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If public subscription has been invited, copies of the public calls or notices issued must also be submitted, together with the application for final permission.

SECTIONS 7 AND 8.-CONTRIBUTIONS OTHER THAN CASH.

If, according to the plan for the foundation of the corporation, contributions other than money are to be accepted as a part of the share capital (Apports), or if materials (Anlagen) either existing or to be produced, or other property is to be taken over by the proposed corporation, a statement containing all details necessary for the formation of a judgment regarding these transactions must be submitted with the application for final permission. Legal documents, excerpts from the books of the corporation, etc., regarding such transactions, are also to be handed in.

SECTION 9.-REPORTS ON CONTRIBUTIONS OTHER THAN CASH.

A special written report must be made in the case of contributions other than cash to the share capital or of acquisitions of property necessary to the founding of the company, which shall contain an exact statement regarding the object contributed or purchased, the person from whom the corporation is to acquire the object, the number of shares to be issued or consideration paid for the object, together with a statement of all burdens assumed by the company and of other conditions under which such contributions or acquisitions are made. If personal property (bewegliche Sachen) are to be taken over by the company, the amount of which is not definitely fixed at the time application is made, a statement must at least be made of the principles that will be followed in fixing the price of the same. This report is to be made out by the applicants for the charter collectively, together with the persons who are to make contributions other than cash to the capital of the corporation or from whom purchases of property are to be made.

SECTION 10.-INVESTIGATION OF SUCH CONTRIBUTIONS.

The value of such contributions or acquisitions and the statements made with regard to the same in the report of the founders is to be ascertained in a thoroughgoing way. (Submission of inventories, contracts regarding earlier purchases, data with regard to amount of taxes paid, etc.) The applicants for the charter may also have the report of the founders submitted to two special revisers. If the applicants for the charter do not give sufficient data for the judgment of such transactions, the submission of their report to revisers may be required by the State administration for the purpose of deciding whether or not permission should be granted.

The manner of selecting such revisers is as follows: A list of persons qualified to perform the duties of revisers is submitted to the political official of the State by each chamber of commerce and industry, the names on the list being divided according to occupation and residence.

From this list the revisers may be selected by the applicants for the charter, preference being given to those persons familiar with the special branch of business in which the corporation purposes to engage and with the district in which it is to be located.

The examination of the revisers must cover the correctness and completeness of the special statements submitted by the applicants for a charter regarding noncash contributions or purchases of property, and the suitability of the consideration proposed. The revisers must submit a written report containing the results of their investigation, together with a statement of the basis of their calculations regarding estimates of value.

SECTIONS 11 AND 12.-GRANTING OF FINAL PERMISSION.

The political representative of the Central Government must, ordinarily within at least 14 days, submit the application for final permission to the ministry of the interior.

The decision on such applications rests with the ministry of the interior, who must, however, consult other ministries in case the projected company in any way comes within their jurisdiction. Permission is always to be granted, however, if the plan for the undertaking does not conflict with any existing laws or regulations. In case the State administration desires a change in the charter and by-laws of the corporation 10 correction-free copies of the same in which the desired change has been

1 Sec. 14, Imperial Patent of November 26, 1852.

made must be submitted before the issue of final permission. Permission is granted only upon condition that the amount of cash which, according to the charter and by-laws of the company should be paid in before the registry of the company, has actually been paid in and that the constitutive general meeting is to be held in accordance with the provisions of this act.1

Disregard of either of these conditions forfeits the permission. Ordinarily such permission expires within a year, although in special cases exceptions may be made by the ministry of the interior for weighty reasons. Announcement is made of the granting of such final permission in the Wiener Zeitung, and in some cases in local papers also. At the same time copies of the approved charter and by-laws are sent by the State administration to the commercial and business chamber of the district in which the company is to be located.

SECTIONS 13 AND 14.-CONSTITUTIVE GENERAL MEETING.

