to the following schedule: (1) The first adoption or the acquisition of a trade name, for each case, 5 yen.

The provisions of the stamp-duties law touching this subject are included in certain items of the following articles. I do not enumerate many other registration fees and stamp duties which may affect corporations in the various exigencies of their affairs.

ART. IV. On each of the following documents and on each volume of the following account books containing 1 year's entries, stamp duties are to be paid as follows: A debenture, 2 sen; a share certificate, 2 sen; an instrument of subscription for shares, 2 sen; a partnership or company contract or an agreement of association, 2 sen.

ART. V. No stamp duties are required to be paid as to the following documents in account books: An entry on the back of a share certificate or debenture whose object is to prove its assignment.

ART. VI. Stamp duties are paid by affixing stamps to the respective documents or books; but in the case of bills of exchange, promissory notes, bills of lading, warehouse receipts, instruments of pledge as to goods stored, insurance policies, share certificates and debentures, instead of affixing stamps the full amount may be paid in ready money to the Government and the official tax stamp added.

Commercial corporations formed by foreigners in Japan have to make the same registration and are subject to the same regulations as Japanese juridical persons, and have the same rights. Branches in Japan of foreign corporations are treated likewise, the branch office first established there being considered, for all purposes of registration, publication, etc., the principal office. Of course the registration, publication, etc., to be done involves only the business done in Japan.

The legislation concerning (N) Special methods of control by the Government has been indicated in articles already quoted, and there are no (O) Special laws regarding monopolies.

CHAPTER VII.

FRANCE.1

The fundamental law on this subject is a law of July 24, 1867, which was not materially modified until the law of August 1, 1893. A translation of that portion of the law of 1867, as modified by the law of 1893, which is material to the present subject, is submitted herewith. It should be stated that this law contemplated strictly stock companies, which are in France of two kinds: first, the "Société en commandite," composed of shareholders of two different classes, consisting on the one hand of "gérants, or managers, who are unlimitedly responsible as general partners, and "commanditaires" or ordinary shareholders, liable to the extent of the holding merely. The second category is that of the "Société anonyme" (limited liability company) or corporation, properly so called.

A. CAPITALIZATION AND METHODS OF PAYING IN CAPITAL.

There is no restriction in regard to the amount of capitalization of a French company, but the fundamental principle of the law of 1867 is that whatever the cash capital be it must be wholly subscribed before incorporation. According to the law of 1867, in case the capital of the company exceeded 200,000 francs ($40,000), each share could not be less than 500 francs ($100), but if the capital did not exceed 200,000 francs ($40,000), then each share might be of 100 francs ($20) only. This was modified by the law of 1893, which permits companies with a capital larger than 200,000 francs ($40,000) to have shares of 100 francs ($20) each, and companies with a lower capital to have shares of 25 francs ($5) each.

The next fundamental requisite is as to the paying in of capital. In case the shares are of 100 francs or above, one-quarter of each share must be paid in at the date of constitution. In case they are of 25 francs only, the whole of each share must be paid in. Likewise, if it is contemplated to issue the shares in the form of warrants to bearer, the whole of the capital must be paid in whatever the individual value of the shares.

These requirements are essential requisites to the corporate existence of the company. They are set forth in declaration by one of the "gérants" in the case of a "commandite" or one of the founders in the case of a "société anonyme," made in a notarial deed (the most solemn form of deed known to French law, executed before a notary, whose chief functions are not merely to receive acknowledgments, but to act as a conveyancer and depositary of deeds). In fact the notary makes it his careful business to ascertain that the capital has been properly subscribed, requiring a signed list of subscribers, with the number of shares they each take, and the production of a banker's receipt showing that the statutory proportion of the capital has been duly paid in to the credit of the company in formation. This is in strict accordance with the requirements of the law, which further prescribes that a copy of the "statuts" (by-laws or articles of association) shall be added to these other documents.

B.-METHODS OF PROMOTING, AND LIABILITY OF PROMOTERS.

No special legislation has been enacted imposing penalties for false representations made in the prospectus of a company or raising a presumption of fraud, as in the English directors' liability act of 1890.

("Escroquerie" is defined in article 405 of the penal code.)

Article 15 of the law of 1867, however, makes certain practices criminal offenses punishable as "escroquerie," or obtaining money by false pretenses. The practices referred to are obtaining or endeavoring to obtain subscriptions or payments by simu

1 Reports prepared in Paris by Oliver E. Bodington and Edmond Kelly.

lation of other subscriptions or payments, or by publication, with intent to deceive, of subscriptions or payments which do not exist, or of any other false statements, and the publication with intent to deceive of the names of persons designated falsely as being or about to be connected with the company in any capacity whatever.

