may have the same name as the corporation to whose franchises it has succeeded.26

§ 4838. Distinguished from mere amendment of charter or extension or revival. An amendment of a charter of a corporation, which has been treated of in a former chapter,27 is in the nature of a reincorporation, although not strictly such, and will not be treated of in this chapter except by way of illustration. The charter of a corporation may be amended, or extended, or even revived after its expiration, without affecting its existence or identity in any way. In such a case, of course, there is, strictly speaking, no succession at all. The corporation, before and after the amendment, extension or revival, is the same body, both in fact and in law. But a change of name, followed by an exchange of stock and the issuance of new stock, although in form an amendment of the charter, has been held to be in effect a reorganization.28 Thus, by amending the corporate articles, changing the corporate name, and making other organic modifications, a corporation may be deemed to have so reorganized as to have become a new corporation for the purpose, at least, of added liability of its members as prescribed by a general statute enacted after the corporation was originally created but before the amendment of the charter. The corporation in such case may be deemed to have abandoned its original existence by the abandonment of its original name.29

An extension of corporate existence is sometimes referred to as a reincorporation or reorganization but it can be so classified only by using such terms in a very broad sense, since no new corporation is created thereby,30 and there is no change in the corporate name, plan, officers, stockholders or organization, but there is only what is in effect an amendment of the charter in one respect only.

§ 4839. Reincorporation as a species of reorganization. The term "reincorporation" does not seem to have been judicially defined but its meaning, at least in a general sense, is apparent. There is a reincorporation where an existing corporation files incorporation papers, pursuant to a statute so authorizing, and takes out a new

26 People v. Payn, 161 N. Y. 229, 55 N. E. 849.

27 Chapter on Amendment and Repeal of Charters, supra.

28 There is no difference in principle," it has been said, "between a reorganization and an amendment [of the charter] which accomplishes the

same purpose. In both a new corporation is created, which is subject to laws in force at the date of its birth." Senn v. Levy, 111 Ky. 318, 325, 63 S. W. 776.

29 Senn v. Levy, 111 Ky. 318, 63 S. W. 776.

30 See § 413, supra.

charter. Strictly speaking, it is nothing more than an amendment of the charter.31 Thus, in New York, a statute provides for the reincorporation of any stock corporations theretofore organized, with certain exceptions, under the provisions of the Business Corporations Law, and fixes the procedure to reincorporate in detail; 32 but the reincorporation provided for therein is nothing more than the adoption and filing of a certificate containing certain facts, so as to make the existing corporation, as stated in the statute "a corporation organized under this chapter [Business Corporations Law]”, instead of a corporation organized under some other statute.

Reincorporation, as the term is generally used and as provided for by statutes in some states, is not the same as what is ordinarily termed reorganization.33 Reorganization, as the term is usually used, means the creation of a new company to take over the assets of another corporation, while reincorporation, as that term is ordinarily used, more closely resembles the amendment of a charter, and is usually resorted to either to correct errors in the original corporation, or to obtain the benefits of a statute enacted after the original incorporation, or to extend the corporate life.34

The statutes often provide for the reincorporation of special companies, such as insurance companies,35 or banks.36

31 In re Consolidated Kansas City Smelting & Refining Co., 13 N. Y. App. Div. 50, 54, 43 N. Y. Supp. 51.

32 See In re Consolidated Kansas City Smelting & Refining Co., 13 N. Y. App. Div. 50, 43 N. Y. Supp. 51, setting out section 4 of the Business Corporations Law.

33 See Erb v. Grimes, 94 Md. 92, 50 Atl. 397.

34 A corporation may reorganize for real or supposed errors in the original corporation. Ladies' Collegiate Institute v. French, 82 Mass. 196.

In Miller v. English, 21 N. J. L. 317, the purpose of the reincorporation was to "perpetuate the old society in the name of the old incorporation, under a mistake that the old certificate of incorporation had been lost."

35 Reincorporation of insurance companies as authorized by New York statutes, see People v. Payn, 161 N. Y. 229, 55 N. E. 849.

Where, at the time of the organization of a corporation, there is a law in force authorizing the change from a mutual to a joint stock company, the corporation may make the change on a vote of the majority of the members and without the consent of all of them, there being no provision in the statute in regard thereto. Schwarzwalder v. Tegen, 58 N. J. Eq. 319, 324, 43 Atl. 587.

Where a mutual insurance company desires to change to a joint stock company, a special notice of the object of the meeting of the policyholders to pass thereon must be given. "It was necessary that notice be given to the policyholders that this change from a mutual to a stock company was proposed." Schwarzwalder v. Tegen, 58 N. J. Eq. 319, 326, 43 Atl. 587.

