Financial liability

“ To ascertain the existence of the liability in a given case requires an account to be taken of the amount of the corporate indebtedness, and of the amount of the capital stock actually paid in, facts which the directors, upon whom the liability is imposed, have a right to have determined, once for all, in a proceeding which shall conclude all who have an adverse interest, and a right to participate in the benefit to result from enforcing the liability. ”

“ One of its most obvious and distinguished characteristics is, that it exempts the private property and persons of the stockholders from all liability for the payment of the debts of the company. By the laws of every State in the Union, every man is, I believe, liable for the payment of his debts, to the full amount of his private fortune ”

“ Every agent, attorney, treasurer, trustee, guardian, executor, administrator, consignee, commission merchant, and every debtor of a fiduciary character, who has received for others money, hard money, worth 100 cents on the dollar, will forever release himself from liability by buying up for that knavish purpose, at its depreciated value, the spurious which we shall have put afloat. ”

“ Charters can and frequently do undoubtedly provide for a personal liability of stockholders in various forms; the liability to creditors of the corporation is one of the common illustrations, and the liability may be thus imposed for a tax as well as for any other debt or obligation. ”

“ Look at it as a business proposition—and it is a business proposition—it is an insurance risk and it ought to be left in such a way that the liability is direct. The first thing the business man undertakes to consider on this proposition is what will it cost me; can I afford it? Every time you put on a double liability, every time you leave a thing uncertain, you increase the risks to him and the cost to him in his business, and he so understands it, and that is something which you should give consideration. ”

“ The liability to pay G.A. contributions falls primarily upon the owner of the contributing interest, ship, goods or freight. But in practice the contributions are paid by the insurers of the several interests. Merchants seldom have to concern themselves with the subject. And yet in an ordinary policy of insurance there is no express provision requiring the underwriter to indemnify the assured against this liability. ”

“ One is to let the risks in force expire, paying the losses as they occur; that will take about five years. The other, which is the usual way, is to pay some other company to assume the liability on all our outstanding policies—to reinsure us. We pay a lump sum, and the other company pays the losses as the risks expire, instead of our doing so. ”

“ Each stockholder is bound for the debts in proportion to his stock. His liability is not limited to the par value of his stock, neither is he bound absolutely for the payment of the full amount of that. ”

“ As a compensation for the benefits so conferred, liability is transferred from the individual to the artificial person created by the law. We have been gradually losing sight of the public good involved in the arrangement, and reducing the number of corporators until now any three persons may secure incorporation for profit. In other words, a man wishing to start any business venture by giving a share of stock to his clerk and another to his messenger may escape individual liability for the indebtedness incurred. ”

“ When the liability is by guarantee, each member of the Company undertakes, in the event of the{579} concern being dissolved, to contribute a fixed sum towards the assets and the winding-up expenses. This sum being fixed at the formation of the Company, each member knows the utmost sum he will have to contribute, should it prove a failure and liquidation be resorted to. ”

“ Not having taken it, they cannot have the benefit of it. The bank cannot be charged with a liability which it did not assume. Such securities throng the channels of commerce, which they are made to seek, and where they find their market. ”

“ This theory of the government was accepted by the Court of Claims and the addition to the gross income was approved.
The statute does not in terms dispose of the question thus presented.
Reserves, as we have seen, are funds set apart as a liability in the accounts of a company to provide for the payment or reinsurance of specific contingent liabilities. They are held, not only as security for the payment of claims, but also as funds from which payments are to be made. ”

“ The individual liability of the stockholders, as imposed by and expressed in the statute, is, indeed, for all the contracts, debts, and engagements of such association, but that must be restricted in its meaning to such contracts, debts, and engagements as have been duly contracted in the ordinary course of its business. ”

“ Section 3 provides that the court shall consider the proofs offered by the assignee or receiver, or by any creditor or stockholder who may appear in person or by attorney as to the probable indebtedness of the corporation and the expenses of the assignment or receivership and the probable amount of assets available for the payment of such indebtedness and expenses; also as to what parties are or may be liable as stockholders, and the nature and extent of such liability. ”

“ That the several insurance companies of this state, and foreign insurance companies and other corporations, firms, or persons doing an insurance business in this state, in all cases when a loss occurs and they refuse to pay the same within sixty days after a demand shall have been made by the holder of said policy on which said loss occurred, shall be liable to pay the holder of said policy, in addition to the loss and interest thereon, a sum not exceeding 25 per cent on the liability for said loss ”

“ In other words, the statute imposes a uniform and ratable liability upon all stockholders who are liable at all, and affords no justification for assessing one stockholder at one amount and another stockholder in another sum, upon the theory that the date of the contracting of debts, and not the date of the failure, is the test of liability. ”

“ If one thousand men are prepared to risk say £20 each for a purpose, and after a time the success of their operations seems to warrant it, why not issue more shares, and so do away with the liability, which all have assumed, but which only the few may be able to discharge. ”

“ All proceedings to enforce the liability of a stockholder for the debts of a corporation shall be, either by suit in equity, conducted according to the practice and course of equity, or by an action of debt upon the judgment obtained against such corporation ”

