shares by some or all of the stockholders, or by purchasing and retiring shares, provided the purchase be made from funds that might be distributed as dividends-i. e. surplus profits. Or, if no rights of creditors intervene, the purchase may be made by exchanging to stockholders assets of the company proportionate to the stock retired. In any event, all stockholders must be dealt with upon a basis of equality, in the absence of waivers.Marshall's Corp. p. 587.

A two-thirds majority may, as against the dissent of the minority, reduce the authorized capital stock and the pro rata number of shares in the hands of each stockholder, without distributing any of the assets of the corporation. Under the present act, this right is conferred by the charter contract, to the terms of which each stockholder has given implied assent.Joy v. Jackson & M. P. R. Co., 11 Mich. 155-171.

This rule would not be applicable to a corporation having preferred shares outstanding, for, in that instance, its operation would be violative of a special contract between the corporation and the preferred stockholder. -Cook's Corp. Sec. 493. An amendment detrimental to such rights can be made by unanimous consent only.

Distribution to stockholders of assets corresponding to a reduction of capital stock by amendment, is not such a "withdrawal and refunding" of capital stock as is contemplated by Sec. 21 of this act. It is not technically a withdrawal of capital stock at all.-Marshall's Corp. p. 586-587. Yet there can be no doubt that existing creditors might, upon the trust fund theory, after exhausting the property of the corporation, pursue such refunded assets into the hands of the stockholders.-See American Steel & Wire Co. v. Eddy, 130 Mich. 266; Brewer v. Michigan Salt Ass'n., 58 Mich. 351; Lockhart v. Van Alstyne, 31 Mich. 75.

$155. Certificate of Amendment.

Where the amendment increases or diminishes the capital stock, a certificate reciting the action, and, according to best practice, embodying the amendatory resolution, signed by the president and a majority of the board of directors, must be recorded in the same manner as articles of association.

Amendments not increasing or diminishing the capital stock, are to be made in accordance with Sec. 17 (Sec. 214, post) of the act. Thus, Sec. 17 and not Sec. 2 (Sec. 138, ante) of the act, should be followed in changing the number and par value of shares, if unaccompanied by a change in the capital stock. Changes of name, objects, place of operation, location of business office, duration, and changes converting common stock authorized into preferred stock (See Act Sec. 35; Sec. 267, post) are to be made pursuant to Sec. 17 of the act.

The procedure under Sec. 17 differs from that under Sec. 2 in but one respect: Sec. 17 requires the certificate of amendment to be signed by the president and secretary; Sec. 2, that the certificate shall be signed by the "president and a majority of the directors."

Under a like statute, it has been held, that when other amendments are joined with an increase of capital, the proceeding must be governed by the provisions of Sec. 2. Continental Paint Co. v. Secretary of State, 128 Mich. 621. The better practice, under such circumstances, is to comply with both sections-this being accomplished by having the secretary join with the president and directors in signing the certificate of amendment.

A duly adopted amendment, unrecorded, becomes an amendment de facto. The State alone can complain of the omission to record.-Hoeft v. Kock, 123 Mich. 171.

$156. Special Provisions "Creating, Defining, Limiting and

Regulating Powers."

The clause permitting insertion in the articles of "any provision which the incorporators may deem advantageous... .....and any provision creating, defining, limiting and regulating the powers of the corporation, the directors and the stockholders" etc., was borrowed from the General Corporation Act of New Jersey and received its first judicial interpretation December 7, 1904, in the case of Audenried v. East Coast Milling Co., 68 N. J. Eq. 450, in an opinion by Vice Chancellor Bergen, who said: "Under this clause, it is insisted, the legislature has granted the right not only of creating, defining, limiting and regulating the powers of the corporation, but also the right to authorize the directors to exercise the powers thus established according to any method the incorporators may see fit to adopt, although the power to do this is not granted in express terms. I do not so interpret these words. The right to create' is limited to the establishing of, or regulating a power to be exercised by the corporation through its directors, which power shall not be inconsistent with the terms of the general act. The method of exercising the power created must conform to settled legal principles, unless it be otherwise distinctly authorized by the legislative act. No such express authority is conferred by this act, and it ought not to be inferred from ambiguous expressions. To hold that the legislature of our state, by the adoption of our general corporation act, intended to confer upon individuals an indefinite power of legislation, would require the adoption of a liberality of construction which the act does not warrant, and which, upon every known principle, is contrary to public policy."

