General Corporation Law (L. 1890, ch. 563), §§ 19, 21.

without securing a certificate of authority, it may bring an action in the courts of this state if at the time the suit is commenced such certificate of authority to transact business in the state has been issued. Dunbarton Flax Spinning Co. v. Greenwich and Johnsonville Ry. Co., 87 App. Div. 21, 83 N. Y. Supp. 1054.

Failure to obtain certificate of authority as a defense. The defendant in an action brought by a foreign corporation cannot raise the objection that the plaintiff has failed to obtain a certificate of authority as required in the above section unless the defense is affirmatively set forth in the answer. An averment that the defendant has no knowledge or information sufficient to form a belief as to whether or not the plaintiff is a foreign corporation is not sufficient to permit of proof as to the failure to obtain such certificate. International Bank v. Dennis, 76 App. Div. 327, 78 N. Y. Supp. 497. Recovery on counterclaim.

The provisions of this section prohibiting a foreign corporation maintaining an action in this state upon any contract made by it in this state until it shall have procured a certificate of authority, does not prevent a foreign corporation, doing business in the state of New York without having procured such certificate, from recovering in a suit brought against it in this state upon a counterclaim growing out of the transaction upon which the plaintiff sues. Alsing v. New England Quartz Co., 66 App. Div. 473, 73 N. Y. Supp. 347. Effect of amendment of 1901.— Under this section as it existed prior to the amendment made by chapter 538 of the Laws of 1901, a foreign stock corporation could, upon obtaining the necessary certificate, enforce a contract made in the course of business transacted by it before procuring such certificate. The amendment of 1901 modified the law so that no such foreign corporation could maintain an action in this state upon a contract unless "prior to the making of such contract it shall have procured such certificate." It was held that if this amendment was intended to affect the right of action upon a contract made prior to the taking effect of such act, it was to that extent unconstitutional as impairing the obligation of a contract. Lewis Publishing Co. v. Lenz, 86 App. Div. 451, 83 N. Y. Supp. 841.

§ 19. Prohibition of banking powers.- No corporation except a corporation formed under or subject to the banking laws, shall by any implication of construction be deemed to possess the power of carrying on the business of discounting bills, notes or other evidence of debt, of receiving deposits, or buying and selling bills of exchange, or shall issue bills, notes or other evidences of debt for circulation as money. (Amended by L. 1904, ch. 236, in effect April 5, 1904.)

§ 21. Proxies. (C. & G. Gen. Laws, p. 827.)

Agreement as to proxies of foreign corporation. The state having declared in this section its general policy as to proxies in relation to

General Corporation Law (L. 1890, eh. 563), § 27, 29, 30.

domestic corporations, it would seem that the courts of this state would not enforce an agreement relating to a proxy of a foreign corporation to be voted on in this state, which is in violation of the general policy thus declared. Sullivan v. Parkes, 69 App. Div. 221, 230, 74 N. Y. Supp. 787.

§ 27. Powers of supreme court respecting elections. (C. & G. Gen. Laws, p. 829.)

Effect of determination.— An order made upon notice to the borrower in a proceeding instituted by the lender under the above section, adjudging that the lender, having the legal title to the stock, might lawfully be elected as a director, is not res adjudicata upon the question of the ownership of the stock. Farmer v. Farmer & Son Type Founding Co., 83 App. Div. 218, 82 N. Y. Supp. 228.

§ 29. Quorum of directors and powers of majority. The affairs of every corporation shall be managed by its board of directors, at least one of whom shall be a resident of this state. Unless otherwise provided (by law) a majority of the board of directors of a corporation at a meeting duly assembled shall be necessary to constitute a quorum for the transaction of business and the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. The members of a corporation may in by-laws fix the number of directors necessary to constitute a quorum at a number less than a majority of the board, but at least equal to one-third of its number. Subject to the by-laws, if any adopted by members of a corporation, the directors may make necessary by-laws of the corporation. (Amended by L. 1901, ch. 214, and L. 1904, ch. 737, in effect May 14, 1904.)

§ 30. Directors as trustees in case of dissolution. (C. & G. Gen. Laws, p. 832.)

Action for libel against directors of dissolved corporation.- An action for libel, which has abated because of the dissolution of the corporation committing it, may be continued and survived against the former directors of the defunct corporation, in order to reach the assets of that corporation in their hands as the trustees created by this section for the benefit of stockholders. Shayne v. Eve. Post Pub. Co., 168 N. Y. 70.

Application of section.-- Upon the voluntary dissolution of a corporation under section 57 of the Stock Corporation Law the directors become trustees of the creditors and stockholders with full power to settle the affairs of the corporation and collect and pay its outstanding debts, and as such trustees they may recover dividends declared in favor of debenture stockholders from the assets of the corporation. Janeway v. Burn, 91 App. Div. 185, 86 N. Y. Supp. 628.

Stock Corporation Law (L. 1890, ch. 564), § 3.

(2) The Stock Corporation Law. (L. 1890, ch. 564.)

