out of office, and what number shall be a quorum at their meetings.3

1 N. Y. Laws of 1850, ch. 140, § 5.

2 N. Y. Laws of 1864, ch. 582, § 3, as amended by laws of 1883, ch. 46. 3 8 Vict. ch. 16, § 82.

2

§ 457. Qualifications of directors at common law. The qualifications of directors may be prescribed by a by-law passed by the shareholders of the company;' but the directors themselves have no such authority. Any one competent to act as an agent, as for example, a married woman,3 may be elected as a director of a company; and at common law it is not necessary that a director be a stockholder of the corporation. Unless there be some constitutional, statutory, or charter provision, or some by-law requiring the directors, or a majority of them, to be citizens and residents of the incorporating State, there is no principle of common law imposing such a qualification.o

5

1 People v. Northern R. R. Co. 52 N. Y. 217; Cammayer v. United Church, 2 Sand. Ch. 186.

2 In re British Provident Life etc. Assoc. 5 Ch. Div. 306. Cf. Lord Claud Hamilton's Case, Law R. 8 Ch. 548.

3 People v. Webster, 10 Wend. 554.

4 Wight v. Springfield etc. R. R Co. 117 Mass. 226; 19 Am. Rep. 412; In re ctc. St. Lawrence Steamboat Co. 41 N. J. 529; State 7. McDaniel, 22 Ohio St. 354, 367; Ex parte stock, 33 Law J. Ch. 731; Cook on Stock & Stockh. § 620. Cf. Despatch Line v. Bellamy Manuf. Co. 12 N. H. 205; 37 Am. Dec. 203; Bartholomew v. Bentley, 1 Ohio St. 37; Taylor on Corporations § 614, note.

5 As in Illinois. See Ill. Const. (1870) art. xi, § 11.

6 Kerchner v. Gettys, 18 S. C. 521.

§ 458. Statutory qualifications of directors. In New York it is provided by the General Railroad Act of 1850, that no person shall be a director unless he shall be a stockholder, owning stock absolutely in his own right and qualified to vote for

directors at the election at which he shall be chosen.1 Similar statutes are to be found in other American States. In England it is enacted by the Companies' Clauses Act of 1845 that no person shall be capable of being a director unless he be a shareholder, nor unless he be possessed of the number of shares prescribed by the act of incorporation, if any; and no person holding an office or place of trust or profit under the company, or interested in any contract with the company, shall be capable of being a director; and no director shall be capable of accepting any other office or place of trust or profit under the company, or of being interested in any contract with the company, during the time he shall be a director. It has been held in Connecticut that a director of a corporation which holds stock in another corporation is a stockholder in the latter within the meaning of a statute requiring the directors of corporations to be stockholders therein. Even a person who is entitled to vote at corporate meetings merely as the holder of a power of attorney, is competent to act as a director. It is no objection to the competency of a director that stock was transferred to him in trust for the purpose of qualifying him to act. Under a statutory provision that the directors of a corporation shall be elected from the shareholders, and a provision in the by-laws that transfers of shares shall be made only on the corporate books, and that for a designated time before the annual meeting the transferbook shall be closed, it has been held, that although the privilege of voting or of receiving dividends may be denied a purchaser of shares, who has not procured his transfer to be recorded, yet that he is eligible to

the office of director." The provision directing that no person shall be a director who is not a shareholder, or possessed of the required number of shares, applies only to elected directors and not to directors named in the special act of incorporation." The directors are not bound to take their qualification shares from the company itself. They may go upon the market and purchase them. There is a constitutional requirement in Illinois that a majority of the directors of a railway company must be citizens and residents of the State." A statutory provision by which a minority of the directors of a railway company are allowed to reside without the State will apply equally as well to a company owning a very short line, which they operate for their own private purposes, as to a company owning a more extended line, operated in the interest of the public."1

1 N. Y. Laws of 1850, ch. 140, § 5.

2 State v. Smith, 15 Or. 98; State v. Leete, 16 Nev. 242; Bartholomew v. Bentley, 1 Ohio St. 37.

3 8 Vict. ch. 16, § 85.

