11. Public, and private corporations. —Another classification of corporations considers them from the standpoint of their relation to the state. Public corporations are subdivisions of the state with fixed territorial boundaries. They may or may not have delegated to them certain of the attributes of sovereignty. Examples of public corporations are a citv a countv a road district.
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Quasi-public corporations or public service corpora tions are. those which possess a franchise to use public property for a public purpose but for private gain. A railroad company, a gas company, or an electric light and power Company illustrates this class.
Private corporations are corporations which are formed for private purposes and for private gain. The ordinary manufacturing or trading company is a private corporation.
12. General and special cor poration has a franchise, known as a general fran chise. This franchise is the corporation's contract with the state containing the privilege granted by the state to exist as a separate entity with all the rights and immunities of a person within the state.
Quasi-public corporations have in addition a spe cial franchise conferring the right to use public prop erty. General franchises can be multiplied indefi nitely. Thus everybody can be given a franchise to vote for public officers, and an indefinite number of corporations can be formed. But special franchises are necessarily limited. It would be impossible for more than, say, a dozen companies to use the tracks laid in a city street, and it has been found quite im practicable to give the franchise to more than one or two companies to lay pipes under city streets.
13. Investors' classification of investor is primarily interested in earnings of cor porations, and he therefore classifies corporations in .such a way that all the members of a given class can be fairly well compared with one another in respect to the stability of their earnings. For this reason the investor speaks of public utilities, railroads, indus trials and mining corporations.
Public utilities include urban, suburban and inter urban street railways, electric lighting and power com panies, gas companies, water companies and telephone and telegraph companies. The railroads include the steam railroads of the country, tho in the process of electrification it has become difficult to draw a line between branch roads and what have heretofore been designated as interurbans.
The industrials include all the manufacturing and trading companies such as the United States Steel Corporation, Westinghouse Electric and Manufac turing Company, American Car and Foundry Com pany, American International Corporation, Canadian Car and Foundry Company, Limited, the Steel Company of Canada, Limited, etc.
In the class with mining companies are ordinarily included all corporations whose purpose is to extract raw materials from the earth, such as timbering and lumbering corporations.
Public utilities are quasi-public corporations which usually have a monopoly because of their special fran chises and because of the immense investment in their properties and plants. Their earnings, therefore, are more stable than .those of the industrials and mining corporations. Further discussion of these companies will be found in the Text on Investment.
14. De jure and de facto corpora tion is a creature of the state. It must accordingly be formed as the state prescribes. When a number of individuals undertake to form a corporation, if they comply with all the provisions of the law they have what is known as a de jure corporation—that is, a cor poration in law. If they do not succeed in complying with all the provisions of the law, they may still have a corporation which will be immune from attack by everybody except the state. To show in the latter ;` case that such a de facto corporation or corporation in fact exists, the incorporators will have to prove (I) that there was a valid law under which the corpora tion could have been formed; (2) that there was a bona fide attempt to comply with the provisions of this law; and (3) that there has been a use of cor porate powers,' that is, that the individuals have as sumed that they have had a corporation and have acted accordingly.
The following instance illustrates this condition: The law provides that three citizens, all of full age, may form a corporation. A promoter names two persons who with himself are to be the incorporators. It is subsequently discovered that one of the incor porators was not of age at the time the papers were signed. If those responsible for the incorporation knew of this at the time and wilfully violated tbe law, it cannot be said that they had made a bona fide at tempt to comply with the law. If, however, the in fant incorporator appeared to be of age and there was no reason for questioning him on tbat point, the corporation would undoubtedly exist in fact; it would be a de facto corporation.
Where neither a de jure nor a de facto corporation is created, the persons associated are considered part ners with all the obligations of partners. Hence the importance of determining whether an improperly in corporated company is at least a de facto corporation.
The Dominion Companies Act provides that not less than five persons must apply for incorporation.