Arthur M. (Arthur Martineau) Alger.

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UNIVERSITY

OF CALIFORNIA

LOS ANGELES



SCHOOL OF LAW
LIBRARY



A TREATISE ON THE LAW



IN RELATION TO



PROMOTERS AND THE PROMOTION



OF



CORPORATIONS.



KF

A



"



TREATISE ON THE LAW



IN RELATION TO



PROMOTERS AND THE PROMOTION



OF



BY

ARTHUR M. ALGER.
m



BOSTON:
LITTLE, BlfcwN, AND COMPANY.

189T.



Copyright, 1897,
BY ARTHUR M. ALGEK.




SSnibersitg
JOHN WILSON AND SON, CAMBRIDGE, TI. S. A.



PREFACE.



THE public is constantly responding to the invitations of
promoters of corporate enterprises to contribute the funds
necessary for their prosecution. Very large sums of money
in the aggregate are annually invested in such ventures by
persons who must necessarily rely more or less upon the
good faith and integrity of those engaged in promoting
them. The promoters " have in their hands the creation
and moulding of the corporation ; they 'have the power to
define how and when, and in what shape, and under what
supervision, it shall start into existence and begin to act
as a corporation." The material facts in relation to the
undertaking are often exclusively within their knowledge.
In view of these conditions, it is apparent that the question
of the reciprocal rights and obligations of the promoter
and the corporation, and of the shareholder and the pro-
moter, is of great practical importance ; and it would seem
to be worthy of fuller treatment than that which has been
accorded to it in the text-books on the law of corporations.
In the absence of any treatise on the subject, the writer

761470



VI PEEFACE.

submits this work to the profession, in the hope that the
attempt to do what so far has been left, to a great extent,
undone, namely, to analyze the cases and to state and
classify the principles deducible from the cases, may prove

useful.

A. M. A.

MAY 1, 1897.



CONTENTS.



CHAPTER I.

NATURE OP PROMOTERSHIP AND RELATION OF PROMOTERS
TO THE CORPORATION



1. Explanation of term "pro-
moter."

2. Term not applicable to one

acting as an agent only.

3. In re The Great Wheal Pol-

gooth Co., 53 L. J. Ch. 42.

4. One who is an agent may be a

promoter also.

6. Agent may be promoter, al-
though compensation does
not come from corporation.

6. Central Land Co. v. Obenchain,

92 Va. 130.

7. Tests to ascertain who are

promoters.

8. Ex-Mission Land & Water Co.

v. Flash, 97 Cal. 610.

9. St. Louis & Fort Scott R. R. Co.

v. Tiernan, 37 Kan. 606.

10. Question of fact whether one

is a promoter.

11. Emma Silver Mining Co. v.

Lewis, 4 C. P. D. 396.

12. Bagnall v. Carlton, 6 Ch. D. 37 1 .

13. Nant-y-Glo & Blaina Iron Works

Co. v. Grave, 12 Ch. D. 738.



14. Twycross v. Grant, 2 C. P. D.
469.

15. Lydney & Wigpool Iron Ore

Co. v. Bird, 33 Ch. D. 85.

16. Mere intent or agreement to

promote does not make one
a promoter.

17. Absolute purchase of prop-

erty with view to resale
to projected corporation as
evidence of promotership.

18. Ladywell Mining Co. v.

Brooks, 35 Ch. D. 400.

19. Conditional purchase of prop-

erty with view to resale to
projected corporation as evi-
dence of promotership.

20. Promotership not limited to

period anterior to organiza-
tion of corporation.

21. Fiduciary relation of pro-

moters to corporation.

22. Existence of such relation es-

ta"blished by authorities.

23. Consequences of fiduciary re-

lationship.



CHAPTER II.

DUTIES OF PROMOTERS TO THE CORPORATION



25



24. Duties of promoters in organ-
ization of corporation.
25. Erlanger v. New Sombrero
Phosphate Co., 3 App. Cas.
1218.

. 26. Judgment of Lord Cairns.



27. Exception to rule laid down

by Lord Cairns.

28. Promoters must disclose their
interest in transactions with
corporation.



vm



CONTENTS.



29. As vendo* of corporation not
always bound to disclose
cost of property to them.

30. Under some circumstances

must disclose such cost.

31. Trustees not permitted to

make secret profit in matter
of trusteeship.

32. Similar rule applies to pro-

moters.

33. Mere declaration that pro-

moter is interested not
enough when made to the
directors only.

