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forfeiture, it shall be canceled and deducted from the amount of the capital stock. If by such cancellation, the amount of the capital stock is reduced below the minimum required by law, the capital stock shall be increased to the required amount within three months thereafter or an action may be brought or proceedings instituted to close up the business of the corporation as in the case of an insolvent corporation. If a receiver of the assets of the corporation has been appointed, all unpaid subscriptions to the stock shall be paid at such times and in such installments as the receiver or the court may direct.

Former section 43 amended.

See section 5, chap. 67 of 1811, section 6, chap. 40 of 1848, section 11, chap. 611 of 1875, and section 1, chap. 102 of 1883, now repealed.

The corporation, when formed, may enforce payment of the subscriptions to its capital stock against persons who subscribe its articles of association before the corporate body has a legal existence. Dorris v. French, 4 Hun, 292; Buff., etc., R. R. Co., v. Hatch, 20 N. Y., 161; Burr v. Wilcox, 22 id., 551; Strong v. Wheaton, 38 Barb., 616.

When payment of subscriptions to be made. Williams v. Taylor, 120 N. Y., 244; L. Ó. A. & N. Y. R. R. Co. v. Mason, 16 id., 451; White v. Haight, id., 310; Howland v. Edmonds, 24 id., 307; Tuckerman v. Brown, 33 id., 297. The power of the directors to forfeit the stock in the manner prescribed in this section is clearly given, and is to be exercised at their discretion. Mills v. Stewart, 62 Barb., 444; aff'd 41 N. Y., 384. The only limitation on this power is that it is done in the manner prescribed and in good faith. Id. The right of the creditor to sue a stockholder for the amount of his unpaid stock is not independent of, but subordinate to, the right of the directors to compromise the claim or to forfeit the stock. Id. After such forfeiture in good faith, the holder of unpaid stock ceases to be a stockholder and liable as such to any creditor of the corporation by reason of such unpaid installment on his stock. Id. A fraudulent forfeiture is voil as to creditors, and the stockholder liable notwithstanding. Id.

The right of the company to make a demand for the unpaid balances due upon the stock is limited to stockholders as such. Billings v. Robinson, 28 Hun, 122. Many and onerous obligations are, by the statute, imposed upon stockholders, which are not imposed upon mere subscribers for stock who have not received certificates therefor, ante.

A subscription to the articles of incorporation, with a statement of the number of shares opposite the name, is a sufficient and binding subscription for the stock, and takes effect upon the filing of the certificate. Phoenix W. Co. v. Badger, 67 N. Y., 294; Buffalo, etc., Co. v. Dudley, 14 id., 336; Lake Ontario, etc., R. R. Co. r. Mason, 16 id., 451; Dayton v. Borst, 31 id., 435.

When stock certificates have been delivered to the subscriber for the stock, he becomes a member of the company, entitled to all right and privileges incident to the relation, and the original promise is merged in the new obligation. Billings v. Robinson, ante.

Persons, who sign the articles of association of a manufacturing company, are stockholders. Strong v. Wheaton, 38 Barb., 616. When the holding of stock is once established, it must be presumed to continue until its surrender or assignment is shown. Id.

One, to whom stock has been apportioned in a corporation, is a stockholder, though no certificate has been issued. Burr v. Wilcox, 22 N. Y., 551. This is the case, even though the apportionment was made for him to an agent, who subscribed at his request. Id. The members, as soon as the corporation has any property or valuable franchise, become stockholders in proportion to their respective in terests. Id.

An agreement to take stock in a corporation to be thereafter formed becomes binding on the organization of the corporation and its acceptance of the agreement. Buffalo & J. R. R. Co. v. Clark, 22 Hun, 359; aff'd 87 N. Y., 294; Stanton v. Wilson, 2 Hill, 153; Ref. Bo. D. Ch. v. Brown, 29 Barb., 335; Buffalo & N. Y. C. R. R. Co. v. Dudley, 14 N. Y., 336; Buffalo & P. R. R. Co. v. Hatch, 20 id., 157.

Where a person, after his subscription and after the company is fully organized recognizes the existence of the contract by making payments upon the shares as called for by the company, and receiving a certificate for such shares, a legal liability on his part is created to pay the full amount of his subscription as called for by the company. Billings v. Robinson, ante; Phoenix W. Co. v. Badger, 67 N. Y., 294; Dayton v. Borst, 31 id., 435. This liability continues until the company releases or surrenders up its right of action. Id.

