Domestic corporation

“ When General Ward had finished reading, he lifted up his glasses and said: "Well, that's it, boys; John has come to his turn of the road. Here's the rest. It says: 'The corporation in question is practically controlled by one man, the man who has placed the information above mentioned in the hands of the government. It is a corporation owning no physical property whatever, and is organized as a rebate hopper, if one may so style it. ”

“ Secondly, The directors of a joint-stock company have always the management of a large capital, the joint stock of the company, a part of which they may frequently employ, with propriety, in building, repairing, and maintaining such necessary forts and garrisons. But the directors of a regulated company, having the management of no common capital, have no other fund to employ in this way, but the casual revenue arising from the admission fines, and from the corporation duties imposed upon the trade of the company. ”

“ It cannot escape notice, that this rule, if it be one, would apply to almost all corporations aggregate, and would abolish the distinction which has been taken between those which act by an individual, and those which act by an aggregate of persons. The first partakes of the qualities of a sole corporation, the last of a corporation aggregate. ”

“ The general power to perform all corporate acts refers to the ordinary business transactions of the corporation, and does not extend to a reconstruction of the body itself, or to an enlargement of its capital stock. A corporation, like a partnership, is an association of natural persons who contribute a joint capital for a common purpose, and although the shares may be assigned to new individuals in perpetual succession, yet the number of shares and amount of capital cannot be increased, except in the manner expressly authorized by the charter or articles of association. ”

“ In corporations existing at the common law and by charter, there are great diversities both of powers and organization. In some corporations the whole powers rest in a select body, or in select bodies, with powers to perpetuate their own corporate existence, by filling up vacancies in their own body; and such body or bodies constitute the corporation itself, and the meetings and acts done thereat are the meetings and acts of the corporation itself. In short, they constitute the corporation, so far as it has life or organization exclusively. ”

“ The nature of a corporation is such, however, that many acts and privileges which are per se rights of the stockholders must in their exercise be delegated to others. Thus, while the right of ownership and control of the profits of a corporation is inherent in its proprietorship, the control is indirect—through the medium of a board of directors subject to periodic review and election by the owners. ”

“ As soon as the official document has been properly filed and the other necessary steps taken the incorporators hold the first meeting and effect an organization, after which time the corporation is generally in a position to transact business, although in some States it is provided in effect that corporations should not commence business until a certain share of the capital has been paid into the corporation in cash. ”

“ These shareholders, be they many or few, control the management of the business. They elect each year a board of directors, who, in turn, appoint the officers and managers. The latter purchase the raw materials, engage the workmen, supervise their labor, sell the finished goods, and distribute the profits among the shareholders in the form of a dividend declared upon each share. Every corporation has as its legal basis a charter, which is a document issued 386by the governmental authorities, usually by the state. ”

“ The great carrying trade by land is governed by substantially the same principle; being in the hands of corporate associations, whose members are not personally liable for acts of the employees, but risk only the amount of their capital stock in the corporation. ”

“ An artificial person of this sort is now recognized under most systems of law. It can be formed, as a rule, only with the consent of the sovereign power, and is described as a 'societe,' or 'compagnie,' 'anonyme,' an 'Actiengesellschaft,' or 'joint-stock company limited.' A less pure form of such a corporation is a company the shareholders in which incur an unlimited personal liability. ”

“ The argument supposes the corporation to have been originated for the management of an individual concern, to be founded upon contract between individuals, having private trade and private profit for its great end and principal object. ”

“ Money earned by a corporation remains the property of the corporation, and does not become the property of the stockholders, unless and until it is distributed among them by the corporation. The corporation may treat it and deal with it either as profits of its business or as an addition to its capital. ”

“ The first act does, in fact, if it can have any effect, create a new corporation, and transfer to it all the property and franchises of the old. The two corporations are not the same in anything which essentially belongs to the existence of a corporation. They have different names, and different powers, rights, and duties. Their organization is wholly different. The powers of the corporation are not vested in the same, or similar hands. In one, the trustees are twelve, and no more. In the other, they are twenty-one. In one, the power is in a single board. ”

“ Corporations no less than individuals of course have rights which should be scrupulously respected by both our Federal and State legislators. But one defect in corporation legislation by Congress, as well as the States, has often been that it failed to make a sufficient distinction between what may be called private and public corporations. ”

“ Now, persons dealing with the managers of a corporation must take notice of the limitations imposed upon their authority by the act of incorporation. Their powers are conceded in consideration of the advantage the public is to receive from their discreet and intelligent employment, and the public have an interest that neither the managers nor stockholders of the corporations shall transcend their authority.' 21 How. ”

“ Its creation (except where the corporation is sole) is the investing of two or more persons with the capacity to act as a single individual, with a common name, and the privilege of succession in its members without dissolution, and with a limited individual liability. The right and privilege, or the franchise, as it may be termed, of being a corporation, is of great value to its members, and is considered as property separate and distinct from the property which the corporation itself may acquire. ”

