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as a basis of assessment, but the deduction of 3} per cent of the paid-in share capital is not made in the case of the communal income tax.

Supplementary property tax.-All forms of shares are subject to the supplementary property tax of July 14, 1893. (Ergänzungssteuer, sec. 7.) This is, however, a tax on the owners of shares, not on the companies directly. It amounts to one-half of 1 per cent of the value of property assessed. Exemption is granted to property of less than 6,000 marks ($1,500), and to all persons whose yearly income does not exceed 900 marks ($225) per year, provided their property does not exceed 20,000 marks ($5,000), and to women wage-earners and minor orphans whose yearly income does not exceed 1,200 marks ($300), and whose property does not amount to more than 20,000 marks ($5,000) in value. (Seligman, Essays in Taxation, p. 335.)

Stamp tax (Prussian). The articles of incorporation of joint stock or commandite companies, and resolutions of such companies providing for an increase of the share capital are subject to a stamp tax of one-fiftieth per cent of the value of the share capital, or the amount by which it is increased. (Preuss. Steuerges. of July 31, 1895.) Limited liability companies are also subject to this tax, but in the case of such companies the rate varies from one-fiftieth per cent to 1 per cent as their capital increases from 100,000 marks ($25,000) or less to 500,000 marks ($125,000) or over. For the incorporation of societies not conducted for profit a stamp tax of only 1.50 marks (37} cents) is collected.

Noncash contributions to stock companies are also subject to a special tax under this law. In case such contributions include domestic real property or rights equivalent to the same (unbewegliche Vermögensgegenstände im Inlande) a tax of 1 per cent of the full value of the compensation granted by the company for such contributions is collected, or if the amount of compensation does not appear in the documents by which the transfer is effected, the tax is estimated on the value of the property contributed. If the contribution consists in real foreign property, or rights equivalent to the same, a fee of 1.50 marks (37} cents) is charged. If it consists of personal property, the rate of one-third of 1 cent. In case it consists of claims (Forderungsrechte), the rate of one-fiftieth of 1 per cent of the value of the claims.

The law of July 31, 1895, further provides that the transfer of rights in the property of a company by a shareholder or his heirs to another shareholder, to the company itself, or to a third person, and also settlements made with shareholders at the dissolution of a company, are subject to a stamp tax of one-fiftieth of 1 per cent of the value of the compensation received, or, if this is not to be ascertained from the deed of transfer, of the value of the right transferred. In case of a transfer by the company of property or rights to a shareholder or his heirs, a stamp tax is assessed, the rate of which is the same for different kinds of property as the rate spoken of in the preceding paragraph. In estimating the amount of this tax, however, that part of the property transferred to a shareholder which corresponds to his share in the company is left out of consideration.

Court fees.—The Prussian law regulating court fees (Gerichtskostengesetz vom 25. Juni 1895) contains a list of fees which must be paid by stock companies for the various announcements, notices, etc., which they are required by law to make to the courts. These fees range from 40 pfennigs (10 cents) for transactions not involving more than 20 marks ($5) to 40 marks on transactions involving between 90,000 and 100,000 marks ($22,500 and $25,000). For larger transactions 1 mark (25 cents) is added to the fee for each additional 10,000 marks ($2,500) involved (sec. 33). In the case of announcements of the redemption or cancellation of securities, or of elections, or of resolutions passed by general meetings, councils of supervision, or other organs of stock companies, twice the usual court fee is charged. In the case of the announcement of the redemption or cancellation of securities, the value upon which the fee is assessed is determined in the same way as the value of the securities. In case redemption and cancellation are accomplished by one act the fee is collected once only. In the case of the other announcements noted above, the value subject to fee is to be assumed ordinarily at 20,000 marks ($5,000, fee, 20 marks; doubled, 40 marks, or $10); but under exceptional circumstances a higher or lower sum may be assumed. In no case,

however, shall the fee exceed 300 marks ($75). (NOTE.--In Prussian laws for the years prior to 1891 are to be noted frequent enactments placing corporations under the local property taxes in the different provinces. There is nothing since that date to show that they have been exempted from the taxes. Doubtless, therefore, they pay property taxes to Landgemeinden, cities, and Kreise, as do private persons or ordinary business firms. In this connection the often overwhelming influence which they secure in city councils and in Kreistage, as a result of the three-class election system based on the amount of direct taxes paid, is worthy of mention.)


Stock companies and other corporations (Kapitalgesellschaften) are not as such placed under the control of the State. Certain kinds of associations only, in consideration of the nature of their business, are placed under State control. This is especially the case with mortgage banks (Hypotheken bankgesetz 13 Juli, 1899), and, according to most of the State laws, this applies also to insurance companies. For the latter coi rol by the is also provided in th officially published draft of an imperial law regarding private insurance companies.

Reference has been made repeatedly in the preceding notes to the part played by the courts in the founding and control of the business of stock companies.


The German laws contain no special provisions on this subject.

1 From the note verbale to the United States embassy in Berlin.



NOTE.—Under the law of Austria special charters must be granted to each corporation by the proper Government board. As has been explained in Part I (p. 109), for many years, especially after the panic of 1873, the permission to organize a corporation was granted often with apparent reluctance, and the preliminary examination was frequently so inquisitorial in its nature that it acted as a decided check on meritorious business enterprise. In consequence of this condicion of affairs, business men have for years been endeavoring to secure a corporation law which would enable them to incorporate in regular form without being subject to a discretionary power of concession on the part of the executive. A law similar to the German law seems to be what they have had especially in mind.

