$321. Loans of Credit, Name or Capital.

$322. Partnership Associations, Limited, Law.-Sections Relating to Voluntary Dissolution.

$323. Proceedings upon Voluntary Dissolution.

$324. Partnership Associations, Limited, Law.-Section Relating to Conveyances, Suits and Service of Process.

$325. Service of Process.

$326. Partnership Associations, Limited, Law.-Section Relating to Vested Rights.

$327. Amendment, Modification or Repeal.

$328. Partnership Associations, Limited, Law.-Section Relating to Franchise Fee.

$329. Franchise Fee.

$330. Partnership Associations, Limited, Law.-Section Relating to Annual Reports and Notice of Change of Status.

$331. Penalties.

$332. Partnership Associations, Limited, Law.-Section Relating to Associations Existing Prior to Amendment of 1903.

$333. Statute of Limitations.

$334. Partnership Associations, Limited, Law.-Section Relating to Amendments.

$335. Amendment of Articles of Association.

$336. Partnership Associations, Limited, Law.-Section Relating to Reorganizations Prior to July 1, 1905.

$337. Status of Reorganized Companies.

$284. Title.

"An Act authorizing the formation of partnership associations, in which the capital subscribed shall alone be responsible for the debts of the association, except under certain circumstances."

$285. Constitutionality.

The Act has been held constitutional in its original entirety in Pennsylvania. Cox v. Watts, 157 Pa. 93; Lauder v. Logan, 123 Pa. 34; Maloney v. Bruce, 94 Pa. 249. As to such of its provisions as have been called into question in Michigan, the Act has been sustained.-Rouse, Hazard & Co. v. Donovan, 104 Mich. 234, 27 L. R. A. 577.

$286. Partnership Associations, Limited, Law.-Sections Relating to Formation.

Section 1. When any three or more persons may desire to form a partnership association, for the purpose of conducting any lawful business or occupation within the United States or elsewhere, whose principal office or place of business shall be established and maintained within this State, by subscribing and contributing capital thereto, which capital shall alone be liable for the debts of such association, it shall and may be law

ful for such persons to sign and acknowledge, before some officer competent to take acknowledgment of deeds, a statement in writing, or articles of association, in which shall be set forth the full names of such persons, and the amount of capital of said association subscribed for by each; the total amount of capital, and when and how to be paid; Provided, however, that the amount of capital stock subscribed shall not be less than fifty per cent of the authorized capital stock and the amount of capital stock paid in at the time of executing the articles of association shall not be less than ten per cent of the authorized capital. Said articles of association shall also state the character of the business to be conducted, and the location of the same, whether or not the capital subscribed shall be subject to the restrictive provisions of section four of this act, and unless the articles of association expressly declare that the capital subscribed shall not be subject to the provisions of said section four such capital shall be subject to the provisions of said section four so far as the same prohibits the members from transferring their interests and the transferee from becoming a member without the consent of the other members; the name of the association, with the word "limited" added thereto as part of the same; the contemplated duration of said association, which shall not in any case exceed twenty years; and the names of the officers of said. association selected in conformity with the provisions of this act. Contributions to the capital stock may be in real or personal estate, at a valuation to be approved by all the members subscribing to the capital of such association; but where property has been contributed as part of the capital, a schedule containing the names of the parties so contributing with a description and valuation of the property so contributed, shall be inserted in such statement or articles; and any amendment of said statement or articles shall be made only in like manner; which said statement and amendments shall be recorded in the office of the Secretary of State of this State and in the office of clerk of the county in which such association has its principal office, at the expense of the association; and until said statement or articles. are so recorded the same shall not be deemed valid or operative nor authorize the association to commence or conduct business thereunder. The Secretary of State and the county clerk, in whose office such articles of association shall be recorded, shall each certify upon every such article of association recorded by him, the time when it was received with a reference to the book

and page where the same was recorded, and the record or transcript of the record, certified by the Secretary of State, of this State, and under the seal thereof, shall be received in all the courts of this State as prima facie evidence of the due formation, existence and capacity of such association in any suit or proceedings brought by or against the same.

$287. Organizers.

These associations are governed by the general principles of corporation law. Sec. 283, ante. Hence, the "three or more persons who become organizers must be natural persons capable of contracting.-Sec. 44, ante. No residential qualification is required.

$288. Purpose.

"The purpose of conducting any lawful business or occupation" embraces the widest field accorded to any statutory organizations under the laws of this state. There would seem to be no reason why a railway company (without right of eminent domain), a telephone or telephone company (without rights in streets and highways, except as acquired by special grant or purchase) or a trust company (without power to act as executor, administrator or guardian), may not be formed under this law. Such companies have been formed under this act in Michigan.-Sec. 449, 450, 442, post. In general, however, it is obviously best to incorporate under the act specially provided for the proposed purpose.

Sometimes the "limited act" is found useful in the formation of a primary company, pending the accumulation of property, and funds for an ultimate enterprise. Such tentative association holds the invested property and defines the rights of the original adventurers while they are working out the problem incident to the development of their undertaking. It is a "promoters' company." There being no fixed minimum of capital stock required, such organizations may be formed with slight investment.

