District of Columbia governing general business corporations is both inadequate 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. in the District of Columbia that the laws of the District of Columbia be adequate It is, of course, desirable for convenience to operations withto 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. be considered desirable, I will be glad to appear before the committee and state Should a committee hearing 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, LEVI COOKE Hon. ARTHUR CAPPER, LITTLEPAGE & LITTLEPAGE, Senate Office Building, Washington, D. C. MY DEAR SENATOR: Your bill (S. 3492) entitled entitled 'An act to establish a Code of Law for the District of Columbia,' approved A bill to amend an act 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, Hon. ARTHUR CAPPER, Washington, D. C., March 11, 1930. 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. Hon. ARTHUR Capper, J. HARRY COVINGTON. KENYON & MACFARLAND, Washington, D. C., March 13, 1980. 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. Hon. ARTHUR CAPPER, Government OF THE DISTRICT OF COLUMBIA, United States Senate, Washington, D. C. MY DEAR SENATOR CAPPER: At your request Mr. Levi Cooke and I have framed amendments to S. 3492, to meet the objections I advanced at the hearing last Friday. The As already explained at the hearing, the bill consists of three sections. first, section 639 (b) enables corporations to add to or diminish corporate powers, substitute other purposes and powers, change corporate business, change location of place of business, and make any other amendment or amendments not already provided for if such amendment or amendments of the charter contain only such provisions as would have been lawful or proper in the original certificate of incorporation. We suggest no change in this section. The second section, section 639 (c) as originally framed, provides for the issuance of preferred stock. We suggest an amendment which also permits the classification of common stock and eliminates the requirement that the recorder of deeds before receiving and filing a certificate of incorporation, shall have proof of a full subscription of all stock and payment of 10 per cent of cash thereon. This requirement has no premise in general sections and is created by section 552 of the code. Its effect is to restrict unduly the incorporation of companies under District of Columbia law. It is subject to easy evasion and undoubtedly has been the source of misstatements under oath in order to secure recordation. Sections 613, 615, and 616, which are general sections, provide, respectively, that no company shall be authorized to transact business until 10 per cent of the capital stock shall have been actually paid in, either in money or in property at its actual value; that stockholders shall be individually liable for the unpaid amount due upon shares of stock held by them; and that the president and a majority of the trustees, within 30 days of the payment of the last installment of capital stock, shall make a certificate as to the amount of the capital stock so fixed and paid in; and that they shall within the said 30 days record the same in the office of the recorder of deeds of the District. The provisions of these three sections are ample to protect the public in dealing with corporations as organized in the District. An effort was made to include a provision for no-par stock, but such an amendment would require correction of several other provisions in the code, and it is respectively suggested that such provision in the District law await a general revision of the corporation laws of the District of Columbia. The third section, section 639 (d) permits a corporation to dispose of all of its assets upon a two-thirds vote of all of its stockholders with protection to minority stockholders. This protection is furnished by the amendments substituted for lines 7 and 8 on page 6 through giving to dissenting stockholders prior to the settlement of their claims a lien upon proceeds of the sale, lease, or exchange in the hands of the vendor, lessor, or grantor corporation. In other words, until the dissenting stockholders' rights are finally determined through agreement or award in litigation, the company in which the dissenting stockholder holds shares must submit to a lien in favor of the dissenting stockholders on the proceeds of the sale, lease, or exchange. We have also removed from this section the provision that the vendee shall take the property subject to the grantor's debts and liabilities including the claims of dissenting stockholders. As before stated, provision has been made for the protection of the dissenting stockholders and general creditors of vendor corporations are fully protected by the bulk sales law. The formal amendments are self-explanatory. I have the honor to remain, Very respectfully yours. 71ST CONGRESS 2d Session } SENATE { REPORT No. 760 LEGAL RESERVE ON LIFE INSURANCE POLICIES IN THE DISTRICT OF COLUMBIA MAY 29, 1930.-Ordered to be printed Mr. CAPPER, from the Committee on the District of Columbia, submitted the following REPORT [To accompany S. 4325] The Committee on the District of Columbia, to whom was referred the bill (S. 4325) to amend subchapter 5 of chapter 18 of the Code of Law for the District of Columbia by adding thereto a new section to be designated section 648-a, having considered the same, reports favorably thereon, with the recommendation that the bill do pass, with the following amendment: Page 2, line 4, strike out the word "after" and insert, in lieu thereof, "before the first day of January next following". The object of this bill is to require life-insurance companies operating in the District of Columbia to maintain a legal reserve. The District now has no law requiring maintenance of such a reserve, which is a vitally important element in the life-insurance contract. It is the insured's only assurance that his contract will be satisfied by the company. Discovery of this serious defect in the District laws was made by the corporation counsel in a recent case. The District Commissioners urged the introduction of this bill, and recommend its adoption in their letter appended hereto, as part of this report. The committee knows of no opposition to the bill. Hon. ARTHUR CAPPER, COMMISSIONERS OF THE DISTRICT OF COLUMBIA, Chairman Committee on the District of Columbia, United States Senate, Washington, D. C. SIR: The Commissioners of the District of Columbia have the honor to submit the following on Senate bill 4325, Seventy-first Congress, second session, entitled SR-71-2-VOL 2-45 "A bill to amend subchapter 5 of chapter 18 of the Code of Laws for the District of Columbia by adding thereto a new section to be designated section 648-a," which you referred to them for report as to the merits of the bill and the propriety of its passage: This bill was introduced by you upon request of the commissioners in a letter to you dated April 29, 1930, from which the following is quoted: "There now exists no provision of law in the District of Columbia requiring the maintenance of a legal reserve on life-insurance policies. The corporation counsel in reviewing an appeal of the Federal Life Insurance Co. from the action of the superintendent of insurance suspending its license to operate in the District of Columbia for alleged impairment of capital, rendered an opinion holding that life-insurance companies now operate in the District of Columbia under the provisions of section 653 of the Code of Laws of the District of Columbia. The opinion further held that section 648 of the code, supra, has been repealed by the provisions of legislation contained in section 653, supra. (Act of August 15, 1911.) The outstanding point of the opinion was the holding that there now exists no provision of law in the District of Columbia requiring the maintenance of a legal reserve on life-insurance policies. "A legal reserve is an important, as well as a necessary, element in the contract of life insurance. Its existence is the only assurance that the insured has that his contract will be satisfied at maturity. To realize that there is no authority in law requiring the maintenance of such a fund is but a harbinger of chaos so far as the insured is concerned. "The bill proposes to grant relief in this connection and the commissioners believe that the measure is an emergency one requiring prompt action." The bill should be amended by striking out on page 2, line 4, the word "after". and inserting in lieu thereof, the words "before the 1st day of January next following." The bill, as introduced, used the word "after" for the reason that the reserve requirement is an essential element in a life insurance contract and it was felt that immediately upon passage of the act all companies transacting life insurance business in the District of Columbia should be required to set up the reserve required by the legislation; but the superintendent of insurance states that there are two different standards of valuation made applicable to contracts issued after the approval of the bill and no provision is made for standards for valuation of contracts issued before the approval of the bill. It is customary in other jurisdictions when setting up new standards of valuation to have the law take effect as of the first of any given year. Very truly yours, L. H. REICHELDERFER, President. O |