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corporations, greatly stimulate the demand which originally brought about their enactment. Like every true social phenomenon, it has been a growth, at first tentative and slow, then more rapid and general, and at last practically superseding former and more cumbrous methods. Chancellor Kent, in his Commentaries, first published more than fifty years ago (2 Kent's Comm. 272), giving a brief history of corporations, speaks of “the propensity in modern times to multiply civil corporations, especially in the United States, where they have increased in a rapid manner and to a most astonishing extent;" and yet he apparently refers only to special charters by legislative act. The later work of Angell & Ames, though alluding to general corporation laws, still implies that corporations are commonly created by special Act. But in all modern treatises on private corporations the new questions which have arisen under general corporation laws occupy a prominent place.
Actually, in twenty-four States and all the Territories, and practically throughout the Union, the new method of incorporation has superseded the old. Such legislation is no longer for individuals, but for whole classes of industries. If its advantages are so much the more widely enjoyed, in like or even greater proportion its possible evils and dangers are multiplied. And it follows, that if there be any class or profession specially qualified to foresee and guard or aid in guarding against those dangers, then a special responsibility rests upon its members in that regard.
The most cursory examination of the statute books of the several States shows this growth in its successive stages. For example, in Pennsylvania, a State described by one of her own judges as “an extensive manufacturer of home-made corporations” (per Duncan, J., in Bushell v. Commonwealth Ins. Co., 15 S. & R. 186), the earliest step in this direction seems to have been taken in 1791, by an Act which authorized the incorporation of associations formed for literary, charitable, and religious purposes, but no other. Upon the
approval by the Attorney-General, and then by the Supreme Court, of articles setting forth their objects and organization, the Governor was authorized to order their enrollment, upon which the association became incorporated. In 1833 this Act was amended so as to include mutual beneficial associations, also fire engine and hose companies. In 1840 the courts of common pleas were authorized to incorporate associations, but only such as above described, by an order entered of record, upon approval by such court of the articles and objects proposed, after three weeks' notice by publication, the approval of the Attorney-General being dispensed with. In 1836 this method of incorporation was for the first time applied in that State to manufacturing associations, but only to those formed for manufacturing iron ; upon the prior approval of their articles by the Attorney-General and the Governor, and proof that the entire stock was subscribed in good faith, and one-fourth paid up. Another Act passed in 1849 made like provision for incorporating companies for the manufacture of cotton, woolen or silk goods, iron, paper, lumber or salt; and during the twenty years following the powers of common pleas courts, under the Act of 1840 already mentioned, were extended by numerous amendatory and supplemental Acts to many other specified kinds of business. In 1863 a more elaborate Act authorized the incorporation of any three or more persons as a trading company for carrying on mechanical, mining, quarrying and manufacturing business, except the manufacture of intoxicating liquors; the only requirement being the filing in the Auditor-General's office of a certificate on oath, stating the name, objects, location, and capital of the proposed company; and in 1868 a separate Act was passed authorizing the incorporation, by certificate, of co-operative associations for carrying on any lawful mechanical, manufacturing or trading business. This Act was noteworthy as providing for what is now called profitsharing among workmen and customers, as well as stockholders, after the accumulation of a sinking fund 30 per cent. in
excess of the capital. The same general policy has ever since prevailed in that State.
