98. Consolidation of Corporations. The right to exist as a corporation does not carry with it the right to combine or consolidate with other corporations. Where two or more corporations combine or consolidate, the resulting corporation is distinct from the combining corporations. The right to consolidate, like the right to exist as a corporation, is a special privilege granted by the state. Consent must be obtained from the state before a valid consolidation can be made. Most states provide by statute for the consolidation of certain corporations under certain prescribed conditions. Before a valid consolidation can be effected, the provisions of these statutes must be complied with. Some states require the payment of a consolidation tax. Others require that parallel and competing railroads cannot consolidate.
Unless the charter of the corporation permits of consolidation without the consent of all the shareholders, and unless the shareholders have by valid resolution given the directors the right to consolidate, a consolidation cannot be made over the objection of any shareholder. An attempted consolidation under these circumstances may be enjoined by a dissenting stockholder, or if the consolidation is made over his objection the resulting consolidated company is liable in damages to him.
When a consolidation has been legally made, the consolidated company is liable for the debts, and is entitled to the assets of the component corporations.
99. Meetings and Elections of Corporations. A corporation transacts its business through a board of managers. The shareholders or members of the corporation do not transact the business of the corporation directly, but through the governing board. In case of a corporation having a capital stock, this governing board is called the board of directors. In case the corporation has no capital stock, such as a church or charitable organization, the governing board is called the board of trustees. The charter, or statute under which corporations are formed, usually provides for annual meetings for the election of officers. If the corporation has no fixed place of meeting, notice must be given each stockholder of the place of such meeting. A corporation has no power to hold its meetings outside the state of its organization. It may employ agents to represent the corporation outside the state of its creation, but it should hold its corporate meetings within the state. If the time of holding the election of officers is fixed by statute, or by a regulation or by-laws of the corporation, the meeting should be held at that time. If for any reason a corporate election cannot, or is not held at the time designated, the old directors hold over until the new board is regularly elected.
100. Voting at Corporate Meetings, Quorum and Proxy. Each shareholder or stockholder of a corporation is entitled to vote at the corporate meeting for the election of officers. Usually the vote is by shares. Each shareholder is entitled to one vote for each share he holds. Some states, by statute, limit the right of a single shareholder to a certain number of votes. When this limitation is fixed, it usually limits the shareholders to one vote regardless of the number of shares held. Such a limitation, where found, is for the protection of small shareholders. Corporations keep books in which are kept the names of the shareholders. Only the persons whose names appear upon the corporation's book as shareholders are entitled to vote.
Some states provide by statute for what is known as cumulative voting. Instead of voting the number of shares he owns for each director, by cumulative voting a stockholder is entitled to vote for one director the number of shares he owns, multiplied by the number of directors to be elected. This is sometimes called ticket voting. For example, three directors are to be elected, and a shareholder holds ten shares. He may have ten votes for each director, or thirty votes for one director. This is for the protection of the small shareholder.
By quorum is meant the number of votes required to constitute an election. Sometimes a quorum is based upon a majority of the number of shareholders present. In the absence of statute or corporate regulations to the contrary, this rule applies. Statutes of some states provide that a two thirds majority of the shares of the corporation shall constitute a quorum.
Most states provide by statute for voting by proxy. This entitles one shareholder to give another written authority to vote his shares at a corporate meeting. This right does not exist in the absence of statute. A proxy may be revoked at the will of the shareholder giving it.
101. Stockholders of a Corporation. The membership of a corporation is made up of the stockholders or shareholders. A corporation for profit is authorized by its charter to have a certain capitalization, or the capitalization is the total amount of the shares authorized to be issued. The charter usually requires that a certain percentage of shares subscribed be paid in before the corporation is authorized to elect directors. The charter usually provides that at least ten per cent of the capitalization be subscribed, and at least ten per cent of the amount subscribed be paid in, before directors can be elected. A stockholder is liable to the corporation on his subscription and, in the absence of any additional liability fixed by the charter, is not liable for the debts of the corporation for any amount in addition. Formerly some of the states provided by statute for double liability of stockholders. In case of insolvency of the corporation, stockholders could be required to contribute an amount equal to their subscription in addition to paying their subscription in full. Stockholders' double liability has been abolished by most states. At present a stockholder can be compelled to pay the full amount of his stock subscription, and no more.
Stockholders of national banks, corporations organized under United States laws, are liable for double the amount of their stock. Those persons are regarded as stockholders who appear as such on the books of the company. A person may become a stockholder by purchasing stock from the corporation, or by purchasing it from another stockholder. Any person legally competent to contract may become a stockholder.