Of this clause, the Michigan Department of State has said: "We do not think this provision can be construed as giving the company unlimited right to create and define its own powers. Many have construed the act in this way, and have sent in articles for record containing all the powers that might be granted to the company under the New Jersey statutes. As understood by this Department, the powers that may be created and defined must be, as shown in the provision at the end of the section, such as are not inconsistent with the act itself, or with the general statutes of the state; that is, the corporate powers of the corporation itself can only be such as are granted to it by the act."

The interpretation placed upon this clause by the Department of State practically holds, that all powers not granted to the corporation, expressly. or by necessary implication, are manifestly inconsistent with the act and are therefore excluded by its express terms. This view has the support of authority: Walker v. Commissioner of Insurance, 103 Mich. 344-346; Chapman v. Colby, 47 Mich. 51; Town v. Bank of River Raisin, 2 Doug. (Mich.) 548; Orr v. Lacey, 2 Doug. (Mich.) 253; Bank of Michigan v. Niles, 1 Doug. (Mich.) 403.

The affirmative effect of the clause is, that the manner of exercising powers expressly or impliedly granted by the act may be provided in the articles in consonance with legal principles.

So far as the powers of the corporation itself are concerned, the word "creating," as used in the clause under consideration, is clearly nugatory. The creation of corporate powers is an inherent right of the state, exercisable by the legislature only.-Marshall's Corp. 58. It cannot be delegated.— Isle Royale Land Co. v. Osmun, 76 Mich. 163.

The underlying objection to the creation of corporate powers by incorporators is the fact that legislative scrutiny would be thereby evaded and the dangers that lurk in special charters would be, in effect, revived. By this, the spirit, if not the letter, of the state constitution would be violated.See Beecher's Annotated Const. 1908, Art. XII, Sec. 1.

The preceding considerations narrow the use of the special provision clause of the act to statements of special arrangements relating to the rights of stock, stockholders and directors. Among the subjects that may properly be covered by special provisions in the articles, the following may be mentioned:

(a) Provisions delegating to the board of directors exclusive or concurrent power to make and alter by-laws.-Cahill v. Insurance Co., 2 Doug. (Mich.) 123-136.

(b) Provisions regulating the voting power and representation of the preferred stock.-Act. Secs. 2 and 35; Marshall's Corp., p. 598.

(c) Limitations upon the power of the directors to mortgage the property or pledge the credit of the corporation.

(d) Any provision that might be legally enacted as by-laws. The purpose of inserting such provisions in the article is to give the arrangements permanency, and to make them a matter of public record-constructive notice to all persons.

§157. Consolidated Corporation Law-Section Relating to First Meeting.

Section 3. When any number of persons shall have associated according to the provisions of this act, any two of them may call the first meeting of the stockholders, at such time and place as they may appoint, by giving notice thereof by publishing the same in some newspaper published in the county in

which its office is located, and if there is no newspaper published in such county, then by publishing the said notice in some newspaper published in an adjoining county, at least two weeks before the time appointed for such meeting. But said notice may be waived by a writing signed by all the subscribers to the capital stock of said corporation, specifying the time and place for said first meeting, which writing shall be entered at full length upon the records of the corporation; and the first meeting of any such corporation, which has been held pursuant to such written waiver of notice, shall be valid.

$158. Notice of First Meeting.