Before the entry of a company in the registry of a commercial court the holders of the charter (Concessionaires) must call a constitutive general meeting, sending notice in advance to the political official of the Central Government of the district in which the company is to be located. The by-laws of a corporation must contain regulations with regard to the manner of calling such a meeting, quorum, and the method of passing resolutions; also with regard to who shall preside over it and the matters reserved for its decisions, always including the following:

(1) Decision with regard to the formation of the corporation and the final accept-‹. ance of the contents of the charter and by-laws in the form approved by the State administration.

(2) The election of the members of the first council of supervision, or of the first revisers of accounts (Sec. 37, p. 275).

(3) Election of the first board of directors in case their appointment is not provided for in some other way according to the by-laws (Sec. 34, see p. 274), and also election of the members of the first council of direction (Sec. 36, see p. 275).

Reports and documents concerning all previous transactions in the formation of the company, especially with regard to capital amounts paid in, contributions other than cash, purchases of property, etc., must be submitted to this meeting. The majority necessary to the passage of the resolution for the formation of the corporation must be fixed in the by-laws in such a way that it shall require at least onefourth of all subscribers of shares and one-fourth of the total number of shares to be issued. Further, even when the majority provided for in the by-laws is attained, the resolution is to be regarded as having failed, if, according to the charter of the corporation, one or more subscribers to shares have contributed property or things other than cash to the joint capital, and one-half of the votes of the remaining subscribers to shares are cast against the formation of the company.

Any essential changes in the by-laws of the company (Sec. 3) made since shares were offered for subscription require a unanimous vote of the shareholders present at the constitutive general meeting for their acceptance.

Resolutions adopted by the constitutive general meeting must be sworn to before a judge or notary (Beurkundung), and a certified copy together with all documents must be sent to the local political official of the central government, who, after examining it, is to send it to the commercial and business chamber of the district in which the corporation is located, where it shall be open to inspection by anyone.

SECTIONS 13 AND 16.-CHANGING CHARTER OF A CORPORATION.

Changes in the charter and by-laws of a corporation require the approval of the State and must pass through a process similar to that described above in the case of granting the final permission for the establishment of a corporation. An increase of the total capital necessitates a change of the charter and by-laws, and is consequently subject to the above provisions. In such cases evidence must be presented that an increase has been determined upon in accordance with the charter and by-laws, and, further, the circumstances justifying the increase to the extent determined upon must be explained in general. The methods proposed for the issue and payment of the proposed new shares must be made known and the balance sheet of the company for the last business year submitted with the other documents. The application for the permission of the State to change the by-laws so as to increase the total capital through the issue of new shares paid in cash must be supported by the following documents:

1Sec. 13, Imperial Patent of November 26, 1852.

(1) A list of the subscribers to shares (Sec. 6).

(2) The declarations of subscription made by the subscribers which must state the day on which the resolution regarding the increase of capital was passed by the corporation: further, the number and kind of shares subscribed for by each subscriber, price to be paid for the same, and the time and amount of the separate payments to be made thereon.

(3) A statement made by all members of the board of directors that the total amount due on the newly issued shares has been paid to the corporation in cash by the subscribers.

The provisions regarding publicity of the original charter and by-laws through commercial and business chambers apply also to changes in the charter and by-laws mentioned above.

SECTION 17.-CONTRIBUTIONS OTHER THAN CASH.

When contributions other than cash are made for new shares, the provisions of sections 8, 9, 10, and 15 apply.

SECTION 18.-REDUCTION OF THE TOTAL CAPITAL.

Any reduction of the capital stock of a corporation must be accomplished in the same way as an increase. (See above, pp. 271, 272.) Such action is subject to the provisions of general commercial law (H. G. B., 243, 248) regarding the division of the property of the company in case of its dissolution and the publication of notice for all creditors to send in their accounts, which must be made three separate times with a period of 3 months succeeding the last announcement.

SECTION 19.-RIGHTS OF FOUNDERS.

If, according to the plan for founding a company, special privileges are to be accorded to particular shareholders or other persons of the company, the kind and the extent of these privileges must be given in the by-laws, together with the names of the persons accorded them.

