« ÎnapoiContinuați »
Mr. ROBSION of Kentucky, from the Committee on the District of
Columbia, submitted the following
[To accompany S. 4551)
The Committee on the District of Columbia, to whom was referred the bill (S. 4551) to amend an act entitled “An act to establish a Code of Law for the District of Columbia,” approved March 3, 1901, and the acts amendatory thereof and supplemental thereto, having considered the same, reports favorably thereon, with the recommendation that the bill do pass.
The purpose of the proposed legislation is to amend the District Code with respect to the organization of corporations. The bill was suggested to the committee by prominent members of the District bar, and, so far as the committee has been able to ascertain, there is unanimity of opinion among the attorneys of Washington that the existing corporation law of the District is archaic, clumsy, and unduly restrictive.
The bill under consideration represents a revision of the original bill studied by the committee, S. 3492, reference to which is made in the reports and letters appended to this report. The revision was undertaken by the committee, and the present bill introduced, in order to make certain modifications suggested by members of the committee and by the corporation counsel of the District. In its present form, the bill, S. 4551, has the approval of the committee, the District authorities and the representatives of the bar.
CONTENTS OF THE BILL
The bill proposes to amend the District Code by adding thereto three additional sections-639 (b), 639 (c), and 639 (d).
Section 639 (b) provides that corporations organized in the District may amend their charters so as to permit them to add to or diminish corporate powers, substitute other purposes and powers, change corporate business, change location of place of business in the District, and to make any other amendment which would have been lawful or proper to insert in the original certificate of incorporation. This proposed new section may indirectly give some indication of the drastic restrictions imposed by present law upon District corporations.
Section 639 (c) contains provisions permitting a local corporation to create one or more classes of preferred stock, with or without voting power as the charter may provide; and to have one or more classes of common stock, subject to the stipulations governing such stock in the charter.
The section also contains a definition of the term “charter”; a provision that preferred stock may be made subject to redemption at such times and prices as the charter may provide; and a provision stating that the charter shall state the amount and terms of preference of stock which is preferred as to its distributive share of the assets of the corporation upon dissolution. The section further calls for a plain statement of restriction, limitation, or preference on all certificates for stock having limited or no-voting powers, or having preference or limitation as to dividends or as to its share of the assets upon dissolution.
There is no provision in existing law in the District for the classification of stock, and the committee feels that this proposed new section is fair to the seller and buyer of stock.
Section 639d is designed to enable local corporations to sell, lease, or exchange its business upon a two-thirds vote of all the shares. Ample provision is made for the protection of dissenting stockholders, the section outlining a fair and reasonable method by which such stockholders may obtain a just price for their stock from the corporation, or in event of a disagreement, from the District courts.
a The section makes clear that this proposed legislation shall not affect any law regulating public-utility corporations in the District or the act of April 28, 1904, to prevent the fraudulent sale of merchandise in the District
INDORSEMENTS OF THE BILL
There are appended hereto, as part of this report, letters from the District Commissioners and members of the local bar, in support of this proposed legislation. It will be noted that the objectionable features referred to in the commissioners' letter have been removed from the bill.
COMMISSIONER OF THE DISTRICT OF COLUMBIA,
Washington, March 14. 1930. Hon. ARTHUR CAPPER, Chairman Committee on the District of Columbia,
United States Senate, Washington, D. C. Sır: The Commissioners of the District of Columbia have the honor to submit the following on Senate bill 3492, Seventy-first Congress, second session, entitled “A bill to amend an act entitled 'An act to establish a Code of Law for the District of Columbia,' approved March 3, 1901, and the acts amendatory thereof and supplemental thereto," which you referred to them for report as to the merits of the bill and the propriety of its passage.
The bill was referred to the corporation counsel of the District of Columbia for report, and there is inclosed herewith a copy of the report of the acting corporation counsel, Mr. Vernon E. West, regarding the features of the bill. As will be seen, the corporation counsel finds no objections to the proposed new sections 639 (b) and 639 (c). As to section 639 (d), however, certain objectionable features are found by him.
The commissioners concur in the report and recommendations of the acting corporation counsel and recommend that section 639 (d) be modified along the lines suggested by him. Very truly yours.
