In British Columbia, Alberta, Saskatchewan and -Nova Scotia, the applicants sign a memorandum of association which is forwarded with the necessary affi davits and the usual fee to the registrar of joint stock companies; they thus become an incorporated com pany either with or without limited liability, accord ing to the articles of association.
6. Management of joint stock companies, it has been pointed out, are much like cor porations so far as management is concerned. Mem bership is usually evidenced by a. certificate of shares, each share representing a unit of interest in the busi ness and its profits. The by-laws prescribe the rights of the certificate holders. Under such by-laws, mem bers are ordinarily given the right to elect directors and to receive such dividends as are determined upon by the directors. Officers, whose powers are pre scribed in the by-laws, are usually elected by the di rectors. It will be seen, therefore, that the manage ments of the joint stock company and of the corpora tion are quite similar. In fact, the by-laws of a corporation may be used as a model for a set of by laws for the joint stock company.
7. Control of joint stock companics—an, illustra tion.—An interesting case in connection with the control of joint stock companies arose over the man agement of the United States Express Company by the late Thomas C. Platt. The company was organ ized in 1854. In 1862 there was an election of direc tors. It appears that no other election has ever been held. When a vacancy occurred it was filled by the remaining directors. In 1913 an action was brought to Compel the calling of a meeting for the election of directors. It was held that the provision of the articles whereby a meeting could be demanded only by holders of two-thirds of the stock was valid.
That the shareholders may devolve the sole management of the affairs of the association upon the board of directors is provided by the Joint-Stock Association Law (Consol. Laws, c. If 3) ; but we find no provision of law prescribing the manner in which the directors shall be chosen, nor limiting the right of a voluntary association to itself prescribe the method of choosing directors, nor fixing a definite term of office; neither arc we referred to any authority to the effect that it was unlawful for the associates to provide in the articles of association that, in the event of a vacancy occur ring in the board of directors, the same should be filled bv the remaining directors. It would seem that one shareholder would have the right, by proxy or otherwise, to empower another shareholder, altho he might be a director, to cast the vote of the former at an election to fill a vacancy in the board of directors. The provision in question-'was ap parently adopted in order to secure stability in the manage ment of the affairs of the association, harmonious action upon the part of its board of directors, and to avoid the necessity- of an election by the shareholders whenever a va cancy might occur in the board of directors. In order fur
ther to assure stability in management, a mere majority of shares was deprived of the right of choosing directors, which might result in frequent changes in the policy of the adminis tration ; but in order to correct abuses which might arise in the management of the affairs of the association, or dissatis faction with the action of the board in filling vacancies, the power of displacing directors was vested in the owners and holders of two-thirds of the shares thru a meeting of share holders which should be called at their request.1 8. Advantages and disadvantages of joint stock companies.—Joint stock companies enjoy certain ad vantages over the partnership, which enable them to acquire larger sums of capital than the partnership can accumulate. In the first place, a great number of people can become interested in the enterprise as co owners, without stumbling over each other as they would in a partnership. The joint stock company, it has been noted, is organized with a board of direc tors, which has the sole right to control the business. The board may be small and wieldy, no matter how large the number of shareholders. Moreover, be cause the joint stock company does not terminate its existence whenever there is a change in its member ship, either thru the withdrawal or death of a con stituent, it can borrow a great deal more capital than the partnership is able to secure, since it can issue long term bonds. As compared with the corporation, the joint stock company, perhaps, is somewhat freer, in that it may be formed by a contract instead of by the filing of a certificate. Moreover, it does not have to pay an organization tax, or an annual tax, to maintain its existence as a joint stock company.
However, these advantages of the joint stock com pany over the corporation are outweighed by the fact that members of the joint stock company have an un limited liability. The fact is, that in every way, ex cept in the matter of formation, the payment of taxes and the liability of members for the debts of' the concern, the two methods of organization are alike. Whatever would induce a group of business men to form a joint stock company would generally induce them to form a corporation; the decision would prob ably hang on the fact that in the corporation the members' liability is limited. In the case of express companies, which are the only large stock companies 110W doing business, this form of organization was probably chosen because the laws of' New York at that time, suggested it. Their continuance as joint stock companies has been due chiefly to inertia.