Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/597

 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 5T1 - existing stock, it is the right of each shareholder that it shall be so distributed as not to divest him of his vested proportion- ate right in the corporate property, including the accumulated profits. 1 But this rule is held not to apply to old stock pur- chased by the company, on which the right to vote is merely suspended. Such stock directors in their discretion may re- issue or sell for the benefit of the corporation. 2 A corporation having the power to issue further stock, may issue it in ex- change for an equal amount of its indebtedness ; and no par- ticular form of subscription is necessary. 3 § 570. Conversely, when a national bank under the United States Revised Statutes, 8 5143, reduces the amount _. . . ' ° Rights on a of its capital stock, it must return to the shareholders decrease of pro rata the amount of capital set free, and cannot retain a portion of it for a surplus. 4 When a corporation com- petently reduces the amount of its capital stock, a shareholder cannot restrain the division among the shareholders of the surplus over and above the amount to which the stock is reduced, provided that amount exceeds the liabilities of the company ; even though the statute authorizing the reduction makes no provision for such division. 5 § 571. Whether, when not specially authorized, a corpora- tion on the first issue of its stock may divide the „ ^ Power to same into classes, and issue a portion as preferred issue stock, is not altogether settled by authority. There fhares. seems to be no decision in this country, however, forbidding a corporation to issue preferred shares provided it keep within the limits of the stock which it is authorized to issue, and does not in any way impair the vested rights of any shareholder. 6 And it has been held that where it appears Smith o. North Am. M'g Co., 1 Nev. 423. See § 541. 1 State v. Smith, 48 Vt. 2G6; Gray v. Portland Bank, 3 Mass. 364. 2 State v. Smith, 48 Vt. 266. See State Bank v. Fox, 3 Blatchf. 431; Williams v. Savage M'f'g Co., 3 Md. Ch. 418. 3 Lohman v. New York and Erie R. R. Co., 2 Sandf. (N. Y. ) 39. See cases in last note. 37 4 Seely v. New York Nat. Exch. Bk., 8 Daly, 400; S. C, 4 Abb. N. C. (N. Y.) 61. 5 Strang v. Brooklyn Cross-town R. R. Co., 93 N. Y. 426. As to the division of surplus assets of a mu- tual insurance company, see Carlton v. Southern Mutual Ins. Co., 72 Ga. 371. 6 Hazelhurst v. Savannah, etc., R. R. Co., 43 Ga. 13. See for what was 577