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certificate of incorporation. In Connecticut, it is held that the judgment of the board of directors as to the value of property given for stock is final. In Illinois, the directors have the power to adopt by-laws. In Massachusetts, their powers are entirely dependent on the by-laws. In Missouri, at least three of the directors must be at all times citizens and residents of the State.
Liabilities of Directors.
In general, directors occupy practically the position of trustees, and consequently, any act which they may do contrary to law, or contrary to the provisions of the certificate of incorporation or the by-laws, subjects them to severe penalties. It has been pretty thoroughly decided, however, that in order to hold directors responsible for wrong done, the particular act must be brought home to them that they attended the meeting at which it was decided to do the particular act and voted in favor of doing that act, or that they stayed away purposely, knowing that the question was to be decided at that meeting. It is almost invariably held that directors are personally liable for making unauthorized dividends. They have no right to increase or to reduce the amount of capital stock without the express sanction of the stockholders; and in general, they are personally liable for passing property of the corporation to an individual for the purpose of defrauding creditors. They also incur liability for not making such reports as are provided for by law. A few of the peculiar regulations of the different States are stated below.
In Arizona there are severe provisions against all fraud to greditors, which charge the directors with full knowledge even when absent from meetings. Protection for the director is granted only by his entering his dissent in writing on the minutes, or by resigning
In California, directors who were absent from any meeting where any illegal act was done can protect themselves by entering their dissent on the record.
In Connecticut, directors are held liable for fraudulent valuation of property taken in payment for stock.
In Delaware, directors are liable for failure to publish certificates of reduction of capital stock. Directors are also liable for loans made to officers of the corporation, or made to stockholders for the security of its stock.
In Illinois, if the corporate debts at any time exceed the amount of the capital stock, the assenting directors are personally liable for such excess.
In Indiana, directors are liable for paying dividends when the company is insolvent, or if the paying of the dividends render it insolvent. To avoid liability, dissenting directors must file their written objection with the County Clerk and with the secretary of the company.
In Maine, directors are subject to a fine not to exceed $2,000, and imprisonment for not less than a year, for voting a dividend to the prejudice of the corporation; and they are also liable to creditors for the amount of the dividend so paid.
In Ohio, the rules for calculating profits are prescribed; and for any violation of these regulations the directors are personally liable to stockholders and creditors for any loss sustained.
Powers and Liabilities of Oficers.
The officers are under the immediate control of the board of directors, and are given just the powers that the by-laws and the board of directors delegate to them. Officers can be removed by the board of directors at pleasure; and in order to protect themselves from personal liability for their acts, should invariably, ask the board's approval by resolution of what they have done, if they could not obtain it before acting.
In general, the president of the corporation must be a director, and is elected by the board of directors. It is thus specified in Arkansas, Missouri, Montana, Michigan, Massachusetts, Indiana, Nebraska, Nevada, New Jersey, New York, Pennsylvania, South Carolina, South Dakota, Colorado, and Connecticut.
In Delaware, the officers may be elected by the board of directors or by the stockholders, as the by-laws prescribe.
In Indiana, officers are liable for issuing stock as full paid when in fact it is not so. Officers hold office until their successors are chosen. Invariably, the officers who make false statements or file false reports are held liable to the persons injured by reason of these reports.
EMPLOYERS' LIABILITY ACTS.
At common law, where an employee was injured by the act or omission of another employee engaged on the same work, the employer was generally held not liable. This is still the rule in States which have not passed what is known as “ Employers' Liability Acts.” It was to obviate this apparent injustice that these acts have been passed. The “ Pioneer Act" is an English one of 1880; and the subsequent acts which have been passed in several different States of the Union, Australia, and portions of Canada, are all modeled after it. They substantially provide as follows:
1. If an employee, using due care and diligence, is injured
a. By reason of any defective condition of ways, works, or machinery connected with or used in the business of the employer, which defect had not been discovered or remedied owing to the negligence of the employer, or of any person in his service whose duty it was to see that such ways, works, or machinery were in a safe condition, or
b. By reason of the negligence of any person in the service of the employer who is entrusted with, or whose principal duty is that of, superintendence; or in the absence of such superintendent, the negligence of the person undertaking such superintendence with the authority or consent of the employer,
The employee, or in case of fatal injury, the employee's executor or administrator (where a husband, wife, or next of kin survives), has the same rights of compensation and remedy against the employer as if the employee had not been in the service of the employer nor engaged in his work.