The distribution of "fictitious" dividends (see below under D) without any inventory or upon the basis of a fraudulent inventory. The criminal liability involved in these practices necessarily throws the burden of strict proof upon the party aggrieved. A heavy blow has been struck at illicit profits made by vendors, by a provision in the law of 1893 to the effect that shares issued as fully paid up, venders' shares, or what are known in French law as "actions d'apport," can not be detached from the stub book or negotiated until 2 years after the formation of the company. During this period they are marked with a stamp indicating their nature and the date of the formation of the company. Article 4 of the law contains a further provision which, although usually fulfilled in a perfunctory manner, might be available as a valuable guaranty to the stockholders. This article prescribes that whenever any stockholder makes what is called an "apport"-that is to say, brings into the company any form of property other than cash or stipulates for his benefit any particular privileges-the value of his contribution or the grounds of the particular privileges to be accorded to him must be submitted to the approval of two successive general meetings of the shareholders. The shareholders at the first of these meetings appoint auditors ("commissaires") to inquire into the value of this "apport" and report upon it. Their report is printed and placed at the disposal of the stockholders at least 5 days before the second meeting. The majority at this second meeting must comprise one-quarter of the stockholders and represent one-quarter of the stock capital paid up in cash. In case the value of this "apport" is not approved, the company becomes void and of no effect as regards all the parties concerned.

C.-LIABILITY OF STOCKHOLDERS.

In

As has been already stated, the liability of stockholders differs somewhat according as to whether the company is a "commandite" or a "société anonyme.' the former case the managers, or "gérants," are indefinitely liable, but the ordinary stockholders are liable merely for the nominal amount of the stock held by them. In the "société anonyme” the liability of all the stockholders without exception is limited to the amount of stock held by them. This liability, in the case of both these forms of companies, is strictly limited to the amount of the holding, and the stock can not, by any possibility or under any contingency whatever, be assessed in any way beyond this amount.

The liability of the "gérants" (managers of a "commandite") is joint and several as well as unlimited in extent. They are, in fact, in the position of general partners in an ordinary partnership.

There is a further special liability involved in the holding of stock which is not fully paid. In case the holder of such stock sells it, he remains liable jointly with the purchaser thereof for the unpaid calls, but this liability ceases for the original subscriber 2 years after the sale.

D.-DUTIES AND RESPONSIBILITIES OF DIRECTORS.

Speaking generally, the duties and liabilities of the directors of a "société anonyme" are those of agents as toward the stockholders, their principals. In addition to this they have certain special duties prescribed by the law of 1867, the principal of which are the following: They must place the books of the company at the disposal of the auditors during a period of 3 months prior to the date fixed for the annual general meeting. They must draw up every 3 months a summary of the assets and liabilities of the company, which must be placed at the disposal of the auditors, and every year a complete inventory. The inventory, the balance sheet, and the profit and loss account must be submitted to the auditors 40 days at least before the annual general meeting. They must see that one-twentieth part of the net profits is set apart to form a reserve fund.

The liabilities of directors are threefold: They are liable, first, for any inobservance of the formalities prescribed by the law of 1867; secondly, for faults committed in their management of the company; and thirdly, for a particular kind of fault of management, namely, the distribution of "fictitious" dividends. By "fictitious" dividends are meant not only dividends paid out of capital, but also dividends paid on the faith of a balance sheet made to show ostensible profit by fraudulent methods, such, for instance, as the crediting of book debts admittedly uncollectible, the overvaluation of securities or stock in trade.

The directors incur no personal or joint or several liability for the undertakings of the company. Apart from the special liability for inobservance of the law, they are liable as ordinary agents for faults committed within the limits of the powers conferred upon them. In order to fix civil liability upon a director it is not necessary to show deceit or fraud; it is sufficient to show that he has been negligent in his management and that his negligence has caused damage. It is entirely a question for the court as to what amounts to a fault in negligence of management. Among these faults which involve liability upon the directors is of course the fact of their having distributed prospectuses containing false representations. This, as stated above under B, involves them in criminal liability if fraudulent intent can be proved against them.

They may also be declared liable for the acts of a managing director, but this liability is attenuated if they can establish that they have properly supervised the management of the director and that he has failed to carry out their instructions, or in case the by-laws provide for the appointment of a managing director independent of the board. If the act complained of was the result of a vote of the board of directors all members of the board are jointly and severally liable, and any dissenting member wishing to disassociate himself from such act must, in order to escape liability, make formal protest at once.

The directors give security for their management by depositing at the office of the company a certain number of shares determined by the by-laws of the corporation, which shares bear a stamp indicating that they are not transferable.

E. RESTRICTIONS UPON DIRECTORS IN DEALING IN STOCKS AND OTHERWISE.

The directors are not permitted to purchase the stock of the company of which they are directors out of company funds unless they are authorized to purchase it out of profits by a vote of the general meeting of stockholders. As regard dealings in stocks of other companies all will depend whether they are authorized to do so by the by-laws of the company or by a special vote of the general meeting. It should be borne in mind that neither the articles of the code of commerce which govern the subject, nor the law of 1867, contain any express provision for or provide any general definition of directors' powers. These powers are usually defined more or less completely by the by-laws. The usual practice is for the stockholders, at the original statutory meeting, to confer upon the directors the widest powers for the purpose of the management of the company in accordance with its objects, and then the directors are left to their discretion to act within these powers. Unless the company were expressly formed for the purpose of dealing in stocks it would not be competent for the directors to deal in stocks without being specifically authorized by the stockholders so to do.

