to the issue thereof, the directors of the company, except any without whose knowledge or consent the prospectus or notice was issued, and any other person who authorized the issue of such prospectus or notice, shall be liable to indemnify the person named as a director of the company, or as having agreed to become a director thereof as aforesaid, against all damages, costs, charges, and expenses to which he may be made liable by reason of his name having been inserted in the prospectus or notice, or in defending himself against any action or legal proceedings brought against him in respect thereof. Every person who by reason of his being a director, or named as a director or as having agreed to become a director, or of his having authorized the issue of the prospectus or notice, has become liable to make any payment under the provisions of this act, shall be entitled to recover contribution, as in cases of contract, from any other person who, if sued separately, would have been liable to make the same payment.' 1 Directors Liability Act of 1890, 53 & 54 Vic. ch. 64, § 4. 2 Directors Liability Act of 1890, 53 & 54 Vic. ch. 64, § 5. This statute owes its origin to the disapprobation of the English public of the decision, reversal and reaffirmance of Derry v. Peek, L. R. 14 App. Cas. 337; s. c. 6 Ry. & Corp. L. J. 360 and 428; s. c. 8 Ry. & Corp. L. J. 61. See Bower's Directors Liability Act, (London, 1890.) § 289. Place of directors' meetings. 290. Estoppel from pleading illegality of the place of meeting. 291. Time of meeting. 292. Premature convening of meeting. 293. Delay and postponement. 294. Adjourned meetings. 295. Minutes. 296. Irregularities. 297. Trick, secrecy, surprise and bribery. 298. Elections. 299. Failure to call meetings or to hold valid elections. 300. Eligibility. 301. Cumulative voting. 302. Judicial review of elections. 303. Proxies. 66 304. Voting trusts"-Combinations among shareholders. 305. The same subject continued. 306. The same subject continued— "The Reading Voting Trust." 307. The same subject continued— "The Wisconsin Central Voting Trust." § 272. Introductory. The powers conferred by the charter of a corporation upon the body of incorporators and board of directors, respectively, can be exercised by them only when duly convened in a corporate meeting. And where an alleged corporate act rests upon the assent of a majority of the members, expressed, not in a corporate meeting, but given by each one separately and at different times, and evidenced, not by the minutes of their corporate proceedings, but by a separate paper in the possession of a committee, it is a nullity.' This is the rule not only as to the corporators themselves, but 1 Duke v. Markham, (N. C. 1890) 10 S. E. Rep. 1017, where it was held that a mortgage so executed is not a corporate act, and that even the use by the company of money raised by a mortgage so authorized would not of itself be a ratification. If the company ratify the mortgage, it would not validate it as to other creditors, if the mortgage is invalid when registered. Peirce v. New Orleans Build. Co., (1836) 9 La. 397, 404, where the court said: "We can not see in this any legal evidence of the consent of the corporation, either according to its charter or the general principles of law." Finley Stove &c. Co. v. Kurtz, (1876) 34 Mich. 89; Commonwealth v. Cullen, (1850) 13 Pa. St. 133; s. c. 53 Am. Dec. 450. Even though all the capital stock should be acquired by one person, he does not thereby become the corporation. Button v. Hoffman, (1884) 61 Wis. 20. Contra, Swift v. Smith, (1886) 65 Md. 428, per Irving, J.; s. c. 34 Alb. L. J. 257. But see In re Great Northern Salt & Chemical Works Co., (Ch. Div. 1890) 7 Ry. & L. J. 157, a case arising under the English Companies Act of 1862, 25 & 26 Vic. ch. 89, being an application to fix K. upon the list of contributories of a company in liquidation, in respect of 500 shares. He objected on the ground that there had never been any valid allotment to him of the shares in question. The company was formed in April, 1888, under Table A to the act of 1862, which provides (art. 52) that the number of the directors, and the names of the first directors, shall be determined by the subscribers of the memorandum of association; and (art. 53) that until directors are ap pointed, the subscribers of the memorandum of association shall be deemed to be directors. Two only of the subscribers of the memorandum had, in the first instance, purported to appoint directors, but the directors so appointed had resigned, and on the 27th of July, 1888, the seven subscribers of the memorandum, by a document in writing, signed by them all, appointed four persons to be directors. On the 2d of August those four persons held a meeting and resolved that two directors should form a quorum to conduct the business of the company. At the first general meeting of the company, held on the 20th of August, three of those four directors were authorized and requested to continue to act as directors for the present. Two of these directors subsequently allotted to K. the shares in question, and K. had paid money in respect of such shares. On the 24th of November, 1888, the company was ordered to be wound-up. At that time K. was on the register of shareholders as the holder of 500 shares. It appeared that the document of the 27th of July, 1888, had not been signed at any meeting of the subscribers of the memorandum, and it was contended on behalf of K. that it was therefore an invalid appointment of directors, and the persons who had made the allotment were not legally directors, as the subscribers, to exercise the powers given by art. 52, ought to have met together in the same way as directors are required by art. 66 to meet together for the dispatch of business. It was held that art. 52 required that the subscribers should "determine," and if it could be also as to their trustees or directors. The directors can lawfully act only when duly convened as a board. This is the law even where the act by which the company derived its corporate existence makes no provision for the manner in which the corporators are to be convoked or how they are to vote.