PROCTOR L. DOUGHERTY, President Board of Commissioners of the District of Columbia
March 13. 1930. The CommisSIONERS:
I return herewith Senate bill 3492, to amend the Code of Law for the District of Columbia, referred to this office for report.
This pending bill proposes to insert new sections, 639 (b), 639 (c), and 639 (d), as an amendment to subchapter 4 of chapter 18 of the code providing for the incorporation of commercial enterprises.
Section 639 (b) permits corporations to amend their charters by adding to, or diminishing, the corporate powers; by substituting other powers for those set forth in the charter; by changing the corporate business, and by making any other amendment provided such amendment shall contain only such provisions as might be inserted in an original certificate of incorporation.
Section 639 (c) provides for the issuance of preferred stock and the rights and obligations which may be granted to and imposed upon the holders thereof.
I see no objection to the two sections above referred to and am of the opinion they should be approved.
Section 639 (d), however, contains certain objectionable features. It provides that a corporation organized or existing under subchapter 4 of chapter 18 of the code may “sell, lease, or exchange all of its property and assets as an entirety, including its good will, and franchises” to or with any other corporation or natural person upon the affirmative vote “of two-thirds of all the stockholders" but any stockholder who, at least 5 days before the meeting for the approval of such sale, lease, or exchange, files his protest, may, within 20 days after such meeting make a written demand upon the grantor corporation for payment of his stock, and he shall thereupon be entitled to receive an amount equal to the fair value thereof, unaffected by such sale, lease, or exchange.
If such dissenting stockholder and the corporation of which he is a stockholder shall fail to agree upon the fair value of the stock he may file a petition within 30 days after such demand in the Supreme Court of the District for the ascertainment of the fair value of his share. Thus far the section is not objectionable. It, however, provides that the claim of the dissenting stockholder for the fair value of his stock is made a lien upon the property and assets so leased or exchanged superior to any mortgage or other lien placed on said property and assets by the grantee. This section also provides that the grantee shall take the property and assets of the grantor corporation subject to the latter's debts and liabilities, and such debts and liabilities shall have priority over any incumbrances placed upon said property by the grantee. The effect of this portion of the section, in my opinion, is to preclude a corporation from selling, leasing, or exchanging all of its property for the reason that the grantee would be unable to borrow money upon the security thereof or give a good title thereto until the statute of limitations had run after such sale or lease, and all suits brought within the statute by creditors or dissenting stockholders had tenninated.
I, therefore, recommend that the provisions to which I have made objection be omitted.
VERNON E. WEST, Acting Corporation Counsel, District of Columbia.
COOKE & BENEMAN,
Washington, D. C., January 17, 1930. Hon. ARTHUR CAPPER,
United States Senate, Washington, D. C. Sir: I hand you herewith draft of a bill which is intended to amend the Code of Law for the District of Columbia with respect to the organization of corporations within the District of Columbia. The present corporation law of the
District of Columbia governing general business corporations is both inadequate and cumbersome in its provisions, and the business community of the District of Columbia and counsel bave realized the inadequacy thereof through practical experience in corporate organization and management. Business operations requiring corporate character have been compelled to resort to other jurisdictions for charters in order to make avail of the more modern provisions of State corporation acts elsewhere available.
Resort has been had to the adjacent States of Virginia and Maryland, with modern enactments, as well as to the States of West Virginia, Delaware, New Jersey, and others. It is, of course, desirable for convenience to operations within the District of Columbia that the laws of the District of Columbia be adequate to provide all necessary requirements for local corporate operations.
The provisions of the proposed bill herewith are in the way of amendment to section 639 of the District Code, adding three additional sections thereto as follows:
Section 639 (b) authorizing amendment of charter for adding to or reducing corporate powers, substitution of powers, changing of business, changing of location of place of business, and amending charter for lawful purposes.
Section 639 (c) authorizing classification of preferred stock or stocks with conditions therefor not inconsistent with law and specifying voting power thereof, and providing for statement of voting powers on certificates of stock.
Section 639 (d) a general provision by which, pursuant to a meeting of its stockholders as now provided by law, a corporation may dispose of its property and assets as an entirety to another corporation, such transfer to be accomplished on an affirmative vote of two-thirds of all the stock outstanding, with full provision for protection of dissentient stockholders in settlement of their rights according to modern practice.
