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It is thought, therefore, that these forms and precedents
may be of use to counsel in the organization of corporations
under the laws of other states, as well as in the formation
and subsequent management of New Jersey companies.
JAMES B. DILL.
27 PINE ST., NEW YORK,
JULY 1, 1901.
Preface to the First
Since 1875 it has been the announced and settled policy of the State of New Jersey to attract incorporated capital to the State, by the enactment of laws first wise and then liberal and by like legislation to protect capital thus invested against attacks from within and from without.
The Legislature, irrespective of party, has never hesitated to pass promptly any law which tended to improve the general scheme of incorporation.
The State has kept pace with modern legislation along these lines, remodeling and amending the corporation acts whenever necessary to meet new demands and fresh emergencies, but always with a view of doing no violence to the established scheme of incorporation, and always preserving vested rights and acquired franchises.
The “Revision of 1896" was intended to meet the modern tendency of business concerns to incorporate. It recognizes the commercial need for a system of organization of private companies, as distinguished from quasi public corporations, whose salient features are simplicity of organization and management, freedom from undue publicity in the private affairs of the company, and facility of dissolution without recourse to judicial proceedings.
The amendments of 1897 were pronounced in their individuality, and made it apparent that the State of New Jersey would by prompt and remedial legislation protect her corporations, stockholders and incorporators from attack, confining, as far as practicable, all questions of construction of New Jersey corporation laws, so far as they affected the officers and incorporators of any company, to the courts of New Jersey.
The Laws of 1898, the Session just passed, follow somewhat along the line of the English “Companies Act, 1862."
The acts of 1898 have three characteristics, each distinct, each important.
The first, restrictive: Intended as a terror to the fraudulent promoter and the tramp corporation, and calculated to deter bubble organizations from claiming the State of New Jersey as their place of residence.
Compelling every corporation from its inception to its dissolution to maintain a registered office in the State of New Jersey with an agent in charge upon whom process may be served and to whom stockholders and creditors may go for information as to the personnel of the company, its assets and property. This registration of the office and the name of the agent is required to be made in every certificate, statement or report filed or published.
The second, protective: Having thus established a registered office within the State of New Jersey, where its officers, stockholders and creditors may go to obtain information which they are entitled to receive, the law closes this information to the tax gatherers of other states, and to outsiders, by making it unnecessary in the public statements made and filed to give any other address of officers and stockholders than this registered office.
Chapter 173 of the Laws of 1898 emphasizes the principal characteristic of the New Jersey act that corporations must be respectable, that the “tramp corporation" is not wanted, and that the bubble organization must seek a place of abode elsewhere than in the State of New Jersey.
The third, remedial: By an act passed the previous year the power was given the State Board of Assessors to modify the taxes of any corporation, and by an act passed this year it was left to the discretion of the Governor and the Attorney-General to remit the taxes of any corporation whose charter had been forfeited by reason of non-payment, and to restore the corporation to its powers and franchises upon payment of such sum as to the Governor and Attorney-General should seem proper, not less, however, than the initial charge for incorporation.
The 1898 amendment of Section 8 of the Revision providing for the contents of the certificate of incorporation must not be passed over without mention. The power given to incorporators in the certificate of incorporation to insert any provision, creating, defining, limiting and regulating the powers of the corporation, directors and stockholders, is important. (See Notes, pp. 8, 21, 22.)
Taken as a whole the scheme of organization as contained in the certificate of incorporation is largely left to the incorpora
Within certain clearly defined limits parties may by their certificate of incorporation obtain what is practically equivalent to a special act of the Legislature. With the choice of powers, objects and purposes invested in the incorporators, the certificate or incorporation is no longer the mere record proof of incorporation, it is the foundation of the corporate structure.
All corporations do not possess equal powers because incorporated under the same act. The extent of their powers and privileges is largely dependent upon the certificate of incorporation.
The by-laws are under the statute a collection of semiprivate rules intended to provide for the conduct of the business of the company according to the general system agreed to by the stockholders, as manifested by the certificate of incorporation.
Stockholders are thus permitted to delegate and determine and qualify the powers of the directors and officers elected to carry on the business of the company.
The liability of officers and directors is clearly defined and can result only from the making of a statement known to them to be false at the time it was made.
The law of the State of New Jersey is singularly free from pitfalls and ambiguities leading to personal liberty of stockholders, officers and directors, and stockholders and officers obtain in the fullest sense limited liability.
With respect to the issuance of stock for property purchased, New Jersey has avoided the danger whlch the laws of many other states have created for holders of such stock. It has eliminated the question of the value of property for which stock is issued, standing by itself, and with the single exception of cases in which there is absolute fraud on the part of the directors there is no liability upon the holders of stock issued for property purchased.
As it is a simple and easy process to incorporate, so, equal facility is given the stockholders to dissolve the corporation without recourse to the cumbersome and expensive process of judicial procedure so common to other states. As a corporation is created by the filing of a voluntary certificate with the Secretary of State, so if may be dissolved by the filing in the Secretary of State's office of a certificate signed by all of the stockholders.
Finally, with regard to the following pages, there has been no attempt to display learning or erudition, but to give in a concise and practical form information as to the organization and subsequent management of private companies under the Laws of New Jersey.
The writer has attempted to answer in a practical way some of the many questions which have come before him during some years of active practice in relation to such companies.
The reported cases affecting private companies have been collated and arranged under appropriate headings.
The derivation of each section of the law is sought to be traced, the purpose being to show the origin and evolution of each section to the end that many matters otherwise in doubt might become clear.
The writer is under many obligations to the Hon. George Wurts, the Secretary of State of New Jersey, to the AssistantSecretary of State of New Jersey, Hon. A. H. Rickey, and as well to the chief Corporation Clerk, John W. Brooke, Esq.
In the analysis and compilation of authorities he has had the assistance of Mr. John S. Parker, of the New York Bar.
Notwithstanding the care bestowed upon the work and the desire to make it acceptable and useful to the profession, it is not assumed that error has always been avoided, or that the work is free from fault.
JAMES B. DILL. May 1, 1898.