“ It is not denied that in the language of Savigny, cited by the learned counsel, 'a corporation consists of the whole formed of its members,' but it is not always true that the will of a bare numerical majority of the members is the will of the corporation, and has the disposal of, and is invested with all the rights of the corporation. ”

“ Many corporations have upon their boards of directors the leading business men, merchants, bankers and financiers. In this way, the investing public has the assurance that the enterprise will be conducted along business lines, while the business men on the board have an opportunity to get in on the "ground floor."
The corporation has a permanence, a stability, and a breadth of financial support that are quite impossible in the case of the private venture or of the partnership. It does for business organization what the machine did for production. ”

“ If they act as a corporate body, then the whole law applies to them as to other corporate bodies. If they act as individuals, then we have a corporation which never acts in its corporate character, except in the instances of electing its directors, or instructing them. The corporation possesses many important powers, and is, as a corporation, to perform many important acts, scarcely one of which is to be performed in a corporate character. They are all to be performed by agents, acting as individuals, under general powers conferred by the charter. ”

“ So that the real owners have only an indirect supervision over the affairs of the business. The corporation is given a name and seal and is empowered to act as an individual, may borrow money, own property, sue and be sued. Notwithstanding its somewhat cumbersome machinery the corporation is a favorite form of organization possibly because of its limited liability feature, its close centralized control even though the ownership be spread over large numbers, and the amount of money handled be great. ”

“ The shareholders of the corporation, including, if there is one, its parent corporation, are not responsible This is a conscious decision made by the law of every state to encourage business in the corporate form. ”

“ Conversely, when a flourishing partnership or similar private firm has gained an assured footing of good-will, in the way of any or all of the items enumerated under that term above, its lot, as prescribed by modern business exigencies, is to go up into a corporation, either by simple conversion into the corporate form or through coalition with other firms into a larger corporate whole. ”

“ A further aggravating feature of this problem is the increasing tendency of capital to associated action. What little knowledge of his employees or sympathy with them the individual manufacturer might have is wholly lost in the case of the corporation. To the stockholders of a great joint-stock company, many of whom are never on the spot, the hundreds of laborers employed by the company are simply "hands"—as to whose possession of hearts or minds or souls the by-laws rarely take cognizance. ”

“ Working Organization and Management.—The corporation’s owners, that is, the stockholders, are the source of all authority and control. Unlike the partnership where control and voice in the management are equally shared by the partners regardless of any inequality in their investments, the corporation ownership is evidenced by shares of stock and each share is given one vote. Thus each owner’s authority and voting power are dependent upon the amount of his ownership of stock. ”

“ The franchise to be a corporation remained in, and was exercised by, the old corporation, notwithstanding the mortgage of its charter, until the new corporation was formed and organized; it was then surrendered to the state, and by a new grant, then made, passed to the corporators of the new corporation, and was held and exercised by them under the constitutional restrictions then existing. ”

“ There are corporations of another sort, where the aggregate body of corporators meet and assemble to discharge corporate functions, and have authority also to perform certain acts and duties, by means of different agents, sometimes designated in the statutes creating them, and sometimes left to their own choice. Of this nature are the townships in New-England, where the inhabitants are corporators, and assemble to exercise corporate powers, and have authority to appoint various officers to perform public duties, under the guidance and direction of the corporation. ”

“ On the one hand, the approved methods of corporation finance may in some measure be resorted to by a private firm, Without formal conversion of the concern into the corporate form; and on the other hand, an incorporated company may continue to carry on its business after the manner usual with privately owned concerns. ”

“ Baring and Rutherford, would be wholly immaterial under the act of 1839.
If the company be considered as a corporation, the same consequence follows, with the single anomalous exception which I shall presently notice, a fortiori.
The first great difference between a corporation and a private partnership or voluntary association is, that in the former the company acts only by its constitutional organs, whether a committee of directors or appointed officers; while, in the latter, the obligations of a single member, or number of members, by the subscription of the firm, will bind the society. ”

“ It is necessary, therefore, to inquire into the true nature and character of the corporation which was created by the charter of 1769.
There are divers sorts of corporations; and it may be safely admitted that the legislature has more power over some than others. Some corporations are for government and political arrangement; such, for example, as cities, counties, and towns in New England. These may be changed and modified as public convenience may require, due regard being always had to the rights of property. ”

“ It cannot even hold its glebe tenaciously enough to prevent the freehold falling into abeyance whenever a parson dies.
When we turn from this mere ghost of a fiction to a true corporation, a corporation aggregate, surely the main phenomenon that requires explanation, that sets us talking of personality and, it may be, of fictitious personality, is this, that we can conceive and do conceive that legal transactions, or acts in the law, can take place and do often take place between the corporation of the one part and some or all of the corporators of the other part. ”

“ Fifty years ago, the great majority of business operations were conducted either by individuals or by partnerships. To-day, especially in conducting large business [Pg 122] enterprises, corporations have replaced individuals and partnerships. Although (as we shall see later in the chapter on corporations) in law a corporation is deemed a separate, legal entity, distinct from the stockholders, in actual practice we know that there is no such distinct physical being as a corporation. It follows, therefore, that every act performed by a corporation must be performed through an agent. ”