34. Imperial Mercantile Credit

Association v. Coleman, L.
R. 6 H. L. 189.

35. Disclosure of interest only

sufficient if made to the
shareholders.



36. Full disclosure must be made.

37. In re Westmoreland Green &

Blue Slate Co., 2 Ch. (1893)
612.

38. To whom disclosure must be

made and by whom acted
upon.

39. Effect of disclosure to, and

consent by, all the share-
holders representing entire
capital stock.

40. Effect of disclosure to and

consent by all the existing
shareholders, when entire
capital stock not issued.

41. Ultra vires acts not validated

by disclosure to and con-
sent by all the shareholders.



CHAPTER III.

PAGE

ACCOUNTABILITY OP PROMOTERS TO THE CORPORATION FOR
PROFITS, GIFTS, AND COMMISSIONS 41

ARTICLE I. ACCOUNTABILITY OF PROMOTERS FOR PROFITS OBTAINED

BY THEM AS VENDORS OF THE CORPORATION.



42. Right of corporation to claim
benefit of purchase made
by promoters while such.

43. Tyrrell v. Bank of London,

10 H. L. C. 26.

44. Mere fact that property pur-

chased by promoters while
such does not entitle cor-
poration to benefit of pur-
chase.

45. Benson v. Heathorn, 1 Y. &

C. 326.

46. Right of corporation to claim

benefit of purchase made
by promoter before he be-
came such.



47. In re Ambrose Lake Tin and
Copper Mining Co., 14 Ch.
D. 390.

48. Ladywell Mining Co. v.

Brooks, 35 Ch. D. 400.

49. Colorable transfer of property

to promoter to be by him
sold to the corporation.

50. Whaley Bridge Calico Print-

ing Co. v. Green, 5 Q. B. D.
109.

51. Acts and declarations of pro-

moter giving corporation
right to claim benefit of
purchase made by him.



CONTENTS.



IX



52. Simons v. Vulcan Oil Co., 61
Penn. 202.

53. Burbank v. Dennis,101 Cal.90.

54. Eight of corporation to ben-

efit of optional purchase
made by promoter before
becoming such.

55. Offer by promoter to corpo-

ration entitling it to benefit
of his purchase.

56. Plaquemines Tropical Fruit

Co. v. Buck, 52 N. J. Eq. 219.

57. Pittsburg Mining Co. v.

Spooner, 74 Wise. 307.

58. Right of corporation to bene-

fit of optional purchase
made by third persons con-
federating with promoter.



59. Fountain Spring Park Co. v.
Roberts, 92 Wise. 345.

60. Right of corporation to re-

cover the profit made by
promoter on a sale of his
property to it. Definition
of term "profit."

61. Recovery of profit when prop-

erty sold is a commodity
having a current market
price.

62. Recovery of profit when prop-

erty sold is not a com-
modity with current market
price.



ARTICLE II. ACCOUNTABILITY OF PROMOTERS FOR GIFTS AND

COMMISSIONS 71



63. Explanation of term " promo-
tion money."

64. Accountability of promoters

for promotion money.

65. Hichens v. Congreve, 4 Russ.

562 ; 1 Russ. & Myl. 150, n.

66. Beck v. Kantorowicz, 3 Kay

& J. 230.

67. Lyclney & Wigpool Iron Ore

Co. v. Bird, 33 Ch. D. 85.

68. Bagnall v. Carlton, 6 Ch. D.

371.

69. Emma Silver Mining Co. v.

Grant, 11 Ch. D. 918.

70. Emma Silver Mining Co. v.

Lewis, 4 C. P. D. 396.

71. McElheney's Appeal, 61 Penn.

188.

72. Chandler o. Bacon, 30 Fed.

Rep. 538.



73. In re Westmoreland Green &
Blue Slate Co., 2 Ch. (1893)
612.

74. Yale Gas Stove Co. v. Foley,

64 Conn. 105.

75. Right of corporation to re-

cover from vendor promo-
tion money which he has
secretly agreed to pay to
promoter.

76. Accountability to corporation

of persons confederating
with promoters.

77. Right of corporation to re-

cover from promoters gifts
and commissions not ob-
tained at its expense.

78. In re North Australian Terri-

tory Co., 1 Ch. (1892) 322.



CONTENTS.



CHAPTER IY.



MEASURE OP PROFITS RECOVERABLE BY CORPORATION.
STATUTE OF LIMITATIONS AS A BAR TO SUIT FOR THEIR
RECOVERY. SURVIVAL OF CAUSE OF ACTION



89



79. View that net profit only re-
coverable.

80. Modification of this view.

No allowance for expendi-
tures ultra vires the corpo-
ration.