Payment of the calls made upon the capital stock under this section may be enforced by an action upon the undertaking of the stockholder, notwithstanding this section authorizes a forfeiture of the stock in case of non-payment. Troy & 5. R. R. Co. v. Tibbetts, 18 Barb., 297; Ogdensburg, R. & C. R. R. Co. v. Frost, 21 id., 541; Northern R. R. Co. v. Miller, 10 id., 269.

The remedy by forfeiture of stock on non-payment of calls is merely cumulative, and does not deprive the company of its remedy by action on the assumpsit. Buffalo & N. Y. C. R. R. Co. v. Dudley, 14 N. Y., 336; Northern R. R. Co. v. Miller, 10 Barb., 260; Mann v. Currie, 2 Barb., 294.

The right of an incorporated company to enfore a forfeiture of stock, and all previous payments, upon the failure of a stockholder to meet the calls made by the company, will not prevent such company, or the receiver thereof, from collecting the balance due upon any share of its stock. Mann v. Currie, 2 Barb., 294. The rule is the same, whether the stock is held by an original stockholder or by an assignee. Id. The latter, by the transfer, adopts the contract of his assignor with the company, and becomes substituted in his place both as regards his rights and his liabilities. Id.

It was held in Rensselaer, etc., v. Barton, 16 N. Y., 457, that an agreement to take stock imports a promise to pay for it. But in Seymour v. Sturgess, 26 N. Y., 134, the court held that no contract to pay for the stock can be implied from the mere purchase. The effect of the purchase is to acquire a title conditional upon making the remaining payments, but leaves such payments optional with the purchaser. Id. It is only where there is an express agreement to pay that an action will lie by the corporation. Id. But if there is no such agreement, the sole remedy for the corporation is by a sale of the shares of the delinquent members. Id.; Wintringham v. Rosenthal, 25 Hun, 580.

A failure to pay calls when due, not only divests the holder of his title and interest in the shares, but vests his interest in the corporation and remaining stockholders. Weeks v. Silver Islet, etc., Co., 54 Supr., 1. The interests of the latter become enhanced in value by the addition of the shares which the delinquent stockholder has lost. Id. Such right can not be divested upon the delinquent stockholder's willingness to pay the calls after considerable time has been afforded him to do so, and his laches and delay have caused the corporation and non-delinquent stockholders to treat his stock as forfeited. Id.

Such action may be brought upon the original subscription. Phoenix W. Co. v. Badger, 67 N. Y., 294. It is not necessary to aver calls, at least after the lapse of two years from the time of incorporation. Id.; Rensselaer, etc., Co. v. Barton, 16 N. Y., 457 note; Lake Ontario, etc., R. R. Co. v. Mason, id., 451.

The interest acquired, on the incorporation of the company, by a subscriber to its stock is a good consideration to support his implied promise to pay for such stock. Buffalo & N. Y. C. R. R. Co. v. Dudley, 14 Ñ. Y., 336.

A corporation, after it has forfeited the stock of a subscriber for non-payment of an installment due upon his subscription, can not maintain an action to recover any part of such subscription. Small v. Herkimer Mfg. Co., 2 N. Y., 330. The exaction of the forfeiture operates as a rescission or satisfaction of the contract. Id. Nor can the stockholder, in such case, recover any surplus. Id.

For interest of defaulting shareholder, and the rights of the corporation, in the forfeited shares, see Weeks v. Silver Islet C. M. & L. Co., 8 N. Y. St. Rep., 110. Such shares become vested in the other stockholders. Id. They can not be deprived of such interest without their consent or due process of law. Id. When court of equity will not relieve from effect of forfeiture. Id.

The liability of a stockholder of a corporation for the amount unpaid on stock owned by him, can be enforced only by a creditor. Tucker v. Gilman, 45 Hu, 193. It can not be enforced by a receiver. Id.; Farnsworth v. Wood, 91 N. Y., 308; Mann v. Pentz, 3 id., 415.

Where the stock is transferred on the books to a person who appears to be the legal owner, such person is liable, though it is held by him as collateral security for a debt. Rosevelt v. Brown, 11 N. Y., 148; Cutting v. Damerel, 88 N. Y., 410.

Where transfer of stock is made with due observance of the conditions of the sections regulating the mode and manner of transfer, and is entered into in good faith, the liability to pay future calls ceases, and the obligation to pay unpaid balances is shifted from the assignor to the assignee. Billings v. Robinson, ante. Where the assignee of the share of stock is, under the statute, liable for the balance unpaid thereon, and the company has assented to the transfer by entering it upon its books, it has thereby released the assignor from the liability imposed upon him by the original subscription papers, and can not, nor can its receiver, maintain an action to enforce the same against him. Billings v. Robinson, ante. A receiver occupies no other position, and has no better right than the corpora tion. Cutting v. Damerel, 88 N. Y., 410.

