12 BULLETIN 1106, U. S. DEPARTMENT OF AGRICULTURE. 



corporation suffered a loss by reason of the excess indebtedness, 

 and it brought suit against the manager to recover the amount of 

 the loss which it claimed it had sustained and recovered a judgment 

 for $3,000 against him. 



In probably all of the States there are penal statutes prescribing 

 punishments for various acts by officers and agents of the corpora- 

 tion. Typical among such offenses are securing subscriptions to 

 stock by fictitious persons or deceiving State officials by false en- 

 tries or records as to the assets of the corporation. In some States 

 directors of corporations are personally liable to creditors of the 

 corporation in the event that they create debts beyond the pre- 

 scribed capital stock. 



An officer or director of a corporation at common law may re- 

 sign at will,^^ and a statute providing that directors shall hold 

 office for one year and until their successors have been elected and 

 qualified does not prevent resignation during the year.^^ 



WHO MAY BECOME MEMBERS. 



The question of who may become stockholders or members of a 

 corporation is worthy of consideration. Fundamentally a cor- 

 poration has the right to determine to whom it will sell stock or 

 issue membership certificates. On the other hand, a corporation 

 can not make an individual a member or stockholder of it without 

 his consent. Within constitutional limits a State undoubtedly 

 could, by statute, require corporations incorporated under it to ad- 

 mit to membership all who apply and meet certain conditions, or 

 who belong to a certain class, but as a rule this is not done. 



SUBSCRIBER, STOCK, CAPITAL STOCK. 



"A subscriber is one who has agreed to take stock from the 

 corporation on the original issue of such stock." ^^ The shares of 

 stock into which the capital stock of the corporation is divided may 

 consist of common stock or common and preferred stock. In Cook 

 on Corporations it is said : 



By common stock is meant that stock which entitles the owners of it to 

 an equal pro rata division of profits, if any there be ; one stockholder or class 

 of stockholders having no advantage, priority, or preference over any other 

 shareholder or class of stockholders in the division. By preferred stock is 

 meant stock which entitles its owners to dividends out of the net profits be- 

 fore or in preference to the holders of the common stock. Common stock 

 entitles the owner to pro rata dividends, equally with all other holders of the 



s^Ewald V. Medical Society, 130 N. Y. S. 1024; (reversed on other grounds, 144 App. 

 Dlv. 82). 



s*Briggs V. Spaulding, 141 U. S. 132, 154. 

 ^ Cook on Corporations, vol. 1, p. 43. 



