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E.- RESTRICTIONS UPON DIRECTORS IN DEALING IN STOCKS AND OTHERWISE.
Restrictions upon directors may be found in the general commercial code ? quoted under Sec. XXXIV of the decree of September 20, 1899, and also under Sec. XXXV of the same decree.
F.-REGULATIONS REGARDING PRICES OF PRODUCTS.
A law of April 7, 1870, which took the place of sections 479, 480, and 481 of the general commercial law of May 27, 1852, makes the following special provisions regarding prices: “Agreements of employers for the purpose of forcing a reduction of wages or other less favorable conditions of labor upon their workmen by means of a stoppage of work or the dismissal of workmen, and agreements of laborers, with the intention of obtaining higher wages or other more favorable conditions of labor by means of a combined stoppage of work, and finally all combinations for the support of those who stand by such agreements or to harm those who renounce them are of no legal effect (Sec. 2).
“Whoever, in order to effect the formation, the extension, or the compulsory carrying out of such agreements, hinders or attempts to hinder, by means of intimidation or violence, employers or employees in the carrying out of their free will to give or accept work is guilty of a misdemeanor and shall be punished by the court with a term of imprisonment of from eight days to three months in case his offense does not come under some more severe provision of the criminal code (Sec. 3).
“The above provisions apply also to agreements of manufacturers (Gewerbsleuten) formed for the purpose of increasing the price of a commodity to the disadvantage of the public.” (Sec. 4.)
G.-REGULATIONS REGARDING PROFITS AND DIVIDENDS.
Regulations regarding profits and dividends are found under Sections XXVI, XLIX-LIV of the decree of September 20, 1899. The following provisions of the general commercial code also apply here:
“A shareholder can not demand the return of amounts paid in on shares, and as long as the company exists he has a claim only upon the net profit, in accordance with the provisions of the company's charter with regard to the division of the same among shareholders.2
“Interest at a fixed rate may neither be promised nor paid out to shareholders; only the net surplus shown by the annual balance sheet after the deduction of contributions to the reserve capital, when so provided in the by-laws (Sec. LIII, Decree of September 20, 1899), may be divided among them. An exception to the above rule with regard to the payment of fixed rates of interest may, however, be made in the company's charter for a definite period of time, no longer, however, than is necessary for the preparation of the company for the full prosecution of its business." 3
H.- REGULATIONS REGARDING THE OWNERSHIP OF STOCK IN OTHER CORPORATIONS,
OR THE COMBINATION OF DIFFERENT CORPORATIONS.
There are no regulations regarding the ownership of stock in other corporations. The combination of corporations can occur only where the by-laws expressly permit it (Sec. LV), and action on resolutions providing for such combinations is expressly reserved to the general meeting (Sec. XXXIX).
1.-REPORTS TO BE MADE TO THE GOVERNMENT.
A great number of reports and statements are required of corporations by the Government in the exercise of its right of supervision (see under N, below) and in the assessment of corporations for purposes of taxation (see under M, below).
K.-REPORTS TO BE MADE TO THE STOCKHOLDERS.
Reports must be made to the constitutive general meeting covering the transactions of the founders (Secs. XIII, XIV). Full notice must be given to stockholders regarding resolutions proposed for passage at general meetings (Secs. XL, XLI). Accounts must be submitted annually (Sec. L), and provision is made for the publication of notices and accounts (Sec. LIV.)
1H. G. B., 231-234.
2 H. G. B., 216.
3 H. G. B., 217.
L.-PRIVILEGES OF STOCKHOLDERS REGARDING EXAMINATION OF BOOKS AND
OVERSIGHT OF BUSINESS.
The provisions mentioned under K, above, guarantee not only stockholders, but also administrative officials and the general public, considerable privileges regarding the examination of corporate affairs. Stockholders exercise supervision over business directly through the general meeting (Secs. XIII-XIV, ÂXXIX-XLVIII), and indirectly through councils of direction (Sec. XXXVI), councils of supervision, or revisers of accounts (Sec. XXXVII). The general commercial code provides as follows regarding the call for general meetings: “The purpose of a general meeting must always be announced in the call for the
Resolutions dealing with subjects not so announced may not be adopted, with the exception of resolutions providing for the calling of an extraordinary general meeting. Motions may, however, be made and discussed in a general meeting without such prior announcement.”' 1
M.-METHODS OF TAXATION OF CORPORATIONS. Provisions regarding the taxation of Austrian corporations are found in the law of October 25, 1896. The principle of stoppage at the source is employed. The second part of the above law is devoted entirely to business undertakings, including corporations, which are obliged to make public reports of their accounts to the Government (Sec. 83). Its main points are as follows: The business tax (Erwerbsteuer) imposed upon undertakings which must make public reports of their accounts shall amount to 10 per cent of their taxable net income, unless otherwise provided for in the following paragraphs.2
The tax may not, however, amount to a smaller gum than one one-thousandth of the total capital invested in the taxable undertaking, and in the case of joint stock insurance companies, not less than one one-thousandth of the net annual premiums (after subtracting rebates on premiums). In the case of corporations and commandite companies, taxable capital is here construed to mean the paid-in share capital plus the yet unpaid original debt.