36 Change of state bank into national bank, see § 4870, infra.

Generally, under the statutes, there is no new corporation but the company is the same as before the reincorporation.37

The authority to reincorporate must be based on a vote of the stockholders or members as distinguished from the directors.38

On reincorporating, the same name for the company need not be used unless the statute so provides.39

The creation of a new corporation merely to increase the stock of the old corporation, where the new company has no assets except the property of the old company, is not only fraudulent and in violation of law, independently of statute, but is also a violation of a constitutional provision forbidding the fictitious increase of stock; but it is otherwise where the stock of the old company was worth twice its par value and the new company merely issued two shares of stock in the new company for one in the old.40

§ 4840. Reorganizations as favored by the courts. Reorganizations, where entered into in good faith, are regarded with favor by the courts, at least in connection with judicial sales.41 But while reorganizations are encouraged by the courts, yet a court of equity will not lend its aid to one that is inequitable or oppressive.42

§ 4841. Power of courts in connection with reorganizations. Reorganizations of corporations are the result of agreement of the

37 See § 4851, infra.

38 Schwarzwalder v. Tegen, 58 N. J. Eq. 319, 43 Atl. 587.

39 Erb v. Grimes, 94 Md. 92, 50 Atl. 397.

40 State v. Citizens' Light & Power Co., 172 Ala. 232, 55 So. 193.

41 Shaw v. Little Rock & Ft. S. Ry. Co., 100 U. S. 605, 25 L. Ed. 757; Cutter v. Iowa Water Co., 128 Fed. 505; Reed v. Schmidt, 115 Ky. 67, 82, 24 Ky. L. Rep. 1889, 61 L. R. A. 270, 72 S. W. 367.

"Such plans of reorganization have met with general approval, because they tend to avoid sacrifice and loss, and are beneficial to the public." Paton v. Northern Pac. R. Co., 85 Fed. 838, 842.

"Without such previous organizations and arrangements, great sacrifice and loss must attend all such sales. They are therefore to be promoted,

rather than discouraged by unneces sary and improper exposure of their membership." Robinson v. Philadelphia & R. R. Co., 28 Fed. 340.

Where a corporate charter possesses all the elements of a contract between the state and the corporation, subject to alteration only by the consent of both parties, it is clearly wise public policy that limit be placed upon corporate existence. But where a state has by constitutional or statutory provision reserved to itself the power to alter or amend corporate charters at will, it is as much a matter of public policy to facilitate the continuance or reorganization of a corporation as to facilitate its original formation. Erb v. Grimes, 94 Md. 92, 105, 50 Atl. 397.

42 Guaranty Trust Co. of New York v. Missouri Pac. Ry. Co., 238 Fed. 812, 815.

bondholders, stockholders or general creditors, either of one, a part, or all. It necessarily follows that reorganization cannot be compelled by a court, nor the terms thereof fixed by it. It cannot determine the propriety of a scheme for reorganization without foreclosure and compel objecting stockholders to comply with it. The courts cannot, at the suit of a complaining stockholder, make a completely new reorganization agreement. The reorganization agreement establishes the rights of the parties, and the courts "cannot read into it any other or additional term, or reform it or bind the committee to something which they did not promise, or impose upon them a liability which they did not assume, or make a new contract for the parties." 46 A bankruptcy court cannot even make an order approving a plan of reorganization of a corporation.47 So a court, having charge of corporate property through receivers, cannot destroy vested contract liens by directing a lease to a single reorganized company with power to issue bonds to improve the property and making the mortgage securing such bonds a first lien, over the objections of prior mortgagees whose liens will be thereby displaced, although it is wise that the bond issue be made and that the railway system be unified and improved.48

43 Wabash, St. L. & P. Ry. Co. v. Central Trust Co. of New York, 22 Fed. 138.

It

"Courts are created for the purpose of enforcing contracts which parties have made, not for the purpose of making contracts for parties. would be more than doubtful, if power was conferred upon a court to make a contract for parties, whether it could make as fair and just and equitable a contract as could the parties themselves."' Paton v. Northern Pac. R. Co., 85 Fed. 838, 843.

"Whether there shall be a new organization formed of stockholders, bondholders, or creditors, with what respective interests, and upon what terms, is one that should be left for the determination of the persons interested, without interference in any way by the court or its officers. The court in these cases is a harbor of refuge, not a repair shop." The court "will not undertake, either itself or by its officer, to reorganize the old

corporation, or to create a new one, or to solicit subscribers to some syndicate of prospective purchasers.'' Chable v. Nicaragua Canal Const. Co., 59 Fed. 846, 848.

But suggestions as to the terms are often made by the courts. See Duncan v. Mobile & O. R. Co., 3 Woods 597, Fed. Cas. No. 4,139.

44 Lake St. El. R. Co. v. Ziegler, 99 Fed. 114, 129, where the court said that a rule to the contrary would be "a startling proposition, suggesting a wide departure from precedent, and great enlargement of equity power."

a

45 Schuler v. Southern Iron & Steel Cơ. (N. J. Ch.), 75 Atl. 552.

46 Glens Falls Paper Mill Co. v. Trask, 29 N. Y. App. Div. 449, 51 N. Y. Supp. 977, aff'd without opinion 164 N. Y. 604, 58 N. E. 1087.

47 In re Northampton Portland Cement Co., 185 Fed. 542. See also In re Witherbee, 202 Fed. 896.

48 It is not for the court to as

A court may, however, take cognizance of a reorganization, or plan to reorganize, in connection with a receivership or the like where corporate property is in the custody of the law; 9 may enforce such agreements in proper cases; 50 and may award damages for the breach of such an agreement.51 So preventative relief may be awarded in sume the power to compel, because it believes that it is wise and good business. Parties have vested rights." Merchants' Loan & Trust Co. v. Chicago Rys. Co., 158 Fed. 923, rev'g 158 Fed. 913.