banking," "insurance," 66 assurance," indemnity," ""savings," "investment," "loan," "bene "bank," 99.66 fit," or any other words or terms indicating, representing or holding out such company to be a moneyed corporation as a part of its name, or corporate title, or who, in connection with such corporation or otherwise, shall put forth any sign containing said name, or who shall advertise or publish the said company as doing business in this state, directly or indirectly, through agents or otherwise while such company shall not be authorized under a certificate procured from the secretary of state pursuant to section 15 of the general corporation law to do business in this state, Is guilty of a misdemeanor. § 664. Misconduct of officers and directors of stock corporation. — A director of a stock corporation who concurs in any vote or act of the directors of such corporation, or any of them, by which it is intended: 1. To make a dividend except from the surplus profits arising from the business of the corporation, and in the cases and manner allowed by law; or, 2. To divide, withdraw or in any manner pay to the stockholders, or any of them, any part of the capital stock of the corporation, or to reduce such capital stock without the consent of the legislature; or, 3. To discount or receive any note or other evidence of debt in payment of an installment of capital stock actually called in, and required to be paid, or with intent to provide the means of making such payment; or, 4. To receive or discount any note or other evidence of debt with intent to enable any stockholder to withdraw any part of the money paid in by him on his stock; or, 5. To apply any portion of the funds of such corporation, except surplus profits, directly or indirectly, to the purchase of shares of its own stock, Is guilty of a misdemeanor. An officer or director of a stock corporation who: 6. Issues, participates in issuing, or concurs in a vote to issue any increase of its capital stock beyond the amount of the capital stock thereof, duly authorized by or in pursuance of law; or, 7. Sells or agrees to sell, or is directly or indirectly interested in the sale of any share of stock of such corporation, or in any agreement to sell the same, unless at the time of such sale or agreement he is an actual owner of such share, is guilty of a misdemeanor, punishable by imprisonment for not less than six months, or by a fine not exceeding $5,000, or by both. 1. A trustee is disqualified from acting where the board are dealing with him. self, and in such case, without another number being present, the trustees acting had no authority to transact business. Butts v. Wood, 37 N. Y. 317, aff'd 38 Barb. 181. 2. The directors of a corporation, as such, and without special authority for that purpose, have no power to sell the entire movable property of the corporation, which is necessary for the transaction of its customary business. They are only authorized to do such things as are directly or impliedly directed or implied by the charter, and when the acts of such directors are inconsistent with the object and purpose for which the corporation was created, they are void. Abbot v. Am. Hard Rubber Co. et al., 33 Barb. 578; S. C. 21 How. Pr. 193, aff'g 11 Abb. Pr. 204. 3. The directors of a company are chosen to manage the business of the corporation, not to destroy it, and a general assignment by them of all its property is fraudulent and void as against the stockholders not consenting thereto, whether the company be solvent or not. In the language of Judge ALLEN, in Abbot r. Am. Hard Rubber Co., above quoted, "it was ultra vires." Smith v. N. Y. Consolidated Stage Co.; S. C. 28 How. Pr. 377. 4. The director of a company is not liable for statements false in fact, but not known to him to be such, made in its circulars, and on which his name appears only as one of the directors. Wakeman v. Dally, 51 N. Y. 27, 10 Am. Rep. 551; S. C. Thoms. Liab. of Off, and A. of Corporations, 299, aff'g 44 Barb. 298. 5. "The principle that trustees, directors, and others acting in a trust relation, cannot make valid contracts with themselves affecting the trust estate, is well established and clearly applicable here. The trustee cannot fix the price of the property of the trust estate, which they take under the name of a purchase; nor can they sell to the estate which they represent, and conclusively settle the price to be received. Where the trustees have bought or sold such property, as it was necessary for the estate which they represented to buy or sell, at fair and reasonable prices, the transaction is not necessarily to be disturbed. But if the price is unreasonable or unfair, or any fraud or advantage has been imposed or taken, courts are swift to hold the transaction void; or to open the contract so as to fix proper compensation between the trustees and the estate which they represent, as upon the whole the transaction may be just." LEONARD, J. Coleman v. Second Ave. R. R. Co., 48 Barb. 390, aff'd 38 N. Y. 201. 6. The mere fact that a trustee of a corporation allows his name and credit to be used to sell its stock, which afterward turns out to be valueless, does not constitute actionable fraud in the absence of proof of knowledge on his part, or that he has made or permitted any false statement; but "it is hardly necessary to say that a director of a company, who knowingly issues or sanctions the cir culation of a false prospectus containing untrue statements of material facts, the natural tendency of which is to mislead and deceive the community, and to induce the public to purchase its stock, is responsible to those who are injured thereby. Mere exaggerated statements of the prospects of a new enterprise will not subject those who make them to liability; but as was said by the chancellor in Central Railroad Company v. Kish, Law Rep., 2 Eng. and Irish App. 100: 'No material misstatement, or concealment of any material fact, ought to be permitted.' The directors of a company are supposed to know the facts touching its condition and property, and their statements in respect to its affairs naturally attract public confidence. If they fraudulently unite in an attempt to deceive the public, and by false statements of facts to give credit and currency to its stock, is it not simple justice that they shall answer to those who have been deluded into giving confidence to them?" ANDREWS, J. Morgan v. Skiddy, 62 N. Y. 326. 