Corporations paying dividends in excess of 10 per cent in any one year are subject to additional taxes as follows: A tax of 2 per cent on what is paid in dividends between the 11th and the 15th per cent, and a tax of 4 per cent on what is paid in dividends from 15 per cent upward.
Exceptions are made in favor of mutual insurance companies and sayings banks which pay a lower rate of taxation than the above.
The method of administering the tax law of October 25, 1896, is prescribed in the greatest detail in a decree (Vollzugsvorschrift) published May 25, 1897, which contains complete forms of tax statements and lays down minutely the provisions according to which the annual net income of corporations is to be ascertained. From this document the following important qualifying statements are taken (p. 996, art. 39):
It is to be noted that the percentage of dividend according to which the above tax is assessed is not to be calculated on the basis of capital construed as in paragraph 2, above, but solely on the basis of share capital actually paid in, deducting only the amount of share capital already amortized.
It makes no difference whether dividends paid in excess of 10 per cent are drawn from profits actually obtained from business operations or whether they are paid out of reserve funds, except in cases where the tax has already been paid at the time money was transferred to the reserve funds.
N.-SPECIAL METHODS OF CONTROL BY THE GOVERNMENT. Control exercised by the Government in passing upon preliminary and final applications for the formation of a corporation is covered by Sections I-XII of the decree of September 20, 1899. Changes in the charter and by-laws of a corporation, including an increase or decrease of share capital (Secs. XV and XVI) or the creation of a bonded debt (Sec. XXIII), also require the approval of State officials. Arbitrary interference by the State is forbidden by Sec. LVI of the same decree. The supervision of insurance companies and foreign corporations is provided for by special decrees, abstracts of which follow:
Insurance companies.-A joint decree of the ministries of the interior, justice, com
1H. G. B., 238.
2 An additional tax of one-half per cent is added to the 10 per cent noted above unless the total sum realized from taxation under this law does not reach a certain amount which is fixed with reference to the income of the State from combined sources during the fiscal year. (See arts. 8 and 9, law of October 25, 1896, Reichsgesetzbuch, No. 220.)
3 R. G. B., No. 124.
merce, and finance of March 5, 1896," lays down regulations for the formation, organization, and management of insurance companies. Such companies are subject to State supervision to a much greater degree than ordinary business corporations, as the following extracts from this decree indicate:
“The supervision of the State (over insurance companies] must cover the exact observance on the part of the companies of their legal and charter regulations, and also all circumstances affecting the power of the company to meet its future obligations at any time. It must consequently give particular attention to the correct estimate of the premium reserve, the investment of funds, and also the correct, complete, and clearest possible presentation of all circumstances connected with the management and property of the company in abstracts and reports of accounts.” (Sec. 27.)
The decree of March 5, 1896, protects the interests of policy holders as follows: “The report on the management of insurance companies and their abstracts of accounts are to be given the widest practical publicity, and copies of the same must be held ready at all times for the examination of policy holders, or to be sent to them on request. Insurance companies are also obligated to send to policy holders upon request at any time copies of their by-laws or general statements regarding the conditions under which they accept risks.” (Sec. 35.)
Public reports are required of insurance companies as follows:
“Insurance companies must submit the following reports in authentic form to the ministry of the interior annually:
“(1) At least 3 copies of the report on management, including the abstract of accounts;
“(2) A copy of the minutes of the general meeting;
“(3) Evidence of the publication of the abstract of accounts as required by law.” (Sec. 31.)
Further, insurance companies are required to furnish the ministry of the interior with any information desired for the purpose of lightening the duties of State supervision or for publication in the annual official statistical reports. (Sec. 35.) Insurance companies are obligated to furnish State supervisory officials with all assistance and explanations which they may desire in exercise of their right of supervision, and also to open to them the books, accounts, etc., of the company at any time. (Sec. 38.)
