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

from surplus profits.
1t makes the directors under whose ad-
ministration any such payment is made
liable to the corporation and to it's cred
itors for the full amount of any loss sus-
tanned by the corporation or its creditors
The only way in which a director in the
minority may escape liability for such an
act on the part of a majority of directors
is to cause his dissenting vote to be en-
tered on the minutes at the time when
such action is taken
The bill then grants the usual powers to
purchase, hold and dispose of property, to
borrow money, to issue mortgages, and to
merge with other corporations subject to
the provisions of such laws as may exist
against monopolies and restraints of trade
1t then proposes to compel existing State
corporations engaged in Interstate COM
merce to accept the provisions of the ma
tional act by imposing a differential fran
chise tax In the case of corporations TAX
ing advantage of the national act, this
differential franchise tax is placed at an
extremely low figure.
In the case, however. of corporations
engaged in interstate business which fail
to take out charters under the national
act, an annual franchise tax is imposed
amounting to per cent upon the gross
receipts of such corporations from their
interstate business.
PRESIDENT TAFT'S BILL.
The great advantage thus enjoyed by
CORPORATIONS formed under the national act
would inevitably and speedily lead every
existing State corporation to take out
national charter.
tax of this kind has been held to be
constitutional, and the principle of using
the powers of taxation in order to induce
corporations to take out national charters
was applied successfully in the state bank
cases when the national banks were es-
tabshed.
President Taft's Federal incorporation
bill, three years after the Hearst bill,
adopted in its entirety, with one single
exception, the provisions of the Hearst bill
aimed at overcapitalization. The one ex-
ception was that it did not authorize or
require any oral examination by the pub
lie authorities of corporations as to the
value of property against which stock can
be issued
Dummy directors might therefore be used
under the Taft bill, whereas under the
provisions of the Hearst bill RESPONSE
BILE director with knowledge Of the facts
would have to appear in person and vouch
for every value before any issue of stock
would be authorized and before any char
ter would be issued.
The Taft bill absolutely prohibits any
corporation from holding stock in any 9TH
er corporation. Such a provision would
make impossible any plan of legitimate
combination, even under the sanction of
supervising authorities, and after thorough
and complete investigation.
The only way in which any corporation
could under the Taft bill effect legiti-
mate combination with any other corpo-
ration would be by acquiring all of its
property and this step can ordinarily cas-
lily be prevented by handful of dissent
ing stockholders such as frequently ap
pear as plaintiffs in strike suits.
The other distinctive feature of the Taft
bill was provision which authorized Con-
gress to repeal the charter of any corpo-
ration that enters into any contract or
combination in restraint of trade
This feature is merely an attempt to
perpetuate the ineffective Taft method of
dealing with the combination question, as
exenpfied in the Tobacco Trust and Oil
Trust suits.
Even if this method should prove eff
fective, the only result would be to pun
ish innocent stockholders instead of re-
sponsihle directors
The Taft bill fails to provide any meth
Cd for compelling corporations to take out
national charters
A bill to be effective must do something
more than merely invite corporations to
abandon the shelter of the laws of favor
lite States which by their Iaxity place
premium upon stock watering and other
get-rch quick methods.
The Hearst bill probably could be i'm
proved upon and probably will be i'm
proved upon. Nevertheless it has fulfilled
a purpose in indicating the lines which
legislation may take in compelling cor
porations to submit their incorporation to
governmental supervision
The bill has also indicated the methods
by which governmental supervision can
effectively and properly control and limit
the capitalization of corporations for the
benefit of business and FOR the protection
of the public.