examination by the Government, be granted to a company of the first order, while to a company of the second order either a simple permission is given or some other stipulated privilege is granted.

SEC. 2145. When a company desires to have the exclusive privilege of exploiting a new invention made in Russia or imported from abroad the request for permission to establish such a company must be made before the petition is filed for the patent of said invention, in the order established in the statutes relating to the industries.1 The operation of this kind of privilege is granted by the Government to a company when the privilege is accorded by decree. The receiver of such patent on a new invention, if he desires to exploit it by means of a company already established or to be organized purposely for it, must first abandon to it his patent rights and remain a foundator of the company or a simple shareholder.

SEC. 2146. Companies are formed according to the nature of their enterprise either for an unlimited number of years or for a fixed period, which must be stipulated in the company's statutes; but special privileges and exclusive rights oblige companies to be formed for fixed periods, the term of which depends upon the kind of enterprise, according to the importance of outlays to be made and the more or less risk of the enterprise, etc. It is of course understood (1) that if the object of the company is the exploitation of some new invention, then the term for which the patent is granted governs the number of years for which the company is formed; (2) that the company is not prohibited from continuing its exploitation after the patent right has expired, only in this case the company has no longer the exclusive right to such patent, and (3) that, if by the general statutes of the company its existence is limited to a fixed term, upon its expiration the shareholders are allowed to request the permission of the Government to grant that the company may continue its enterprise for a limited or unlimited number of years.

SEC. 2147. If a company has been granted some exclusive right for a limited number of years, at the expiration of this term the privilege can not be renewed or extended.

SEC. 2148. Every company must be organized under a stipulated name, chosen from the object to be exploited or the nature of the enterprise.

SEC. 2149. Stock companies or associations in shares organized for commercial or industrial purposes must secure each year the necessary commercial documents.

SEC. 2150. If the article which the company is to exploit should be injurious to neighboring enterprises or the inhabitants, then the companies of this kind are allowed to be established upon the limited and precautious requirements of the law or such laws as may be enforced later relating to the existence and construction of private works in cities.

SEC. 2151. Companies whose object of pursuit is not salable or is against the law of morality or good faith in commerce, or which is connected with detriment to the Government, are not allowed to be organized.

SEC. 2152. Companies which have received special privileges have not the right to unite in partnership with another stock company or to cede to it its privileges without a special permission from the Government.

SEC. 2153. A company whose statutes have been confirmed by the Government is not allowed to extend its operation outside the limits of its statutes or to make any changes in the statutes without again presenting them to the Government for confirmation, with the exception, however, of those statutes which relate to details of the expedition of business which may be changed as experience may show necessary; and the by-laws may be changed by the board of directors of the company or at a general assembly of shareholders.

SEC. 2154. If at the terms fixed by the by-laws of the company for the signature and payment of the shares, all the shares are not taken or the money for the shares has not been fully paid up, and the founders do not desire and the statutes do not oblige them to take the balance of the shares upon themselves, the company is declared as not having been formed, and the privileges, if any were granted to the company, are canceled. Exception is made, however, in the case when, upon the general consent of the shareholders, it is recognized possible either to limit the actual collection of the capital, or in proportion to it, to decrease the programme of the enterprise; either of these solutions, however, requires the sanction of the Govern

ment.

SEC. 2155. Companies already existing which have started their operations, whether privileged companies or companies with special advantages and which as such have received a permission, may terminate their operations either at the expiration of the period fixed in the statutes, when decided at a general assembly of the shareholders,

1 Edition 1887, secs. 167 to 198.

or even before the expiration of the period fixed in the statutes, when at a general assembly of the shareholders it is found necessary to wind up the affairs of the company, and the obligations it may have taken with the public or with private individuals, according to the nature of these obligations, do not prevent the affairs from being liquidated.

SEC. 2156. Should the affairs of a company be liquidated the patent right or special advantage which has been granted to it ceases at the time the company ceases to exist even should the term of the privilege not have yet expired, but the action of the privilege or special advantage ceases even before their expiration if the company has not commenced to exploit the special privilege during the term fixed in the company's statutes, even if it is proved that this was not the fault of the company, and when it is found impossible to extend the term of the privilege or advantage without detriment to the public or causing damage to a third party.

SEC. 2157. In all the cases mentioned when patent rights or special advantages cease or when the affairs of the company are liquidated the formal publication must be made by the department or ministry to which by its nature the affair belongs through the existing senate, and besides this the company itself advertises its liquidation in the newspapers for the information of its shareholders and other persons who may have an interest in the company.