81. English decisions based on

provisions of the Compa-
nies Acts.

82. Interest recoverable.

83. Rule when gift, commission,

or profit is in form of shares
of corporation's stock.

84. Statute of Limitations as a bar

to suit to recover profits.



85. Metropolitan Bank v. Heiron,
6 Ex. D. 319.

86. Statute runs from time of dis-

closure to or knowledge by
corporation.

87. In re Fitzroy Bessemer Steel

Co. v. Smith, 50 L. T. Rep.
N. s. 144.

88. Right of action not divested

short of period of statute
without accord and satisfac-
tion or release under seal.

89. Right of action survives

against personal represen-
tatives of promoters.



CHAPTER V.

BREACH OF DUTY OR FRAUD BY PROMOTERS AS GROUND
FOR RECOVERY OF DAMAGES FROM THEM BY CORPORA-
TION, AND FOR PROCURING THE SETTING ASIDE OF EXE-
CUTED CONTRACTS ENTERED INTO BY IT . . 98



ARTICLE I. LIABILITIES OF PROMOTERS IN DAMAGES TO THE
CORPORATION.



90. Rule laid down in Taylor on

Corporations.

91. Damages recoverable for

breach of duty damnifying
corporation.



92. Instances where promoters
liable to corporation in
damages.



CONTENTS.



ARTICLE II. RESCISSION BY CORPORATION OP CONTRACTS EN-
TERED INTO BY IT WITH OR THROUGH PROMOTERS . 102



93. Rescission an elective rem-

edy.

94. Rescission of contracts on

ground of breach of duty
by promoters.

95. Erlanger v. New Sombrero

Phosphate Co., 3 App. Cas.
1218.

96. Atwool v, Merryweather, 5

Eq. 464, n.

97. Phosphate Sewage Co. v.

Hartmont, 6 Ch. D. 394.

98. Caveat emptor not applicable

to dealings by promoters
with corporation.



100.



101.



102.



103.
104.



Rescission by corporation of
transactions with third per-
sons on ground of partici-
pation by such persons in
frauds of promoters.

Election by corporation to con-
firm or rescind contract.

Right to rescind barred by
laches.

Return of consideration re-
ceived ordinarily condition
precedent to right to re-
scind. Exceptions.

Partial rescission not allowed.

Burden of proof in suit for
rescission.



CHAPTER VI.

SUITS BY SHAREHOLDERS TO COMPEL REDRESS FOR WRONGS
BY PROMOTERS TO THE CORPORATION 114



105. As general rule suit can be
brought only by corpora-
tion.

106. Exceptions to this rule.

107. Proof necessary to establish

disability of corporation
to sue.

108. Transactions on account of

which shareholders may
or may not bring suit.

109. Exposition of rule on this

subject by Lords Justices
James and Mellish.

110. Right of minority sharehold-

ers to sue to rescind trans-
action voidable for fraud,
when majority are the
wrong-doers.



111. Atwool v. Merryweather, 5
Eq. 464, n.

112. Mason v. Harris, 11 Ch. D.

97.

113. Right of minority, where

majority are not the
wrong-doers, to sue to
rescind contracts voidable
for fraud.

114. Foss v. Harbottle, 2 Hare,

461.

115. Right of minority to sue to

rescind a voidable trans-
action where there is no
fraud.

116. Right of minority to sue for

recovery of secret profits
obtained by promoters.



Xll



CONTENTS.



117. Majority not allowed to
retain profits wrongfully
obtained at expense of
minority.

118. Bight of minority to sue
for recovery of promoter's
profits on sale to corpora-
tion at fraudulently ex-
cessive price.



119. Shareholder whose shares
have been voted on in
favor of a transaction can-
not maintain suit based
upon it.

120. Rule in Federal Courts.

121. Shareholders' suit may be

barred by laches.

122. Form of shareholders' suit.

Necessary parties.



CHAPTER VII.

PAGE

LIABILITY OF PROMOTERS TO ACCOUNT FOR PROFITS, COM-
MISSIONS, AND GIFTS, OR IN DAMAGES TO SHAREHOLDERS
OF THE CORPORATION . . 131



ARTICLE I. LIABILITY TO ACCOUNT FOR PROFITS, GIFTS, AND
COMMISSIONS.



123. Effect of invitation by pro-
moters to others to join
them in acquiring property,
and to become shareholders
in corporation to be formed
to purchase it.