§ 3. Reorganization upon sale of corporate property and franchises. When the property and franchises of any domestic stock corporation shall be sold by virtue of a mortgage or deed of trust, duly executed by it, or pursuant to the judgment or decree of a court of competent jurisdiction, or by virtue of any execution issued thereon, and the purchaser, his assignee or grantee shall have acquired title to the same in the manner prescribed by law, he may associate with him any number of persons, not less than the number required by law for an incorporation for similar purposes at least two-thirds of whom shall be citizens of the United States and one shall be a resident of this state, and they may become a corporation and take and possess the property and franchises thus sold, and which were at the time of the sale possessed by the corporation whose property shall have been so sold, upon making and acknowledging and filing in the offices where certificates of incorporation are required by law to be filed, a certificate in which they shall describe by name and reference to the law under which it was organized, the corporation whose property and franchises they have acquired and the court. by whose authority the sale had been made, with the date of the judgment or decree authorizing or directing the same, and a brief description of the property sold, and also the following particulars:

1. The name of the new corporation intended to be formed by the filing of such certificate; and the place where its principal office is to be located.

2. The maximum amount of its capital stock and the number of shares into which it is to be divided, specifying the classes thereof, whether common or preferred, and the amount of, and rights pertaining to, each class.

3. The number of directors, not less nor more than the number required by law for the old corporation, who shall manage the affairs of the new corporation, and the names and post-office address of the directors for the first year.

They may insert in such certificate any provisions relating to the new corporation, or its management, contained in any plan or agreement which may have been entered into as provided in section four of this chapter. Such corporation shall be vested with, and be entitled to exercise and enjoy, all the rights, privileges and

Stock Corporation Law (L. 1890, ch. 564), §§ 4, 21.

franchises, which at the time of such sale belonged to, or were vested in the corporation, last owning the property sold, or its receiver, and shall be subject to all the provisions, duties and liabilities imposed by law on that corporation. Any proceedings heretofore taken in substantial compliance with this section as hereby amended, and any and all incorporations based thereon are hereby ratified and confirmed. (Amended by L. 1901, ch. 354, and L. 1902, ch. 80, in effect March 5, 1902, and subdivision 3, amended by L. 1904, ch. 706, in effect May 12, 1904.)

§ 4. Contents of plan or agreement. (C. & G. Gen. Laws, p. 852.)

Plan of reorganization.- The plan of reorganization of corporations under this section may provide for the assumption of the indebtedness of the old company by the new. Where the articles of incorporation of a company show that it was planned pursuant to a previous agreement or plan to reorganize and purchase assets sold under foreclosure of another company, and issue stock for various purposes, among which the assumption of the debts or obligations of the former company was not included, is not conclusive as to the terms of such agreement and does not control the determination of the question as to whether the corporation assumed certain obligations of the former company. Klein v. East River Electric Light Co., 90 App. Div. 92, 86 N. Y. Supp. 164.

The number of direct

§ 21. Change of number of directors. ors of any stock corporation may be increased or reduced, but not below the minimum number prescribed by law, when the stockholders owning a majority of the stock of the corporation shall so determine, at a meeting to be held at the usual place of meeting of the directors, on two weeks' notice in writing to each stockholder of record. Such notice shall be served personally or by mail, directed to each stockholder at his last known post-office address. Proof of the service of such notice shall be filed in the office of the corporation at or before the time of such meeting. The proceedings of such meeting shall be entered in the minutes of the corporation and a transcript thereof, verified by the president and secretary of the meeting shall be filed in the offices where the original certificates of incorporation were filed. Such increase or reduction may also be effected by unanimous consent without a meeting, in which case there shall be filed in the offices herein specified the unanimous consent of the stockholders in writing, signed by them, or their duly authorized proxies, but no such

Stock Corporation Law (L. 1890, ch. 564), §§ 24, 29, 30.

consent shall be valid unless there is annexed thereto an affidavit of the custodian of the stock book of such corporation stating that the persons who have signed such consent, either in person or by proxy, are the holders of record of the entire capital stock of said corporation issued and outstanding. If a corporation formed under or subject to the banking law, the consent of the superintendent of banks, and if an insurance corporation, the consent of the superintendent of insurance, shall be first obtained to such increase or reduction of the number of directors. This section. shall apply to any stock corporation whether organized under a general or special law, and the number of directors may be increased as hereby provided notwithstanding the maximum number of directors now prescribed by law. (Amended by L. 1903, ch. 320, and L. 1904, ch. 307, in effect April 13, 1904.)

§ 24. Liability of directors. (C. & G. Gen. Laws, p. 860.) Liability of directors for excessive indebtedness. The plaintiff in an action against directors under the above section must not only show the existence of an indebtedness in excess of the paid-up capital stock, but he must also show that such indebtedness is not secured by mortgage. Irving National Bank v. Moynihan, 84 App. Div. 301, 82 N. Y. Supp. 705.

$29. Books to be kept.

(C. & G. Gen. Laws, p. 863.)

Refusal to exhibit books. A statement made by an employe of a corporation in charge of its office to the agent of a stockholder who applies for the examination of the stock book of the corporation, that the book was not at that office, but that he was at liberty to examine the same at the office of the president of the corporation only a short distance from the main office of the corporation, constitutes neither a refusal nor a neglect to exhibit the book within the meaning of the statute subjecting the defendants to a penalty. Lozier v. Saratoga Gas Co., 59 App. Div. 390; 69 N. Y. Supp. 247.

§ 30. Annual report. (C. & G. Gen. Laws, p. 865.)

Statement of assets. A statement in an annual report of a corporation that the assets thereof "at least did not exceed the sum of $1,400,000" is not a compliance with the requirements of the statute. The rule deduced from all the cases is that the statute is to be construed strictly, and the report filed in attempted compliance with it must be construed liberally. Lilienthal v. Betz, 61 App. Div. 601, 70 N. Y. Supp. 920.

Liability of directors for failure to file annual report; abandonment of business.

The mere fact that a stock corporation ceases doing busi