should be understood by anyone forming a corporation which has at all the character of a combination or trust.

Sherman Law. The federal anti-trust law, the Sherman Law, is directed against any combinations or operations in restraint of trade. It affirms the Common Law principle as to restraint of trade, causes it to apply to interstate transactions, thus curing difficulties arising from the inability of a State to exercise sufficient jurisdiction and control of many cases. In addition to defining the offence, the act also imposes a penalty of fine or imprisonment or both. It also provides for an action in Equity to enjoin operations declared illegal by this act. It took some time for the Supreme Court of the United States to determine the true meaning and application to the act, but this was finally accomplished under what has been denominated "the light of reason." The dissolution of the Standard Oil Trust and the Tobacco Trust were accomplished under this act. With the fixing of this meaning and application it is expected that it will be possible to enforce the penalty of imprisonment, which had seemed not to be possible while the meaning remained somewhat vague. The certainty which the law aims to secure is temporarily disturbed with relation to this act by the later legislation known as the Clayton Act and The Federal Trade Commission Law enacted late in 1914; new Statute Law of this sort is likely to bring about new rulings and definitions of the law from the Supreme Court, as the laws overlap.

Clayton Act. The Clayton Act is specifically an anti-trust act. It prohibits discrimination in price between individuals "where the effect of such discrimination may be to substantially lessen competition or tend to create a monopoly." It further prohibits making contracts which specify that the purchaser shall not use or deal in the goods of a competitor if the effect is to lessen competition. The act further provides, in the case of banks and certain other corporations, that any individual shall not hold positions of director or important officer in more than one such corporation, where both corporations are naturally competitors; this is known as the "interlocking directorate" provision.

Federal Trade Commission. The Federal Trade Commission is a body appointed under United States laws to investigate and remedy infractions of the laws as well as any acts suppressing competition. Provision is made so that it may act less formally than a court of law in such investigations.

A careful reading of all these acts and of the decisions rendered will be necessary for a proper understanding of the laws, and there may then remain some uncertainty as to their scope and application until there has been time for Supreme Court decisions to bring about the stability which business needs and which the law seeks to secure.

Another federal law, the Interstate Commerce Act, deals not only with railroad rates but also with safety appliances for railroads, thus giving a new expression of federal powers; the same is true of the federal Workmen's Compensation Act, which however is not confined in its action to corporations, although in practice few personal employers are interested.

Amount of Capital Stock. As to the amount of capital stock, it should be understood that the value of property is mainly determined by its earnings. With corporations having public service qualities, a high rate of dividend return, if the capital stock is small, will tend to cause dissatisfaction on the part of the public, and perhaps bring about adverse legislation; over-capitalization on the other hand results in higher taxes under the laws of many States. It is not altogether uncommon with corporations for preferred stock to be issued to the amount of the physical value of the property, and common stock to capitalize the additional or surplus earnings, representing the value of the franchise or good-will of the company; such stock is sometimes called watered stock.

Capital; Capital Stock; Capitalization. In considering the financial side of the corporation it may be proper to distinguish between: (a) capital, the property value of the corporation, its assets, or the fund with which it does business; (b) capital stock, the amount of stock authorized; (c) capitalization, which includes bonds as well as stock.

Promoters. In the formation of a corporation, an important person sometimes is the "promoter," whose function it is to effect the incorporation and organization of a company; who brings together the persons who become interested in the enterprise; who aids in procuring subscriptions and sets in motion the machinery which leads to the formation of the company itself. His position differs much from that of the subscriber.

While a contract comes into force between subscribers and corporation the moment the charter is secured, on the basis of a continuing offer then accepted, it is held in most States that there is no such contract between a promoter and the corporation. The promoter's services were performed before there was any corporation to make either an express or an implied contract to pay the expenses of promotion.

Payment to Promoters. If the promoter expects payment for his services, he should have a contract with the subscribers or with some individual or individuals, with proper assurance that enough money is available. The agreement should be in writing; for, if the subscriber he dealt with should die, the other subscribers might be inclined to dodge responsibility if opportunity offered. While a promoter has no claim that he can enforce against the corporation, on the other hand there appears to be no legal obstacle to the payment by the corporation, at its pleasure, of expenses connected with organization, and these may properly include

any allowances for promotion. It is not improbable that mining engineers may have the opportunity or find it necessary to act as promoters. If the work of the promoter is properly conducted there is no reason why stigma should attach.

Secret Profits of Promoters. It is held that promoters stand in a fiduciary relation which prevents them from receiving any secret profits. A promoter, therefore, cannot purchase property in the interests of a corporation and sell at an advance, at least unless all others interested are notified and assent; neither can he receive a bonus from the seller of the property. Sometimes, however, the property is his own, and was his own before he undertook the promotion; his position then is not equivocal and he may properly bargain and agree with the corporation for its purchase. It is probable that in many cases of promotion some abuse creeps in. The promoter in any important transactions ought to have the advice of a good lawyer to make sure that his dealings with the subscribers and corporation are clearly legal in form as well as in substance. This is especially important if he desires not only to sell property, but also to retain a large and perhaps controlling interest in the company, as often happens.

Stock in Hands of Trustees. In some cases, an inventor with little funds, or a miner, financially weak, desires to form a company to finance his enterprise, where neither he nor the capitalists interested may be willing that the other party shall exercise a controlling interest. In such case, the parties may agree to place the stock in the hands of trustees in whom both interests have confidence.

