Atlanta Georgian. [volume] (Atlanta, Ga.) 1912-1939, 1914-01-28
INITIAL STEPS IN TRUST CONTROL: Compel Federal In
corporations PreUent OUer- Capitalization; Make
Directors Personally Liable

sworn to by majority of the directors
must accompany the above agreement OF
association and must be filed with It.
These articles must set forth the amount
of capital that Is TO be issued, the amount
of capital that is to be paid for in full in
cash, the amount to be paid for on ac-
count by installments, and the amount to
be paid for in property,
If capital is to be issued for property
and not for cash, the articles must spe-
officially describe the property, state Its
value, under oath, and the amount Of val
ue to be issued against that property.
An important provision of the bill is
the following:
The directors who sign the articles OF
organization are made liable to any stock
holder OF the corporation for damages
caused by any statement of the articles OF
organization which is false and which they
know to be false. In addition, the making
of such false statements 10 declared
felony.
The deputy commissioner of corporations
with whom the articles Of organization are
filed is required to examine the articles
with due care and is authorized to re-
duire any amendment or any additional
information that he may consider nee
essary for a proper estimate of the pro-
posed stock issue.
To secure this every deputy commits
sioner is given the right to compel the
attendance of witnesses and the produc-
ton of documentary evidence and to ad-
minister oaths
In every case where it Is proposed to
issue capital stock for property the dep
uty commissioner Of corporations must ex-
anime orally at least one of the directors
who has signed the articles of organiza-
ton, and so obtain all possible information
in reference to the value of such property.
II the deputy commissioner finds that
the articles Of organization conform to
law, and IL he is satisfied with the good
faith Of the directors whom he has inter
rogated, he shall approve and indorse In
writing the articles of organization and is
sue certificate which shall have the
force and effect of a charter.
In this way a comparatively simple
method is provided for safeguarding the
investing public against fictitious and
worthless stock issues. But the method,
while simple. is drastic in so far as II
compels honesty and fair dealing
EVILS AsATED BY THE BILL.
Under this method it becomes a very
difficult matter and very dangerous mat
ter for directors to issue capital stock for
imaginary values based upon mere antiei-
patton Of future legitimate or Legitimate
gain.
Under this method the capitalization Of
the abuses of monopoly is prevented and
the conversion into stocks and bonds of
the power of monopoly to extort exees-
sive prices is made impossible.
In the Same way worthless speculative
stock issues designed to be unloaded on
the public for the purpose of swindIins
the public are made impossible.
Not only will all the necessary infor-
nation about a. corporation be made pub
lie for the guidance of the public but no
stock can be issued, and consequently no
stock can be sold, which has not some cor
responding value in property.
II any n,isstatements of the value Of the
property Of the corporation are made by
the directors who sign the articles of or
ganization, those directors are made la
JIG UT Oa"NSSS " any purchaser OF tne
stock, and also liable to Imprisonment for
felony.
Under those conditions It is hardly to
be conceived that there will be either any
advantage in making false statements or
any inducement to do so.
Under the Hearst bill all increased or
new issues of capital stock must be sub
jected to the same forms processes. in
vestigations and examinations as origi-
nal Issues of capital stock and not share
OF additional stock may be legally is
sued until the approval OF the deputy
commissioner of corporations has been OBJ
tanned.
The Hearst bill prohibits the loan Of the
corporations money to any stockholders.
directors or officers, and in this way pre-.
vents such scandals as were disclosed in
the Hartman and other nvestiq atoms.
As penalty for Ioanirg the corpora.
TONS money to any stockholders, diree.
tors or officers, the Hearst bill makes all
who assent to any such loan liable for all
the debts of the corporation up to the ex-
tent OF the loan and the interest upon IL
until the repayment Of the sum so loaned.
The Hearst bin also stringentlv pro-
hibits the payment of any dividend except