available to the corporation they must be reserved or specified in the articles of incorporation. The powers to which reference is here made may be enumerated as follows: To subscribe for, purchase, and hold stock in other corporations; to transact all or any part of its business outside of the State of its origin; to issue preferred stock; the power to insert in the charter provisions for the regulation of the internal affairs of the corporation; power of bondholders to vote at election of directors; power to classify directors; and possibly power to purchase its own capital stock.

§ 18. Power of Corporations to purchase their own Stock. There is considerable conflict of opinion in this country relative to the question whether a corporation may purchase its own stock without express statutory authority so to do. One line of decisions holds to the view that such power exists only when expressly conferred by statute no matter what the purpose may be.1 Other courts of equally high standing take the view and this we believe to be the true one-that every corporation has implied power to purchase its own stock provided it does so in good faith and without prejudice to the rights of creditors. It has been said that, generally speaking, a corporation, when acting within the scope of the purposes of its organization, has the same power to contract with reference to such powers as an individual. We believe the rule to be well settled in the United States by the overwhelming weight of authority and reason that a private corporation may purchase its own stock if the transaction is fair and in good faith; if it is free from fraud, actual or constructive; if the corporation is not insolvent and in process of dissolution, and if the rights of creditors are in no way affected thereby." 3

Where there is no formal corporate action taken, authorizing the purchase of the company's own stock, a purchase made thereof, even though all the stockholders separately consented thereto, would be invalid as against creditors.

1 Crandall v. Lincoln, 52 Conn. 73; Currier v. Company, 56 N. H. 262; Morgan v. Lewis, 46 O. St. 1; 17 N. E. 558.

2 City Bank Columbus v. Bruce, 17 N. Y. 507; N. E. T. Co. v. Abbott, 162 Mass. 148; 38 N. E. 432; Clapp v. Petersen, 104 Ill. 26; Hall & Farley v. Henderson, 126 Ala. 449; Bank v Company, 18

Vt. 131; Chapman v. Company, 62 N. J. 497; 41 Atl. 690; Belknap v. Adams, 49 La. Ann. 1350; 22 Sou. 382; Ins. Co. v. Swigert, 135 Ill. 162; 25 N. E. 382; Porter v. Company (Mont.), 74 Pac. 938.

938.

8 Porter v. Company (Mont.), 74 Pac.

4 De La Vergne Refrigerator Machine

Some of the States expressly authorize corporations to purchase shares of their own capital stock, while others expressly forbid it.1 The rule of course does not apply to those cases where statutes exist expressly authorizing the forfeiture of stock for non-payment of assessments.2 The purchase by a corporation of its own stock does not extinguish it. Many of the States have statutes expressly forbidding corporations to vote their own stock when held or owned by them. Even in the absence of such statute, it is probable that the courts would enjoin corporations from voting their own stock. By statute in a number of States corporations are forbidden to purchase their own stock.5

§ 19. Power to subscribe for, purchase, and hold Stock in other Corporations. The prevailing rule in this country is that unless the power is expressly given by statute or by reservation of such right in the charter, corporations have no implied power to subscribe for, purchase, or hold stock in other corporations. 6

An attempt has been made in some States to establish the rule that where the statute does not expressly prohibit such act, the corporation may purchase stock in other corporations without any express authority so to do, provided the circumstances are such as to render the transaction a necessary and proper means for accomplishing the objects of its creation."

If, however, there is no statutory prohibition in the matter and the State officials permit the insertion in the articles of the power to purchase and hold stock in other corporations, the exercise of such power is unquestionably valid.8 In the same connection it may be observed that a corporation cannot organize subsidiary companies unless such power is given in express terms in the charter or by necessary implication from the powers thereby conferred.9

Co. v. German Savings Institution, 175 40 Ga. 582; First Nat. Bank r. Nat. ExU. S. 38; 44 L. E. 65. change Bank, 92 U. S. 122; Knowles v.

505.

1 Tolman v. Company (Dak.), 22 N. W. Sandercock, 107 Cal. 629; 40 Pac. 1047. 7 Hill v. Nisbet, 100 Ind. 341; Peshtigo

2 Taylor v. Company, 6 Ohio, 83; Co. v. Company, 50 Ill. App. 624; S. P.. State v. Association, 35 O. St. 258. T. Co. v. Company, 50 Minn. 93; 52 N. W. 8 Bank v. Wickersham, 34 Cal. 444; 274; Steamship Co. v. Company, 28 La. Clapp v. Peterson, 104 Ill. 26. An. 173.

