UNIV. OF CALIFORNIA

SOME DEFINITIONS

A corporation is an artificial entity created by statute law and endowed with many of the legal capacities of individuals, as for example the power to take, hold, and convey property, make contracts, sue, and be sued.

Corporations may be divided into two classes, public and private.

A public corporation is a political entity created for a governmental purpose, as a county, city, and the like.

A private corporation is created for the promotion of some interest in which its members are concerned.

Private corporations may in turn be divided into two main classes-stock corporations, which are for private pecuniary gain, and nonstock or membership corporations which are for a variety of purposes and which comprise clubs, charitable societies, educational institutions, and the like.

Stock corporations, or business corporations as they are called, are formed for the purpose of enabling a number of persons to unite their capital in one enterprise, with two important results: (1) holders of stock are enabled to

transfer their stock to other holders without affecting the business of the corporation; and (2) holders of stock are exempt from any personal liability for the debts, contracts, or torts of the corporation. (Huffcut's Elements of Business Law, p. 248.)

The capital stock of a corporation is the amount fixed by the corporate charter to be subscribed and paid in or secured to be paid in by the shareholders of a corporation, either in money or in property, labor or services, on the organization of the corporation or afterward.

The capital stock is divided into shares which usually have a specified face or par value, although in recent years many corporations have been formed having a capital stock without nominal or par value.

A share of stock is the interest or right which the owner has in the management of a corporation and in its surplus profits and, on a dissolution, in all of its assets remaining after the payment of its debts.

The stock of a corporation may be simply capital stock or it may be divided into classes designated as preferred and common.

Common stock has been defined to be that stock which entitles the owner of it to an equal pro rata division of profits, if there are any, no stockholder or class of stockholder having any preference or advantage in that respect over any other stockholder or class of stockholders.

Preferred stock is stock which gives the

holder a preference over the holders of common stock with respect to the payment of dividends and also in some instances with respect to the distribution of capital. (Fletcher on Private Corporations, pp. 5584-5601.)

A stock certificate is a written acknowledgment by the corporation of the interest of a shareholder in the corporate property and franchises. It expresses the contract between the shareholder and the corporation and his co-shareholders.

The certificate of stock is not the stock itself but merely the evidence of the holder's ownership of the stock and of his rights as a stockholder to the extent specified therein, just as a promissory note is merely the evidence of the debt secured thereby and as title deeds are merely evidence of the ownership of the land. (Cook on Corporations, 7th Ed., p. 64.)

Form of Stock Certificate

Following is a form of stock certificate:

INCORPORATED UNDER THE LAWS OF THE STATE OF NEW

YORK

Shares $........each

Number

Shares $........each
Shares

THE UNION CONTRACTING COMPANY,

Authorized Capital $..

THIS IS TO CERTIFY THAT..

of......

INCORPORATED

..is the owner

.......shares of the Capital Stock of THE UNION CONTRACTING COMPANY, INCORPORATED, transferable only on the books of the Company, by the holder hereof

in person or by duly authorized Attorney, upon surrender of this Certificate, properly endorsed.

CORPORATE
SEAL

WITNESS the Seal of the Company and the signatures of its duly authorized officers this........day of...

19.....

It will be noted that the foregoing certificate

contains the following:

Number of certificate

Number of shares represented

Par value of each share

Name of corporation

State under which incorporated

Authorized capital

Name of stockholder

Signature of corporate officers
Corporate seal

Signature of transfer agent
Signature of registrar

Where the stock has been paid for in full the certificate usually states that it is full paid and non-assessable. Where there are different classes of stock the certificate usually contains an appropriate reference to the charter provisions with respect to the preferences existing in favor of one class against the other.