A like growth appears in the legislation of New York. The first of such Acts in that State was passed in 1796, authorizing the voluntary incorporation of public libraries (see 22 Wend. 53); but the first general incorporation Act for business purposes was that of 1811 (2 Kent's Comm., pp. 272–4), by which five or more persons might be incorporated for carrying on specified descriptions of manufacturing business, on filing a certificate in the Secretary of State's office, giving the corporate name, capital, objects and location. This Act was from time to time enlarged by amendments, until the enactment in 1848 of what is known as the “Manufacturing Corporation Act," applicable to associations formed for manufacturing, mining, mechanical, chemical, agricultural, horticultural, medical, mercantile or commercial purposes; which was further amended between 1848 and 1884 by more than fifty Acts specially extending its provisions to a great variety of purposes and occupations. Distinct from these is the important Act of 1875, known as the “Business Corporation Act,” authorizing the formation of corporations for any lawful business, except banking, insurance, railroads, trust and safe deposit companies. Both these Acts, as amended, are still in force, but with important differences. Under the Manufacturing Act, each shareholder has one vote at corporate elections for each share of stock; while, under the Business Corporation Act, each shareholder is entitled to as many votes as shall equal the number of his shares, multiplied by the number of directors to be elected, and may distribute his votes at pleasure, casting all or any part for one or more candidates. A like provision for the protection of minority stockholders is found in the Constitutions of Illinois (1870), Pennsylvania (1873), and Missouri (1875), and its adoption in one of the general corporation Acts of New York, while not found in the other, illustrates the tentative character of such legislation up to the present time. The
New York Act of 1875 also provides for the formation of “Limited Liability” companies, and “Full Liability” companies, differing as indicated by those terms.
The general banking law of New York, originally enacted April 18, 1838, exemplifies not only this method of incorporation, but also the causes which promoted its adoption. A restrictive clause in the New York Constitution of 1821 required the assent of two-thirds of the members-elect to each branch of the Legislature to any bill creating any body corporate; the result, it is said, of general dissatisfaction with the exclusive privileges theretofore granted to banking corporations by special Act. The Act of 1838 authorized the formation of banking associations by any five or more persons, on filing a certificate with the Comptroller, giving the corporate name, location, capital stock, names of shareholders and proposed duration, and conferred on such associates ample corporate powers for the business of banking, but under regulations whose value experience afterwards fully attested. This Act was passed by only a majority vote. Its validity was questioned, under the constitutional clause above mentioned, in the important cases of Thomas v. Dakin, 22 Wend. 9, and Warner v. Beers, 23 Wend. 102. The question was discussed with great ability and learning by eminent counsel and by the courts. The Act of 1838 was sustained, although it was in effect admitted that these associations were bodies corporate; on the ground, distinctly stated by Chancellor Walworth (23 Wend. 126–7), that the constitutional restriction of 1821 was aimed only at previously existing evils of corporate monopolies beyond legislative control, and that, though the Act of 1838 did confer corporate powers upon these banking associations, it was not within the spirit and intent of the restrictive clause of the Constitution, because it made the business of banking free to all citizens alike for limited periods, while reserving control by the State over the privileges thus granted. This Act, and the banking system successfully established under it, were the forerunners
of our National Banking System—the widest and most important application of this method of incorporation.
The introduction of general incorporation laws in Georgia at a much later date brought before the courts a different question as to their validity. Such Acts having been passed in 1843 and 1845, authorizing the incorporation by decree of the Superior Court, if the petition filed was approved on examination by the court, of certain classes of manufacturing and business companies, their validity was questioned in the case of Franklin Bridge Co. v. Wood, 14 Ga. 80, decided in 1853, on the ground that such Acts were an unconstitutional delegation of legislative power to the courts. But it was held no such delegation of power, but a direct legislative grant of corporate franchises, to take effect on fulfillment of prescribed conditions, and the court referred to such associations as "the usual and favorite mode of conducting the industrial pursuits of the civilized world in modern times."
It would be interesting, if time permitted, to trace in the legislation of other States the like gradual adoption and subsequent rapid growth of this method of incorporation under general laws, now so familiar and universal, as well as to note in detail to what extent and in what manner, under the Acts now in force throughout the Union, conditions are imposed or precautions taken by way of safeguards, either for those who embark their capital in such organizations, or for those who are likely to give credit to them. But such inquiries would fill a volume, I can only allude to some of the general facts which make up the present situation.
How greatly that situation has changed during the past fifty years, in respect of the part which corporate organizations perform in the conduct of the vast business interests of our people, is something scarcely realized until attention is called to it. Yet it is a phenomenon whose relations to our future history may prove to be of the highest importance, and which, in its various aspects, is attracting the earnest attention of many thoughtful men.