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"No illegal purpose is manifest upon the face of this agreement, nor has any been alleged in the bill. It appears to be consistent with the purposes for which the company was created, and whose continuance appears to be necessary for the advantage of all who are interested in the development of the property; it is expressly declared to be for the benefit of all who join in it. No stockholder is prevented from joining in this agreement, and no stockholder who has not availed himself of the opportunity to join in it is excluded from the benefit of it; no one appears to have been injured by it. The complainant does not allege in what way he is damaged by its continuance; he with about four hundred out of five hundred stockholders executed it, and he alone of all the stockholders asks to have it revoked. We do not think he should be allowed to revoke it."

Voting 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 page 42, 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 to vote thereon, in which case only the pledgee or his proxy may represent said stock and vote thereon.

P. L. 1846, p. 72; P. L. 1849, p. 308; Act of 1875, §§ 39, 40.

A formal transfer of stock on the books of the company is not necessary to enable an executor, administrator, etc., to vote. The corporation

§ 37

§ 38 books are evidence of the ownership of the stock by the testator or intes

tate, and this section gives to the executor or other representative virtute officii the right to vote thereon in his representative capacity. (In re Election of Cape May, &c., Nav. Co., 51 N. J. Law, 78.)

This right is held to extend to foreign executors. "An executor taking title under a grant of letters of probate at the testator's domicile is the holder of stock belonging to his testator within the meaning of this section, and is entitled to vote thereon as such." The letters testamentary issued by the foreign court were held to be conclusive proof of the executor's title to the stock, and of his right to vote in respect thereof. Election of Cape May, &c., Nav. Co., 51 N. J. Law, 78.)

(In re

One who lends money on the pledge of stock held in trust, will be held to have had notice that the trustee was abusing his trust and applying the money lent to his own purposes, when the certificates of the stock pledged show on their face that the stock pledged is held in trust (though the name of the cestui que trust does not appear), and when the loan was apparently for the private purposes of the borrower, and that fact would have been revealed by inquiry. (Gaston v. American Exc. Natl. Bank, 29 N. J. Eq., 98.)

38. Shares of stock of a corporation belonging to said corporation shall not be voted upon directly or indirectly.

P. L. 1825, p. 82; R. S. (Ed. of 1846), p. 139, §6; Act of 1875, § 43.

A corporation may purchase its own stock.-Shares of stock are personal property (Sec. 20), and every corporation has power to purchase such personal property as the purposes of the corporation require. (Sec. I, IV.) A corporation may own its own shares of stock. (Sec. 29 and 38.) These sections plainly imply a legislative grant of the necessary power to purchase its own stock. (Chapman v. Ironclad Rheostat Co., 62 N. J. Law, 497.) The question is no longer debatable in New Jersey. A company may purchase its own stock, and may even purchase on credit. (Berger v. U. S. Steel Corp., 53 Atl. Rep., 68.) It is proper, and it may be advisable, to make suitable provision in the certificate of incorporation by including among the purposes of the corporation the power to "purchase, hold and reissue shares of its capital stock." (Precedents, Form 4, p. 168. See "Dill on Corporations," Charters, The Carnegie Co., p. 379; U. S. Steel Corp., pp. 384-385.)

The company may not vote upon such shares either directly or indirectly.— (McNeely v. Woodruff, 13 N. J. Law, 352, 360; Matter of St. Lawrence Steamboat Co., 44 N. J. Law, 529, 539; see also Hilles v. Parrish, 14 N. J. Eq., 380.) This includes all stock standing in the name of an officer,

a trustee, or in the name of any person, if the stock is the property of § 39 the company.

A corporation has no lien on its stock held by its debtor. (D., L. & W. R. R. Co. v. Oxford Iron Co., 38 N. J. Eq., 340, and cases cited.) Except, perhaps, where there is a provision in the certificate of incorporation giving the company a lien. (Drexel v. Long Branch Gas Co., 3 N. J. L. J., 250.)

39. Directors shall be stockholders.

No person shall be elected a director of any corporation. issuing stock unless he shall be, at the time of his election, a bona fide holder of some of the stock thereof; and any director ceasing to be a bona fide holder of some of the stock thereof, shall cease to be a director; any corporation may, by its certificate of incorporation or by-laws, determine how many shares a person shall hold to qualify him to be a director.

Act of 1875, §§ 47, 48.

Under a similar provision of the English law, it has been held that the election of a person not already holding stock is invalid, and that the subsequent acquisition of stock does not render his election valid or qualify him to act as a director.

(Barber's Case, 5 Ch. D., 963; Jenner's Case, 7 Ch. D., 132.)

"But with respect to the qualification of a director, the company's books are not conclusive. A person may be qualified to be a director whose vote cannot be received at the election. He may be a bona fide holder of stock at that time, and yet be disqualified from voting on it by reason of the transfer to him not being entered on the books." (Matter of Election of St. Lawrence Steamboat Co., 44 N. J. Law, 529, 540.)

