STOCKHOLDER. A stockholder is one who owns stock in a corporation or joint stock company, and who has been vested with certain rights and liabilities by law, by virtue of his relation to other owners of stock and to cred itors of the corporation. The term shareholder is used commonly interchangeably with stock holder. When a corporation is formed and the books of the company are opened, individuals subscribe for stock or shares in the company and certificates are issued to them as evidence of their right in the company which is granted by virtue of the sale of stock, the certificates of stock being merely the evidence of the trans action. Loss of certificates, or the fact of their not being issued cannot relieve the owner of stock of his rights or of his liabilities. Al though stock may be paid for in services, or good will, or patents, or property, as well as in money or negotiable paper, the stockholders as soon as they acquire membership in the corpora tion stand on the same footing, and have equal privileges. The number of shares owned regu lates the proportion of interest to be drawn by the individual, and the voting power in the affairs of the company. Any person who has legal capacity to own personal property may be a stockholder, and municipal and private cor porations maybe stockholders in other corpora tions within limitations contained in their in corporation. A manufacturing corporation may not subscribe to the stock of a bank or of a railroad, but may in payment of a debt, take stock in such other corporation, and may hold it and enjoy the same rights as other stock holders. The rights of all stockholders are represented by the corporate management, usu ally a board of directors. Legal relation be tween the corporate management and the share holders is created by subscribing to, or contrib uting for shares of stock. The stockholder re lies entirely upon the charter of the corporation as to his contract, regardless of representations of an agent, and an alteration in the constitution effecting a radical change in the corporate enter prise releases a shareholder from his subscrip tion. A corporation has the right, through its management, to carry on the corporate enter prise as against all persons including a minority of the shareholders, in a manner and for the purposes set forth in its constitution. The board of directors can be controlled only by action of a majority of shareholders. It is understood that the majority of shareholders shall govern in all matters coming within the act of corporation, and all shareholders are bound by the acts of the majority represented by the management. The individual shareholder has
only that control of the affairs of the corpora tion which his vote represents at the meet ings of shareholders. If it may be shown that any act of the corporation will benefit a majority, of shareholders, one shareholder or a minority, may not interfere, because the act may be an injury to him. But a minority may prevent by law any use of the funds of the corporation which are not strictly within the charter, or which may be shown as detrimental to the majority. Shares of stock give the holder a fixed right in the division of the profits or earnings of the company so long as it exists, and of its effects when dis solved. At corporate meetings each shareholder has a right to vote, and this cannot be taken from him. The right to vote by proxy does not exist unless so stated in the constitution of the company. Each holder has the right to inspect the company books either personally or through a representative or attorney.
It is supposed that stock is paid for at ,par and that the number of shares sold represents the working capital of the corporation. A cred itor may enforce his right to have the nominal value of capital stock paid in, even to making the directors call upon the stockholders to pay a pro rata share on their stock. The liability of a stockholder for the debts of the company is fixed by statute and differs in the various States. In some States a stockholder can be held for a sum equal to his subscription; special liabilities which make the stockholder responsi ble for other amounts or for particular debts, also exist under the laws of some of the States. Regarding the liability of shareholders in a national bank, it has been held that the share holders are individually responsible, equally and ratably, and not one for another, for all con tracts, engagements and debts of such associ ation to the extent of the amount of their stock' therein, at the par value thereof, in addition to the amount invested in the shares.
Irregular or fraudulent transfers may be set aside if it can be shown that there was inten tion to escape liability to the detriment of creditors.
A subscriber to stock is presupposed to know the obligations assumed and ignorance will not excuse him from liability to creditors. See