B.-Particular Regulations as to the Formation and Means of Action of Companies.

SEC. 2158. The formation and means of action of each company organized upon stipulated rules described in section 2139 and those following are determined by special conditions, the details of which, as well as further additions relating to the kind and requirements of the enterprise, are made the object of the company's by-laws. In order to insure shareholders and the public of the basis of these conditions the following limits and rules must be observed:

(a) The term for bringing the enterprise into operation.

SEC. 2159. When some special advantage or an exclusive privilege is desired for a company while the company, on account of the nature of the enterprise (such as, for instance, construction of water conduits, railways, etc.), can not commence its direct operations before it has erected its works, machines, etc., and the founders are obliged to stipulate in the statutes the time when the company must absolutely bring the enterprise into full operation after having erected all the auxiliary works. If at the expiration of the term the proper ministry or chief department obtains formal attestation showing that the company did not accomplish its obligations, the ministry then, basing itself upon the provisions stipulated in the foregoing paragraphs, may either order the liquidation of the company or extend its privileges. (b) The form and price of a share and the manner of their distribution and transfer. SEC. 2160. For all companies, without exception, which were formed after the provisions published on December 5, 1836, only one kind of share is allowed, namely, a share indicating the exact name of the person to whom it is granted, his profession or name, Christian names, and surnames. Shares delivered simply to bearer are prohibited. The prices of shares is determined for each company separately in its

own statutes.

SEC. 2161. The value of the shares is paid up according to their price and to the requirements of the enterprise, either in full, upon the formation of the company, or in fractions, up to a stipulated term. In companies where the full formation capital is necessary at the beginning in order to insure success to the enterprise and to exactly execute the obligations of the company at a fixed time, the full payment of the shares is necessary. In all other companies, where only a part of the formation capital is required up to a certain time, part payments of the shares is allowed.

SEC. 2162. The term and first payment on the shares must be stipulated in the company's statutes. The determination of the terms of payment and the amount of instalments to be paid as the requirement of the enterprise may necessitate must be fixed by the board of directors of the company or at the general assembly of the shareholders, as it may be stated in the statutes. In this last case the time of payment and the amount of each payment must be published in the newspapers at least 3 months in advance.

SEC. 2163. When instalments on shares are allowed a receipt is granted for the first payment, which receipt must also contain the ensuing payments. Upon the full amount of the share being paid the receipt is returned to the direction of the company, which replaces it by the original share. Up to that time the receipt takes the place of the share, and the holders of these receipts enjoy all the privileges and responsibilities of shareholders; but in no case can the shares be delivered until they have been paid up in full. Receipts are not allowed to be made out to bearer.

SEC. 2164. Holders of receipts who have let pass the terms fixed for payment of instalments without making the necessary payment on the shares lose their right to the shares, and the instalments already paid by them on such shares become the property of the company, which has the right to cancel these shares and to issue new ones in their stead.

SEC. 2165. The founders of a company have the right to place a certain number of shares in their favor, but on condition (1) that the number of the founders' shares does not exceed one-fifth of the total number of shares, and (2) that the shares intended for the founders should be separated, numbering from No. 1, and should be inserted according to their numbers in a book with foot leaves (in French "à tatons"), delivered to the foundators upon the provisions prescribed in the following paragraph (2166), which describes the manner of keeping this book.

SEC. 2166. The rest of the shares, after deducting those retained by the founders, are distributed among those who are desirous of obtaining them in the following

manner:

(1) After receiving the permission of the Government relative to the granting of the statutes the company publishes in the newspapers the number of shares to be disposed of, their price, and whether they are to be paid up in full or by instalment; the time of the opening and closing of the subscription, and, finally, the number of the shares, according to the statutes, which can be in the possession of one shareholder. The time for the closing of the subscription can not be made earlier than 6 months from the date of the advertisement, in order that the inhabitants of distant provinces may also participate in the affairs of the company.

(2) Demands for shares may be made in person or through the mail, and are inserted in a special book kept in the manner prescribed below (in clause 5).

(3) When the term fixed for the subscription expires the assignment of shares is effected according to the measures of demand, and the same are inserted in the book of shareholders (mentioned in clause 5 of the present paragraph), after which the date fixed for the next instalment is published in the newspapers, as well as the term fixed for the delivery of the shares themselves, or when the shares have not been paid up in full at one time the date of the issuing of preliminary receipts is advertised. (4) The founders keep two sets of books-one for the insertion of the shares and demands therefor, the other for the insertion of the amounts paid on the shares. Both these books are prepared by the founders, to whom the company when it is finally formed returns the expenses incurred thereon. These books are presented either to the town's hall or some such institution for the affixing of the tape and seal and for the attestation of signatures on the receipts, in accordance with the provisions generally observed when foot-leaf books are delivered by the Crown.