"The question of the competency of a person for the directorship is one exclusively of judicial cognizance over which the inspectors of election have no jurisdiction. * * * A stockholder may have purchased stock with a view of becoming a director, or have obtained it by gift, or he may hold it upon a trust, and be qualified to be a director. If the stock was legally issued, and is not the property of the corporation, and the legal title is in him, he is prima facie capable of being a director, and his right to be a director in virtue of his legal title to such stock can be impeached only by showing that title was put in him colorably with a view to qualify him to be a director for some dishonest purpose, in furtherance of some fraudulent scheme touching the organization or control of the company, or to carry into effect some fraudulent arrangement with the company." (Matter of Election of St. Lawrence Steamboat Co., 44 N. J. Law, 529, 540-1; see also In re Leslie, 58 N. J. Law, 609, 618.)

§ 40

The Supreme Court held that where one is made a director of a corporation solely to make up the number of directors required by law, his right to hold such office cannot be impeached for fraud at the instance of one who was a consenting party to his admission into the company and his election to the office. (In re Leslie, 58 N. J. Law, 609, 618.)

When a director makes an assignment of his estate for the benefit of creditors he ceases to be a director de jure, and the company may declare his office vacant and elect his successor, but as to the third parties dealing in good faith with the company, without notice of any infirmity in the title of the director, he must be regarded as a director de facto. (Kuser v. Wright, 52 N. J. Eq., 825, reversing Wright v. First Natl. Bank, 52 N. J. Eq., 392.)

A person is not a director, though nominated and elected, until he has accepted the office either expressly or impliedly. (Whittaker v. Amwell Natl. Bank, 52 N. J. Eq., 400, 415.)

This section is held not to apply to the first directors of a consolidated Company. (Camden, &c., Co. v. Burlington Carpet Co., 33 Atl. Rep., 954.)

40. Stock books to determine who may vote.

In case the right to vote upon any share of stock shall be questioned, the inspectors of the election shall refer to the stock books of the corporation to ascertain who are the stockholders, and in case of a discrepancy between the books, the transfer book shall control and determine who are entitled to vote.

Inspectors of election. The statute does not in express language require inspectors of election; the election must be by ballot, unless the certificate of incorporation otherwise provides (Sec. 34). It is usual, however, to provide in the by-laws that at all elections of directors, two judges or inspectors shall be appointed by the chairman of the meeting.

They are ordinarily sworn to the faithful performance of their duty, and when the polls are closed they present a written report. Except at the first election, no person who is a candidate for election as director can be an inspector, and if elected his election is void (Sec. 35.) The powers of inspectors are purely ministerial. They must receive the votes, count them and certify to the result.

If the right to vote is challenged they must refer to the books and ascertain whether the person offering the vote is a registered holder of stock. The books of the company are the only evidence they may receive on this question, and where this evidence is conflicting the transfer book controls. If a share has been transferred within twenty days next preceding the election, any vote offered on it must be rejected. (Election of St. Lawrence Steamboat Co., 44 N. J. Law, 529, 539; Downing v. Potts, 23 N. J. Law, 66.)

Representatives, executors, guardians and the like, must be permitted to vote on the shares they represent upon producing satisfactory evidence of their representative capacity. (See Section 37; Election of Cape May, &c., Nav. Co., 51 N. J. Law, 78.)

Inspectors of election cannot reject a vote offered by proxy because the written proxy was not acknowledged or proved. If the proxy is regular in form and apparently the act of the stockholder, and not more than three years old, the inspectors should receive the votes offered under it. (Election of St. Lawrence Steamboat Co., 44 N. J. Law, 529, 539.)

Evidence of power to vote.-Under the statute the books of the corporation constitute the only evidence as to who are the stockholders entitled to vote at an election of directors. (In re Election of Directors of Cedar Grove Cemetery Co., 61 N. J. Law, 422.)

At an election of directors of a corporation, two sets of directors were elected, one by persons shown by the original stock book, ledger and transfer book of the company to be the owners of a majority of the stock, and the other set by persons shown by such books to own only a minority of the stock, but by another stock book, specially prepared for the election, shown to own a majority of the stock. Held, that the directors elected by the persons shown by the original books to own a majority of the stock were the directors, under Corporation Act, Sections 33, 40, providing that the stock books of a corporation, and, in case of a discrepancy between them, the transfer book, shall determine who are stockholders entitled to vote for directors. (In re Election of Directors of Consolidated Telephone & Telegraph Co., 43 Atl. Rep., 433.)

41. If the election for directors of any corporation shall not be held on the day designated by the act or certificate of incorporation or by-laws, the directors shall cause the election to be held as soon thereafter as conveniently may be; no failure to elect directors at the designated time shall work any forfeiture or dissolution of the corporation, but any justice of the supreme court may summarily order an election to be held upon the application of any stockholder, and may punish the directors for contempt of court for failure to obey the order.

R. S. (Ed. of 1846), p. 139, § 9; P. L. 1874, p. 37; Act of 1875, § 46. (Hoboken Building Assoc'n v. Martin, 13 N. J. Eq., 427.)

42. Supreme court may summarily investigate complaints touching elections.

The supreme court, upon application of any person who may be aggrieved by or complain of any election, or any pro

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