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CHAP. IX.

Art. III.

5. To apply any portion of the funds of their corporation, except surplus profits, directly or indirectly, to the purchase of shares of its own stock;

6. To receive any such shares in payment or satisfaction of any debt due to their corporation, except as hereinafter provided;

7. To receive from any other stock corporation, in exchange for the shares, notes, bonds, or other evidences of debt of their own company, shares of the capital stock of such other corporation, or notes, bonds, or other evidences of debt, issued by such other corporation ; 8. To make any loans or discounts, if the corporation have

[590] banking powers, by which the whole amount of the loans and discounts of the company shall be made to exceed three times its capital stock, then paid in, and actually possessed;

9. To make any loans or discounts to the directors of such corporation, or upon paper upon which such directors, or any of them, shall be responsible, to an amount exceeding in the aggregate onethird of the capital stock of such corporation actually paid in and possessed; but no securities taken for any such loan or discount shall be held invalid.

(See Penal Code, $ 594, post, p. 275.) Johnson v. Bush, 3 Barb. Ch. 237 ; Leavitt v. Blatchford, 5 Barb. 12 ; Gillett v. Moody, 5 id. 185; Osgood v. Layton, 48 id 463 ; 13 J. & S. 620 ; Bank Commissioners v. Bank of Buffalo, 6 Paige, 497 ; Gaffney v. Colvill, 6 Hill, 567; Gillett v. Moody, 3 N. Y.479; Talmage v. Pell, 7 id. 340.

Profit, how § 2. In the calculation of the profits of any moneyed corpora- calculated. tion, previous to a dividend, interest then unpaid, although due, or accrued, on debts owing to the company, shall not be included.

Surplus $ 3. In order to ascertain the surplus profits, from which alone

profits. a dividend can be made, there shall be charged in the account of profit and loss, and deducted from the actual profits,

I. All the expenses paid or incurred, both ordinary and extraordinary, attending the management of the affairs, and the transaction of the business of the company ;

2. The interest paid, or then due or accrued, on debts owing by the company;

3. All losses sustained by the company; and in the computation of such losses, all debts owing to the company shall be included, which shall have remained due, without prosecution, and no interest having been paid thereon for more than one year; or on which judgments shall have been recovered, that shall have remained for

CHAP. IX.

Art. III.

to be

Loans
when to be

more than two years unsatisfied, and on which no interest shall

have been paid during that period. Losses, how § 4. When any losses shall be sustained by any such

corporacharged. tion, that shall exceed its undivided profits, then realized and

possessed, thay shall be charged as a reduction of the capital stock of the company; and no dividends shall thereafter be made on the shares of such stock, until the deficit of capital so created shall be made good, either by the recovery of the moneys charged as lost, or from the subsequently accruing profits of the company. Scott v. Eagle Fire Co., 7 Paige, 203.

§ 5. If, from the occurrence of losses charged, or proper to be called in. charged, as a reduction of its capital stock, the whole amount of

the loans and discounts made by any corporation having banking powers, shall exceed three times the amount to which its capital paid in, is, or ought to be reduced, it shall be the duty of the directors of such corporation to call in and cause to be paid, without delay, such a portion of such loans as shall reduce their whole

amount within the limits before prescribed. (591)

§ 6. If any shares of its own capital stock shall be hypothe

cated or pledged to any moneyed corporation, and the debt Proceed ings on which they shall be intended to secure shall not be paid when due, stock hypothecated, it shall be the duty of the directors of the company, within sixty is not paid. days thereafter, to cause such shares to be sold; and if, within

that period, such shares shall not be sold, and the debt shall remain unsatisfied, the shares shall be charged at the amount actually paid thereon, as a reduction of the capital stock of the company, and no dividends shall thereafter be made until the deficit so created be made good from the subsequently accruing profits of the company.

8 7. No conveyance, assignment or transfer of any effects, for

the use, benefit or security of any such corporation shall be valid poration in law, unless it be made to the corporation directly and by name; invalid.

but the provisions of this section shall not be construed to apply to a conveyance or assignment for the benefit of creditors, in which such corporation shall be included, or to a conveyance or assignment of the effects of a debtor under the laws of this State, or of any other State or country.

Leavitt v. Fisher, 4 Duer, 21 ; Harper v. Raymond, 3 Bosw. 29; Holbrook v. Bassett, 5 Bosw. 171.

8 8. No conveyance, assignment or transfer, not authorized by a previous resolution of its board of directors, shall be made by

Certain conveyances for use of cor

Id.

CHAP. IX.

any such corporation of any of its real estate or of any of its effects art. iti. exceeding the value of one thousand dollars; but this section shall not apply to the issuing of promissory notes, or other evidences of debt, by the officers of the company in the transaction of its ordinary business, nor to payments in specie or other current money, or in bank bills made by such officers; nor shall it be construed to render void any conveyance, assignment or transfer, in the hands of a purchaser for a valuable consideration, and without notice.

Leavitt v. Tylee, i Sandf. Ch. 207; Aspinwall v. Meyer, 2 Sandf. 187; Palmer v. Yates, 3 id. 144 ; Brouwer v. Harbeck, 1 Duer, 129; Gillet v. Moody, 5 Barb. 185 ; Curtis v. Leavitt, 17 id. 309; Warner v. Chappel, 32 id. 309; Bank of Vergennes v. Warren, 7 Hill, 91; Houghton v. McAuliffe, 26 How. 270; Brouwer v. Harbeck, 9 N. Y., 589; Marvine v. Hymers, 12 id. 223; Gillet v. Phillips, 13 id. 114; Nelson v. Eaton, 26 id. 410; Commercial Bank v. Ten Eyck, 48 id. 305.