2. No action for recovery or compensation shall be had unless notice of the time, place, and cause of injury is given within one hundred and twenty days, and action started within one year. This notice must be in writing, and signed by the party injured or by some one authorized by him.
3. If the employee dies before giving notice as above provided, then the executor or administrator has sixty days from the time of his appointment in which to serve the above notice. The notice should be served by leaving the same at the residence or place of business of the employer, or may be served by mail properly addressed to the employer.
The employee is presumed to have assumed the necessary risks and no others. Whether he assumed the risk in question, is a question of fact for the jury. Where an employee discovers a defect, and fails to give notice of the same to the employer or superintendent within a reasonable time, he can have no recovery if injured thereby, unless it appears that the employer or his superintendent knew of the defect. It is generally provided that an employer may set off in mitigation of damages a proportion of the sum which he may have contributed towards insurance of the employee.
Practically all of the “Employers' Liability Acts” expressly include railroads. In New York there is a separate act. (The Federal Act of June 11, 1906, which affected only railroads, has been pronounced unconstitutional by the Supreme Court; it was generally similar to the above, except that it had an additional clause holding that where the employee is guilty of contributory negligence, but his negligence is slight and the employer's negligence is gross, the employee shall still have his recovery.) The comparative question of negligence is one for the jury.
The statutes of Alabama and Massachusetts are practically similar. Notice there must be given within sixty days, and the action commenced within one year.
Indiana has the same general rule, but without any time of limitation for the commencement of the action.
In Colorado, it is provided that where the injury results from the negligence of a fellow employee, recovery is limited to five thousand dollars. Notice to the employer must be given within sixty days, and the action commenced within two years.
In Illinois and Georgia, the Federal rule regarding slight negligence, as noted above, is followed.
While the statutes abrogate the common law, and accordingly, should be construed strictly, nevertheless the courts are inclined to look to the purpose of the act, and in general, give a liberal construction. The interpretations placed upon the various words and phrases, of course, vary somewhat in different localities; and it would be impossible here to enter into all the different shades and varieties of opinion which the courts have set up.
PURE FOOD AND DRUG LAW.
Being Chapter 3915 of the First Session of the Fifty-ninth Congress, June 30, 1906.
This is a law, passed to regulate the traffic in foods and drugs, whether manufactured in the United States, or imported from a foreign country to be used in the United States.
The term “drug” includes all medicines and preparations recognized in the United States Pharmacopoeia or National Formulary for internal or external use, and any substance or mixture of substances intended to be used for the cure, mitigation, or prevention of disease of either man or other animals. The term “ food " includes all articles used for food, drink, confectionery, or condiment by man or other animals, whether simple, mixed, or compound.
Any person violating the provisions of this act is guilty of a misdemeanor, and for each offense is subject to a fine not exceeding five hundred dollars or one year's imprisonment, or both fine and imprisonment, in the discretion of the court; and for each subsequent offense is subject to a fine of not less than one thousand dollars or one year's imprisonment, or both fine and imprisonment, in the discretion of the court.
An article shall be deemed adulterated,
1. If, when sold under or by a name recognized in the United States Pharmacopoeia or National Formulary, it differs from the standard of strength, quality, or purity, as determined there. Provided, that no such drug shall be deemed adulterated if the standard of strength, quality, or purity be plainly stated upon the bottle, box, or other container thereof.
2. If the strength or purity fall below the professed standard or quality under which it is sold.
In the case of confectionery:
If it contain terra alba, barytes, talc, chrome yellow, or other mineral substance or poisonous color or flavor, or other ingredient