124. Emery v. Parrott, 107 Mass.
96.

125. Getty v. Devlin, 54 N. Y.

403 ; 70 N. Y. 504.

126. Rule as to joinder of plain-

tiffs in suit against pro-
moters for an accounting.



ARTICLE II. LIABILITY IN DAMAGES WHEN IN A FIDUCIARY

POSITION TOWARD SHAREHOLDERS 135



127. When such relation exists
between promoters and
shareholders, former li-
able to latter in damages
for breach of fiduciary
duty to them.



128. Brewster v. Hatch, 122 N.

Y. 349.

129. Teachout v. Van Hoesen, 76
Iowa, 113.



CONTENTS.



Xlll



ARTICLE III. PROMOTERS' LIABILITY IN DAMAGES WHEN NOT IN A

FIDUCIARY POSITION TOWARD SHAREHOLDERS 140



130. Promoters ordinarily not in
fiduciary position toward
subscribers for shares.

131. When action will lie in favor of

subscribers against promo-
ters for misrepresentations.

132. Misrepresentation must be

assertion of fact.

133. Mere commendatory expres-

sions privileged.

134. Representation as to value in

exceptional circumstances
not privileged.

135. Representation as to price

paid by third persons for
shares or as to cost of
company's property not
privileged.

136. Commendatory expressions

in prospectuses.

137. Expressions of opinion, al-

though untrue, not action-
able.

138. Representations as to the law.

139. Representation must be of a

material fact.

140. Promoters as a rule not lia-

ble to purchasers of shares
for misrepresentation in
prospectus addressed by
them to prospective sub-
scribers for shares.

141. But connection between pro-

moters issuing prospectus
and persons purchasing
shares in reliance upon it
may be shown.

142. Andrews v. Mockford, 1 Q. B.

(1896), 372.

143. Representation must be

fraudulent as well as false.
Facts to be proved to es-
tablish fraud.

144. False representation made as

of one's own knowledge
deemed fraudulent.

145. Absence of reasonable

grounds for belief in repre-
sentation evidence that it
is fraudulent.



146. Effect of subsequent discov-
ery by one who has made
representation that it is
untrue.

147. Fraud may be inferred from

concealment as distin-
guished from non-disclos-
ure of material facts.

148. Circumstances under which

non-disclosure of facts may
make facts stated false.

149. Omission of facts from pro-

spectus not ground for
action of deceit, unless it
makes facts stated false.

150. Peek v. Gurney, L. R., 6 H.

L. 377.

151. Statement of portion of truth

with suggestions and infer-
ences rendered credible
only by suppression of
other portions of truth.

152. Rules as to misrepresentation

and non-disclosure not the
same in actions ex-delicto
as in suits for equitable
relief.

153. No legislation in this country

requiring promoters' agree-
ments to be disclosed in
prospectuses.

154. English statute on subject.

155. Right of subscriber to rely on

representations addressed
to him.

156. Liability of promoters on sale

of shares issued to them at
discount or in payment for
property at overvaluation.

157. Liability of promoters for

misrepresentations made
by co-promoters.

158. Conflicting views as to meas-

ure of damages.

159. Rule in Massachusetts and

other jurisdictions.

160. Rule in New Jersey.

161. Rule laid down in England

and by Supreme Court of
United States.



XIV



CONTENTS.



CHAPTER VIII.

LIABILITY OF PROMOTERS TO SUBSCRIBERS FOR SHARES IN
A PROJECTED CORPORATION WHICH PROVES ABORTIVE .



169



162. Promoters, in such case, may
be liable to refund moneys
paid in advance on shares
by subscribers.

163. No deduction allowed for ex-

penses, unless subscriber
has authorized deposit to
be applied thereto.

164. What subscriber must prove

in order to recover from
promoters.



165. Burnside v. Dayrell, 3 Ex.
224.

166. Criticism of Burnside v. Day-

rell.

167. Subscriber has no lien on

moneys advanced as
against creditors of com-
pany.

168. Subscriber's remedy is at

law, unless fraud shown,
or accounting necessary.

169. Apperly v. Page, 1 Phill. 779.



CHAPTER IX.

PAGE

REMEDIES OF SUBSCRIBERS FOR SHARES AGAINST CORPO-
RATION WHEN MISLED BY MISREPRESENTATIONS MADE

BY PROMOTERS OR BY THEIR NON-DISCLOSURE OF
MATERIAL FACTS . . 176



ARTICLE I. LIABILITY OF CORPORATION IN DAMAGES FOR
FRAUDULENT MISREPRESENTATIONS MADE BY PROMOTERS.



