Modern Business Corporations, Including the Organization and Management of ... - William Allen Wood

to us, is that the corporation must not be separated from the individuals who manage its affairs, and that these individuals must carry into the management of the corporations the same rules of conduct that they apply to their private lives. They must not have one standard of morality as officers and another as private individuals. They must not only obey the law, but they must actively support the law."

Neither lawyers nor laymen having to do with corporations can have too extensive a knowledge of the well-established principles of corporation law. It would be impossible in a book this size to include the exceptions declared by positive rules of law in matters of detail; but a book of this kind furnishes a basis for all later and more extensive knowledge, and suggestions of caution are liberally sprinkled in places where they are most needed. The authorities used in the preparation of this book are many; but principally the following works have been consulted: Seymour D. Thompson on Corporations, Elliott on Private Corporations, Dill on New Jersey Corporations, Conyngton on Corporate Management and Meade on Trust Finance.

It has been the plan, as far as possible, to arrange the divisions of the subject as to their time sequence in the formation, organization and management of corporations, and to keep from chopping the subject into such small bits by sectional arrangements that its organic conception is destroyed. A book of this kind is necessarily an interweaving of law and business economics, as corporate business purposes are forwarded only through the union of corporate powers and corporate funds or assets.

WILLIAM ALLEN WOOD.

INTRODUCTORY.

Sohm, in The Institutes of Roman Law, says: "The conception of a collective juristic person as a possible subject of private rights was not developed till towards the close of the republic with the rise of the system of municipal government. The property of the municipium or town-community was brought under the private law, and the municipium thus acknowledged as a person capable of private rights and duties. [The juristic person of Roman law] represents a kind of ideal private person, an independent subject capable of holding property, totally distinct from all previously existing persons, including its own members. It possesses, as such, rights and liabilities of its own. * In point of law, the collective person is a new individual like other individuals. Roman law contrived to accomplish a veritable masterpiece of juristic ingenuity in discovering the notion of a collective person; in clearly grasping and distinguishing from its members the collective whole as the ideal unity of the members bound together by the corporate constitution; in raising the whole to the rank of a person (a juristic person, namely), and in securing it a place in private law as an independent subject of proprietary capacity standing on the same footing as other private persons.

A natural person, then, is a visible individual person, a human being; a juristic person, within the meaning of private law, is an ideal individual person with proprietary capacity, created by means of organization." So much for the origin of the corporations.*

In the time of the republic of Rome voluntary corporations were formed so extensively and so without restriction that they were all dissolved by a law passed 64 B. C. Later they were revived, and under Julius Cæsar it was required that the objects of incorporation should be clearly defined in the charter (ar

* Gaius traces corporate bodies to the time of Solon of Athens.

ticles), and that every charter should be submitted to Cæsar for approval. After the fall of Rome, and during the Middle Ages, the business corporations did not cut much figure. Church and workmen's guild corporations flourished. Later great trading corporations, such as the East Indian Company, the Hudson Bay Company, and many similar corporations were organized in England and other European countries. The English companies got to be monopolistic, and, in the end of Elizabeth's reign, two hundred shareholders controlled five-sixths of the foreign trade of England. These companies were created by special charter. England now has general incorporation laws. In colonial times in America corporations were formed through grant of charter by the crown or by the governors as representatives of the crown. From time to time the separate colonies became independent states. Up to 1837 charters were granted only through special acts of the legislatures. In 1837 a business corporation act, drawn by Theodore Hinsdale, a graduate of Yale, was passed by the Connecticut legislature. This was the first act of the kind in America, and it was the model for the general enabling acts for business corporations passed by the other states for several years after. The working of this kind of legislation was so satisfactory that the creation of corporations by special acts has been forbidden by the constitutions in many of the states of the Union. Later years and wider experience have developed a more liberal kind of code, which follows the modern theory that, in the absence of fraud in organization and management, a business corporation should be allowed to do anything that an individual may do. A model code, called The Business Companies' Act, was formed on this idea, and was drawn up under the direction of the eminent corporation counsel, Mr. James B. Dill, of New York, and the eminent economist, Professor Jeremiah W. Jenks, of Cornell University, and was recommended in 1900 to the New York legislature by Governor Roosevelt. It is worthy the study of all who are interested in the reform of this important branch of the law. The Industrial Commission, also, has made some important recommendations as to reforms in corporation law.

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