(5) The book for the inscription of shares must show, first, the shares separated in favor of the founders, beginning with No. 1 (sec. 2165) and, further, the shares or receipts issued for installments paid on such shares. On the opposite sheets on which are inserted the shares or the receipts therefor must be inscribed the demands made for shares, in the order the demands were made, as well as the name, profession or rank, and places of residence of the subscribers.

(6) The book kept for the insertion of the amounts is kept as follows: (a) On the left side from the fold of the book are inserted the dates and the sums received on account of the shares, the founders being authorized to insert each payment separately or to insert on one page the total sums received each day, but they must state whether the amounts paid are for shares or for receipts on account of a special number of shares; (b) each list must state the numbers, which must follow in their regular order; (c) each list must be subscribed by all the founders, who are jointly responsible for the safekeeping of the money received and who are therefore bound to watch over each other; (d) on the side of the sheet opposite the receipts are inserted the amounts debited, in special lists each time, of sums paid in to the credit in the name of the company, according to the rules set forth in clause 7, indicating in each list the number of receipts of moneys received and the time of their receipt. (7) Amounts paid to the founders for the shares on account of receipts, on attaining the sum of 300 rubles, must be sent immediately with the communications relating thereto, signed by all the founders, to one of the credit establishments for safekeeping and they may bear interest, and remain thus until they are required for the purposes described in the statutes.

(8) The two books above mentioned, in order to be uniform, must be kept by one of the founders chosen among them for this purpose, or when there are only two founders, according to lots drawn, or with an understanding between them. On this founder devolves the duty of delivering the shares and receipts, as well as of receiving the money therefor and the safekeeping in credit bank notes, under the general responsibility of all the founders for any irregularity or improper action in case he should come to fail.

(9) The founder is obliged to keep both the books open to the inspection of the shareholders, in order that the latter may assure themselves that the books are kept in proper order. The shareholders have the right also to assure themselves that the founders have the full amount of money paid to them in their possession in bank notes. For the inspection of the books certain hours are fixed every day, excepting holidays. This information, stating the hours, must be published in the newspapers for the general information of the shareholders.

(10) Independently of the inspection of the books and sums received by the shareholders, the founders are bound, not less than once every 3 months, to call the shareholders to verify the above-named books and amounts of money received by them. This examination is limited, however, (1) to the inspection of the book in which is kept the account of the shares disposed of, the number of which is seen by their consecutive numbers, and (2) whether the total amount received on the shares amounts to the number of shares sold or to the amounts received as instalments on the shares, and that these amounts have been turned into bank notes, as well as that the total amount received is intact, for which the money, if kept on the spot, must be counted. This examination must be effected at one sitting; an insertion to this effect must be made in the book, stating the place where and the time when the examination took place. This manner of inspection must be continued until the company is fully organized. The management of the company, which receives from the founders the money and the books, is obliged to make known the place where the books have been delivered.

SEC. 2167. The holders of shares and preliminary receipts on shares may dispose of them in the same manner as that prescribed for the disposal of any other property, but with the following limitations: Shares or receipts of money paid on account of shares, during the lifetime of the holders may be transferred to other parties, but not otherwise than with an indorsed transfer, which must be noted by the company's management; and should these shares or receipts become the property of other parties through inheritance or by will, the transfer is indorsed by the management of the company.

SEC. 2168. In all the cities of the Empire where brokers are to be found the following rules must be observed for the mortgage of shares and interest-bearing bonds: (1) The person making the loan on shares or interest-bearing bonds transfers the same to the person who advances the money, together with a letter, which gives him the right, in case of the nonpayment of the capital and interest at a fixed date, to dispose of the said shares or interest-bearing bonds according to his option, namely, either to sell them to some other person or to retain them for himself at their value on exchange, and should it occur that the sale of the shares or interest-bearing bonds does not refund the amount loaned on them, the person who borrowed the money binds himself to make good the difference; (2) the lender issues a certificate in which he states that, as guaranty for certain amounts of money loaned, he has received such and such shares or bonds, which, upon the return of the money lent by him, he binds himself to surrender to the borrower, but that if the money lent by him is not returned he shall have the right to retain the shares or bonds for himself or to sell them at their exchange value; (3) and the person who has received the money, according to the statutes of the company, together with the shares or bonds, hands to the money lender a declaration addressed to the management of the company for the transfer of such shares or bonds to the name of the money lender; other shares are transferred by written indorsements, and bonds to bearer require no indorsement; (4) operations effected as loans on shares or bonds must follow the rules prescribed in paragraph 639 of the commercial laws.