SECTION 20.-CONTRIBUTIONS OTHER THAN CASH.

In case contributions to the capital, other than cash, are accepted either in the founding of a company or when a new issue of shares is made, the object of the contribution, the person making it, the number of shares or other compensation given for it, must be mentioned in the by-laws. Similar provisions cover the acquisition or purchase of property necessary to the founding of a company. In case it is designed to purchase personal property, the amount of which is not yet determined at the time the by-laws are drawn up, the principles according to which the prices of such goods are to be fixed must at least be stated in the by-laws. Such provisions may never be dropped from the by-laws, although at a later time they may be included in historic form.

SECTIONS 21 AND 22.-FIRM NAME AND SEAT OF CORPORATIONS.

With regard to firm name and seat of a joint stock company, the general provisions of commercial law1 apply.

SECTION 23.-SPHERE OF ACTION AND BONDED DEBTS.

Special permission of the State is necessary whenever a company desires to take up any undertaking outside the sphere of action provided for it in its charter. This applies particularly whenever a company wishes to create a bonded debt, in which case the permission of the State is granted by the finance ministry after a consultation with other ministries affected. The right to create a bonded debt must appear in the bylaws. Particular resolutions for contracting such a debt can not, however, be incorporated in the by-laws until they have received the approval of the State.

SECTIONS 24 AND 25.-KINDS OF SHARES.

The by-laws must contain provisions as to whether shares are to be issued under certain names or to holders, or whether both kinds may be issued, and if so, the number of each kind and the possibility of changing from one to the other form. If

1 H. G. B., art. 18, et seq.

shares are issued under particular names, the by-laws must provide for the keeping of a share book in accordance with the provisions of ordinary commercial law, the purpose of which should be at all times to show transfers and present ownership of shares. In case it is provided that shares issued under particular names may be transferred only with the consent of the company, the by-laws should state whether the board of directors alone or in connection with other organs of the company is competent to give such permission to transfer. The issue of fractional parts of shares may be permitted but only in exceptional cases and for special reasons. by-laws must state whether such fractional parts of shares are to be issued, their number, and the shares which are to be divided into fractional parts. Shares or fractions of shares issued by the company are not [further] divisible.

SECTION 26.-PREFERRED STOCK.

The

In case different kinds of shares are to be issued the special rights accruing to each kind, especially with regard to the division of net profits or of the property of the company, must be stated exactly in the by-laws. În case preferred stock is issued the following rules must be observed:

(1) Preferred stock may not exceed two-thirds of the total share capital.

(2) The dividends guaranteed on the preferred stock shall not exceed 5 per cent of the face value of the preferred shares.

(3) In case it is provided that when preferred dividends are defaulted they shall be made up in whole or in part out of the net profit of later business years, the highest number of business years, which may not exceed 5, for which such back payments of dividends are to be made, must be stated in the by-laws.

SECTION 27.-NOMINAL VALUE OF SHARES.

Ordinarily the face value of shares must be at least 200 crowns ($40). Smaller undertakings of local importance only may be permitted to issue shares to particular names of a less amount, not, however, smaller than 100 crowns ($20). If for any cause the nominal value of shares should be reduced below the amounts stated above, it is necessary, at least before new stock can be issued, that the old shares should be brought together under titles which have a nominal value corresponding to the amounts stated above.

SECTION 28.-PAYMENT OF SHARES.

As a rule, shares are to be paid in cash. For contributions other than cash, see Sec. 20. The issue of shares for a less sum than their face value is not permissible. Shares are, as a rule, to be paid in full before the formation of the company or before shares are issued, as the case may be. The issue of shares not paid in full may be permitted only in exceptional cases when for particular reasons such a policy seems desirable. Shares issued for contributions other than cash may be so issued at their face value only. The first payment on shares must amount to 40 per cent of their nominal value, although in special cases a smaller payment, not, however, less than 25 per cent, may be permitted. As a rule, the first payment on shares must amount to at least 200 crowns, although exceptions may be made in the case of smaller undertakings of local importance only. In case the shares are issued at a price exceeding their nominal value, the first payment on them must include this excess. Stock certificates (Interimsscheine) are to be issued until shares are paid in full.

