State laws regarding stock companies differ very largely. Students of this course who desire to know the law in any particular State can easily secure the information by writing to the secretary of that State.
The usual par value of a share of stock is $100. That is, if a company organises with a capital of $200,000, there will be 2000 shares to sell. Each person who buys or subscribes for the stock—that is, who joins the company—receives a certificate of stock. Our illustrations show two examples; one of a national bank, and the other of a manufacturing company. These certificates are transferable at the pleasure of the owners. The transfer is made usually by a form of indorsement on the back of the certificate, but to be legal the transfer must be recorded on the books of the company.
The men subscribing in this way become responsible for the good management of the business and are obliged to act according to the laws of the State in which the company is organised. Usually they are not responsible individually for the liabilities of the concern beyond the amounts of their individual subscriptions.
Every person who subscribes for stock owns a part of the business and is called a shareholder. All the shareholders meet together, and out of their number they choose a certain number of directors. The directors choose a president and other necessary officers, and in a general way direct the policy of the company. As a rule directors have no salaries attached to their positions. General meetings of shareholders are held once a year to elect the directors and to hear the reports of the officers.
The student should be familiar in a general way with the different classes of stock and with the technical terms familiar to stock companies. The more important of these matters are as follows:
Directors. All the shareholders meet together and out of their number choose a certain number of directors. The directors choose a president and other necessary officers and fix the amount of salary which shall be paid such officers for their work.
Capital Stock. This name is given to the gross capital for which the company is organised, without any reference to its value or to whether it has been fully paid in or not. The paid-in capital is the amount received from the stockholders on the shares for which they have subscribed.
Dividends. The directors of the company, after paying the expenses and laying by a certain amount for contingencies, divide the profits among the shareholders. These profits are called dividends, and in successful concerns such dividends as are declared quarterly, semiannually, or annually usually amount to good interest on the shareholders' investments.