C.-Reserve Fund and Dividends.

SEC. 2169. Companies are allowed to organize a reserve fund on condition that a portion of the remains which determine the net profits should be fixed for the reserve fund, either by the company's statutes or by a resolution of the general assembly of shareholders. At this general assembly the dividends must also be determined.

SEC. 2170. Should a shareholder not present himself for the receipt of his dividends, the same is kept in the treasury of the company during a period of 10 years, to be personally claimed by the shareholder or by his heirs; after a period of 10 years, if such dividends have not been claimed, they are either added to the reserve fund or divided among the shareholders, according to the provisions of the statutes.

THE RIGHTS AND RESPONSIBILITIES OF SHAREHOLDERS.

SEC. 2171. The rights of shareholders, according to the number of shares they possess, to be present at the general assembly of the company and to participate in the discussions of the assembly, with a number of voices, according to the number

of shares belonging to one person, as well as the cases and means of participation of representatives with full power from the shareholders, at the general assemblies, must be specially determined in the statutes of each company.

SEC. 2172. Inasmuch as the responsibility of the company is limited to the money paid on the shares, therefore, in case of the failure of the enterprise, or should there be claims brought against it, all the shareholders, as well as the directors of the company, are responsible but for the amount of shares they possess in the enterprise, and can not be forced in any way to answer for debts which the enterprise may have contracted.

SEC. 2173. In case a shareholder is declared bankrupt for debts owed to the Crown or to private parties, the capital paid by him for his shares remains the direct property of the company, but the shares which are in his possession, considered as his personal property, as well as all profits thereon still unpaid, are placed in the hands of his creditors for the satisfaction of his debts.

D.—The Manner of Administering the Company.

SEC. 2174. All companies at first are administered by the founders, and when formed by the board of directors of the company.

SEC. 2175. The founders of the company administer its affairs only up to the time when the company is definitely formed; that is to say, until the time when all the shares are subscribed and payment on them is made, whether in full or only preliminary instalments have been made, after which time the general assembly of shareholders elect members of administration or directors, among which may also be elected the founders. The choice of the members of administration, as well as the term for which they are appointed and the manner of their election, must be determined in the statutes of the company.

SEC. 2176. The administration of the company having obtained the subscription books from the founders, they must verify the accounts and take over the books and accounts from the founders. The subscription book remains to show to whom and in what number shares have been granted. The administration gives the founders

a receipt for the books as having been verified.

SEC. 2177. No person whatever, whether the inventor of the patents which are being exploited by the company or one of the former founders, etc., has the right to claim continual membership in the administration.

SEC. 2178. The administrative board disposes of the affairs and capital of the company, not otherwise than based upon the provisions granted in the statutes, which must absolutely determine up to what amount of capital the administrative board may dispose of without convoking a meeting of the shareholders, which may authorize it to effect expenditures for the affairs of the company. Sums of money which may be required for the enterprise and which are placed in credit institutions may be drawn for, but the draft must be signed by at least 3 members of the board of directors. For this purpose each time that there is a change of directors or of members of the board of directors the late directors or members of the board must inform the credit institutions of the changes made in the direction of the company, and the signatures of the new members must accompany this information. This change of directorship must also be advertised in the newspapers.

SEC. 2179. In case of urgency the board of directors may have the right to decide matters within their power which may require larger sums of money than are prescribed for in the statutes, but on the condition that the members of the board of directors are personally held responsible for their action at the general meeting of the shareholders.

SEC. 2180. The decisions of the board of directors are put into effect upon a majority of the voices of the members present, but only in the case when more than half of the members are of one opinion. The resolutions arrived at by the board, when more than the half of the members were present, are likewise obligatory, just as if all the members had been present and were of one opinion; but those of the members who did not side with the majority are allowed to sign their protest in the journal kept by the administrative board. When a decision is not arrived at, owing to a minority of voices, the case is laid before a general assembly of the shareholders for their decision.

SEC. 2181. The directors of a company or the members of administrative board act as the procurators of the company and, therefore, should they commit any illegal acts or exceed the power which is given to them they are held responsible toward the company according to the statutes of law.

(1) The administrative board and general assembly of shareholders are the organs of the company; the association or company, and not the general assembly of share