The business of foreign insurance companies in Austria is subject to State supervision to the same extent as domestic companies, and so far as possible this supervision is to be extended over the whole business of such companies (i. e., its transactions outside as well as within Austria). To this end the resident representative of foreign insurance companies in Austria must procure from its central office, if need be, all books and statements of the company necessary for its supervision by Austrian officials. (Sec. 39.)
The admission of foreign corporations to do business in Austria, with the exception of insurance companies, is regulated by an imperial decree of November 29, 1865.2 Reciprocal permission granted to Austrian corporations of a similar character to do business in foreign countries is made one of the conditions. (Art. 1, par. b.) The foreign corporatio must appoint a representative, subject the confirmation of the administration of the State, who must take up his residence at the seat of the principal branch of the corporation in Austria, and who shall have full power to represent the company in all affairs of the company relating to its Austrian business. This representative is required to submit annually to the local representative of the Austrian Government the minutes of the general meeting of his company, its general balance sheet, and its special balance sheet for its Austrian business. These balance sheets must also be published by the company. (Sec. 5.)
ABSTRACT OF DECREE (VERORDNUNG) OF THE AUSTRIAN MINISTRIES OF THE INTERIOR, FINANCE, COMMERCE, JUSTICE, AND AGRICULTURE OF SEPTEMBER 20, 1899, TOGETHER WITH ĆERTAIN OTHER LEGAL PROVISIONS REGARDING CORPORATIONS REFERRED TO THEREIN.
SECTIONS 1 AND 2.-APPLICATION FOR PERMISSION TO ESTABLISH A CORPORATION.
The permission of the State is necessary for the formation or transformation of a joint stock company. The application for the permission of the State may be either (a) for the approval of the formation of the joint stock company or (b) for the permis
sion to take the preliminary steps with a view to the formation of such a company, All applications for the permission of the State must be sent to the political official of the central government in whose administrative district the joint stock company is to have its seat. Such applications must state the names, positions, and residences of the applicants. (Firm names and the location of firms must be given in case any such apply. If several persons together apply for permission of either sort (see a and b above), they must state in their application the person or persons whom they wish to represent them in the matter, and who shall be empowered to transact the necessary dealings with the State official in securing permission).
SECTION 3.-APPLICATIONS FOR PRELIMINARY PERMISSION.
Applications for preliminary permission must be made in the cases provided for by Sec. 15 of the Imperial Patent of November 26, 1852, i. e.: (a) When the persons who wish to undertake the formation of the corporation intend to issue public notices or calls in order to encourage participation, or (b) when the undertaking is of such a character that it necessitates preliminary action by which the rights of third persons are affected. (For example surveys, the granting of which presupposes the permission or assistance of public officials.) Further, preliminary permission may be sought when the promoters do not intend to organize the corporation? at once.
In the statement conveying the application for preliminary permission to form a joint stock company the reasons for applying for such permission must be stated in detail and the plan of the undertaking described in its main outlines. Five copies of the plan of the charter or by-laws of the corporation must accompany the application. The plan of the charter must cover the following points in particular:
(1) The names or the firms, as the case may be, of those applying for the charter, and the names of all other persons who are to represent the interests of the corporation up to the time it is definitively constituted.
(2) The firm name and seat of the corporation. (3) The object of the undertaking. (4) The amount of capital and of the separate shares and fractional parts of shares.
(5) Regulations as to whether the shares are to be issued under a particular name or to holder, and whether they may be changed from the one form to the other and by what method of procedure. (6) Regulations regarding the paying up of shares (payment in full or in part).
(7) Regulations regarding the appointment and the organization of the board of directors.
(8) Regulations regarding the manner of calling the constitutive general meeting, quorum, and method of passing resolutions at such meeting, and the matters which it will be called to pass upon.
The plan of the charter must also give statements with regard to the following points in case it is the intention to adopt them:
(9) If shares of different kinds are to be issue the total amount of each kind, together with a statement of the particular rights accorded each of the different kinds of shares.
(10) In case contributions other than cash are to be accepted or purchases are to be made in founding the corporation, the statement required by law 3 in such cases.
(11). If particular privileges are to be accorded individual shareholders or others, the nature and the extent of these privileges are to be given, together with the names of the persons concerned.
(12) If, in addition to the payments on shares, other regular duties not of a financial character are laid upon shareholders, the statement required by law 4 regarding such duties.