The directors are forbidden to take or keep any interest, direct or indirect, in an undertaking or contract made with the company or for its account unless they are specially authorized to do so by the vote of the stockholders.

F.-REGULATIONS REGARDING PRICES OF PRODUCTS.

(See memorandum by Mr. Edmond Kelly, page 296.)

G.-REGULATIONS REGARDING PROFITS AND DIVIDENDS.

The general policy of the law of 1867 is that dividends must be paid out of profits actually realized in bona fide transactions and set forth in an inventory drawn up in accordance with the provisions of the law. At least one-twentieth of the profits, or such larger proportion as may be provided in the by-laws, is appropriated to a reserve fund, and this appropriation continues until the reserve fund amounts to one-tenth of the stock capital of the company. In case dividends are distributed out of capital, or fictitiously in the sense which has been explained above, the directors are responsible.

No dividends distributed to the stockholders can be recovered from them unless such dividends have been distributed without any inventory having been made, or upon results not shown by the inventory, and any right of action which may thus arise is barred at the end of 5 years from the day fixed for the distribution of the dividends.

H.-REGULATIONS REGARDING OWNERSHIP OF STOCK IN OTHER CORPORATIONS, OR THE COMBINATION OF DIFFERENT CORPORATIONS.

There are no specific restrictions in the law of 1867 against one company owning stock in another. With regard to amalgamation with another company, it has been held that no amalgamation can take place without the unanimous consent of the stockholders, unless it is provided for by the by-laws. Furthermore, even when authorized by the by-laws, the terms of article 31 of the law of 1867 must be complied with, which require that one-half at least of the capital shall be represented in meetings called for the purpose of voting a modification of the by-laws, and amalgamation with another company amounts to a modification of the by-laws.

I.-REPORTS TO BE MADE TO THE GOVERNMENT.

There is no requirement calling for direct reports to the Government except in regard to fiscal matters, which will be treated further on, but there exist equivalent requirements in regard to the publication of deeds relating to corporations. The law of 1867 provides that within a month from the constitution of every commercial company, a duplicate or a certified copy of the deed by which it is constituted (according as the deed is under private signatures or notarial) must be filed in the registry of the justice of the peace or the tribunal of commerce of the place where the corporation has its offices. With this deed must also be filed a certified copy of the notarial deed setting forth the subscription of the capital and the payment in cash of one-fourth thereof, and a certified copy of the resolutions voted by the meeting of stockholders in regard to "apport" where such "apport" exists. The nature of an "apport" has been explained above under B. Also in the case of a "société anonyme" there must be filed a list of names of the subscribers duly certified, containing the full names, occupations, residence, and number of shares taken by each of them. Within the same period of 1 month, an extract from the deed constituting the company and the annexed documents must be published in a legal newspaper. This extract contains the names of all parties interested in the company except the stockholders or special partners ("commanditaires "), the commercial name of the company, the address of its offices, the names of the partners authorized to manage and sign for the company, the amount of the stock capital and of the sums of money or apport" furnished by the stockholders or the "commanditaires," the date of commencement of the company, the date when it ends, and the date of the publication made at the registry in the clerk's office of the justice of the peace of the tribunal of commerce. It must also state the nature of the association, that is to say, whether it is a private partnership (for these provisions apply also to private partnerships or "sociétés en nom collectif" as they are known in France), "commandite," "société anonyme,' or corporation; and this publication must take place in every district where the company has a business establishment. The same formalities apply to all deeds and resolutions modifying the by-laws, prolonging the company beyond the term fixed for its duration, its dissolution beyond such term, the method of its liquidation, any change or retirement of managers, and any change in the name and style of the company. Among the most important modifications of the by-laws is of course the increase or diminution of the capital of the company, which involves publication in accordance with the articles quoted.

K.-REPORTS TO BE MADE TO THE STOCKHOLDERS.

The law requires that each year an annual general meeting of stockholders be held, at which the inventory, the balance sheet, and the profit and loss account are presented. These are the only reports to which a stockholder in a "société anonyme" is entitled according to law.

L.-PRIVILEGE OF STOCKHOLDERS REGARDING EXAMINATION OF BOOKS AND OVERSIGHT OF BUSINESS.

66

In the corporation or "société anonyme" the management of the corporation is checked on behalf of the shareholders by officials appointed at the general meeting of stockholders, known as commissaires" or auditors. These auditors are required to make an annual report, to be presented at the annual general meeting of stockholders, on the situation of the company, the balance sheet and the accounts presented by the directors. They are entitled, as representing the stockholders, during

1 Tribunal Civil de la Seine, 14th May, 1892. Houpin, sec. 627.