See McNeely v. Woodruff, 13 N. J. Law, 352; Brewster v. Hartley, 37 Cal. 15. 5 See Tolman v. Company (Dak.), 22 N. W. 505.

6 Franklin Bank v. Commercial Bank, 36 O. St. 258; Central Ry. Co. v. Collins,

8 N. S. Co. v. Horton (Neb.), 93 N. W. 225; De La Vergne Refrigerating Machine Co. v. German Savings Institution, 175 U. S. 38; 20 S. Ct. 20.

9 Lagrone v. Timraerman, 46 S. C. 372; 24 S. E. 290.

In Alaska, District of Columbia, and Georgia corporations are forbidden by statute to hold stock in other corporations.

§ 20. Power to consolidate with other Corporations. Corporations cannot consolidate as against dissenting stockholders, however desirable or beneficial the consolidation may be, unless legislative authority is granted to that end. In the exercise of the police power of the State it may lawfully prohibit the consolidation of corporations.2

Consolidation of corporations to a greater or less extent is permitted by statute at the present time in the States of Alabama, California, Connecticut, Delaware, ́Illinois, Kentucky, Maine, Montana, Nevada, New Jersey, New York, North Carolina, Virginia, and West Virginia. An attempt has been made to lay down the rule that in order to effect a lawful consolidation as between two corporations, the power to so consolidate must be conferred by each of the States under whose laws they were created. A better rule, however, and the only practicable one seems to be this That either statutory power to dispose of all the assets of the corporation, or in the absence thereof, the consent of all the stockholders inust be obtained to the sale of the assets of one corporation to another. Consolidation in this way then takes the form of a selling out and of accepting money or shares in the new corporation in return for the assets of the old.

§ 21. Power to transact all or any Part of the Corporate Business outside of the State of its Domicile. If there are no statutory restrictions, a corporation has implied power to carry on its business at any place within the State in which its charter is procured.5 The statutory requirement requiring the corporation to fix in the articles its principal place of business does not prohibit under ordinary circumstances the transaction of other business within. the State.6

Long ago in Bank of Augusta v. Earle 7 Chief Justice Taney, 1 Pearce v. Ry. Co., 91 How. 341; Hill Racine, etc. Ry. Co. v. Company, 49 Ill. v. Nisbet, 100 Ind. 341; People v. Com- 331. pany, 121 N. Y. 582; 24 N. E. 834; L. & N. Ry. Co. v. Kentucky, 161 U. S. 677.

677.

5 Ashley Wire Co. v. Company, 60 Ill. App. 179; City Bank v. Beech, 1

2 L. & N. Ry. Co. v. Kentucky, 161 U. S. Blatchford, 425; Stickle v. Company (N.

8 Id.

4 Matter of Prospect Park, etc. Ry. Co., 67 N. Y. 371; Toledo, etc. Ry. Co. v. Company, 95 Fed. 497; 36 C. C. A. 155; Lanman v. Company, 30 Pa. St. 42;

J. Eq.), 32 Atl. 708; Underwood v. Waldron, 12 Mich. 73; Berthin v. Company, 28 La. An. 210; Lane v. Bank, 9 Heisk. (Tenn.) 419.

6 Potter v. Bank, 5 Hill (N. Y.), 490. 7 13 Peters, 519.

commenting upon the right of a corporation to transact business beyond the limits of the domiciliary State, spoke as follows:

"It is very true that a corporation can have no legal existence out of the boundaries of the sovereignty by which it is created. It exists only in contemplation of law, and by force of the law; and where that law ceases to operate, and is no longer obligatory, the corporation can have no existence. It must dwell in the place of its creation and cannot migrate to another sovereignty. But although it must live and have its being in that state only, yet it does not by any means follow that its existence there will not be recognized in other places; and its residence in one state creates no insuperable objection to its power of contracting in another. It is indeed a mere artificial being, invisible and intangible; yet it is a person for certain purposes in contemplation of law. . . . Natural persons through the intervention of agents are continually making contracts in countries in which they do not reside; and where they are not personally present when the contract is made; and nobody has ever doubted the validity of these agreements. And what greater objection can there be to the capacity of an artificial person, by its agents, to make a contract within the scope of its limited powers, in a sovereignty in which it does not reside; provided such contracts are permitted to be made by them by the laws of the place." 1