8 9. No such conveyance, assignment or transfer, nor any pay- Id. ment made, judgment suffered, lien created or security given by any such corporation, when insolvent, or in contemplation of insolvency, with the intent of giving a preference to any particular creditor over other creditors of the company, shall be valid in law; and every person receiving, by means of any such conveyance, assignment, transfer, lien, security or payment, any of the effects of the corporation, shall be bound to account therefor to its creditors or stockholders, or their trustees, as the case shall require.

Leavitt v. Tylee, 1 Sandf. Ch. 207; Furniss v. Sherwood, 3 Sandf. 521; Brouwer v. Harbeck, 1 Duer, 129; Leavitt v. Blatchford, 5 Barb. 15; Gillet v. Moody, id. 185; Curtis v. Leavitt, 17 id. 316; Leavitt v. Yates, 4 Edm. Ch. 134; Ogden v. Andre, 4 Bosw. 602; Holbrook v. Bassett, 5 id. 171; Nelson v. Wellington, id. 186; Hervy v. Kerr, 8 id. 200; Matter of Bowery Bank, 16 How. 56; Brouwer v. Harbeck, 9 N. Y. 591 ; Curtis v. Leavitt, 15 id. 9; Marine Bank v. Clements, 31 id. 33.

§ 10. Every director who shall violate, or be concerned in vio- Penalty on lating, any provision in the preceding sections of this article con- violating tained, shall be liable personally to the creditors and stockholders, sections. respectively, of the corporation of which he shall be a director, to the full extent of any loss they may respectively sustain from such violation.

(See Penal Code, & 606, post, p. 276.) Franklin Fire Ins. Co. v. Jenkins, 3 Wend. 130; Gaffney v. Colvill, 6 Hill, 567; 13 J. & S. 620; Ogden v. Rolls, 13 Abb. Pr. 300.

(Sections 11 to 18, inclusive, were repealed by Laws of 1830, chap. 71, but not so as to affect corporations then existing.)

19. It shall be the duty of every moneyed corporation here- [593) after created on the first day of January after its incorporation, statement

Annual

CHAP. IX.

mitted to comptroller.

Art. III. and annually on the same day thereafter, to make out and transto be trans. mit to the comptroller, in the form prescribed by him, a full state

ment of its affairs, verified by the oaths of its president and cashier,

or treasurer or secretary. Contents § 20. Each statement so transmitted shall contain, thereof,

1. The amount of the capital stock of the corporation paid in, or invested according to the provisions of its charter, and the amount of such stock as then possessed;

2. The value of the real estate of the corporation, specifying what portion thereof is occupied by the company as necessary to the transaction of its business;

3. The shares of stock held by such corporation, whether absolutely or as collateral security, specifying each kind and description of stock, and the number and value of the shares of each;

4. The debts owing to the corporation, specifying such as are owing from other moneyed corporations, the names of such corporations and the amount due from each; and also specifying the

amount secured by bond and mortgage or judgment, the amount [594] which, according to the provisions of this article, ought to be in

cluded in the computation of losses and the total amount of such debts then collectible;

5. The amount of debts owing by the corporation, specifying such as are payable on demand, and such as are due to other moneyed corporations, the names of such corporations, and the amount due to each;

6. The amount of the claims against the corporation, not acknowledged by it as debts;

7. The amount for which the corporation is bound as surety, or for which it may become liable on the happening of contingent events, whether upon policies of insurance or otherwise; and,

8. If the statement be from a corporation having banking powers, the amount of its notes or bills then in circulation, of its loans and discounts, and of specie on hand.

§ 21. Each statement subsequent to the first so transmitted shall each state- also contain,

1. The amount of the losses of the corporation charged, specifying whether charged on its capital or profits, since its last preceding statement, and of its dividends declared and made during the same period;

2. The average amount for each month, during the preceding year, of the debts due to and from the corporation ; and

Further contents of

ment after the first.

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CHAP. IX.

ment,

3. If the statement be from a corporation having banking powers, Art. III. the amount, on the first day of July of the same year, of its notes or bills in circulation, of its loans and discounts, and of its specie on hand. $ 22. Every corporation that shall neglect to make out and Penalty for

neglect. transmit the statement required, for one month beyond the period when by law it ought to be made, may be proceeded against, and dissolved as an insolvent corporation.

§ 23. It shall be the duty of the comptroller to enter every such Duty of statement received by him in a book to be provided by him for troller in that purpose, and which shall at all times during office hours be such stateopen to public inspection.

§ 24. If it shall appear to the comptroller, from any statements id. received by him, that the provisions of its charter, or of this title, have been violated by any corporation, or that there is reason to apprehend that any corporation is or will become insolvent, it shall be his duty to report the facts, together with his opinion thereon, without delay, to the legislature.

§ 25. It shall be the duty of the comptroller to prepare forms Id. of the statements above prescribed, and to transmit a copy thereof,

[595] together with such instructions as he may deem necessary, to

every corporation which is or shall be bound to furnish such statements under the provisions of this title.

(Sections 26, 27 and 28 relate exclusively to corporations having banking powers, and are therefore omitted.) § 29. No moneyed corporation, to which a charter shall hereafter Affidavits

required be granted, shall commence the business for which it shall be in- from corcorporated, until its president and cashier, or treasurer, or secre- hereafter tary, or its two principal officers, by whatever name they may be described, shall have made and subscribed an affidavit, stating that the whole of the capital stock of such corporation, or such portion thereof as by its charter shall be required to be paid or secured before the commencement of its operations, has been actually paid or secured to be paid, according to the provisions of its charter.

§ 30. Every such affidavit, if made in a city, shall be made be- How made fore the mayor or recorder of such city, and if made in a county, before the first judge of a county, or any master in chancery therein, and shall be filed in the clerk's office of the city and county, or of the county in which it shall be taken.

created,

and filed.

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