SECTION 4.-ACTION UPON APPLICATIONS FOR PRELIMINARY PERMISSION.
The political official representing the central government in the district in which the corporation is to have its seat is empowered to grant, in the name of the ministry of the interior, preliminary permission for the formation of a corporation within
1 The word “Verein” is translated as “corporation” here. The imperial patent of November 26 refers, however, not only to industrial, but also to political, social, and other forms of organization. But as applied in the decree of September 20, 1899, the word “corporation" seemed to be the best translation. Throughout the word “Gesellschaftsvertrag” is translated "charter (of a company;] ” the word “Statuten,” “
“by-laws.” Sec. 15, Imperial Patent of November 26, 1852. 3 See below p. 272, Sec. 20, Ver. v., September 20, 1899. 4 See below p. 273, Sec. 30, Ver. v., September 20, 1899.
the provisions of this act. In all cases where the granting of such permission would affect the sphere of action of other State officials he should put himself into communication with them as quickly as possible before granting the preliminary permission.
Officials are directed to transact business of this nature with all possible dispatch, and, as a rule, to answer applications for permission within 30 days at the longest. The official is to file the papers in the case with the ministry of the interior.
In case the official should have any doubt regarding the granting of the permission he should leave the decision with the ministry of the interior.
With the granting of preliminary permission, the parties to whom the charter is granted are empowered to take the necessary steps for the founding of the corporation under consideration, including the issue of public announcements and calls for the purpose of procuring the subscriptions of shares.
The official has the right to state in granting preliminary permission for a corporation the conditions under which it is to be formed. He may entirely refuse permission in case the personality of the promoters or their financial ability does not, in his opinion, guarantee the upright conduct of an undertaking, or at least is not such as to assure him that unauthorized by-purposes will not be followed by the company. He must, of course, refuse permission in case the object proposed for the corporation is not permitted by law. It is made his especial duty to observe that in the case of corporations which purpose seeking subscribers, either by way of public announcements or by private subscriptions, it shall be expressly stated either in the programme itself or in the invitation to subscribe, who are to represent the interests of the company up to the time of its definitive constitution and who are to accept the responsibility with regard to preliminary actior. in founding the corporation; it is further his duty to see that each participant in the company, as soon as he becomes such, complies with the published programme and by-laws. In granting preliminary permission for the formation of a corporation the conditions are always to be stated, which must be fulfilled before the final permission shall be granted, especially those requiring the paying in of the share capital in cash by means of subscription, and also the legal requirements regarding contributions other than money to the capital, or purchases necessary to the formation of the corporation. (See pp. 270, 272.)
Public notices or calls for subscriptions must contain statements 1 to 12 of Sec. 3 above.
Preliminary permission expires in a year from the date it is granted, if within this period application is not made for final permission. In exceptional cases this period may be extended, notice of the extension being sent to the ministry of the interior by the official granting it.
SECTION 5.—APPLICATIONS FOR FINAL PERMISSION. Application for final permission must state in greater detail all facts regarding the corporations (see above, p. 268), and must explain the circumstances determining amount of capital to be invested in plant or share capital, as the case may be. (Anlage- bezw. Actiencapital.). In case of corporations which intend to carry out building operations, the time of beginning the work, of completing its various parts, and of its final completion must be stated. It is made the duty of those seeking the charter to add everything to their statement necessary to the explanation of their programme for realizing their business undertaking. Ten correction-free copies of the charter and by-laws must accompany the application. Especial mention is again made in this connection with regard to the regulations concerning contributions to capital other than in money or acquisitions of property necessary for the founding of the corporation.
SECTION 6.—METHOD OF SUBSCRIBING FOR SHARES.
Application for final permission must also be accompanied by a statement regarding means proposed for guaranteeing the paying in of the cash capital. To this end, written declarations of the concessionaires or of third persons regarding the subscription of shares, together with a list of the subscribers, with their names, occupations, and residences, and the number of shares for which they subscribe must be submitted. Each subscription for shares must contain a statement of points 1 to 12 of Sec. 3 (see p. 268), and a statement from the subscriber that he obligates himself to accept and pay cash for the shares to which he subscribes, in case the corporation is granted a charter. This statement must give the number and kind of shares subscribed for by each, the price to be paid for them (Uebernahmscurs), time, and amount of payments.
1 Secs. 16, 17, and 18 of the Imperial Patent of November 26, 1852. IC-VOL XVIII--01-18