poration, whose act of subscription may be held out as an inducement to others to subscribe, from making a contract for future sale, with a view to secure his investment; and, that such a contract is void, because many co-stockholders may have been chiefly induced to subscribe by a knowledge that so prominent and successful an operator was willing to risk his money in such an adventure," "who, had they been told that he had exacted a private security or guaranty, which availed to give him the benefit of both the experiment in business, and of getting back his money with interest, if it did not succeed, would assuredly either have refused to subscribe, or have demanded a similar guar anty," and who also had a right to suppose that the new company would have the subscriber's countenance and assistance in the future. The court held that such a view was a palpable misconception of the nature of the transaction; that it is just in this respect, especially, that an incorporated joint-stock company differs from an ordinary co-partnership; for in the latter, the individual members of the firm are presumed to, and in general, actually do contribute, to the common enterprise, not only their several shares of partnership capital, but also their individual skill, experience or credit, no member having the right to sell out his interest, or retire from the firm, without the consent of the co-partners, and that if he does either, the act amounts to a dissolution of the partnership; that the very reverse is the case of a joint-stock corporation, in which each stockholder, whether by purchase or original subscription, has the right, unless restrained by the charter or articles of association, to sell and transfer his shares, and, by transferring them, introduce others in his stead.1

§ 2307. Transfer by Minor. Like other contracts of a minor, a transfer of shares of stock is voidable, not void. It is one of those acts which may or may not be for the interest of the minor. The sale being voidable only, the company must register the transfer, if it has not been avoided at the date of the application for registration.2

2 Smith v. Nashville &c. R. Co., 91 Tenn. 221; s. c. 18 S. W. Rep. 546; post, § 2533.

2 Smith v. Nashville &c. R. Co. 91 Tenn. 221; s. c. 18 S. W. Rep. 546; post, § 2533.

§ 2308. Transfer after Dissolution.

By the dissolution of

a banking corporation the transferable nature of the stock is destroyed, and a subsequent sale, by a holder of stock at the time of the dissolution, transfers only his right to the balance which may be found due him after paying all his debts due the bank.1 And so, in the case of a sale and transfer of shares after a compulsory winding-up order under the English Companies Act,' the transferee is not entitled to be registered as the owner without the sanction of the court; and it has been held that the court's power to order the insertion of such transferee's name in the register of members is discretionary and will not be exercised in favor of transferees, who hold only as representing a company engaged in speculating in such shares, and which purchased them at a discount.8

§ 2309. Transferability of Shares in an Unincorporated Joint Stock Company. Shares in an unincorporated joint-stock company, whose property is held in the name of a trustee, are equitable interests, which can be sold, pledged or mortgaged in like manner as shares in a corporation, so that the transferee will acquire such an interest as a court of equity will protect.1

§ 2310. General Rule that a Corporation has no Power to Restrain Transfers of its Shares. It may be stated as a general principle, that unless the charter, or the original compact among the corporators, gives to the corporation the power to restrain the alienation of the shares of its members, it cannot,

James v. Woodruff, 10 Paige (N. Y.), 541.

225 & 26 Vict., c. 89, §§ 35, 87, 98 and 153.

3 Re Onward Building Soc. (1891), 2 Q. B. 463.

4 Several persons associated themselves together, intending to buy land, build mills and commence a city, the property to be holden by a trustee. The nominal capital was divided into shares, and transferable certificates therefor were issued to the parties in interest, and were expressed to

be subject to all the provisions, etc., of
the articles of association.
It was
held that these certificates represented
an equitable interest in the whole
property, real and personal, which a
court of equity would protect, and
which could be sold, pledged or mort-
gaged by the owner of the certificate,
like any other species of property, and
that thereupon the transferee would
take such an interest in the company's
property as equity would recognize
and protect. Durkee v. Stringham, 8
Wis. 1.

by the mere passing of a by-law, impose such a restraint upon any dissenting shareholder. As against him such a restraint, not being warranted by the governing statute or by the terms of the original compact, would be void as in restraint of trade.1 One court has gone even further, and held that a by-law which requires the consent of all the stockholders to a transfer of the stock of one of them is void as against public policy; and that it does not matter that the stockholder who objects to the enforcement of the by-law originally voted for it. From this the conclusion easily follows that a charter power to "regulate" the transfer of shares does not include the power to prevent such transfers, nor to prescribe to whom the owner may sell and to whom not, or on what terms.3

