an offense which in and of itself is not indictable or of an infamous character, but which is against the party's duty to the corporation as a member of it, the corporation is warranted in proceeding in a legal manner to expel the member.

§ 90. Voluntary Withdrawals. In Non-Stock Corporations. In the case of non-stock corporations, the interests of the members in the property of the corporation and their liabilities to corporate creditors, are the principal questions involved. The general rule seems to obtain that by a voluntary withdrawal from a non-stock corporation, the member loses his right to claim any interest in the property of the corporation. He is deemed to have abandoned his property rights. His personal liability of a member in a non-stock corporation for the corporate debts will be considered in a later chapter.

In Stock Corporations. In a stock corporation, upon transfer of ownership and consequent loss of membership, the questions involved are somewhat different. They include the right of the corporation to a lien upon his stock for debts due the corporation, the question of unpaid subscriptions to the capital stock and the right of other shareholders to require him to meet his proportion of the corporate liabilities. These questions will be considered in a subsequent chapter. Upon sale and transfer of the stockholder's interest in the corporation, he is presumed to have received from the purchaser of his interest the equivalent monetary value of that interest in the corporate property.

CHAPTER XI

RIGHTS OF CORPORATE MEMBERS

The powers or rights of corporate members may be somewhat roughly divided into ordinary and extraordinary. Extraordinary rights exercised by members are those which change the original contract of membership and include the power to amend the charter of the corporation; to increase or reduce its capital stock; to sell or lease the entire corporate property, and to consolidate or merge the corporation with others. The courts hold that these powers of the corporation must be exercised, when authorized by law, originally by the stockholders or members of the corporation, and cannot be exercised by the directors without express authority from them.

The ordinary rights or powers appertaining to corporate membership consist of the right to meet and elect directors; to participate in the proceedings at stockholders' meetings; to accept or reject applications for admission, in case of non-stock corporations; to prescribe by-laws; to inspect the corporate books; to participate in the net profits of the corporate business through the payment of dividends; to insist that the corporate property and funds shall not be diverted from their original purpose; to restrain the corporation from doing acts ultra vires; to hold officers accountable for their actions in the management of the corporate business; and, in extreme cases, to defend or bring suits or actions at law for and on behalf of the corporation. These powers were indicated in a decision where the judge said:

"The rights of stockholders are: to meet at stockholders' meetings; to participate in the profits of the business; and to require that the corporate property and funds shall not be diverted from their original purpose. If the com

pany becomes insolvent, it is the right of the stockholders to have the property applied to the payment of its debts. I do not know of any other rights except incidental ones, subsidiary and auxiliary to these. Of course, the stockholder has, ordinarily, the right to a certificate for his stock; to transfer it on the company's books, and to inspect these books. For the invasion of these rights by the officers of the company, he may sue at law or in equity, according to the facts in the case.''1

A textbook writer has divided the rights of members into individual and collective. The former including a right to a certificate of shares; to transfer his shares; to vote at the stockholders' meeting; to inspect the books of the company; to dividends after the same are declared; and the latter including the right to interfere with corporate management. The more important of these membership rights will be briefly considered in the following sections.

§ 91. Right to a Certificate of Stock. In stock corporations the relation of membership is based upon the ownership of one or more of the aliquot parts into which the capital stock of the corporation is divided. To establish this relation, the possession of a so-called certificate of stock is not necessary, but it is customary for the corporation to issue, as prima facie evidence of ownership, a written acknowledgment, under the seal of the corporation and executed by its proper officers, of the ownership of the individual named in the capital stock of the corporation. Every member of a stock corporation is entitled, as a matter of legal right, to this written acknowledgment, and if the corporation refuses to issue it, it has been held that its refusal may be treated as tantamount to a conversion of the shares.

§ 92. Right to Participate in the Management of the Corporation. The right of a member in a stock corporation to share in the general management and conduct of its affairs is limited to participation in stockholders' meetings and to the election of a board of directors or managing

1 Forbes v. Memphis, etc. R. R., 2 Woods C. C. 323.

officers in whom is vested, usually, the entire power of the direct management of the business affairs of the corporation.

§ 93. Rights in Corporate Property. Incidental to the subject of the right to actively participate in the management of the business of the corporation, the legal doctrine might be stated that the shareholder has no legal title to the property or profits in a corporation until a dividend has been declared or a division made. His interest is merely an inchoate, indivisible, and intangible one. The title to all corporate property is vested in the legal person, viz, the corporation. A stockholder, merely because he may own one-half of the capital stock of a corporation, cannot claim or assert any rights of ownership over one-half of the corporate property. His rights only become tangible and fixed in case of the dissolution of the corporation and a division of its property; or when corporate profits have been formally declared in the form of dividends.

§ 94. Right to Inspect Records. The right existed at common law in every member of a corporation to inspect the books and records of a corporation, at a convenient time and place from the viewpoint of the corporation, and for a proper purpose, either in person or by his properly authorized representative. Many States have passed statutes declaring, as a matter of law, this common-law right. The Minnesota provision is illustrative of acts of this class. 2

After provision for the keeping of certain accurate and complete records of corporate proceedings, it declares that "All such books and records shall, at all reasonable times and for all proper purposes, be open to the inspection of every stockholder." In Alabama it is provided that "the stockholders of all private corporations shall have the right of access to or inspection and examination of the books of records and papers of the corporation at reasonable and proper times." The wording of the statute in a particular State will determine the exact right of a corporate member, Rev. Laws of Minnesota, 1905, § 2869.

for, as will be noted in the statement of the common-law rule, this is not an absolute but a limited one.

§ 95. Right to Inspection. The fundamental limitations upon the right of inspection on the part of the stockholder are that it shall be exercised at a convenient time and place and for other proper purposes. Even where, by statute, the absolute right is apparently given, certain inherent limitations necessarily exist. These would include an exercise of the right within business hours and at the office of the corporation. The right, further, cannot be exercised in an unreasonable manner, considered from the standpoint of the corporation in the transaction of its business. The right cannot be exercised by the member in such a manner as to prevent the corporation from transacting its business in the usual manner. A corporation with many thousand stockholders-not an unusual condition at the present time-might be entirely prevented from transacting its business if each one of these insisted upon his right to inspect certain corporate books and records, the daily use and keeping of which is absolutely necessary to the carrying on of its business. In the absence of statutes limiting the purpose for which corporate records may be inspected, it has been held that the right is not to be exercised to gratify curiosity or for speculative purposes, but in good faith and for a specific honest purpose and where there is a particular matter in dispute involving and affecting materially the rights of the stockholder. It cannot be exercised at the caprice of the curious and the suspicious. The courts also have held that the right cannot be exercised on account of a general dissatisfaction on the part of the stockholder with the management of the enterprise based upon a vague belief that it is being dishonestly or inefficiently managed. The stockholder has, in general, however, the right to inform himself of all corporate transactions, the right to be exercised under the essential conditions noted above. On this point a New Jersey cases held as follows:

8

"To say that they have the right, but that it can be

Huylar v. Cragin Cattle Company, 40 N. J. Eq. 392