The news-democrat. (Providence, R.I.) 1906-1909, 1906-05-24

capital stock is $5.oo0.0oo II is permitted
10 purchase, own, hold and dispose OF
shares OF the capital stock OF other cor.
porauons to the extent or 81 per cent. or
its capital stock. IL is intended TO base
upon corporate action OF the Gorham
company. the practical crea ton OF a dis
tinct corporation holding nearly 100000
of said stock. or about 10000 in excess
OF what the Gorham company Is author
ICED by it's own charter 10 hold The fact
that the Silversmiths' company Is already
incorporated does not alter the fact that
IL is intended that the Gorham company is
TO institute substantially new corpora
ton.
Assuming that the amendment to the
charter OF the Gorham company. which
authorizes II 20 hold stock In other cor
poratiOns, gives TO the Gorham company
the ordinary rights OF n shareholder 10
vote upon the shares OF stock which IT
holds, can IL be said that the voting
power which is incident TO its right 10
hold shares OF stock I'm other corpora
tions enables II 10 take such corporate
action as will convert subsidiary COM
pany into corporation OF larger capitai
than itself?
WAS 1t the intention ~ the Rhode
Island legislature. in granting TO the Cor
ham company the right TO be stockhold.
err 10 confer upon II. as an incident TO
that right the unlimited right TO create,
by increase OF capital stock OF its subor-
dinate companies an indefinite and un-
limited amount OF shares? IL the right
exists TO enlarge the silversmiths' com
poration, IL equally exists as 10 every
other company whose shares Of stock are
now owned by the Gorham company.
Looking 10 the substance Of the com
plainants rights s. a large shareholder
In the Gorham company. there certainly
is force In the complainant's objection
that the -Gnrhap7- mpany.- -hs-tts stucix-
holders vote, and by the action Of It's
board Of directors IN pursuance thereof.
has embarked I'm the promotion OF an
enterprise foreign TO that for which II
was created and which. II effected. will
leave the complainant the choice OF In
vesting a considerable amount Of addi-
tional capital in the Silversmiths' COM
pany and of parting with his shares I'm
the Gorham company in exchange for
shares In the Silversmths' company. a
holding corporation or. on the other hand.
Of remaining n shareholder in tho Cor
ham company with the risk that IL shall
be managed not solely ror lts own inter
estS, but with regard 10 the interests OF
other corporations controlled by the Sill
versmiths' company.
1T seems probable that the power of
holding shares Is n subordinate power
not to be so exercised as 10 enlarge the
general scope OF the business ~ the cor
poration by promoting other distinct cor
porate enterprises. whether in n different
field or in the same field. II Is very
doubtful whether, by giving the Gorham
company power 10 invest IN the shares
Of other corporations. the legislature in
tended 10 confer the power 70 set up and
practically create a new corporation in
the same line Of business which should
control It's creator.
I'm deciding upon this petition. do not
proceed upon the ground that a fraudu-
lent intention Is exhibited In any Of the
acts of the defendant
I'm view OF the Importance ~ the
questions which have been presented. I
am 81 the opinion that the complainant
presents n proper case for a preliminary
injunction.
The petition for a preliminary injunc.
ton is granted