Hamor v. Taylor-Rice Engineering Co.

Citations

• 84 F. 392
• 1897 U.S. App. LEXIS 2971

Syllabus

<p>1. Corporations — Capital Stock — Trust Fund.</p> <p>The capital stock of a corporation is a trust fund for the payment of the corporate indebtedness, before any distribution among the stockholders.</p> <p>2. Same — Capital Stock Defined.</p> <p>The capital stock of a corporation, in its merely nominal sense, is the sum specified in its charter or certificate of incorporation, and thereby usually divided into aliquot shares; and such sum is intended to represent in amount the corporate fund which is to serve as the basis for the business or enterprise for which the corporation was created.</p> <p>8. Same.</p> <p>In its substantial sense, the capital stock of a corporation is the fund of money or other property, actually or potentially in its possession, directly or indirectly derived or to be derived from the sale by it of shares of its stock or their exchange by it for property other than money. This fund includes not only money or other property received by the corporation for shares of stock but all balances of purchase money, or instalments, due the corporation for shares of stock sold by it, and all unpaid subscriptions for shares.</p> <p>4. Same — Disposition of Capital Stock.</p> <p>In the absence of statutory authority in that behalf a corporation, whether solvent or insolvent, has no legal power to reduce the fund represented by its capital stock by any formal or voluntary act on its part, to the prejudice of its creditors either then or thereafter existing, by distributing any part of it among the stockholders by way of dividend, or by giving any part of it to one or more stockholders, or by disposing of any part of it in any other manner, except by way of changing its form to meet the exigencies of the corporate business.</p> <p>5. Sami? — Purchase of Stock — Ultra Vntics.</p> <p>It is ultra vires of a corporation to dispose of any part of its property other than surplus or net profits for the purchase of shares of its own stock, and a promissory note