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§ 32-33

32. Incorporators may dissolve corporation.

The incorporators named in any certificate of incorporation, before the payment of any part of the capital, and before beginning the business for which the corporation was created, may surrender all their corporate rights and franchises, by filing in the office of the secretary of state a certificate, verified by oath, that no part of the capital has been paid and such business has not been begun, and surrendering all rights and franchises, and thereupon the said corporation shall be dissolved.

P. L. 1893, p. 444.

III. Elections; Stockholders' Meetings.

33. Stock and transfer books must be kept in registered office; annual list of stockholders.

Every corporation shall keep at its principal and registered office in this state the transfer books in which the transfer of stock shall be registered, and the stock books, which shall contain the name and address of the stockholders, the number of shares held by them respectively, which shall at all times during the usual hours for business be open to the examination of every stockholder; the directors shall cause the secretary, or other officer designated by them having charge of said books, to make, at least ten days before every election, after the first election, a full, true and complete list, in alphabetical order, of all the stockholders entitled to vote at the ensuing election, with the residence of each, and the number of shares held by each, which list shall at all times during the usual hours for business be kept at such principal and registered office, and open to the examination of any stockholder at said office, and if any officer having charge of such books or list shall, upon demand by any stockholder, refuse or neglect to exhibit such books or list, or submit them to examination as aforesaid, he shall for every such offense forfeit the sum of two hundred dollars, one-half thereof to the use of the state of New Jersey, and the other half to him who will sue for the same, to be recovered by action of debt in any court of record, together with costs of suit, and the books aforesaid shall be the only evidence as to who are the stockholders entitled to examine such books or list, and to vote at such election; and the board of directors shall produce at the time and place of such election such books and list, there to remain during the election,

and the neglect or refusal of said directors to produce the same § 34 shall render them ineligible to any office at such election.

(As amended by Chap. 172, § 3, Laws of 1898; P. L. 1898, p. 408.)

P. L. 1825, p. 81; P. L. 1841, p. 117; P. L. 1846, p. 70; R. S. (Ed. of 1846), p. 139, §§ 1, 4; P. L. 1849, p. 306; Act of 1875, §§ 36-41.

The Acts of 1846 and 1875 required the books to be open to the examination of every stockholder for thirty days previous to any election of directors. The present act requires them to be open at all times during business hours.

The Supreme Court in 1851, construing the phrase "books containing the names of the stockholders" in the statute in force at that time (Rev. Stat. 139, Sec. 1), declared that "It includes, therefore, not only the "books of original subscription, but the certificate book, and we incline to "think the stock ledger also." (Downing v. Potts, 23 N. J. Law, 66, 76.)

The amendment of the statute in 1898 rendered it clear what books were to be kept in the New Jersey registered office, and put the duty of complying with the statute upon the directors.

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In the same case it was held that the provision of the statute requiring a full, true and complete list, &c., to be made out ten days before the election, was directory merely, and that a failure to comply with it could not render the election invalid. "The design of the first section was to "afford to every corporator a knowledge of his co-corporators, and an "opportunity of corresponding with them on the affairs of the institution, "of the necessity of expediency of a change in its direction, and thereby "rescuing the election from the immediate control of the board or of "officers whose misconduct or incapacity may have rendered a change 'necessary. (Id., p. 72.) The list of stockholders does not 'operate as a registry of voters. The right of the stockholder to vote "does not depend upon his name being contained in the list; on the con"trary, the statute expressly declares that the books of the corporation "shall be the only evidence who are the stockholders entitled to vote.” (Id., p. 73.) (See also Matter of St. Lawrence Steamboat Co., 44 N. J. Law, 529, 539.) The Court held that the evidence of right to vote under the statute comprised the stock ledger, the certificate book and the transfer book, but that the ledger is evidence only subordinate to and as supported by the other books, and that in case of dispute the transfer book must control the rest. "It is no answer to say that the transfer book had not "been much used or that it did not truly represent the actual condition "of the stock. The fact that the books have been negligently or improp"erly kept cannot work a repeal of the statute or relieve against its "operation." (Downing v. Potts, 23 N. J. Law, p. 77; in re Election of Cape May, &c., Co., 51 N. J. Law, 79, 81.)

34. Directors, election of, &c.

All elections for directors shall be by ballot, unless otherwise expressly provided in the charter or certificate of incorporation;

§ 35-36 the poll at every such election shall be opened between the hours of nine o'clock in the morning and five o'clock in the afternoon, and shall close before nine o'clock in the evening; the same shall remain open at least one hour, unless all of the stockholders are present in person or by proxy and have sooner voted, or unless all the stockholders waive this provision in writing; the persons receiving the greatest number of votes shall be the directors; provided, however, that in all corporations formed under the provisions of this act a majority in interest of all the stockholders shall be present in person or by proxy to constitute a quorum. (As amended by Chap. 120, Laws of 1899; P. L. 1899, p. 262.)

P. L. 1841, p. 116; R. S. (Ed. of 1846), p. 139, § 2; Act of 1875, § 37; P. L. 1898, p. 409.

The 1899 amendment of this section limits the application of the proviso to corporations organized under this act. The statute is different from the New York act, under which it was held in a recent case that the common law rule was in force and that any number of stock holders who attend a regularly called meeting, however small their hold ing, can proceed to hold their election, and that a majority of those who vote can elect the board. (Matter of Rapid Transit Ferry Co., 15 App. Div. 530 N. Y.)

35. No person who is a candidate for the office of director shall act as judge, inspector or clerk of any election for directors; and if any candidate shall so act and be elected, his election shall be void, and the directors shall not appoint such person a director within twelve months next succeeding; this section shall not apply to the first election of directors.

