The Rutland daily globe. [volume] (Rutland, Vt.) 1873-1877, 1873-07-23
PERSONAL LIABILITY CLAUSES.

casting stoves, etc, the Roe manufacture
ing company is organized for the same pur-
pose, obtaining, thereby, more capital than
John Doe, individually, was able to COM
mand, or was willing to invest in that |
branch of industry Instead of special |
privileges being granted to, greater rcstric-
lions are often imposed upon Incorporated
companies. The stockholders may be men
of wealth and integrity, the officers men of
enterprise and the superintendent and man.
ayers men of business capacity and finan-
cial ability, yet legislators, in order to pro-
tect creditors, sometimes give them, or en-
deavor to give them, a security and pecu-
mary liability outside of the corporation it.
self With individual enterprises, there is
no such additional security-if additional
security - if it can be called -
but when the capital and means of
the individual are exhausted business must
cease and the creditors take their chance
from the legitimate assets. If the business
is prudently, honestly and economically
managed, with an entire absence of fraud,
this is all that the community can or ought
to ask.
A corporation, being but community of
individuals, should upon the same state of
facts stand upon the same footing. Some
forty years or more ago, however, the idea
began to prevail somewhat extensively in
this and other states that members of a cor
poration ought to be liable to its creditors
for an amount in excess of the money in
vested in the enterprise. This, of course,
would have no effect in providing for Sc
curity to the creditors of a fraudulent con-
cern,as persons investing in that kind of I'M
dertakings would have no property of their
own, personal credit or principles of honor
that would afford any relief when the ar
rangcd-for crash came. Business would
not be attracted by such a liability, neither
would credit be given in reliance thereon.
Its result, moreover, in legitimate enter
prises would be to rctard rather than pro-
mite union of capital Stockholders in
corporations are not, by any means, always
men of wealth. Many of them are pos
sessed of property only to limited extent,
and are induced to so invest their money,
that they may receive reasonable profit
thereon, and aid in building up the place
of their residence. They would shrink
from aiding therein, if a disastrous failure
of the crops, business Heterogeneous, a
stringent money market, gluttcd market,
or other causoo over which they, as individ-
uals or as a company, had, and could have,
no control, and against which they could
not provide, could, at any time, cngulph
their whole private fortunes. individuals
can furnish their creditors with an en-
dorser or not as they please, but in thest
personal liability charters, the law com
pels every stakeholder to be an cndorsel
for the company. Notwithstanding thes'
considerations, we should ever favor sucl
clauses IN special charters, if they wer'
productive of good. 1t were better that
guaranty, if it were such, against fraut
and an inducement to correct manage
ment of business were held over the man
: ayers and stockholders of corporations, il
it amounted to anything rather than that
door for possible fraud should I've lief
open.
While, however, such attempts to creat
personal liability, outside of the none,
invested, acts, practically, as restrain
upon cooperative enterprises, it, in reality
affords no additional security to creditors
and opens, rather than shuts, the door t,
fraudulent transactions, if not ON the par
of the corporation itself, on that of tn
stockholders thereof. 1t were far bette
that business be repressed, than that in tn
endeavor to extend it and, thereby, bull
up city or town, the flood gates of frau,
should be raised. Years ago, when manu-
featuring enterprises were at their high
in Vermont, manufacturing compan
was Incorporated in this county
with personal liability on the part of tn
stockholders, who were, for those days
men of wealth. The business was we
and judiciously managed, and large profit
made and dividends declared. A time @
financial CONFUSION came, the market, also
being glutted with the class of goods mar
ufactured by them, and disastrous fai
ure occurred. The assets were as nothin
compared with the liabilities, which wei
, divided among capitalists, producers an
laborers, both at home and abroad Whe
the personal liability of the owners VIZ
looked after, it was discovered that I'll
, men of wealth had stepped out, just |
, time, while the actual stockholders, VIII
were personally liable, were men of straw
5 so far even as the ability to support then
selves was concerned. Take another il
: stance. There was, in this state, q fe
Q years ago, bank doing large and lucr
4 tive business. The directors were men
!. large wealth and had given bonds, wit
G ample security, as required by law. In Il
f course of business, more than half their r.
n sources were lost, depreciating the stool
i and destroying the face value of their bill
e nearly, if not quite, fifty per cent. I'll
/ loss was incurred in such way that Il
p personal liability of the directors, provide
o for In their charter and by general la,
}, could be enforced by stockholders, bill
# holders, depositors and other creditor
It When suits were commenced, howeve
J. the wealth of the directors and their sur
J, tics had vanished in thin air. This san
i state of facts will be found to exist In Il
J, failure of nearly every corporation, whe
o there has been an endeavor to provide
: security for creditors, through person
3 liability on the part of the stockholders
It directors.
t Take the case which has just been broug
n to light in Brooklyn, the depth of fra'