Board of Directors. While the stockholders constitute the corporation, most of the powers must be exercised through the board of directors; this may be provided in the by-laws, although in some States it is specified in the statute which constitutes a part of the charter. Sometimes the "president and board of directors" are specified. While the directors have power to incur debts, and thus to issue bonds, in some bylaws it is provided that the issuance of bonds or the sale of real property shall require the vote of the stockholders; in some States the statute requires this. The by-laws may provide for other general officers, and may also specify their duties; unless so specified, it will be implied that they exercise the powers customary to such officers.

Functions of Stockholders. In the absence of any special requirements, the functions of the stockholders may be restricted to the election of a board of directors and the passing of by-laws; ordinarily they are not so closely confined. Unless otherwise provided, the power to increase or decrease capital stock rests with the stockholders rather than with the board of directors, but there must be some statute authorizing such change;

the same is true of any change in the articles of incorporation. Unless the by-laws provide otherwise, the power to amend by-laws also rests with the stockholders. Nor are the rights of a stockholder confined to action in the meetings; he has a right to inspect the books and papers of the corporation either personally or by agent; but it must be for a proper purpose and at a proper time. While a majority vote of the stockholders controls ordinarily, yet a minority may sometimes enjoin or restrain either action by the board of directors or by a majority of stockholders, if such action is prejudicial to corporate interests or the rights of the minority, which a court of Equity tends to protect.

Payment of Dividends. The stockholders have not the right to compel the payment of a dividend. Such payment is in the discretion of the board of directors, and even when earned, need not be made unless the board thinks best. It may not be paid from capital; it must be from net profits or surplus. It may be in money, stock, or other property. Any act or failure to act, as to dividends or otherwise, which indicates bad faith may, however, be reached by a proceeding in Equity.

Stockholders' Meetings. Stockholders' meetings are held annually and at such other times as special meetings are called. The notice or call for the meeting generally specifies the items of business to come before it. At the annual meeting the election of directors occurs, and this is usually followed immediately by a meeting of the board of directors who at once elect a president and such other officers as seem necessary or wise.

At the annual meeting the stockholders also usually ratify the acts of the directors and officers during the year past. Voting on important matters is ordinarily by shares, and a majority of the shares are necessary to constitute a quorum. A majority of votes represented, elect; in some corporations cumulative voting is practiced; this is allowed by the statutes of some States, but is rather unusual. Under this system, a voter may be allowed to cast six ballots for one director rather than cast one ballot for each of six directors, thus enabling a minority to secure some representation in the directorate, if the minority is not too small. As a rule, few stockholders are actually present at a meeting; when absent, a stockholder is often represented by a "proxy," a sort of power of attorney authorizing another to act in his stead. Voting by proxy is not a Common Law right or privilege, but must be authorized by statute or by-law; as a matter of modern practice, however, most of the votes cast at any stockholders' meetings are by "proxy."

Stockholders' Meetings: Where Held. Unless otherwise clearly authorized by statute, stockholders' meetings must be held in the State where the corporation is chartered; this is especially necessary in the case of the "first meeting" where the incorporation is effected. Ordinarily

there is no requirement that meetings of the directors shall be held within this State; but it is considered desirable that the first meeting of the directors should be held within the State, probably because at this meeting the organization of the corporation is perfected.

Business in Hands of Directors and Officers. The business of the corporation, as has been stated, is carried on by the board of directors, or by the president and board of directors, and not directly by the stockholders, although by by-law or statute certain proceedings must have previous authorization from the stockholders, or in some cases ratification by the stockholders at one of their meetings.

Restricted Powers of Corporations; Ultra Vires. In many ways the legal status of the corporation is substantially that of an individual; but while an individual may without restriction do almost any legal act, a corporation is restricted to acts within the scope of the objects or purposes for which it was organized. Other things, although legal in themselves, it may not do, because they are outside the scope of the corporate powers; the expression ultra vires is used to characterize acts outside the scope of corporate powers. An official of one of the railroads terminating in Boston subscribed some years ago to a fund to secure the success of the Peace Jubilee, but at the action of a stockholder, he was restrained from paying the subscription out of the funds of the company. The corporation was organized to carry on a railroad, and running a band concert was ultra vires. No doubt the Peace Jubilee brought profit to the railroad, but so also did almost any commercial business in the city.

Rights Under Ultra Vires Contracts. Not only may a stockholder enjoin a corporation from acting ultra vires, but in the case of certain actions, the State may sometimes even proceed to bring about forfeiture of charter. A contract fully executed, however, will seldom be set aside as ultra vires; the railroad company for instance might have paid the money at the time it was subscribed for the Peace Jubilee. An executory contract ultra vires cannot be enforced by either party, but where something has been done and either party has received benefits, a proceeding in Equity will adjust the matter. Similarly, the law will often protect a person who has honestly performed his part of a contract ultra vires, or one who has entered into a contract not clearly ultra vires without full knowledge of the circumstances. In case of conveyances by or to the corporation ultra vires, authorities differ. It is doubtful if even unanimous action by shareholders will cure an ultra vires act; the control of the corporation is in the State and limited by its charter, a control not to be set aside by any action of the shareholders.

Negotiable Instruments Ultra Vires. A negotiable instrument issued ultra vires in the hand of an innocent party is clearly good under the laws