❜ Where the organic law of the body is silent on these points its proceedings and the validity of acts done in its name must be judged according to the principles of law applicable to corporations in general as above set forth, and such by-laws as may have been adopted for the regulation of its conduct. So that, unless the contrary be provided by statute or charter, there are but two ways in which a corporation as such can act, shown in any way that they had determined, the directors upon whom they had determined would be validly appointed, although such determination was not reached at any meeting; and in the present case the directors had been appointed, and the allotment made by them was valid. Hallows v. Fernie, 15 L. T. Rep. N. S. 602; L. Rep. 3 Eq. 520, followed. D'Arcy v. Tamar &c. Railway Company, L. R. 2 Ex. 158, distinguished. Cf. Granger v. Grubb, (1870) 7 Phila. 850; Graham v. Boston &c. R. Co., (1886) 118 U. S. 161. 65 N. Y. 252. In England it is enacted that at the first meeting of directors held after the passing of the special act of incorporation, and at the first meeting of the directors held after each annual appointment of directors, the directors present at such meeting shall choose one of the directors to act as chairman of the directors for the year following such choice, and shall also, if they think fit, choose another director to act as deputy chairman for the same period; and if the chairman or deputy chairman die or resign, or cease to be a director, or otherwise become disqualified to act, the directors present at the meeting next after the occurrence of the vacancy shall choose some other of the directors to fill such vacancy; and every such chairman or deputy chairman so elected as last aforesaid shall continue in office so long only as the person in whose stead he may be so elected would been entitled to continue if such death, resignation, removal or disBuild. qualification had not happened. 8 Vic. ch. 16, § 93. If at any meeting of the directors neither the chairman nor deputy chairman be present the directors present shall choose some one of their number to be chairman of such meeting. 8 Vic. ch. 16, § 94 1 Buttrick v. Nashua &c. R. Co., (1882) 62 N. H. 413; s. c. 13 Am. St. Rep. 578. 2 Gashwiler v. Willis, (1867) 33 Cal. 11; People's Bank v. St. Anthony's R. C. Church, 39 Hun, 498, where a majority of the trustees of a Romish church attempted to bind the church upon notes executed without a meeting of the board. Cf. Granger v. Grubb, (1870) 7 Phila. 350. Pierce v. New Orleans Assoc., (1836) 9 La. 397. Pierce v. New Orleans Build. Assoc., (1836) 9 La. 397; People v. Albany &c. R. Co., (1869) 55 Barb. 314. Cf. Craw v. Easterly, (1873) 54 N. Y. 679; Easterly v. Barber, (1875) to wit, either through its president and directors, or at a meeting of the stockholders duly convoked and conducted in conformity with the general rules governing corporate meetings, or the special by-laws supplementary thereto.' Any material departure therefrom destroys the validity of the proceedings so taken. Unless, of course, provision be made for suspension of the rules. It has been held in Colorado, how ever, that where claims against a corporation are approved by a majority of the board of directors, acting separately, in accordance with a customary usage, the approval is sufficient, there being no law or by-law restricting the directors to a different mode.3 § 273. Called or special meetings.- Provisions for calling special meetings found in the charter or by-laws of the companies or in the statutes of the incorporating States, generally make it obligatory upon the directors or some specified corporate officer to issue a call upon the demand of a certain number of members or of shareholders owning a certain percentage of the capital stock. While as a general rule it should appear in the notice that the meeting has been summoned by the proper official," — the board of directors, or the general agent of the company,' and while the provisions of the statute or by-laws relating to the calling of special meetings, must be complied with in every particular, ' yet meeting called by the secretary was illegal, the code prescribing that the 1 Pierce v. New Orleans Build. Assoc., (1836) 9 La. 397. 2 Pierce v. New Orleans Build. directors should issue the call. Assoc., (1836) 9 La. 397. 3 Longmont Supply Ditch Co. v. Coffman, (1888) 11 Colo. 551. 1 Stebbins v. Merritt, (1852) 10 Cush. 27. 8 Reilly v. Oglebay, (1884) 25 W. 48 Vic. ch. 16, § 70; W. Va. Code, Va. 36, where it was held under the ch. 53, § 41. Stevens v. Eden Meeting House Soc., (1839) 12 Vt. 688; State v. Pettineli, (1875) 10 Nev. 141; Johnson v. Jones, (1872) 23 N. J. Eq. 216; Congregational Soc. v. Sperry, (1834) 10 Conn. 200; Evans v. Osgood, (1841) 18 Me. 213; Ang. & Ames, Corp. 491. 6 Reilly v. Oglebay, (1884) 25 W. Va. 36, decided under W. Va. Code, ch. 53, § 41, and holding that a West Virginia Code, ch. 53, § 41, providing that "a general meeting of the stockholders may be called at any time by the board of directors, or by any number of stockholders, holding together at least one tenth of the capital," that a call by the secretary simply on authority of stockholders holding one tenth of the capital was invalid and all proceedings thereunder illegal. |