The strictly legal existence of a corporation is confined to the State which created it, and it can exercise its powers in another State only by permission, express or implied, of the legislative power thereof; but the mere right to purchase and sell property will be recognized and protected in any State subject only to the limitations that the exercise of such right shall not be contrary to the laws or settled policy of the latter State or prejudicial to its interests or those of its citizens. Unless the Constitution or statutes declare a contrary rule, the courts of another State are bound to recognize the right of a foreign corporation to collect debts due to it, by receiving a conveyance of land.2

In order, however, to avoid complications that might possibly arise through hostile action on the part of stockholders or of foreign. States, statutes have been enacted in a number of the Common

1 See Hall v. Company, 91 Ala. 363; 8 So. 348.

2 Thompson v. Waters, 25 Mich. 214.

wealths expressly authorizing the transaction of business in foreign states and jurisdictions.1

Under the progressive incorporation acts in force in many of the States at the present time it is unquestionably permissible to organize corporations in one State for the exclusive purpose of transacting their entire business in other States and Territories.2

$22. Power to perform Constituent Acts outside of the Domiciliary State. By constituent acts is meant such corporate transactions as are separate and apart from its ordinary business dealings with third parties; such, for example, as the organization of the corporation in the first instance, the adoption of by-laws, the issuance of stock certificates, the election of directors and officers, and the holding of stockholders' meetings. As a general rule such constituent acts cannot be performed without the domiciliary State.

The legislature may, of course, authorize the performance of constituent acts beyond the limits of the State. This has been done in a number of the Commonwealths. It is probably safe to say that aside from organization meetings the presence of stockholders of the corporation at a meeting held without the State will estop them from attacking the validity of the proceedings had at such meeting.

§ 23. Power to extend Corporate Existence. In twenty-seven

1 Ashley Wire Co. v. Company, 60 Ill. App. 179; Kennebec Co. ». Company, 72 Mass. 204; Aspinwall v. Company, 20 Ind. 492; Blodgett v. L. Z. Company, 120 Fed.

893.

2 Sec. Nat. Bank v. Hall, 35 O. St. 158; M. L. & S. Co. v. Reinhard, 114 Mo. 218; 21 S. W. 488; O. M. Co. v. Garst, 18 R. I. 484; 28 Atl. 973; People v. Company, 153 Ill. 25; 38 N. E. 752; Tilley v. Coykendall, 172 N. Y. 87; 65 N. E. 574; Minn., etc. Co. v. Denslow, 46 Minn. 171; 48 N. W. 771; Wright v. Lee, 2 S. D. 596; 51 N. W. 706; A., etc. R. R. Co. v. Fletcher, 35 Kan. 236; 10 Pac. 596; North, etc. Stock Co. v. People, 147 Ill. 234; 35 N. E. 608; Canada S. Ry. Co. v. Gebhard, 109 U. S. 527 ; 3 S. Ct. 363; Cowell . Springs Co., 100 U. S. 55; Hastings v. Anacortes, etc. Co., 29 Wash. 224; 69 Pac. 776; Irvine Co. v. Bond, 74 Fed. 849. See McCall v. Company, 6 Conn.

428; Galveston, etc. Ry. Co. v. Cowdrey, 11 Wall. 459; 20 Law. Ed. 199.

4 Commonwealth v. Smith, 45 Pa. St. 59; Smith v. Company, 64 Md. 85; 20 Atl. 1032; Tuckasegee Mining Co. v. Goodhue, 118 N. C. 981; 24 S. E. 797; Camp v. Byrne, 41 Mo. 525; F. T. L. Co. v. Laigle, 59 Tex. 339; Craig Co. v. Smith, 163 Mass. 262; 39 N. E. 1116; Bellows v. Todd, 39 Iowa, 209; Hodgson v. Company, 46 Minn. 454; 49 N. W. 197; Harding v. Com. pany, 182 Ill. 551; 55 N. E. 577; Jones v. Company, 20 Col. 417; 38 Pac. 700; Mack v. Company, 90 Ala. 396; 8 So. 150; Aspinwall v. Company, 20 Ind. 492; Courtright v. Deeds, 37 Iowa, 503.

Handley v. Stutz, 139 U. S. 417; Galveston, etc. Ry. Co. v. Cowdrey, 11 Wall. 459; see also Humphreys v. Mooney, 5 Col. 282.