The act has been found a useful vehicle for the organization of construction companies.-Emery v. Kalamazoo & Hastings Construction Co., Limited, 132 Mich. 560; see Sec. 227, post. It is useful, too, in all instances where other acts are found inadequate or inapplicable to the particular purposes sought to be accomplished. For example, suppose that the projectors of a proposed manufacturing company are promised sufficient capital for their project, provided they will make their offered shares fully participating, ten per cent, cumulative, preferred stock, retirable after three years. If it is deemed desirable to accept the offer upon these terms, the parties in interest will seek means of compliance. At the outset they will discover that the consolidated corporation act, while providing for issuance of cumulative, retireable, preferred stock, limits the preferential dividend to eight per cent, and, as construed (Sec. 274 ante), inhibits participation of preferred shares in dividends beyond that amount. Under such circumstances, the limited act

presents a solution. Preferred stock being a mere matter of contract. it may be created by by-law (Cook's Corp., Sec. 268), provided the by-law is not inconsistent with the charter. While ten per cent and full participation advantages would be inconsistent with the provisions of the consolidated corporation law, and hence could not be provided by either the articles or the by-laws of a company formed under that act, the partnership association, limited, act, presents no such obstacle. The by-laws of limited companies may provide, at the time of organization (or afterwards, by unanimous consent) for preferred stock upon such terms as may be desired. There is no doubt that preferred stock thus created is lawful.-Lockhart v. Van Alstyne, 31 Mich. 76; Cook's Corp., Sec. 268.

While the field of selection accorded to limited companies is broad, the object selected must be single-one business, including its natural and convenient incidents.

The act is applicable to gainful pursuits only. Associations not for profit are now constrained to organize under a different law. See Act 163 Pub. Acts 1905, p. 228.

The word "occupation" adds nothing to the breadth of the act. Any gainful occupation is "business," and no other kind of occupations may be pursued by such associations. The word came to us from Pennsylvania (Sec. 282 ante) and, like the vermiform appendix, is a useless relic of a bygone organism. It is to be remembered that the Pennsylvania statute originated out of slightly modified common law partnerships, and, at the time of its adoption in Michigan, had been undergoing evolution during a period of about forty years. The origin of the act accounts for its peculiarities.

$289. Principal Office.

A partnership association, limited, may carry on business anywhere, but must maintain its principal office within this State. The State alone can take advantage of non-compliance with this requirement.-Staver & Abbott Mfg. Co. v. Blake, 111 Mich. 282-288.

290. Capital Alone Liable for Debts.

This is, of course, one of the vital provisions of the act. The capital stock of such an association is eminently a trust fund for creditors.Rouse, Hazard & Co. v. Circuit Judge, 104 Mich. 234; Wood v. Sloman, 150 Mich. 177. Unpaid subscriptions are assets for the payment of association debts, and may be enforced by execution issued directly against the indebted members at the instance of a judgment creditor-Rouse, Hazard & Co. v. Circuit Judge, ante; or at the instance of a receiver-Rouse, Hazard & Co. v. Cycle Co., 111 Mich. 251-260; or of a trustee in bankruptcy.-Wood v. Sloman, 150 Mich. 177-194.

The constitutional liability of stockholders for labor debts applies tɔ members of these companies.-Mich. Const. 1908, Art. XII, Sec. 2 and 4, and Beecher's Notes. But the "limited" act contains no provision for its enforcement. Labor debts in the hands of an assignee may probably be

enforced against stockholders under the provisions of C. L. 1897, Sec. 8554 et seq., but in the hands of the laborer himself such enforcement could be had only in equity.-Peck v. Miller, 39 Mich. 594-597. Where the labor is performed upon construction or improvements, the mechanics' lien law affords a remedy.-C. L. 1897, Sec. 10710, et seq.

$291. Execution of Articles.

These quasi-corporations, like actual corporations, may gain a de facto existence, and, having gained it, the State alone can object to informalities in their organization.-Staver & Abbott Mfg. Co. v. Blake, 111 Mich. 282. When the articles of association have been duly executed in good faith, de facto existence as a body corporate instantly begins. De jure organization cannot arise until the articles have been duly recorded. Until the articles of association have been acknowledged, the statutory entity cannot be said to have come into existence.-Carmody v. Powers, 60 Mich. 26-30; Doyle v. Mizner, 42 Mich. 332.

In Pennsylvania, as we have seen, de facto organization of these associations is not recognized. Any defect in formation leaves the organizers liable as partners.-Ante Sec. 282, note. In Michigan, this Pennsylvania doctrine is expressly repudiated.-Staver & Abbot Mnfg. Co. v. Blake, 111 Mich. 282-289.

$292. Articles of Association.

Until 1903, the words "articles of association" did not appear in the act, but the "statement in writing" required by the original act was construed to mean such articles.

*

Full Names.-The meaning of the expression "full names" of the organizers has been passed upon by the Supreme Court of Pennsylvania in a case where the "statement in writing" had been signed by the use of initials and surname, without giving the Christian and middle names in full. Upon this point, Justice Mitchell said: "We are to inquire what is meant by the full names of members. * *The object aimed at was the identification of the person, and the requirement of his full name had nothing further in view. A man's name is the designation by which he is distinctively known in the community. * * * The full name, therefore, is no more than the whole of such title, as it is used by himself and his neighbors for such purpose. To construe the statute to require the literal and absolute following of the entire list of names which a person may have had bestowed upon him, would be giving it not only a very narrow and technical construction, which serves no purpose of the act, but even one which might tend to defeat its real intent. A statement signed 'Stephen Grover Cleveland' would not create certainty, but doubt, as to its author."-Laflin & Rand Powder Co. v. Steytler, 146 Pa. 434, 14 L. R. A. 690-695.

§293. Capital Subscribed.

The articles of association, when signed, constitute a subscription contract between their signers and the association.-Ante Sec. 36. The sub