The Richmond Virginian. (Richmond, Va.) 1910-1920, 1917-02-08
SOUND PUBLIC POLICY
TO GOVERN CHARTERS
In Refusing Charter, Chairman OF
Corporation Commission Lays
Down Important Principle.
DIRECTORS POSITION DEFINED
Will Not Allow Scheme Which would
Undermine Fundamentals of JUS
tice and Equity-Would Bar Stock
holders from Knowing OF Business.

! All applications for charters, the
provisions of which are not those Of
sound public policy. will be refused by
the state corporation commission. ac-
cording to an opinion handed down
Yesterday by Chairman c. b. Garnet.
The opinion was specifically in connec-
tion with the granting of a charter to
the Superior steel corporation, but Il
4 lays down principles which will govern
the commission in issuing future char
ters
In the certificate of the Superior
Steel corporation. submitted for record.
II was stated that NO contract or
other transaction of the corporation
shall, in the absence of fraud. be az
fected by the fact that any of the di-
. rectors of the corporation are in any
way Interested in or connected with
any other party TO such contract or
Transaction" II Is further stated in
the certificate that The board Of d.
rectors shall. from time TO time. de-
termine whether. and to what extent.
and AT what times and places. and UNI
: der what conditions and regulations.
4 the accounts and books OF the corpora
ltion. or any or them. shall be open to
! the inspection of the stockholders"
Relation Of Director and Stakeholder.
Z
that there ar. three parties who may
be affected by such provisions as the
FIRST clause contains. the creditors of
the corporation. the stockholders. and
the corporation itself Putting aside
+ the effect of The clause as being nuea-
/ tory in regard to the creditors. MIR.
Garuett says that the relation OF a
director to the corporation being that
: of trustee and fduciary. It has been
constantly held that such relation does
not admit Of a directors creating any
: relation between himself and the trust
company which would make his inter
est anita Eon}stfr 10 that OF his bene-
1fTcGAfF. IN AT contracts mazda ny the
directors. they represent the stock
/ holders and not themselves. and in all
Their official actions they are required
ITO consider not their private interests.
but those OF the stock holders, whose
property they manage and control"
Therefore, the opinion states that It
Is perfectly clear that so far as di
rector is concerned II is against pub
lic policy for him to enter into CON
tract with his corporation. whereby he
] is personally 10 reap profit. and that
the courts VIII declare such a contract
void because IL is contrary TO good
morals and against public policy. II
object Of the provision. quoted above,
{, ON the certificate of Incorporation
presented to US, Is to make the sub
3 scriber 10 the stock enter into a con-
tractual obligation waving this salu-
tary rule Of law. We are of the opinion
that such n charter provision contains
! an agreement that is illegal: because
( Il tends to ohstruct and impede the
free course OF justice: il has further
! tendency to withdraw from the court
= or chancery a part OF ITS Jurisdiction,
and il encourages trustees 10 breaches
Of trust upon the false assumption that
the benefciaries of tho trust are
estopped from inquirine into their con
duct. This charter Will. therefore, not
be issued SO long as il contains such
a provision
/ Records Property of Shareholders.
/ In regard to 'tr7 second clause under
4 consideration. n refers TO the eX-
amlnations Of the books OF the cor
poration by the ockholders. the opin-
ion declares that the common law gives
! TO the stockholders the right to exam
inc the books and papers Of corr
poration when an inspection is sought
~ proper times and for proper pur-
poses This right. the opinion states,
rests on the fact of ownership, IN that
?
really belong to the shareholders.
TO allow the insertion OF this pro-
vision The opinion reads. would en-
power the directors to prevent the In
spsction OF the corporate books and
records for the discovery Of any doubt
full transactions To allow the inser-
ton Of both of the clauses referred TO
would give to the corporations pos
sessing such charter provisions rights
and privileges not only not conferred
1 by the general law. but directly in the
teath of the general law. and would
/ ultimately enable all corporations
I those heretofore chartered, by amend
ing their certificates and those hereaf-
ter chartered by the inclusion OF such
I provision---to make OF minority stock
holders mere pawn in the game OF
/ interlockinG directorates, and to under
mine the fundamental principles of
Justice and equity and fair dealing
I which the courts have carefully and
laboriously evolved and applied for the
protection of the weak against the
/ strong
File Bankruptcy Petition.
4. patittoo in voluntary ankrNptry