P. L. 1825, p. 82; R. S. (Ed. of 1846), p. 139, § 5; P. L. 1870, p. 27; Act of 1875, § 42.

36. Regulations as to voting.

Unless otherwise provided in the charter, certificate or bylaws of the corporation, at every election each stockholder, whether resident or non-resident, shall be entitled to one vote in person or by proxy for each share of the capital stock held by him, but no proxy shall be voted on after three years from its date; nor shall any share of stock be voted on at any election which has been transferred on the books of the corporation within twenty days next preceding such election.

P. L. 1825, p. 83; P. L. 1841, p. 117; R. S. (Ed. of 1846), p. 139, § 3; Act of 1875, § 38.

At common law, unless the charter otherwise provided, a stockholder was entitled to but one vote, and that vote he was required to cast in person. Proxies were not permitted. (Taylor v. Griswold, 14 N. J. Law, 222.) This decision brought about the statute providing that each stockholder should be entitled to one vote for each share held by him, and authorizing the use of proxies, limiting them, however, to three years. (Cone v. Russell, 48 N. J. Eq., 208, 213.)

Cumulative voting.-There is no provision in the statute permitting cumulative voting. A bill (Senate No. 6) was introduced in 1898 allowing cumulative voting. The Senate Committee, however, reported a substitute bill forbidding cumulative voting (Senate Committee substitute for Senate Bills Nos. 5, 6, 31 and 32), and this bill was defeated.

It would seem that provision therefor may be made in the certificate of incorporation, or by-laws, by virtue of Section 17, which provides that "every corporation may determine by its certificate of incorporation or by"laws ** what number of shares shall entitle the stockholders to "one or more votes," and under Section 8, subdivision VII. (See Loewenthal v. Rubber Reclaiming Co., 52 N. J. Eq., 440.)

Voting pools or trusts. Of late years there have come to the courts several cases involving the legality of voting pools or trusts. (See article in 31 American Law Review, p. 236, “Pooling Contracts and Public "Policy.") Briefly stated, the scheme is for several holders of shares to enter into an agreement to transfer their shares to a trustee, who has power to vote on them and to the extent of the shares so held by him, by the election of directors, dictate the policy and management of the company.

The trustee issues to the shareholders in exchange for their shares trust certificates, which are usually made transferable in the same manner as stock. The duties of the trustee are fixed by the trust agreement.

Two cases involving such agreements have recently come before the Court of Chancery of New Jersey, both of which were decided by ViceChancellor Pitney.

The first case (Cone v. Russell, 48 N. J. Eq., 208) was decided in 1891. There the agreement was held to be void because the objects intended to be derived from the agreement were bad as against public policy and the carrying out of which also involved a breach of trust by one of the parties. It was not held that a voting trust was in itself void as against public policy. The Vice-Chancellor said: "This conclusion [that the "contract was void as against public policy] does not reach so far as to necessarily forbid all pooling or combining of stock, where the "object is to carry out a particular policy with the view to promote the best interests of all the stockholders. The propriety of the objects "validates the means and must affirmatively appear." (Id., p. 215.)

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In the second case (White v. Thomas Inflatable Tire Co., 52 N. J. Eq., 178), decided in 1893, the agreement was declared to be invalid because it did not by its terms extend to certain shares of the company issued directly to persons who were not parties to the agreement.

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§ 37

It was held to be immaterial whether they had or had not notice of the trust agreement.

"As such holders they were entitled to have the other shares of stock "in the company stand upon an equal footing," and they were deprived of all voice in the management of the company. The issuing of the stock was, therefore, held to be "a waiver and abandonment by the directors "who united in issuing it, of their rights under the contract in question." In the latter case, although there is a general dictum to the effect that all such trusts are illegal, yet the Court, in its actual decision, lays stress on the fact that the "contracts in question were not made a part of "the certificate of organization or incorporated into the by-laws."

From these two cases, it would seem that voting trusts, where the object was in itself proper and lawful, provision for which was inserted in the certificate of incorporation, and formed a part of the original scheme of incorporation, on the basis of which the stock was issued, and the certificate of stock contained notice of the trust, might be upheld by the courts, under Section 8, subdivision VII, which states that the certificate of incorporation may contain "any provision creating, defining, limiting "and regulating the powers of the corporation, the directors and the "stockholders, or any class or classes of stockholders; provided, such "provision be not inconsistent with this act "

Qualification of stockholders.-To enable a person to vote as a stockholder, it is not necessary that he have a certificate of stock. The effect of a certificate of stock is considered at p. 37, ante. A subscriber for stock is a stockholder, even though he has paid nothing on his stock, and as such he is entitled to vote. It is necessary, however, that he should be a stockholder of record on the books of the company whether such books be the original books of subscription, if any, or books containing the original entries of such subscription. In cases of dispute the transfer book must control. (Section 40. Downing v. Potts, 23 N. J. Law, 66; Storage Co. v. Assessors, 56 N. J. Law, 389.)

The fact that a stockholder is indebted to the company on his subscription does not impair his right to vote. (Savage v. Ball, 17 N. J. Eq., 142; Downing v. Potts, 23 N. J. Law, 66.)

37. Voting powers of executors and trustees. Hypothecated stock.

Every person holding stock as executor, administrator, guardian or trustee, or in any other representative or fiduciary capacity, may represent the same at all meetings of the corporation, and may vote thereon as a stockholder, and every person who shall pledge his stock as collateral security may, nevertheless, represent the same at all such meetings, and may vote thereon as a stockholder, unless in the transfer to the pledgee on the books of the corporation he shall have expressly empowered the pledgee

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