporation under statutory procedure. In England it has been held (Licensed Victuallers' Mutual Trading Ass'n., ex parte Audain, L. R. 42 Ch. Div. 1, 26 A. & E. C. C. 217) that "underwriting," as applied to shares, means "an agreement entered into before the shares are brought before the public, that, in the event of the public not taking up the whole of them or the number mentioned in the agreement, the underwriter will, for an agreed commission, take an allotment of such part of the shares as the public has not applied for," and that such an agreement may constitute an application for shares on which the underwriter is liable as on a common subscription.

Assessments on share subscriptions, when unpaid, draw inter

est from the time they are due. The definition of "assessment” is, that it is a resolution, generally passed by the board of directors of a corporation, that the shareholders shall, within a date named, and at a place named, pay a certain percentage of their share subscriptions; and the notice of this resolution communicated to the shareholders is a "call" (Seymour D. Thompson, 10 Cyc. 496). The law relative to notice of assessments in the several states should be complied with in order to enforce subscriptions.

(See Stock Subscription Book.)