Owing in part at least to the disturbed political conditions in Austria they have not been able to secure any act from the legislative bodies. At length, however, they persuaded the Government to issue a decree laying down certain provisions compliance with which would secure them a charter. In this way the discretionary power of the executive has been for the time self-limited. The change is so great that it has seemed best to give a full abstract of the decree, following the report on the law with complete references to it in the report on the law itself. Of course this decree is subject to repeal or change at any time by the executive, and the Austrian business men still wish their law. For the time being, however, this decree has brought much more certainty into the form of corporations and the methods of securing a charter than existed before.

The digest has been made by Robert C. Brooks.


Statements regarding capitalization and the methods of paying in capital are required in the applications made to State officials for permission to establish corporations. (Abstract of the decree of September 20, 1899, Sec. 3.) The method of subscribing for shares (Sec. VI), and regulations regarding contributions other than cash (Secs. VII-X, XX), increase or decrease of the share capital (Secs. XVXVIII, XXXI), preferred stock (Sec. XXVI), nominal value (Sec. XXVII) payment (Sec. XXVIII) and form of shares (XXIX), and the purchase of its own shares by a corporation (Secs. XXXII, XXXIII) are found in the same decree.


State officials are authorized to look into the character and financial standing of promoters. (Imperial patent of November 26, 1852, quoted under Section IV of the Decree of September 20, 1899.) The provisions regarding contributions to share capital other than in cash may also apply here (Šecs. VII-X, XX). Special privileges accorded to founders must be stated in the by-laws (Sec. XIX). The costs of founding a company may be distributed over a period of years not to exceed 5 (Sec. Li). Promoters are made personally liable for unauthorized proceedings by the general commercial code, as follows: "Å corporation as such does not exist until it has received the approval of the State and has been entered in the Commercial Register. Persons acting in the name of a corporation before such approval and entry are jointly and severally liable for such acts.” 2

1 When not otherwise stated, references by sections are to this decree, which is abstracted at length on pp. 267-279. 2 Handelsgesetzbuch, Austrian Commercial Code, abbreviated H. G. B., 211.


The liability of stockholders for payment on shares is defined in the following sections of the general commercial code:

“A shareholder is in no case obligated to return interest or dividends received in good faith.” 1

A shareholder is not liable to contribute more to the purposes of the company and to meet its obligations than the amount fixed by the by-laws to be paid for shares." 2

“A shareholder is legally obligated to pay interest at the rate of 6 per cent in case of delinquency in making payments on shares. The by-laws may in addition provide for the payment of a fine in such cases; they may also provide that delinquent shareholders shall lose their rights as subscribers to shares and forfeit payments already made to the company. 3 If no special form is provided in the charter of a company, calls for payments on shares shall be made in the form in which the ordinary notices of the company are issued. A shareholder can, however, in no case be declared to have forfeited his rights unless the call for payment has been published at least 3 times in the public newspapers designated for this purpose, the last time at least 4 weeks before the last day fixed for payment. In the case of shares issued only under particular names, however, special notices sent to the individual shareholders may take the place of publication in newspapers.

“So long as amounts due on shares have not been fully paid in, the shareholder is released from liability to pay in case of a transfer of his shares to another, only in case the company accepts the new holder in his place and relieves him from his obligations. Even in this case the retiring shareholder is liable in the second instance to the extent of the amount remaining due at the time of his withdrawal for a period of one year succeeding his withdrawal.” 6

The obligation of shareholders for the performance of certain periodic duties other than money payments on shares is limited by Sec. XXX of the decree of September 20, 1899.


The method of electing the first board of directors by the constitutive general meeting (Secs. XIII, XIV) and of later boards of directors, by regular general meetings, and the duties of directors in general (Secs. XXXIV-XXXVI) are stated in the decree of September 20, 1899. The same sections also fix the duties and responsibilities of executive committees and councils of direction, which may exercise certain directoral functions. The compensation received by directors and others must be stated in the by-laws. (Sec. XXXVIII.) It is the duty of directors to keep the books of the company and submit accounts to the stockholders. (Secs. XLIX, L.). Other special duties of directors are laid down in the general commercial code as follows:

“If the latest balance sheet shows that the capital stock of a company has been diminished by one-half, the board of directors must call a general meeting without delay, and immediately give notice of the condition of affairs to the proper administrative official. The latter may in such a case examine the books of the company, and if its condition warrants, order its dissolution.

“If it be ascertained that the property of a company no longer covers its debts, its board of directors must announce the condition of affairs to the court for the purpose of beginning bankruptcy proceedings.?

“Members of the board of directors are not personally liable to third parties for acts undertaken by them with the authority of the company. Members of the board of directors who exceed the limits of their authority or who act contrary to the regulations of this law or the charter of the company are liable jointly and severally for damages arising therefrom. This applies particularly in case they pay dividends or interest to shareholders contrary to the provisions of H. G. B., Sec. 217 (see under G, below), or in case they make payments at a time when they should have been aware of the insolvency of the company.'

1H. G. B., 218.
2 H. G. B., 219.
3 H. G. B., 220.
4 See H. G. B , 209, par. 11.
5 H. G. B., 221.
6 H. G. B., 223.
7 H. G. B., 240.
8H. G. B., 241.

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