A receiver can not maintain an action against one who was formerly a stockholder of the corporation, to collect the amount unpaid upon the shares of stock sold and transferred by him, unless the corporation itself could have maintained such an action, if it had been brought prior to the time when the receiver was appointed. Billings v. Robinson, ante.

An action under this section, may be continued by a receiver, subsequently appointed, in the name of the original party. Phoenix W. Co. v. Badger, 67 N. Y., 294; Rankine v. Elliott, 16 id., 377; Tracy v. First Nat. Bk., 37 id., 523.

An alteration by the legislature of the company's charter, in pursuance of powers reserved, does not discharge a stockholder from liability on his subscription, where it is duly made and without any fraud on the part of the company. Buffalo & N. Y. C. R. R. Co. v. Dudley, 14 N. Y., 336.

A subscriber to the capital stock of a corporation, who has failed to pay for the shares subscribed for, as required by the terms of his subscription, is properly chargeable with interest from the time of the default. Gould v. Town of Oneonta, 71 N. Y., 298. He can not compel the company to issue the stock, until not only the principal, but the interest, is paid. Id.

Subscriptions, based on issue of capital stock at less than par value, are not enforceable. Zel. M. Co. v. Meyer, 28 N. Y. St. Rep., 759.

Subscriber's knowledge does not aid enforcement. Id.

Owners of fully paid up stock are entitle to enjoin corporation from declaring forfeiture of their stock. Moore v. N. J. L. Co., 57 Supr., 1.

A judgment creditor of the corporation will be restrained from prosecuting an action against a stockholder for the amount of his unpaid subscription to its capital, where such action is commenced after the making of an order of sequestration, though before the appointment of the receiver under it is perfected. Rankine v. Elliott, 16 N. Y., 380.

Fraud of corporation will relieve subscriber to stock, on prompt rescission, before any equities intervene. McDermott v. Harrison (Sup. Ct. 1890), 30, 324; 30 N. Y. St. Rep., 324.

When action to recover against stockholder amount unpaid on stock, can not be maintained. Christenson v. Quintard, 29 N. Y. St. Rep., 61.

$44. Increase or reduction of capital stock.-Any domestic corporation may increase or reduce its capital stock in the manner herein provided, but not above the maximum or below the minimum, if any, prescribed by law. If increased, the holders of the additional stock issued shall be subject to the same liabilities with respect thereto as are provided by law in relation to the original capital; if reduced, the amount of its debts and liabilities shall not exceed the amount of its reduced capital, unless an insurance corporation, in which case the amount of its debts and liabilities shall not exceed the amount of its reduced capital and other assets. The owner of any stock shall not be relieved from any liability existing prior to the reduction of the capital stock of any stock corporation. If a banking corporation, whether the capital be increased or reduced, its assets shall at least be equal to its debts and liabilities and the capital stock, as increased or reduced.

Am'd by chap. 346 of 1894. Took effect April 23, 1894.

See section 20, chap. 40 of 1848; section 1, chap. 611 of 1872; section 15, chap.

611 of 1875; section 1, chap. 264 of 1878, and section 2, chap. 397 of 1884, now repealed.

In the absence of evidence to the contrary, a corporation will be presumed to have acted, in increasing its stock, in conformity with its corporate powers and its articles of association. Williams v. W. N. T. Co., 9 Abb. N. C. 437; Chautauqua Co. Bk. v. Riskey, 19 N. Y. 369; De Groff v. Am. L. T. Co., 21 id., 124.

The right to grant or withhold assent to change the relative value of the shares of stock belongs to their owners as individuals, to be enjoyed and exercised by by them in severalty. Campbell v. American Zylonite Co.. 122 N. Y., 454. Fixing the amount of capital stock. Sutherland v. Olcott, 29 Hun, 161.

A corporation has no implied authority to increase or diminish its capital stock. Sutherland v. Olcott, 95 N. Y., 93; Salem M. D. Corp. v. Ropes, 6 Pick., 23. It can do so on when and so authorized by statute. Id.

A corporation can not increase its capital stock at will, in any manner, or to any extent, unless authorized to do so by its charter, and then only in the manner prescribed. Lathrop v. Kneeland, 46 Barb., 432.

This section is intended to apply not only to corporations which have an actual, but also to those which have no market value. People ex rel. Eden M. A. Co. v. Carr, 36 Hun, 488. If the stock is valueless, then clearly its market value is less than par. Id. Where it is a stock which is seldom bought or sold, the comptroller can ascertain to his satisfaction its actual market value sufficiently at least to enable him to guard against the danger at which this provision of the act is aimed. Id.

