CAPITAL STOCK 1. Stock and non-stock corporations.—Capital stock has already been defined as the vested interest which the owners of a corporation have in the com pany. A share is merely one of the equal parts of the capital stock. The shareholders are the owners of the corporation; in fact, in their collective capacity the shareholders are the corporation, since it can have no existence without them. Most corporations are stock corporations.
Another form of corporation, also composed of in dividuals associated under a -charter from the state, is known as a non-stock corporation, because the in terests of the associates are not represented by trans ferable shares. The interested parties in this case are called members, instead of stockholders. Non-stock corporations are formed for public or mutual benefit, and not for private gain. Contributions are in the form of donations, from which financial profits are not expected nor received. Churches, universities, Young Men's Christian Associations, charitable associations, cemeteries, institutions for promulgating art and civic improvement, mutual benefits, etc., are familiar types of non-stock corporations. Altho an interesting volume could probably be written upon the methods of raising funds for these worthy purposes, such associations cannot be classed as business companies and their methods of raising funds do not belong to the subject of corporation finance.
2. Subscriptions to capital is usually de sirable, and frequently necessary, that some provi sion for securing the capital of the corporation be made before the charter is taken out. And yet the cor poration itself, until the charter is received, has no existence and no power to contract for capital. This situation is met by employing subscription lists, which may be used either before or after the charter is re ceived.
A subscription to capital stock may be, in effect, a mere promise to take stock after the corpora tion is chartered, or it may be a contract between the corporation and the subscriber, or between the sub scriber and trustees who are acting for the proposed corporation, as the case may be. The laws of some
states vest authority in certain state officials to act as trustees in receiving stock subscriptions for the benefit of corporations which are about to be formed. Such subscriptions immediately become as binding as any other contract, because the trustees have legal capacity to contract.
In the case of subscriptions to the stock of cor porations not yet formed, when trustees are not act ing, the subscriptions take the form of a mere promise or continuing offer, which cannot be enforced at law until the corporation has filed its certificate of incor poration or received its charter, after which the offer becomes a binding contract between the subscriber and the corporation. Under most state laws the offer is automatically canceled upon the death of the sub scriber, or if he becomes insane, and may be canceled by him at any time prior to the incorporation of the company. In view of this regulation, which applies quite generally, it would seem advisable, from the financial standpoint, to secure the charter of the com pany as soon as possible after the subscription books are opened.
3. Form of the subscription.—Lists or books—pre pared for the purpose—known as subscription lists, may be used for subscriptions, or the subscriptions may be entered on separate cards for convenient fil ing.
Altho subscriptions may be taken by telephone or telegraph and are as binding orally as other forms of contract, it is always advisable to have oral sub scriptions confirmed by letter, or signature on the prescribed form, in order that indisputable evidence of the subscription may be on file. The subscription should always be signed and show in printing, or pre ferably in the handwriting of the subscriber, the date and the actual number of shares subscribed for. Oftentimes, the par value of each share and of the entire subscription is inserted, as a check upon the amount subscribed.