“ If there is a large outstanding liability which cannot be settled, the partners will estimate that, and it will not be considered as part of the profits. If there is a large outstanding possible loss, and there is a large sum due to a client, then you would provide for that. But in ascertaining what is really actually divisible for the year fairly, you would take the cash account as it stands.” In the light of such mental obtuseness and obliquity, one cannot wonder at the occasional reluctance of business to entrust the determination of important matters to the courts. ”

“ We think the liability imposed by section 10 is a liability arising upon contract. The stockholders of the company are by that section made, severally and individually liable within certain limits to the creditors of the company for its debts and contracts. Every one who becomes a member of the company by subscribing to its stock assumes this liability, which continues until the capital stock is all paid up and a certificate of that fact is made, published, and recorded. ”

“ In the case of a policy of guaranteeing the quality of a product or its workmanship, after a few years’ experience very accurate estimates can be made of the loss to be expected therefrom, and at the end of a fiscal period the books can be adjusted on that basis just as they are for taxes. A charge to a suitable expense account and a credit to a reserve or accrued account comprises the book entry, with a listing of the reserve as a real liability. ”

“ Any increase in this item should be offset by an increase in assets, or a decrease in other liabilities.
Liability as Surety. This is an item of more importance than is generally accorded to it. True, the liability is a contingent one, but many a man has been forced into bankruptcy by the failure of another, for whom he had become endorser.
Another item which should in the opinion of the writer appear among the liabilities, is discounted paper. When a man discounts the paper of a customer, received in the course of business, he assumes a liability for the amount, if not paid at maturity. ”

“ An obvious inadequacy of capital, measured by the nature and magnitude of the corporate undertaking, has frequently been an important factor in cases denying stockholders their defense of limited liability. ”

“ So far, therefore, as the beneficiaries and the agents are different persons, the liability of bodies corporate is an instance of vicarious responsibility, and it is to be justified on the same principles as are applicable to the vicarious liability of a principal for the unauthorised acts of his agent—principles which will be considered by us at a later stage of our enquiry. ”

“ If he becomes responsible for the payment of the principal's debts generally, or lends his credit to a proposed purchaser of goods, he knows the amount of his liability, and the means of his principal to meet them. ”

“ We would call your attention to the note made in the statement as regards the cash in trustees' funds and would point out that, as the liability of the company as principal under the various bonds is included in the statement of liabilities, this cash may practically be regarded as an available asset. In other words, if the cash is excluded from the assets, the liability falling on the company under the various bonds should be correspondingly reduced. ”

“ The reference in § 9 to 'reinsurance and loss reserves, as above defined,' is limited by what precedes it; and the section deals not alone with 'reserves,' but requires 'all other debts and claims' to be accounted as liabilities. ”

“ The principle of limited liability having been once adopted by the legislature, justice required not only Register of members. that such limitation of liability should be brought home by every possible means to persons dealing with the company, but also that such persons should know as far as possible what was the limited capital which was the sole fund available to satisfy their claims—what amount had been called up, what remained uncalled, who were the persons to pay, and in what amounts. ”

“ In the liability accounts the balance is normally on the right side because liabilities are subtraction items from the assets and should, therefore, normally be on the opposite side of the account. Notes Payable, Accounts Payable, Mortgages Payable, Interest Payable, Rent Payable, and the like, have normally right-side balances. ”

“ Maximum of responsibility, minimum of risk, maximum of publicity. To secure the maximum of responsibility, unlimited liability has been accepted by the members in many cases; that is, each one pledging his all for the good of all; and, second, to secure the minimum of risk, character is made the basis of membership and good habits the prime requisite for membership. No investments are made in speculative enterprises, and the purposes for which the money is borrowed are closely inquired into and due care taken that the funds shall be applied for such purposes only. ”

“ In the more solemn exercise of derivative powers, as applied to the execution of instruments known to the common law, rules of form have been prescribed. But in the diversified exercise of the duties of a general agent, the liability of the principal depends upon the facts, 1. ”

“ And the liability extends to 'all damages which the association, its shareholders, or any other person, shall have sustained in consequence of such violation.' In the present action the bank represents the interest of its shareholders, as well as of its creditors ”

“ It follows, therefore, that all entries showing the assumption of liabilities are made to the right side of the account, and all entries showing the cancellation of these liabilities are made on the left side. Rarely are liability cancellations in excess of the liabilities owed.
As will be explained in Chapter XII, in the group of accounts indicating decreases in proprietorship, the balance, or larger side, is normally on the left; in the group showing increases in proprietorship the balance is normally on the right. ”

“ The socalled liability of the policy holder never exists as a personal liability, it never is a debt, but is merely a deduction in account from the sum that the plaintiffs ultimately must pay. In settling that account, interest will be computed on the item for the reason that we have mentioned; but the item never could be sued for, any more than any other single item of a mutual account that always shows a balance against the would-be plaintiff. ”

“ As the liability of the stockholders is to pay the debts of the bank to creditors 'equally and ratably,' judicial determination of the inability of the bank to pay its debts and the amount to be assessed against the stockholders to meet the deficiency are prerequisites to the enforcement of liability, and are essential parts of the only cause of action which the statute gives to the creditors. ”

“ In some states the liability of directors is made to include, in addition to restitution of the amounts wrongfully paid, liability for all debts contracted during their term of office and even to a body judgment for misdemeanor. The stockholders receiving such a dividend are held to have known of its illegality and are liable for restitution. ”