The charter is the birth certificate of the corpora tion; and the corporation ceases to exist when ever the charter is annulled or abandoned. Since the corporation is not a natural person, it has no natural rights and privileges but only such as are specifically extended to it by law and charter, or which may be reasonably implied from the expressed powers. The charter is a grant from a sovereign legislature, ob tained by special enactment or by appropriate pro cedure under general laws.
Altho the corporation is an old institution, its ex tensive use is modern, over nine-tenths of the cor porate activities of the United States having been in itiated since the Civil War and fully half of them in the past fifteen or eighteen years. Obviously, it must possess great administrative and financial advantages to receive such general adoption.
Within the memory of our older citizens, means of communication and transportation were crude and expensive, and nearly all enterprise was local in char acter. The investment of capital, production and distribution of goods, and the extension of credit were local and personal affairs, man to man, friend to friend. Competition, accordingly, was local and not over severe, and margins of profit were higher than now.
With the vast development of railroads, telegraph lines, telephone and steamship lines following the Civil War, conditions were changed. Following the lead of the great railways and a few great industrial concerns, larger business units were formed to con duct interstate trade and to outsell the smaller local concerns. This was the result of cheap communica tion and transportation, together with the possibility of financing and managing large aggregations of cap ital thru the corporate form. Economies of large scale production and distribution, with the resulting interstate competition, soon reduced profits to a point which drove many of the smaller concerns out of busi ness or forced them in time to combine or enlarge under the corporate form.
The passing of the small localized business marked the death of the partnership as the principal form of association and ushered in the age of the corporation. Business now demands the large capital that may be secured only by a wide distribution of ownership, to gether with expert centralized management, and these the corporation affords. The development of cor porations has been so rapid in recent times that the science of corporate finance and management is al ways several years in advance of the law and the courts.
3. Formation of corporations.—To form a cor poration, stock subscriptions are first taken on lists provided for that purpose, after which a few of the subscribers, acting as incorporators, draw up a re quest that the state grant a charter to the proposed corporation. This is known as an "application for charter," or a "certificate of incorporation," and must show the name of the proposed corporation, the loca tion of its principal office, the nature of its business, and other essential facts regarding it, followed by the signatures and addresses of the incorporators. Usu ally, a list of stockholders and the number of shares subscribed by each is included. When this certifi cate has been filed for examination in accordance with law, and the application granted by the proper state authority, it becomes the charter of the corporation. Each state, thru general corporation laws, prescribes in detail the procedure in forming corporations, ex tent of their powers, and the rights of stockholders, directors and creditors. Upon receiving the charter, the stockholders meet for the purpose of adopting by laws, electing directors, and otherwise perfecting the internal organization of the company, which is then ready to do business. Unpaid subscriptions are called by directors as rapidly as funds are needed, or as provided in the subscription lists.
The real difficulty arises in securing adequate cap ital and this is the work of the promoter, or financier. If corporations could do business without capital, all of us would be great corporation executives—for a time. Any good lawyer can take care of these formal details of incorporation and organization, but to de pend upon him further for business and financial ad vice is no more sensible than taking a broken leg to the dentist.
4. The lawyer in corporation finance.—Candor compels the statement, based upon the grievous ex perience and careful observations of business men, that lawyers give notably unsound financial advice. Corporation law is a far different thing from corpora tion finance. There are, of course, some well in formed financial lawyers, found mainly in the very large cities, but ninety-nine lawyers in a hundred have given no time to the study of finance, and matters of financial expediency are outside their realm.