SECTION 29.-FORM OF SHARES.

Shares must show on their faces in detail the rights and duties of shareholders, special provisions regarding transfer of shares, duties other than money payments to be performed by shareholders (Sec. 30), and a list of the different kinds of shares issued by the company, together with a statement as to the kind to which the particular share itself belongs.

SECTION 30.-OTHER DUTIES OF SHAREHOLDERS.

In case shareholders are obligated to the performance of certain periodic duties other than money payments, the nature and the extent of such duties, together with the penalties for their nonfulfillment, must be stated in the by-laws. Such obliga

1 H. G. B., 182-183.

tions are to be permitted only in the case of undertakings (e. g., agricultural and others of a similar character) the success of which depends upon their adoption. Shares must be issued under particular names when this is done. A resolution establishing such obligations can be accepted only by the unanim.ous vote of all shareholders.

SECTION 31.-NEW SHARES OF STOCK.

Icsues of new shares of stock can not be made until earlier issues have been paid up in full. Resolutions providing for new issues must be reserved by the by-laws for the action of the general meeting. In no case may the price of shares be set below par. If a higher price is realized, provision must be made that the excess may with the fewest deductions possible be transferred to the company. With these limitations, shareholders may be guaranteed a right of priority [prior purchase] over new issues, but no such right of priority may be guaranteed persons other than shareholders.

SECTION 32.-PURCHASE OF ITS OWN SHARES.

The purchase of its own shares is permitted a company only in the following cases: (1) For the purpose of reducing its capital stock (Sec. 18).

(2) In carrying out the provisions of Sec. 33 with regard to the redemption of shares.

(3) By way of execution, in order that the company may realize on its own demands. For example, when a shareholder is persistently delinquent. In such cases the shares called in must, as soon as possible, be sold, or if this is not possible, a corresponding reduction of the capital stock must be made in the way provided for by law (Sec. 18). All purchases and sales by the company of its own stock must be noted in its yearly report.

SECTION 33.-GRADUAL REDEMPTION OF CAPITAL STOCK.

In the case of companies whose property is gradually destroyed in production, or where it consists of rights limited as to time, provision may be made in the by-laws for the gradual redemption of its capital stock. Details are fixed in the decree of September 20, 1899. Instead of a provision for the gradual redemption of shares, the by-laws may also provide for the collection of a fund made up from the yearly net profits which may be drawn upon for the reduction of the capital stock in accordance with the provisions of Sec. 18. (See above.)

SECTION 34.-BOARD OF DIRECTORS.

Only shareholders in their own right may be members of the board of directors.1 In appointing the directors, consideration is to be given as far as possible to those persons whose occupation familiarizes them with the immediate direction of the business of the company. In every case the directors are to be given a measure of power with regard to the internal affairs of the company that corresponds with their legal authority to represent the company externally. With them rests the decision in all cases not specifically reserved to the general meeting or other organs of the company. If the directorate is made up of a plurality of members, the by-laws must contain provisions regarding the way in which they shall pass resolutions. As a rule, the members of the board of directors must either be elected periodically by the general meeting of shareholders directly, or else by an organ of the company designated by the by-laws, whose members must be elected by the general meeting.

It may, however, be provided in the by-laws that the members of the first board of directors shall be named by the founders of the company. Ordinarily a director's term shall not exceed 5 years. The by-laws may permit reelection. The law also provides for elections in case of vacancies.

If the board of directors is composed of a considerable number of persons, the by-laws may provide that for the immediate direction of business the board may elect from their midst an executive committee whose sphere of action shall be determined by the board.

From the general commercial law (H. G. B., 231-234) the following provisions with regard to the board of directors are taken. The board of directors is obligated toward the company to regard the limitations upon its power fixed in the charter and

1 The original is eigenberechtigte Personen. The purpose is presumably to exclude proxies and trustees.

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