tion, but is a business term familiar in corporate finance. A promoter, in business practice, is one who seeks fields for investment in new enterprises, or in the extension or diversification of established industries, and, for a consideration, forms and organizes a corporation to develop the particular field he has chosen. The promoter commonly attends to everything connected with the floating of an enterprise. In the first place, he finds an enterprise with prospects of good returns on the money to be invested; he employs technical experts in the line of industry to prepare the figures of cost and prospective returns, so he and those to be interested with him may know as exactly as may be what they have and what they may expect; he prepares a prospectus based on the expert's figures; he secures legislation, where that is necessary; he secures options and leases, where they must be secured. In short, he 'assembles,' the proposition. Then he employs a corporation lawyer to prepare the articles of incorporation and secures the necessary subscribers to the articles, sees that the articles are recorded and filed, that the certificate of incorporation is issued, and pays the incorporation costs; he sells the stock of the company directly to the public, or to bankers or other underwriters whom he has usually provided for before organizing the corporation, and ordinarily he takes his own profit out in stock. His relation to the corporation is fiduciary. The promoter has to create value to entitle him to profit. He provides a new or original means of making money, and makes the means productive through the development of a 'going' concern for the utilization of that means.

Wood on Modern Business Corporations, pp. 15-16.

A promoter is not an agent for the corporation, because the principle is not yet in existence. Such corporation can, therefore, only become liable for the contracts made by the promoter by ratifying them. Promoters are themselves liable on all previous contracts either as partners, or as individuals, according to the terms of their agreement. Promoters are liable on an action of deceit for any fraudulent representations.

SECTION 13. ARTICLES OF INCORPORATION.

The filing of articles of incorporation (or a written charter, petition or agreement, as they are called in different states) is required in practically every State. In most states a publication of these articles of incorporation is required, and in nearly every State they must be filed with some designated public official. Articles of incorporation generally contain the name and place of business; the purpose of the corporation; the number and names of the directors; the manner of carrying on business; the amount of capital stock sold, and the number of shares of stock, and sometimes the names of stockholders, with the amount subscribed by each, and a limitation of the indebtedness of the corporation.

SECTION 14. CORPORATE CHARTERS.

The charter which the State issues to the corporation creates the corporation. The charter brings the corporation into existence, and before that time the corporation is not authorized to transact any business.

"That a corporation should have a full and com

• See Statutes of several States.

A

plete organization and existence as an entirety before it can enter into any kind of contract or transact any business would seem to be self-evident. corporation, until organized, has no being, franchises, or faculties. Nor do those engaged in bringing it into being have any power to bind it by contract, unless so authorized by the charter. Until organized as authorized by the charter, there is not a corporation, nor does it possess franchises or faculties for it or others to exercise, until it acquires a complete existence.'

SECTION 15. AMENDING A CHARTER.

Since the granting of the charter is the work of the State government and not of the stockholders, it necessarily follows that only the State can amend the charter. The limitation upon the right of amendment resulting from the decision in Dartmouth College vs. Woodward, has already been discussed. Amendments, which the State government has not the power to make, may be proposed by it to the corporation, and if accepted by the stockholders, become effective.

SECTION 16. BY-LAWS.

The charter of a corporation is supplemented by its by-laws. By-laws differ from a charter in that they are adopted by the stockholders and are based upon their authority instead of being granted upon the authority of the State.

"By-laws are the general working rules adopted for the internal government of a corporation. They regulate the conduct of the corporation and define the duties and rights of members of the corporation

toward the corporation and among themselves. They apply to those discretionary and prudential matters of corporate and business conduct that are not regulated by statutory law or the corporation's charter. By-laws are of a somewhat permanent nature, in which they differ from resolutions and motions, which have reference to temporary and particular occasions and exigencies. By-laws must, of course, not disagree with the law of the land, common, constitutional, nor statutory, nor with the corporation's articles, and they must be reasonable and equitable; that is, they must take no provisions that are in effect against public policy, or an injustice to any members of the corporation. The by-laws may modify the articles, but they cannot alter them."' 8

The matters to be covered by the by-laws of a corporation are at the discretion of the stockholders who adopt them and vary greatly in different corporations.

SECTION 17. DE FACTO CORPORATIONS.

A de facto corporation is one in the exercise and use of a corporate franchise under color of legal organization in pursuance of some charter or some general law. Such a corporation is not a legal corporation, and in a direct proceeding by the government they may be ousted, but the right of existence of such a corporation can not be attached collaterally."

Wood on Modern Business Corporations pp. 82-83.

• Central Agricultural, etc., Assn. vs. Alabama Gold L. Ins., Co., 70 Ala., 120.