170. Action of deceit will lie

against a corporation.
171. Corporation not liable in
damages for frauds com-
mitted by promoters prior
to its formation.



172. Effect of insolvency of cor-
poration on right of suit
by subscriber against it to
recover damages.



CONTENTS.



XV



ARTICLE II. MISREPRESENTATION OR NON-DISCLOSURE OF MA-
TERIAL FACTS BY PROMOTERS AS GROUND FOR RESCISSION OF
SUBSCRIPTIONS FOR SHARES, OR AS A DEFENCE TO SUITS THEREON
BY THE CORPORATION 179



173. Responsibility of corpora-
tion for misrepresentation
or non-disclosure by pro-
moters before corporation
formed.

174. Subscribers' remedies

against corporation for
fraudulent misrepresenta-
tion by promoters.

175. Remedy when misled by

non-disclosure of facts by
promoters.

176. Dicta of Vice Chancellor

Kindersley.

177. Dicta of Lord Chelmsford.

178. Standard of duty as to dis-

closure required by dicta
quoted. Whether legal or
moral duty.

179. Peek v. Gurney, L. R. 6

H. L. 377.

180. Duty to disclose material

facts not a legal duty,
when omission does not
make facts stated false.

181. Absence of direct decisions

on this point. Reasons
for and against require-
ment of disclosure.

182. Contracts to take shares

governed by maxim caveat
emptor.

183. Views of Brett, J., expressed

in Gover's Case, 1 Ch. D.
182.



185.



186.



187.



188.



189.



190.



191.



193.



Relief obtainable in Equity,
and in some jurisdictions
at law, against innocent
misrepresentation.
No relief at law where dis-
tinction in procedure be-
tween action at law and
suit in Equity adhered to.
Principle on which Equity
rescinds or refuses to en-
force contract induced by
innocent misrepresenta-
tion.

Proof necessary to obtain re-
scission of contract of sub-
scription on ground of in-
nocent misrepresentation.
Laches as a bar to rescis-
sion of contract of sub-
scription.

Waiver of right to avoid
subscription on ground of
misrepresentation.
Burden of proof on question

of laches or waiver.
Rule in England as to effect
of corporate insolvency
on right to rescind con-
tract of subscription.
Tendency of decisions in

this country.

Repudiation of contract of
subscription without suit
for rescission effective,
although corporate insol-
vency proceedings subse-
quently begun.



XVI



CONTENTS.



CHAPTER X.

PAGE

RIGHTS AND LIABILITIES OF CORPORATION ON PROMOTERS'

CONTRACTS 198



ARTICLE I. ENFORCEMENT BY OR AGAINST THE CORPORATION OP
CONTRACTS MADE IN ITS NAME AND FOR ITS BENEFIT BY ITS
PROMOTERS BEFORE IT COMES INTO EXISTENCE.



194. Such contracts as a rule
primarily not binding
upon or enforceable by
the corporation.

195. Penn Match Co. v. Hapgood,

141 Mass. 145.

196. Long v. Citizens' Bank, 8

Utah, 104.

197. Gooday v. Colchester, &c.

Ry. Co., 17 Beav. 132.

198. Buffington v. Barden, 80

Wise. 635.

199. By weight of authority, cor-

poration cannot ratify
contract made for it be-
fore its creation.

200. Doctrine held by Lord Cot-

tenham.

201. Decisions of Lord Cottenham

questioned.

202. Corporation may accept or

adopt contracts made for
it prior to its creation.

203. Effect of such adoption or

acceptance.

204. Acceptance or adoption may

be express.

205. Stanton v. New York &

Eastern R. R. Co., 59
Conn. 272.

206. Acceptance or adoption by

corporation may be in-
ferred from its acts.



207. Taking benefit of contract
may be evidence of ac-
ceptance or adoption.

208. Circumstances under which

it establishes acceptance
or adoption.

209. Battelle v. Northwestern

Cement & Concrete Pave-
ment Co., 37 Minn. 89.

210. Pittsburg & Tennessee Cop-

per Co. v. Quintrell, 91
Tenn. 693.

211. Acceptance by corporation

of subscriptions for shares
made before its forma-
tion.

212. Cases in which term ratifica-

tion used in sense of adop-
tion or acceptance.

213. Paxton Cattle Co. v. First

National Bank of Arrapa-
hoe, 21 Neb. 621.

