The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1912-12-16
VIRGINIA ISSUES
LICENSE TO STEAL
States Corporation Laws Sc
verely Criticized Tor
Their Laxity.
OBSERVERS WILL BEWARE
Tobacco Products Charter SAID
to Repudiate Response
bility OF Directors.

bllity OF Directors.
virginia has officially licensed the
directors of the new Tobacco Products
Corporation to steal, says writer In
the current issue OF the Outlook. 1hc
article, which deals with the situation
partly as an editorial. is a strong crit
icism Of the Virginia law on corpora
lions and the way in which IL is admin
istered.
In the charter Of this concern. with
$4,000. 600 stock. this State. with the
approval OF judge in one Of hei
courts. has repudiated the very Lasis OF
! the moral responsibility Of u director,
says the Outl look.
Still more significant is the follow
/ ing editorial comment: II tA.s is a
sample OF what Virginia corporation
law means In the way Of protection
4 to investors. the words 'incOrp )ratrd
under the laws Of Virginia. on "A cef-
, tiicate of stock are likely TO nave the
same effect on the intelligent observer
as red flag on a railway. AS an ar
gument for 4 national corporation Law
| the Tobacco Products Corporation
scheme seems complete.
The corporation laws OF Virginia are
, regarded as very favorable - promot-
ers. so much so that very many Si-
gantic concerns of other states nave
recently been Incorporated here. most
of them with large capital stock. The
l%tS Of charters issued by the state
Corporation Commission have re-
Vealed many such cases.
The Outlook's arraignment Of Nir-
.sinia's procedure is as follows:
Estates Rights and the Trusts
Our attention mas been called to
I'D ct Fftcinc iftnSsT3f of
the futility and injustice OF attempting
to control the Interstate trusts by
State regulation. The Tobacco Pro-
ducts Corporation is a new $5e.ooo.00o
organization recently chartered by the
State OF Virginia. The certificate q
incorporation was approved by a Judge.
as required by the Virginia law. and
is in accordance with the Virginia cor
poration law. our informant points
out that the charter contains two pro-
visions which deserve the attention.
not only OF investors but of the gen
ersl public. BY the fourth paragraph
OF the charter the stockholders Of the
company are specifically deprived OF
any right TO subscribe for additional
stock which the directors may issue
in proportion to their interest in the
corporation. and the directors are
given fun power t. issue new stock
Anu ~ sen X ia sA44s y eie my NAA'N-N'
- any perSon they choose. at any
price they choose. even though that
price b. less than the par value Of the
stock. We should suppose that any in
:elligent investor would regard such
oroad power as being highly ianger-
ous TO invested values when exercised
oy an incompetent or INSCRIPTIONS
board of directors. There is. however.
a provision OF the Virginia charter OF
ion
which is even more serious. We quote
1t verbatim:
HFleventh. No contract Or other
transaction between the corporation
and any other corporation shall be af-
fected or invalidated by the fact that
anx one or more Of the directors OF
this corporation is or are Interested
in. or is a director or officer. or are
directors or officers OF such other cor
poratiOn. and any director or directors
Individuals or jointly. may be a party
or parties TO- or may be interested in.
any contract or transaction Of THIS
corporation or in which this corpora
tiOa is interested. and no contract. act
or transaction Of this corporation with
any person or persons. firm or corpora
ton shall be affected or invalidated
by the fact that any director or di-
rectO-s Of this corporation : party,
are parties 10 or interested III SutN
contract. act or transaction. OF in any
way connected with such person or
persons. firm or association. anG each
and every person who may become
director Of this corporation Is here
by relieved from any liability that
might otherwise exist from contract
ing with the corporation for the bene-
ut of himself or any firm, association
or corporation in which he may be in
any wise interested"
Commenting upon this clause. law
Yer writes US as follows. Notwith-
standing its somewhat involved legal
phraseolOsy. the idea which this clause
contains IL sta-tlingly clear Ccuched
in rough language. this IL license 10
steal I DO not say that the directors
will steal. those who are familiar with
workings Of insiders in the Tobacco"
trust may have their own opinion as
10 the amount Of restraint which tn"
directors Of a corporation containing
such provision as this may impose
upon themselves. II attempts 90 alb
rogate and annul the fiduciary pTinci-
ple which the courts have from time
: imrnemoriaI declared as binding upon
1 persons In trust relations II y
! pointed out that the general law OF
the United States. to use the language
OF the Court OF Appeals Of the state