Corporations are not to be allowed to reduce their capital when their stock is above par in the market. Id.

Action of corporation and registered shareholders in reducing relative value of shares by contract to surrender percentage of stock, is not binding upon assignees having possession of certificate, though holding under unregistered transfers. Campbell v. Am. Z. Co., 122 N. Y., 455; rev'g 23 J. & S., 592.

§ 45. Notice of meeting to increase or reduce capital stock. Every such increase or reduction must be authorized by a vote of the stockholders owning at least a majority of the stock of the corporation, taken at a meeting of the stockholders specially called for that purpose. Notice of the meeting, stating the time, place and object, and the amount of the increase or reduction proposed, signed by a majority of the directors, shall be published once a week, for at least two successive weeks, in a newspaper in the county where its principal business office is located, if any is published therein, and a copy of such notice shall be personally served upon or duly mailed to each stockholder or member at his last known post-office address at least three weeks before the meeting.

Am'd by chap. 700 of 1893.

See section 21, chap. 40 of 1848, section 15, chap. 611 of 1875, and section 2, chap. 264 of 1878, now repealed.

In the absence of evidence that due and sufficient notice of the meeting was not given to the stockholders, the books of minutes of the company and the certificate Showing that more than two-thirds of the stockholders appeared in person or by proxy, and voted for the increase of the stock, establishes, in an action to enforce an assessment upon stock, that the stock was increased at a regularly assembled meeting of the stockholders. Cuykendall v. Douglas, 19 Hun, 577.

§ 46. Conduct of such meeting; certificate of increase or reduction. If, at the time and place specified in the notice, the stockholders shall appear in person or by proxy, in numbers representing at least a majority of all the shares of stock, they shall organize by choosing from their number a chairman and secretary, and take a

vote of those present in person or by proxy, and if a sufficient number of votes shall be given in favor of such increase or reduction, a certificate of the proceedings showing a compliance with the provisions of this chapter, the amount of capital actually paid in, the whole amount of debts and liabilities of the corporation, and the amount of the increased or reduced capital stock, shall be made, signed, verified and acknowledged by the chairman and secretary of the meeting and filed in the office of the clerk of the county where its principal place of business shall be located, and a duplicate thereof in the office of the secretary of state. In case of a reduction of the capital stock except of a railroad corporation, or a monied corporation, such certificate shall have endorsed thereon the approval of the comptroller, to the effect that the reduced capital is sufficient for the proper purposes of the corporation, and is in excess of its debts and liabilities, and in case of the increase, or reduction of the capital stock of a railroad corporation, or a monied corporation, the certificate shall have endorsed thereon the approval of the board of railroad commissioners, if a railroad corporation; of the superintendent of banks, if a corporation formed under or subject to the banking law; and of the superintendent of insurance, if an insurance corporation. When the certificate herein provided for has been filed, the capital stock of such corporation shall be increased or reduced, as the case may be, to the amount specified in such certificate. The proceedings of the meeting at which such increase or reduction is voted, shall be entered upon the minutes of the corporation. If the capital stock is reduced, the amount of capital over and above the amount of the reduced capital shall be returned to the stockholders pro rata at such times and in such manner as the directors shall determine.

Former section 46 amended.

See section 22, chap. 40 of 1848, section 3, chap. 264 of 1878, and section 3, chap. 306 of 1882, now repealed.

A person who was named as one of the trustees in the articles of association and had acted as such at a prior meeting, was held to be qualified to act as chairman at a meeting called under this section. Cuykendall v. Douglas, 19 Hun, 577.

The object of this provision in the statute was to provide a mode of proof of the instrument, to establish its genuine character. Id. Where the signature of the chairman is in the presence of the justice, and the latter has witnessed and certified it, the object of the statute is answerod. Id. A certificate of acknowledgment is only required to be in 'substantial compliance with the statute. Id.; Thurman v. Cameron, 24 Wend., 87; West P. I. Co. v. Reymert, 45 N. Y., 703; Can. Acad. v. McKechnie, 19 Hun, 63.

The amount of the capital may be reduced before it has been actually paid in. Strong v. Brooklyn C.-T. R. R. Čo., 93 N. Y., 426. The reduced amount may still exceed the sum which has been actually paid in, and in that case, the stockholders must pay it in after the reduction. Id. In such case, there can be no surplus for distribution. Id. The reduced amount becomes the amount which the company is bound by law to provide as capital. Id.

To authorize a corporation to avail itself of the provisions of this section, it must obtain the certificate of the Comptroller that the market value of its stock is less than par. Id. The reduction which the act has in view is the reduction of

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