214. Distinction between ratifica-

tion and adoption or ac-
ceptance.

215. English doctrine as to pro-

moter's contracts.

216. Howard v. Patent Ivory

Mfg. Co., 38 Ch. D. 156.

217. Corporation cannot adopt

or accept ultra vires con-
tracts.



CONTENTS.



XV11



ARTICLE II. LIABILITY OF CORPORATION TO PAT ITS PROMOTERS
' OR PERSONS EMPLOYED BY THEM, FOR SERVICES AND EXPENSES
INCIDENT TO ITS FORMATION 220



218. Statutory liability.

219. Liability under the English

Companies Acts.

220. Melhado v. Porte Allegre,

New Hamburgh. & Brazil-
ian Ry. Co., L. R. 9 C. P.
603.

221. Liability on quantum meruit.



222. Doctrines held in this coun-
try as to liability of corpo-
ration.

223. Liability to pay for services

and expenses in obtaining
subscriptions for shares.

224. Doctrine held in Vermont

and New Hampshire.



CHAPTER XI.

RIGHTS AND LIABILITIES OF PROMOTERS UNDER CONTRACTS
MADE BY THEM, OR BY THEIR Co-PROMOTERS, IN BEHALF
OF OR FOR THE BENEFIT OF A PROJECTED CORPORA-
TION. CONTRACTS BETWEEN PROMOTERS ...... 228



225. Promoter not liable on con-
tract made in name of in-
tended corporation, unless
he agreed to be so.

226. Presumption as to intent of

parties.

227. Landman v. Entwistle, 7 Ex.

632.

228. On written contract question

of intent is for the Court.
Kelner v. Baxter, L. R.
2 C. P. 174.

229. Scott v. Ebury, L. R. 2 C. P.

255.

230. Promoter usually not liable

on contract made in name
of corporation. Liable
for misrepresentation as to
existence of corporation.

231. Effect of adoption by corpo-

ration of contract on which
credit was given to pro-
moter.

232. Abbott v. Hapgood, 150

Mass. 248.

233. Promoters not prima facie

partners.



234. English cases as to liability
of promoters on contracts
made by co-promoters.

235. Ordinarily promoter not li-

able from allowing his
name to appear in pro-
spectus or signing articles
of incorporation, if he does
not act in undertaking.

236. Statements in prospectus

in which promoter allows
his name to be used may
impose liability upon
him.

237. When promoter has acted in

undertaking, question for
jury whether he has au-
thorized co-promoters to
bind him.

238. Riley v. Packington, L. R.

2 C. P. 536.

239. Promoter's liability on con-

tract made before he be-
came a promoter. Effect
of admission of liability.

240. To hold promoter, credit must

have been given to him.



XV111



CONTENTS.



241. Joint liability of promoters.
Effect of release of one.

242. Right of promoter to indem-

nity from co-promoters.

243. Right of promoter to contri-

bution from co-promoters.

244. Batard v. Hawes, 2 El. & B.

287.

245. In absence of agreement,

promoter cannot enforce
payment for services from
co-promoters.



246. No contract between pro-
moters to go forward im-
plied from their association
together.

247. Legality of agreements be-

tween promoters as to
formation of corporation
and its future management
and control.

248. Agreement between promo-

ters restricting sale of
their stock.



CHAPTER XII.



RIGHTS AND LIABILITIES UNDER CONTRACTS MADE BY
PROMOTERS CLAIMING TO BE INCORPORATED WHEN
THE PROCEEDINGS TAKEN TO INCORPORATE HAVE BEEN
DEFECTIVE OR ILLEGAL . 250



249. Question as to consequences
of illegal or defective in-
corporation by promoters.

250. Theory that corporation can-

not come into existence
without substantial com-
pliance with enabling stat-
ute.

251. Conclusiveness of certificate

of incorporation.

252. Nature and attributes of a

de facto corporation.

253. Promoters and stockholders

of a de facto corporation
not liable for its debts.

254. What is necessary to consti-

tute a de facto corporation.

255. A valid enabling statute.

256. Color of apparent organiza-

tion under statute and user.

257. Effect of apparently real but

in fact sham or fraudulent
compliance with require-
ments of statute.

258 Construction of statute by
courts of State where en-
acted followed by courts
of other States.



259. Incorporation for apparently
lawful, but in reality un-
lawful purpose, will not



Online LibraryArthur M. (Arthur Martineau) AlgerA treatise on the law in relation to promoters and the promotion of corporations → online text (page 1 of 27)