7. "The rule thus laid down accords with the principle of adjudications in analogous cases, in which it has been held, that it is not essential that a representation should be addressed directly to the party who seeks a remedy for having been deceived and defrauded by means thereof." RAPALLO, J. Eaton, Cole and Burnham Co. v. Avery, 83 N. Y. 33, 38 Am. Rep. 389 (cases cited). 8. As to personal liability of directors of a corporation for their acts, see editorial note to Bosworth v. Allen, 55 L. R. A. 751, presenting the authorities on that subject. § 665. Misconduct of directors, officers, agents and employees of corporations. A director, officer, agent or employee of any corporation or joint-stock association who: 1. Knowingly receives or possesses himself of any of its property otherwise than in payment for a just demand, and with intent to defraud, omits to make or cause or direct to be made a full and true entry therefor in its books and accounts; or, 2. Makes or concurs in making any false entry, or concurs in omitting to make any material entry in its books or accounts; or, 3. Knowingly (a) concurs in making or publishing any written report, exhibit or statement in its affairs or pecuniary condition containing any material statement which is false; or (b) omits or concurs in omitting any statement required by law to be contained therein; or, 4. Having the custody or control of its books, wilfully refuses or neglects to make any proper entry in the stock book of such corporation as required by law, or to exhibit or allow the same to be inspected, and extracts to be taken therefrom by any person entitled by law to inspect the same, or take extracts therefrom; or, 5. If a notice of an application for an injunction affecting the property or business of such joint-stock association or corporation is served upon him, omits to disclose the fact of such service and the time and place of such application to the other directors, officers and managers thereof; or, 6. Refuses or neglects to make any report or statement lawfully required by a public officer, Is guilty of a misdemeanor. name. 6 8666. Unlawful use of certain titles in connection with corporate Any person, association or corporation other than a moneyed corporation, who shall within this state, directly or indirectly, or through agents or representatives transact business under, or in any wise use a corporate name or a corporate title with the words "trust," "bank," "banking," "insurance," "assurance," " indemnity," "guarantee," guaranty," "savings," "investment," "loan," "benefit," as a part of such name or title, is guilty of a misdemeanor; provided, however, that any domestic corporation, other than a moneyed corporation, heretofore duly organized and heretofore duly authorized by law to use and on April 29th, 1904, lawfully using either or any of such words as a part of its lawful corporate title, may lawfully continue to use such corporate title, provided and if it, being a corporation other than a moneyed corporation, shall, wherever the name shall be printed, written, engraved or displayed, add, in legible English characters, of substantially the same size and style as the name, directly under the said name or immediately in connection therefoth, wherever so used, the words "not a moneyed corporation." § 667. Presumption of knowledge of corporate condition and busi ness and of assent thereto by directors; definitions. It is no defense to a prosecution for a violation of the provisions of this article and article 26, that the corporation is a foreign corporation, if it carries on business or keeps an office therefor in this state. The term rector" as used in this article and article 26 includes any of the persons having, by law, the direction or management of the affairs of a corporation, by whatever name described. di A director of a corporation or joint-stock association is deemed to have such knowledge of the affairs of the corporation or association as to enable him to determine whether any act, proceeding or omis sion of its directors is a violation of this article and article 26. If present at a meeting of the directors at which any act, proceeding or omission of such directors in violation of this article and article 26 occurs, he must be deemed to have concurred therein, unless he at the time causes or in writing requires his dissent therefrom to be entered on the minutes of the directors. If absent from such meeting, he must be deemed to have concurred in any such violation, if the facts constituting such violation appear on the record or minutes of the proceedings of the board of directors and he remains a director of the corporation for six months thereafter without causing or in writing requiring his dissent from such violation to be entered on such record or minutes. § 668. Misconduct at corporate elections. — Any person who: 1. Being entitled to vote at any meeting of the stockholders or bondholders or both of a stock corporation, sells his vote, or who issues a proxy to vote to any person for any sum of money or thing of value, except as expressly authorized by law; or, 2. Acts as an inspector of election at any such meeting and violates an oath taken by him in pursuance of law as such inspector, or violates the provisions of an oath required by law to be taktn by him as such inspector, or is guilty of any dishonest or corrupt conduct as such inspector, * Is guilty of a misdemeanor. 1932. Punishment of corporation convicted of felony. In all cases where a corporation is convicted of an offense for the commission of which a natural person would be punishable with imprisonment, as for a felony, such corporation is punishable by a fine of not more than five thousand dollars. |