The first meeting of the stockholders must be held pursuant to published notice, unless notice is "waived by a writing signed by all the subscribers to capital stock." The adoption of by-laws and the election of directors are acts of too much importance to be permitted without due notification to the parties in interest. In the absence of the statute permitting notice by publication, personal notice would have been necessary, in the absence of waiver.-Tuttle v. Michigan Air Line R. Co., 35 Mich,

246-251.

The delay of two weeks incident to published notice, and also the expense of publication, are usually avoided by written waiver. To insure preservation of this instrument, it is ordinarily entered (not copied) directly upon the corporate record book, where the signatures are affixed. While the statute seems to contemplate that the waiver shall be a single instrument, there can be no doubt that the waiver might be made by the different stockholders in separate instruments. The statutory provision is merely directory. A meeting attended and participated in, without objection, by all of the stock subscribers, would undoubtedly be lawful, without either notice or written waiver of notice. Attendance and participation would amount to a waiver.

Where notice by publication has been duly given, actual notice is unnecessary. The statute being directory only, and there being no provision that failure to follow it shall invalidate the proceedings, reasonable personal notice would be sufficient. One who had neither actual nor constructive notice of the meeting, might, in a direct proceeding, call into question the legality of the election of officers chosen. But they would be at least de facto officers, and their right to act would not be open to collateral attack. De facto officers are upon the same footing as de facto corporations. Clement v. Everest, 29 Mich. 19-23. The State alone can complain. Parker v. Northern Central M. R. Co., 33 Mich, 23-24; Eaton v. Walker, 76 Mich. 579; Detroit City Ry. v. Mills, 85 Mich. 634-648; Staver & Abbott Mfg. Co. v. Blake, 111 Mich. 282-288; City of Kalamazoo v. Power Co., 124 Mich. 74-82.

$159. Consolidated Corporation Law-Section Relating to Di

rectors.

Section 4. The stock, property, affairs and business of every manufacturing or mercantile corporation shall be managed by not less than three directors, who shall be chosen annually by the stockholders, at such time and place as shall be provided by the by-laws of said corporation, and who shall be stockholders, and shall hold their offices for one year, and until others shall be chosen in their stead.

In the absence of legislative restriction, a corporation may deal with its property and business precisely as though the corporation were a natural person.-Town v. Bank, 2 Doug. (Mich.) 530; Bank of Montreal v. Salt & Lumber Co., 90 Mich., 345-350.

This power of management is vested in the board of directors.-Star Line v. Van Vliet, 43 Mich., 364; Genesee Savings Bank v. Barge Co., 52 Mich. 438; 3 Thomp. Corp. Sec. 3970; Plaquemines Tropical Fruit Co., v. Buck, 52 N. J. E. 219-238. The power of the stockholders is merely elective and legislative. Their ordinary remedy, if dissatisfied with the management, is to elect other directors at the annual meeting, or to alter the articles of association or the by-laws, or to sell their shares, or to sell out the company to another corporation formed for like purposes, or to bring about dissolution, or a receivership.

$161. Officers and Agents.

The board of directors may delegate its power to an officer.-Preston National Bank v. Purifier Co., 84 Mich. 364-382. Or to an agent.-Lockwood v. Boom Co., 42 Mich. 536; Hartford Mining Co. v. Cambria Mining Co., 80 Mich. 491. Or to an executive committee.-Cook Corp. Sec. 715.

$162. Must Act as a Board.

To bind the corporation, the directors must act as a body. In the absence of delegated power, a director has no greater authority than any other stockholder to bind the company by his individual acts.-Lockwood v. Boom Co., 42 Mich. 536-539; Hartford Mining Co. v. Cambria Mining Co.. 80 Mich. 491. The true and primary managing body consists of a board of directors properly convened.-Cahill v. Insurance Co., 2 Doug. (Mich.) 123-136. Proper notice of the meeting is necessary to enable legal majority action.-Covert v. Rogers, 38 Mich. 363; Doyle v. Mizner, 42 Mich. 332. The meeting must be held on a lawful day; a business corporation cannot legally adopt resolutions on Sunday.-Lansing Turnverein Society