tion shall amend its Articles of Incorporation to alter the statements which appear in the original Articles, of the names and residences of the first directors or the statements which appear in such originals, of the amount of capital stock subscribed and by whom.

Nothing appearing herein shall be construed as permitting a corporation to change its name or its principal place of business, extend or reduce its term of existence, or increase or diminish its number of directors or its capital stock, by amending its Articles of Incorporation. (Stats. 1915, p. 1457.)

This amendment of 1915 clears out some absurdities in the old section, but adds fresh ones of its own, and also seems to be self-conflicting; the last sentence seems to be contradictory to some of the enumerated purposes for which amendments are permitted and, in view of the other sections of the statute, raises the inquiry why this section in its present form should exist at all. See forms for amending Articles for further consideration of this section.

It was expressly decided under the original section that no acknowledgment of amendments is required.39 A complaint which alleges that none of the things required in the first paragraph, quoted above, were done shows that the proposed amendments were not legally adopted.1o

An amendment can not be resorted to for the purpose of curing any defect in the original Articles which made such Articles invalid at the time of filing. No decisions have interpreted this clause. We may look to those decisions as to invalidity of the original Articles, already cited under that heading, for all the light there is yet on this question. This provision is

39 Boca etc. Co. v. Sierra Valleys R. R. Co., 2 Cal. App. 546, 552, 84 Pac. 298.

40 McDermont v. Anaheim etc. Co., 124 Cal. 112, 115, 56 Pac. 779.

far more restrictive and rigid than the laws of most other states on this subject, and its prohibition of amendments curing defects in the original Articles is felt severely by corporations which have been running a number of years; an entirely new organization being necessary, and troublesome and sometimes quite difficult transfers of property, rights, and franchises must be made to the new corporation; or the old corporation must be wound up, probably at much loss, for no corporation desires to take the risk of operating as a de facto corporation only. As such corporations, however, are at least de facto corporations; as no one can object but the state; as no rights of creditors are diminished; as no stockholders' liability is affected; as every person, stockholders and creditors included, having acted in good faith on the theory that the organization was a corporation and all rights and liabilities were created on that belief,-no substantial reason has ever been brought forward why such an amendment should not be made. The laws of most other states in the Union permit an amendment to the Articles which would cure any defect, however vital, in the original Articles.

Many of the eastern states, indeed almost all of them, permit Articles to be amended in all of the respects prohibited in the last clause of this section. No one but the corporation and its stockholders have any interest in the matters prohibited. It is wholly immaterial to the public how many directors the corporation has; or what the name of the corporation is; or whether the corporate existence is extended; or if its capital stock is increased; or, indeed, if it is diminished, for the liability of the stockholders remains the same notwithstanding; and under the sections providing for diminishing the capital stock even no existing creditor can object. No future creditor has the slightest interest in this matter, or in any of these matters. But it is quite

properly forbidden (in Civil Code, section 359, subdivision 5) to diminish the capital stock to an amount less than the indebtedness.

The methods provided in other sections for accomplishing these purposes are, nearly all, very cumbersome, technical, tedious, laborious, and expensive; all of which serves no useful purpose and is attended with liability to errors which sometimes result in great complications. Technicalities and a multitude of details protect no one, but promote litigation, which may be profitable to lawyers, but is often disastrous to the enterprise.

Amending Articles, by making part of the shares preferred and part common, without increasing or diminishing the total number of shares, or the par value thereof, is not an increase or decrease of the capital stock, in violation of sections 359 and 362 of the Civil Code, although such action might increase or diminish one of the classes of stock.41

If the validity of the meeting of stockholders at which the Articles were amended increasing the number of directors is doubtful, still, if the stockholders have long acquiesced therein, they are estopped from questioning the legality of the board on that account.42

A speedy way was found under the former section to accomplish the voluntary dissolution of a corporation, which was also easy and effective. This was done by amending the Articles of Incorporation, shortening the period of the corporation's existence to a near date in the future.43 But that boon to countless corporations which have served their purposes, and are moribund, 41 California Telephone etc. Co. v. Jordan, 19 Cal. App. 536, 126 Pac. 598.

42 Chandler v. Hart, 161 Cal. 405, Ann Cas. 1913B, 1094, 119 Pac. 516. 43 Tognazzini v. Jordan, 165 Cal. 19, Ann. Cas. 1914C, 655, 130 Pac.

was taken away by the amendment of this section in 1915, and now even the most insignificant corporation must resort to the special method provided in the Code of Civil Procedure, sections 1227 to 1234, which is exceedingly cumbersome, tedious, and expensive.

The decision that the number of directors might be increased or diminished by a vote of a majority of the shares under section 290 of the Civil Code, unaffected by the provisions of this section, is now made of no effect, for the reason that the provision of that section permitting this to be done was also left out of the amendment of that section in the act of 1915.

INCREASING OR DECREASING DIRECTORS

The legislature of 1915 adopted a new section of the Civil Code providing the method for these purposes. It is very simple and needs no comment.

Section 361 of the Civil Code is as follows:

§ 361. Any corporation or association may increase or diminish the number of its directors or trustees by the vote or written assent of stockholders representing a majority of its subscribed capital stock, or, if it has no capital stock, by the vote or written assent of a majority of the members. A certificate over the corporate seal, setting forth the action taken by the stockholders, or members, and stating the new number of directors, shall be signed by the president and secretary of such corporation or association, and filed in the office of the county clerk of the county where its original Articles of Incorporation were filed, and a copy of said certificate, certified by such county clerk, shall be filed in the office of the secretary of state, whereupon the number of directors or trustees shall be changed as stated in said certificate. (Stats. 1915, p. 1456.)

44 Bank of Los Banos v. Jordan, 167 Cal. 327, 139 Pac. 691.

EXTENDING CORPORATE EXISTENCE

Article 12, section 7, of the constitution is as follows:

§7. The legislature shall not extend any franchise or charter, nor remit the forfeiture of any franchise or charter of any quasi-public corporation now existing or which shall hereafter exist under the laws of this state.

The term of existence of any other corporation now or hereafter existing under the laws of this state, may be extended, at any time prior to the expiration of its corporate existence, for a period not exceeding fifty years from the date of such extension, by the vote or written consent of stockholders representing two-thirds of its capital stock or of two-thirds of the members thereof.

A certificate of such vote or consent shall be signed and sworn to by the president and secretary, and by a majority of the directors of the corporation and filed and certified in the manner and upon payment of fees required by law for filing and certifying Articles of Incorporation, and thereupon the term of the corporation shall be extended for the period specified in such certificate, and such corporation shall thereafter pay all annual or other fees required by law to be paid by corporations. (Amendment adopted November 3, 1908.)

§7. [Original section.] The legislature shall not extend any franchise or charter, nor remit the forfeiture of any franchise or charter, of any corporation now existing, or which shall hereafter exist, under the laws of this state.

Section 401 of the Civil Code is as follows:

§ 401. Every corporation formed for a period less than fifty years may, at any time prior to the expiration of the term of its corporate existence, extend such term to a period not exceeding fifty years from its formation.