Evening star. [volume] (Washington, D.C.) 1854-1972, 1905-01-16
Hearing Before House Dis
trict Committee.
AMENDMENT TO CODE
URGED BY SEVERAL SPEAKERS
THIS MORNING.
Chairman Babcock Thinks Section
Should Be Repealed Pending Passage
of Suitable Incorporation Law.


the House District committee this morning
on the bill to amend the Incorporation sec
ton of the District code Chairman Babcock
announced that the matter would be taken
up at once and given earnest consideration.
Mr.. Babcock said he convinced after
listening to the utterances of Commissioner
of Corporations Garfield, +. l.. SiddOns of
the law firm of Ralston & Sddons, E. w.
Mccormick, who makes business of in
cooperating concerns, and of Recorder of
Deeds Dancey, that the situation demanded
immediate action, and suggested in the
committee that it would be good thing to
secure the immediate repeal of the existing
section. in order to prevent further incor-
poratons under present conditions. and
then to leisurely prepare an incorporation
law which would be held up as a standard
for the whole country.
Mr.. Siddons' Contention.
Mr.. Siddons, the first speaker, declared
that the present state of affairs with re-
gard to the Incorporation of concerns in the
District closely approached scandal. At
present, he pointed out. a company incor-
porated under the laws of the District
is required only to keep it's stock book
here on inspection. The law does not pro-
vide that the headquarters Of the company
Shall be here, or that it shall have any in
terest in Washington at all.
This Mr. Siddons urged was entirely
wrong and should be changed Until very
recently when the Court of Appeals handed
down decision, a company could be in
corporated for anything under the sun-for
one or for twenty different purposes. TWEEN
ty-ive per cent of the 2,211 companies in
cOrpordted under the code he asserted
were never heard of in Washington again,
and yet, he said, it generally believed
IN various parts of the country that COM
panies incorporated under the laws of the
District in reality possessed federal char
tiers. 1t was Mr.. Siddons opinion that the
pending bills, introduced by Representatives
Morrel of Pennsylvania and Goulden of
New York did not go far enough toward
remedying the evil.
The 2,211 companies spoken of had
an aggregate capital of more than four
billions of dollars, and yet the average cost
of Incorporating each of these concerns
was about one dollar. The total revenue to
the District on account of these 2,211
concerns with their four billions cap
ital had been slightly in excess of 81, 600.
Mr.. Siddons repeated his assertion that such
conditions very closely approached scam
dal and said that the present Incorporation
laws needed thorough overhauling and re-
vision.
MI. McCormick's Practice.
Mr.. Mccormick. who followed, said he
agreed with Mr.. Sddons in a great many
particulars. But" he said, those COM
panies that have incorporated have some
one in the District on whom papers can
be served. l always insist that my name
be placed on the list of directors"
That may be your individual course of
action" remarked Chairman Babcock, but
1t doesn't affect the Interpretation and
operation of the law
Il have Incorporated four hundred COM
panies and have followed that course in
each case replied Mr.. Mccormick
That may be-" said Mr.. Babcock but
still leaves the law in the same state"
Continuing. Mr.. Mccormick said he fully
agreed with Mr.. Siddons that the District
70 a sniff
from the companies incorporate ted in this
jurisdiction. Mr.. Mccormick also admitted
in answer to questions by the members or
the committee, thai although the present
law required that 10 per cent of the cap
ltal stock of company must be paid in
when the article of incorporation are taken
out, that there was no way of compelling
thls 10 De done, and that, in fact, not SO
OF a S10OOOOO0 corporation might be actu-
ally paid in when the concern was incor-
porated. Neither was there any security
to purchasers of stock, Mr.. Mccormick
said, nor protection of any other kind The
post office was engaged in putting out of
business those concerns Incorporated in the
District which claimed to possess a fed
eral charter. but this, he admitted was
not of primary Importance in its bearing
on the faults and inadequacies of the
present law.
In no other state of the country was the
incorporation charge so low as in the Dis
trict. Mr. Mccormick said the lowest charge
elsewhere being so.
Commissioner Garfield's Statement.
Commissioner of Corporations Garfield
said that for the past year his bureau had
been making study of the very subject
which was now of such interest to the Dis
trict of Columbia. He said that the tax on
District corporations was not, in his opn-
ion, the main thing to be considered. He
spoke of the use of District charters as
federal charters as an exceptionally dam
md fah 10
there appeared to be a general impression
in this direction, which was productive of
harm and creative of fraud. He was more
over, in constant receipt of letters from all
parts of the country asking for informa ton
on this point.
Local Corporations.
The District code he thought should re-
quire corporations to state their purpose.
business and property holdings definitely
before articles of incorporation were issued
to them. They should make plain all the
facts with relation TO their business, which
might interest the public and which did
not constitute an intrusion on the proper
and legitimate business privacy to which
they were entitled. Further than that they
should be required to make annual returns
and annual statements. which would serve
TO keep the investing public fully informed
as 10 the stability and solidity of their
business.
Mr.. Garfield expressed himself as heartily
In favor of a suggestion by Chairman Bah
COCK looking to the passage of an incorpora-
ton law for the District of Columbia which
would serve as a standard for the whole
country, and which would remove the con-
ditions which now make every District cor
poration which does business outside looked
upon with suspicion by all those familiar
with present conditions here
Will Draft a Bill.
Mr. Garfield thought, however that the
work of drawing up and formulating for
passage such a standard law on incorpora-
ton as had been suggested was entirely
too much work for one man, and be
thought, moreover. it should be done very
deliberately. He did not want to attempt
10 draft bill for passage at the present
session of Congress, but promised, when
urged by Mr.. Babcock. to draft such a law
Ito include the most desirable features of
the laws OF various states) and submit ii
to the District committee at the earliest
possible moment He was in sympathy, he
said. with the generally expressed desire 10
make the District Incorporation law a credit
and not cloud, and he was aware that
something was Immediately necessary in
the way OF preventive measure.
The corrective legislation could come
later Summing up. he said. he advocated
tax all ba tar