Securities Law Commons^™

Corporations - Capital, Capital Stock And Stock, Frederick K. Brown

Michigan Law Review

The recent case of Haggard v. Lexington Utilities Co. is typical of the nominalistic confusion occasioned by the use of the terms "capital" and "capital stock." Whatever progress the courts have made toward making them words of precise signification has not been reflected in the drafting of statutes, where they are employed to represent a bewildering number of connotations. The courts have recognized this and have not sought to make them words of art with a single, definitive meaning but through the mechanics of statutory interpretation have sought to divine the legislative intent.

Corporations - Significance Of Appreciation And Changing Price Levels In Corporate Dividend Policies, Kenneth K. Luce

Michigan Law Review

The appreciation of assets and the legal and accounting problems involved are largely a product of constant fluctuation in the value of money, and to a lesser degree a prodμct of actual rise in the relative value of isolated pieces of property. In the face of political events such as the devaluation of the dollar, and economic phenomena such as the rising price level which the country has experienced since 1933, such problems are of immediate concern to the accountant and lawyer. We must recognize at the outset that appreciation or depreciation in the price level sense are unrelated to …

Corporations - Statutes Declaring Watered Stock Void - Effect Upon The Stockholder's Liability To Creditors

Michigan Law Review

Prior to the present era of "blue sky" laws providing for the careful scrutiny by the state of the issuance of stock, the evil of watered stock was sought to be curbed by constitutional and statutory provisions of a prohibitory and often penal nature. These statutes and constitutional provisions very generally take one of two forms.

The Colorado and the Arizona provisions are typical. In practical effect the two types of provisions are indistinguishable. The phrase "bona fide subscribers" in the Arizona form is construed to mean one who actually turns something of value over to the corporation in lieu …

Election Of Remedies - As Between Conversion And Replevin - Measure Of Recovery

Michigan Law Review

Through fraud, defendant received from plaintiff certain shares of stock together with other securities to secure a loan of $300,000 to the plaintiff. Defendant wrongfully hypothecated this stock. Plaintiff, after learning of the conversion, sued for the specific stock in replevin. During the course of the action he changed his demand to one in damages for conversion. The court held that plaintiff may not change the theory of his cause of action from replevin to conversion. Satterwhite v. Harriman Nat. Bank & Trust Co., (D. C. N. Y. 1935) 13 F. Supp. 493.

State "Blue-Sky" Laws And The Federal Securities Acts, Russell A. Smith

Michigan Law Review

With the current revival of business has come increased activity in the securities markets. Corporations are taking advantage of low money rates to refund outstanding issues and, to some extent, to obtain new money for corporate purposes. If the upturn in business proves to be substantial, rather than merely a temporary, government-induced short-time swing, the issuance of securities for the purpose of financing capital improvements will doubtless accelerate. Questions arising under the various laws, federal and state, for the regulation of the sale of securities will become increasingly important. Persons interested in the issuance and disposal of securities desire, of …

Constitutional Law-Securities Act Of 1933-Right Of Registrant To Withdraw Registration Statement Filed With Commission

Michigan Law Review

Petitioner filed a registration statement with the Securities Exchange Commission covering a proposed issue of securities. After examining the statement, the commission concluded that it contained false and misleading information concerning certain material facts, and thereupon instituted a proceeding to compel petitioner to appear and answer certain questions pertinent to the papers filed. At the hearing, petitioner sought to withdraw the registration statement but was denied permission to do so. Upon application of the Securities Exchange Commission to the district court, an order was granted compelling petitioner to appear and answer the questions. On appeal to the Supreme Court of …

Corporations-Disregard Of Separate Entities-Subsidiary Corporation An Instrumentality Of The Parent

Michigan Law Review

Defendant corporation had an excess of assets over liabilities, but its ratio of current assets to current liabilities had declined below the then normal banking credit requirement of two to one. In order to avoid acknowledgment of commercial insolvency due to inability to meet obligations maturing in the near future, defendant organized a subsidiary corporation to take over the sales end of the enterprise, transferring to the subsidiary sufficient current assets to give it the required banking ratio with regard to the liabilities assumed by the subsidiary consisting of bank obligations and some of the current bills payable of the …

Taxation-State Tax On Shares Of National Bank-Preferred Shares Held By Reconstruction Finance Corporation

Michigan Law Review

The Reconstruction Finance Corporation owned the entire issue of preferred stock of plaintiff bank The state statute putting a tax on stock of national banks was amended to allow the bank to be taxed directly and pass the tax on to its shareholders. A federal statute permitted states to tax, subject to certain limitations, all shares of national banking associations whose principal place of business was within the state. In a proceeding by the bank for the benefit of the Reconstruction Finance Corporation as well as itself to protest the collection of the tax, it was held that the shares …

Taxation-State Taxation Of Capital Stock Of Corporations Owning United States Securities

Michigan Law Review

A Pennsylvania statute imposed a tax on the shares of trust companies, the companies to be primarily liable therefor and the value of the shares to be ascertained by adding together so much of the amount of capital stock paid in, surplus, and undivided profits as was not invested in the stock of corporations liable to pay to the Commonwealth a capital stock tax or tax on shares, or relieved from the payment of capital stock tax or tax on shares, and dividing the sum by the number of outstanding shares. The corporations so relieved were those exclusively engaged in …

Corporations - Stock And Stockholders - Transfer Of Stock - Right To Vote

Michigan Law Review

Upon the decease of the record owner of shares of the common stock of Canal Construction Company petitioner caused the stock to be transferred upon the books of the corporation to his name as administrator. Certificates were indorsed for transfer and delivered to the distributees of the estate. The recipients of certain of the certificates neglected "to present them for transfer on the stock books of the corporation. When a contest subsequently developed over the election of directors, the petitioner attempted to vote the shares standing in his name as administrator. The ballot was rejected and petitioner brought the proceeding …

Corporations-Validity Of Option To Convert Preferred Stock Into Mortgage Bonds

Michigan Law Review

A corporation issued preferred stock, with a fixed dividend rate, power to elect a director voting as a class, and an option in the holder to convert, at his election, into mortgage bonds which were issued at the same time. After a substantial indebtedness had been incurred by the corporation, the stockholders exercised their option to convert into bonds. The corporation then went into bankruptcy, and in reorganization proceedings, the bondholders claim a preference over general creditors. Held, that the former holders of the preferred stock were stockholders and not creditors of the corporation and that, in the absence …