ferred stock is very frequently so issued. Unless expressly denied or restricted by proper provision, all stock has the usual voting power and this right may be exercised by the owner of record in person, or, usually, by proxy.

§351. Capital Stock vs. Capitai

The "capital stock" or capitalization of a corporation should be very clearly distinguished from its "capital."

The capital stock is the total amount of stock the corporation is authorized by its charter to issue. This amount is fixed in the first place by the parties organizing the corporation— who are termed the incorporators-and, once accepted and authorized by the state, may be changed only by formal amendment of the charter.

The capital, on the other hand, is the net actual amount of property owned by the corporation, that is, the excess of its assets over its liabilities. It is obvious that the value of these assets is liable to change with the fluctuations of the business or from other causes. The capital stock of the corporation and its capital, therefore, even though equal at first, may and frequently do differ greatly in amount. For instance, the capital stock of the Chemical Bank of New York City is $3,000,000 while its capital is over $7,500,000.

§352. Unissued and Issued Stock

Unissued stock is not an asset of the company but is merely an unexercised right to issue stock when and as subscriptions for it are accepted.

It usually represents excess capitalization. For instance, a corporation organized to take over property worth $20,000 might perhaps be capitalized at $25,000 with the idea of selling the excess stock at some future time to raise working capital.

Issued and outstanding stock is stock which has been issued for cash, property, labor, services, or other values, or which

has been subscribed for and the subscriptions accepted by the company. Such stock is issued stock and the subscribers or purchasers are stockholders of the company, even though the actual certificates by which this stock is represented may not have been issued.

Section 55 of the Stock Corporation Law in New York State provides that:

No corporation shall issue either stock or bonds except for money, labor done, or property actually received for the use and lawful purposes of such corporation.

$353. Full-Paid Stock

In most of the states, payment for stock may be made in anything of value. If the corporation has received the full face value for issued stock in cash or in any other form of payment permitted by law, such stock is termed full-paid, and its certificates should be marked "Full-Paid" in order to indicate this fact. After stock has once been issued for full value, it may be sold at less than par without involving the purchaser in any liability for the difference.

If the corporation has not received the full face value for issued stock, the stock is but partly paid, and the immediate purchaser of, or subscriber to, such stock may usually be held liable for the amount necessary to render it full-paid. This liability may be enforced either by the corporation, or, in event of its insolvency, by any creditor of the corporation.

Stock certificates issued as full-paid when they are not full-paid will not protect stockholders, who knowingly subscribe for or buy such stock, from liability to creditors in case of insolvency. But an innocent purchaser for value who buys in the open market is not liable either to the corporation or its creditors.

Watered stock is stock for which the corporation has not

received full payment in cash, services, or property. Watered stock is usually created by the issuance of stock in payment for property or services which have been overvalued; sometimes also it is created by the issue of stock insufficiently supported by the corporate property, as for instance, in cases of unwarranted stock dividends.

$354. No Par Value Stock

In some states, as in New York, stock may be issued having no par value. Its value is the market rate. Here the stock is full-paid when it is sold at whatever can be obtained for it in the market, and there is no further liability.

$355. Common Stock

Common stock is the general or ordinary stock of a corporation, with neither special privileges nor restrictions. If any portion of the stock is given special privileges or restrictions, that portion is thereby removed from the class of common stock and the remainder constitutes common stock. Any statements made concerning stock, when the class is not specified, are usually understood to apply to the common stock. Non-participating stock is stock sharing in all dividends but giving the owner no voting right.

$356. Preferred Stock

Preferred stock, as the term is usually employed, is that which has some preference as to dividends or assets over other stock of the same corporation. This preference is usually secured to it by special provisions in the certificate of incorporation, though in some states this may be attained by by-law provision.

Preferred stock may be either cumulative or non-cumulative as to dividends. Non-cumulative preferred stock must

receive its preferred dividend for the current year before any dividend is paid the common stock, but if in any year its dividend fails or is only partly paid it loses the unpaid amount. If the dividends on cumulative preferred stock are not paid in any year, or years, or are but partially paid, the amounts unpaid go over, or cumulate, and must be satisfied before the common stock receives anything. They remain a charge against the profits of the company until paid in full.

It is usually provided that preferred dividends shall be paid in full before the common stock receives any dividend. Unless otherwise expressly provided, after the preferred dividends are paid in any year, the common stock receives an equal dividend if the profits are sufficient, and both kinds of stock then share alike in any further dividends declared in that year. It is sometimes provided that, after the preference dividends are paid, the preferred stock shall share equally in all further profits with the common stock. Preferred stock is sometimes limited to its preferred dividend and does not participate at all in any further dividends.

It is often provided that in case of dissolution preferred stock shall be satisfied out of any assets of the company before the common stock receives anything. If this provision is not made, either by statute or by charter, the preferred stock in any liquidation of the corporation will first receive any dividends then due, but thereafter will fare the same as common stock.

Preferred dividends may be paid only from profits. If there are no profits, or if the profits are needed for purposes of the business, the dividends to preferred stock are either passed entirely or cumulated until profits are made. Unlike a bond, preferred stock is not a debt or liability of the corporation. Its owners are stockholders and not creditors, and failure of dividends gives no cause of action against the company or its directors.

$357. Treasury Stock

Treasury stock, in the better use of the term, is stock which has been issued for value and has by gift or purchase come back into the possession of the company. It differs from unissued stock in the fact that it may be sold below par without involving the purchaser in any liability for the unpaid balance. So long as the treasury stock is held by the company, it can neither vote nor draw dividends.

$358. Lost Certificates

A stockholder's rights are not affected by the loss or destruction of his stock certificate. Its absence may involve much inconvenience, more particularly if the stock is to be sold. The directors may, in their discretion, provide for the issue of a duplicate subject to the by-laws, which usually provide that a bond must be required.

If a certificate is lost the secretary of the company should be notified promptly, as otherwise the stock certificate might be presented under circumstances which would justify him in making any desired transfer. After notification he would make such a transfer only by direction of the board.

$359. How Transferred

Stock certificates usually have a blank form of transfer printed on the back. If this is simply signed, the stock may be transferred to anyone, and he will have a right to obtain a certificate made out to himself by surrendering the indorsed certificate to the corporation. If the name of the person to whom it is transferred is inserted, only that person has a right to the stock and to the new certificate.

A Uniform Stock Transfer Act is now in force in fourteen states and territories and governs the method of transferring stock and the rights of transferee and transferor. The states which have accepted this act are: