§ 35. Power to dispose of Corporate Assets as an Entirety. In ten of the Commonwealths express power is conferred upon corporations to dispose of their entire corporate assets by obtaining the consent of a certain percentage of the stockholders to such disposition. Much controversy has arisen as to whether or not express statutory power is necessary in order to authorize transfer by a corporation of the entire corporate assets. At common law neither the directors nor a majority of the stockholders had power to sell or otherwise transfer all of the property of an acting and prosperous corporation able to achieve the objects of its creation as against the dissent of a single stockholder.1 The view is taken by the New Jersey court in Coler v. Company that the sale of the corporate assets as an entirety is equivalent to a dissolution, and therefore can only be done through the courts under statutory authority. Many courts, however, take the view that it can be done where it is not in fraud of the rights of creditors or in violation of charter or statutory restrictions, and this, too, by a majority of the stockholders against the dissent of a minority where the exigencies of the business seem to require it. Thus, it has been asserted that "it is a well settled rule that a strictly private corporation has the same right to dispose of its property that an individual has, and that when insolvent or in a failing condition it may sell all thereof without the consent of all of the stockholders. It is the general rule, however, that neither the directors nor a majority of the stockholders of a corporation have power at common law to sell or otherwise transfer all its property while the corporation is a going, prosperous concern against the dissent of any shareholder." 5 It may be added in this connection that the right to exist as a v. Murray, 3 N. Y. App. Div. 273; 38 N. Y. Sup. 233; Id. 157 N. Y 717; 53 N. E. 1130; Kimball v. Company, 69 N. H. 485; 45 Atl. 253; Montgomery v. Company, 48 N. Y. App. Div. 12; 62 N. Y. Sup. 606; Id. 168 N. Y. 657; 61 N. E. 1131. 1 Forrester v. Company, 21 Mont. 544; 55 Pac. 229; Idem, 74 Pac. 1088; People v. Ballard, 134 N. Y. 269; 32 N. E. 54; California Bank v. Kennedy, 167 U. S. 362; 42 L. E. 198; B. & M. C. C. & S. M. Co. v. M. O. P. Co., 89 Fed. 529; Metcalf v. A. S. F. Co., 122 Fed. 115; Traer v. Company (Ia.), 99 N. W. 290. 8 64 N. J. Eq. 117; 53 Atl. 680. 4 Treadwell v. Company, 7 Gray(Mass.), 393; Martin ". Zellerbach, 38 Cal. 300; Miners' Ditch Co. v. Zellerbach, 37 Cal. 543; Featherstonhaugh v. Company, L. R. 1 Eq. 318; Bartholomew v. Company, 69 Conn. 521; 38 Atl. 45. 290. 5 Traer v. Company (Ia.), 99 N. W. corporation is not alienable.1 The sale of all the corporate propcrty does not operate to dissolve the corporation.2 § 36. Power to voluntarily dissolve the Corporation without Recourse to the Courts. The dissolution of a corporation is a peculiar function that rests primarily in the legislature, and is conferred upon courts or upon the corporation itself, only by explicit legislative authority. Stockholders, in the absence of statutory provision, cannot extinguish the corporate charter or dissolve the corporation, nor can a court of equity accomplish a similar result at their instance. In all the States some provision is made for dissolution of corporations. For example, in Alabama, Connecticut, New Jersey, North Carolina, Virginia, and West Virginia the incorporators have the right to surrender the charter before organization. In twenty-seven of the Commonwealths corporations may be dissolved under statutory authority without recourse to the courts. The doctrine that dissolution can only be effected by the joint act of the State and corporation is set forth in a Massachusetts case as follows:6 "Charters are in many respects compacts between government and corporators. And as the former cannot deprive the latter of their franchises in violation of the compact, so the latter cannot put an end to the compact without the consent of the former. It is equally obligatory on both parties. The surrender of the charter can only be made by the formal act of the corporation; and will be of no avail until accepted by the government. There must be the same agreement of the parties to dissolve, that there was to form the compact. It is the acceptance which gives efficacy to the surrender. Dissolution of a corporation, it is said, extinguishes all its debts. The power to dissolve itself by its own act would be a dangerous power, and one which cannot be supposed to exist."7 In this connection it may be observed that the stockholders 1 Detroit Citizens' Street Ry. Co. v. Common Council, 125 Mich. 673; 85 N. W. 96; Pearce v. R. R., 21 How. 441; 16 L. E. 184; State v. Company, 40 Kan. 96; 19 Pac. 349. 2 Miners' Ditch Co. v. Zellerbach, 37 Cal. 543; Sullivan v. Company, 39 Cal. 459. 3 Olds v. Company (Mass.), 70 N. E. 1022. 4 Benedict v. Company, 49 N. J. Eq. 235; 23 Atl. 485. 6 Boston Glass Manufactory Co. v. Langdon, 24 Pick. 49. 7 See also Davis v. Company, 87 Ala. 633; 6 Sou. 140. alone have power to surrender the charter.1 It will be remembered, of course, that the expiration of the time limited by the charter as a corporation's term of existence is held in most jurisdictions to result in the dissolution of such a corporation.2 But neither insolvency nor sale of all of the corporate property, nor cessation of business operates to dissolve the corporation.3 But in the absence of any provision in the charter limiting corporate existence, the corporation is entitled to perpetual life. If the articles provide for a longer period of corporate existence than the law allows, the excess is void.5 In many of the States statutes exist providing that the corporation shall continue in existence for periods ranging from three to five years after the expiration of the time limited for its existence for the purpose of winding up its affairs.6 A majority of the States delegate to the courts the power to dissolve the corporation on application of stockholders or creditors. The fact that certain States make the directors trustees for creditors on dissolution does not necessarily take away the jurisdiction of courts of equity to appoint a receiver. Many States have statutes providing that upon the expiration of the time limited by their charter as the duration of their corporate existence, they shall nevertheless be continued for a certain period of time in order to permit of the winding up of the corporate affairs. Without such statutory provisions suits cannot be maintained against the corporation after such period has expired.9 § 37. Power to insert in the Charter Provisions for the Regulation of the Internal Affairs of the Corporation. The incorporation acts of eighteen of the States contain provisions relative to the contents of certificates of incorporation, authorizing the insertion therein of provisions for the regulation of the business of the corporation, or for the purpose of defining or limiting the powers of the corporation, its officers, directors, and stockholders. 1 Jones v. Bank, 10 Col. 464; 17 Pac. 272; Barton v. Association, 114 Ind. 226; 16 N. E. 486. 140. 2 Mason v. Company, 25 Fed. 882. 4 F. L. S. Co. v. Clowes, 3 N. Y. 470. 5 People v. Cheeseman, 7 Col. 376; 3 Pac. 716. Foster v. Bank, 16 Mass. 245; Nashville Bank v. Petway, 3 Hum. (Teun.) 522. 7 See Miner v. Company, 93 Mich. 97; 53 N. W. 218; Wheeler v. Company, 143 Ill. 197; 32 N. E. 420. 8 City Pottery Co. v. Yates, 37 N. J. Eq. 543. 9 Nelson v. Hubbard, 96 Ala. 238; 11 Sou. 428. Unless the law expressly permits the insertion of such provisions in the certificate of incorporation, State officials are justified in refusing to accept and file certificates containing such provisions. This generally on the ground that in the absence of statutory provision so authorizing, they are properly the subject of by-laws and not proper for insertion in the certificate of incorporation.1 Leaving out of consideration the fact of acceptance by State officials, and approval by them of certificates of incorporation containing such provisions as are here referred to, when there is no statute authorizing the same, the following may be said: The general test as to whether provisions not called for by the statutes are valid when inserted in certificates of incorporation must be determined from their character. If they are not powers, but are merely in the nature of by-laws, they are invalid as not being called for by the statute. If they are powers, but not authorized by statute, to permit such insertion in the certificate of incorporation would be equivalent to saying that the legislature had clothed the incorporators with a number of their legislative functions.2 On this general subject the opinion of the Supreme Court of Alabama in a leading case in that State is instructive: "It is apparent," observes the court, "that the creation of corporations under general law rather than by special act was not intended to work any essential change in their nature and character. Whether deriving existence from a special law, or from incorporation under the general law, the corporation is an artificial being of legislative creation, having no other powers or properties than such as the law confers, or which may be incidental to their very existence. The mode of incorporation the statutes have carefully prescribed. The persons proposing to be incorporated must file and cause to be recorded in a designated public office a declaration in writing, stating the name of the corporation, the objects for which it is formed, the amount of the capital stock, the number of shares into which it is divided, the names of the stockholders, and the number of shares each may hold. The office and the effect of the declaration the statutes do not leave in doubt 1 In re Application for charter, 10 Phil. Rep. 130; Van Pelt v. Gardner, 54 Neb. 701; 75 N. W. 874; Bent v. Underdown, 60 N. E. 307; 156 Ind. 516; Heck v. McEwen, 12 Lea, 97; T. A. L. Co. v. Massey, 56 S. W. 35; E. P. R. Co. v. Vaughan, 14 N. Y. 546; G. L. D. Co. v. Perkins (Texas), 26 S. W. 256; Albright v. Association, 102 Pa. St. 411; Shoun v. Armstrong (Tenn.), 59 S. W. 790. 2 People ex rel. v. C. G. T. Co., 130 Ill. 268; 22 N. E. 798. when recorded, the persons signing it and their successors become a body corporate by the name stated therein and with the powers conferred by law. It is an acceptance by the corporation, under the name designated, for the objects expressed, of the corporate powers and capacity the law confers, and a statement of the principal constituents of the corporation, the amount of the capital stock, the names of the stockholders, and the quantity of interest each has in the capital stock. There is no authority of law for introducing more into it, and if more be introduced, it is mere surplusage, not adding to or detracting from the force of the declaration. A controlling purpose, as we suppose, in authorizing or in compelling the creation of corporations under general laws, is to secure uniformity and equality of corporate powers, functions, and privileges; that all corporations of the same class, formed for like purposes, should possess the same capacities and properties, and exercise and enjoy the same franchises and privileges. Unless it was intended to work a radical change in the nature and character of these artificial beings, the mere creatures of the law, and to subvert the whole theory which has prevailed in reference to them, it cannot have been contemplated that they should for themselves create powers and privileges by declaration or reservation, whether the declaration or reservation is expressed in the articles of incorporation or in the by-laws ordered by the corporators for their government. Such declarations or reservations would soon become more liberal and diverse than was the liberality and diversity of the grants of corporate powers by special legislative enactment, the evil it was intended to remove. Of every corporation formed under the general law, the law itself becomes the charter, defines and enumerates the powers which are to be exercised, the nature and extent of corporate franchises and privileges. The declaration of incorporation, the by-laws adopted for corporate government, do not form the charter, or define or enumerate the corporate powers. These are the acts of the corporators. The charter is the grant from the sovereign power of the State, and by that source only can be varied or enlarged." 1 § 38. Power to authorize Directors to adopt By-Laws. In a number of the States statutes exist authorizing the directors to adopt by-laws under certain conditions. The conditions here re1 G. L. & H. Ins. Co. v. Kamper, 73 Ala. 325. |