§ 2311. Except in Case of Unanimous Agreement, Saving Rights of Third Persons. Referring to this decision, the writer suggests that there is no principle of public policy which is in any way concerned in prohibiting the shareholders of a corporation from agreeing not to transfer their shares without unanimous consent, any more than there would be in prohibiting such an agreement among the members of an unincorporated jointstock company. Such an agreement is made in the case of nearly every partnership, and the inability of one partner to sell his interest to another and to introduce that other in his stead without the consent of his copartners is, as we have seen, one of the chief points of distinction between a partnership and a corporation. The question of the effect of such an agreement upon the rights of third persons purchasing shares in a company without notice of it, would of course be a different question."

1 Moore v. Bank of Commerce, 52 Mo. 377; ante, § 1031.

2 Re Klaus, 67 Wis. 401; s. c. 29 N. W. Rep. 582.

3 Chouteau Spring Co. v. Harris, 20 Mo. 382.

4 Ante, § 13.

5 It has been held that a by-law of a corporation which provides that transfers of stock shall not be valid unless approved by the board of

directors cannot be made available to defeat the rights of third persons. Farmers' &c. Bank v. Wasson, 48 Iowa, 336; s. c. 30 Am. Rep. 398. The subject of stock as personal property, with special reference to prohibitions concerning its transfer, has been discussed and English and American decisions collected by Adelbert Hamilton, Esq., in 26 Am. L. Reg. (N. s.) 104 n.

Constitu

§ 2312. Transfer Offices Required to be Kept. tional provisions and statutes exist in many of the States requiring corporations to keep offices for the register and transfer of their stock and other data. Of these the following are given as examples: "Every corporation, other than religious, educational or benevolent, organized or doing business in this State, shall have and maintain an office or place in this State for the transaction of its business, where transfers of stock shall be made, and in which shall be kept for inspection by every person having an interest therein, and legislative committees, books in which shall be recorded the amount of capital stock subscribed, and by whom; the names of the owners of its stock, and the amounts owned by them respectively; the amount of stock paid in, and by whom; the transfers of stock; the amount of its assets and liabilities, and the names and place of residence of its officers." 1 "Every railroad or other corporation, organized or doing business in this State under the laws or authority thereof, shall have and maintain a public office or place in this State for the transaction of its business, where transfers of stock shall be made, and where shall be kept for inspection by the stockholders of such corporations, books, in which shall be recorded the amount of capital stock subscribed, the names of the owners of the stock, the amount owned by them respectively, the amount of stock paid, and by whom, the transfer of stock with the date of the transfer, the amount of its assets and liabilities, and the names and places of residence of its officers. The directors of every railroad company shall hold one meeting annually in this State, public notice of which shall be given thirty days previously, and the president or superintendent shall report annually, under oath, to the comptroller or governor, their acts and doings, which report shall include such matters relating to railroads as may be prescribed by law. The legislature shall pass laws enforcing by suitable penalties the provisions of this section." 2

§ 2313. Incidental Rights not Following Transfers. It has been held that the purchaser of bank stock subsequent to a dissolution of the corporation, is not entitled to the benefit of securities for the payment of the stock notes, given by a mere surety of the vendor.3 A vote by the proprietors of a bridge that "all the present proprietors of stock therein shall have the right to pass, free of toll, with their horses and carriages," is confined to persons who are then

1 Cal. Const. 1879, art. 12, § 14.

3 James v. Woodruff, 10 Paige (N.

2 Tex. Const. of 1876, art. 10, § 3. Y.), 541.

proprietors of the bridge, and does not extend to those who subsequently become the purchasers of stock then existing.1

ARTICLE II. LIEN OF CORPORATION ON ITS SHARES.

§ 2317. Corporation has no Implied Lien on Shares of Stock. Nearly related to the stockholder's right of alienation of his shares, which we have just discussed, is the right of the company to restrain such transfer, by the assertion of a lien upon the stock for the indebtedness of the stockholder to itself.2 It has been generally held that no such lien exists, in the absence of statutory authority.