The existing law in the District of Columbia does not make provision for these privileges and powers for District of Columbia corporations. Such authority is now general in State corporation acts of modern character.
I understand that the provisions in the bill have been brought to the attention of the corporation counsel of the District of Columbia and of the Commissioners of the District of Columbia and have their considered approval. I, therefore, have confidence in assuring you that upon the introduction of a bill of this character and submission to the District authorities, the District of Columbia Committee in the Senate will be appraised of the approval by the District government.
The business community and the bar of the District of Columbia will, I am confident, cordially receive this improvement of the laws governing organization and management for the District.
I therefore beg to request that, if feasible, you will see that the bill is introduced and preliminary reference made thereof. Should a committee hearing be considered desirable, I will be glad to appear before the committee and state the present condition of the law, its inadequacy under modern necessities and as contrasted with State Corporation acts, and the desirability of the enactment of this measure for the local community. Respectfully,
LITTLEPAGE & LITTLEP,
Washington, D. C., March 11, 1980. Hon. ARTHUR CAPPER,
Senate Office Building, Washington, D. C. MY DEAR SENATOR: Your bill (S. 3492) entitled “A bill to amend an act entitled 'An act to establish a Code of Law for the District of Columbia,' approved March 3, 1901, and the acts amendatory thereof and supplemental thereto,” has come to my attention, and I wish to thank you for having brought this matter forth and to indorse the terms of the proposed measure. Our District of Columbia code provisions relative to corporations are old-fashioned and so restrictive in corporation management that generally resort is had to other jurisdictions for the incorporation of business concerns planning to conduct their entire business within the District of Columbia.
Your measure gives substantial and necessitous remedy to this part of our District Code.
Section 639 (b), as proposed, enables corporations to add to or take from their powers, change their corporate business, change their location in the District of Columbia and increase or diminish their capital stock. All of these things are now difficult of accomplishment.
Section 639 (c) enables corporation organizers to classify their stock. There is no provision now in the District of Columbia law for the making of preferred class or of different classes of stock. This, of course, is a very important element and our law quite archaic in this regard.
Section 639 (d) as proposed, will enable corporations upon a vote of two-thirds of their shares to dispose of their business without unanimous consent of all the shares. There is, however, ample provision for the protection of the interest of dissenting stockholders.
These provisions are modern and similar to those in State corporation laws of modern type. The District law should be amended in order to enable local concerns to incorporate within the District. I trust that the bill will promptly pass as the experience of counsel dealing with these matters in the District of Columbia fully discloses its utility. Very truly yours,
T. P. LITTLEPAGE,
COVINGTON, BURLING & RUBLEE,
Washington, D. C., March 11, 1930. Hon. ARTHUR CAPPER,
United States Senate, Washington, D. C. MY DEAR SENATOR CAPPER: I note that you have introduced as S. 3492, an act to amend certain features of the corporation law of the District of Columbia, and I am writing to say that I hope that this bill can be enacted at the present session as it is legislation which is very urgently needed in the District of Columbia.
At the present time there is no simple method of amending a corporate charter, there is no certainty that preferred stock may be issued, and there is no provision for the sale of all of the property of a corporation except by unanimous consent of the stockholders. In these respects I think the laws of the District of Columbia are very archaic and I am very much interested in the effort to improve them, which is embodied in this bill. Very truly yours.
J. HARRY COVINGTON.
KENYON & MAJFARLAND,
Washington, D. C., March 13, 1930. Hon. ARTHUR CAPPER,
United States Senate, Washington, D. C. My Dear Sir: Senate bill 3492, lately introduced by you in the Senate, has come to my attention, and as a practicing attorney it is desired to state that that portion of the bill (sec. 639 (c)) which provides for the issuance of preferred stock and other classes will, if it become a law, be a great improvement upon the existing statutes wherein there is no provision other than for "capital" stock. Doubtless many corporations are now existing under the laws of other jurisdictions because of the absence of this provision under our local statute.
That section of the bill is also desirable providing for the sale of corporate assets, no: offensive to the act of April 28, 1904 (fraudulent sale of merchandise in bulk). The local law should be amended so that there may be a sale of such assets under provisions alike fair to the large and small stockholder. Respectfully,
J. MILLER KENYON.