4 Chase v. Tuttle (1888), 55 Conn. 455, construing Conn. Laws of 1876, p. 117, together with Conn. Laws of 1880, p. 561

5 State v. Ferris, 42 Conn. 560.

6 Budd v. Monroe, 18 Hun, 316. Contra, Bartholomew v. Bentley, 1 Ohio St. 37.

7 State v. Smith, 15 Or. 98.

8 Portal v. Emmens, 1 Com. P. Div. 664, 667; Browne & Theobald's Railway Law, 101.

9 State v. Leete, 16 Nev. 242; Jenner's Case, 7 Ch. Div. 132; Dent's & Forbes' Case, Law R. 8 Ch. 768; Brown's Case, Law R. 9 Ch. 102; Caruth's Case, Law R. 20 Eq. 506. See Chapman's Case, Law R. 2 Eq. 567; Austin's Case, Law R. 2 Eq. 435. Contra, Fowler's Case, Law R. 14 Eq. 316; Harward's Case, Law R. 13 Eq. 30. Cf. Hamley's Case, 705.

10 Ill. Const. (1870) art. xi, § 11.

11 State v. Smith, 15 Or. 98.

$459. The election of an unqualified person, voidable merely. The election of an unqualified

BEACH ON RAILWAYS-47

person to a corporate office is not absolutely void, but voidable merely. Accordingly, votes cast for a candidate who is not yet qualified to hold office, are not to be wholly disregarded in determining the result of the election, although it has been said that under the English Companies' Clauses Acts the holding of the number of shares prescribed by the act of incorporation is a condition precedent to his election as a director. But the better rule would seem to be that the election of a person not holding the required number of shares is not invalid, for by accepting the office he is presumed to subscribe for the qualification shares; and although he may never actually have done so, he will be liable to corporate creditors as though he had. Even a person appointed director by the special act of incorporation is liable as a contributory for the number of shares necessary for his qualification, though he may never have acted as a director, and directors other than those named in the act of incorporation may have been appointed at the first general meeting. But merely accepting the office without actually serving as director does not render a person liable for the qualification shares where the acceptance has been afterward promptly retracted, on the ground of misrepresentations made to him by the promoters of the enterprise."

5

6

1 People v. Albany etc R. R. Co. 35 Barb. 341; Cook on Stock & Stockh. § 620. Cf. Craw v. Easterly, 54 N. Y. 679; Easterly v. Barber, €5 N. Y. 252.

2 In re etc. of St. Lawrence Steamboat Co. 41 N. J. 529. But votes cast for a person disqualified even to be a candidate, are to be wholly excluded: State v. Thompson, 27 Mo. 365, 363.

3 Browne & Theobald's Railway Law, 102, citing Jenner's Case, 7 Ch. Div. 132; Miller's Case, 5 Ch. Div. 70; 3 Ch. Div. 661; Barber's Case, 5 Ch. Div. 963; Hamley's Case, 5 Ch. Div. 705.

4 Pearson's Case, 5 Ch. Div. 336; Hay's Case, Law R. 10 Ch. 593, 604; In re Great Oceanic Telegraph Co. 41 Law J. Ch. 233; Miller's Case, 3Ch. Div.

661; Fowler's Case, Law R. 14 Eq. 31; Harward's Case, Law R. 13 Eq. 3); Kidney's Case, Law R. 13 Eq. 28; Leck's Case, Law R. 6 Ch. 469; In re Englefield Colliery Co. 8 Ch. Div. 383; In re Empire Assurance Co. Law R. 6 Ch. 469; McKay's Caso, 2 Ch. Div. 1. Contra, Marquis of Abercorn's Case, 4 Do Cex, F & J. 78; Brown's Case, 9 Ch. 102; Stephenson's Case, 45 Law J. Ch. 438. Cf. In re British & American Telegraph Co. Law R. 14 Eq. 316; De Ruvigne's Case, 5 Ch. Div. 306.

5 Stephenson's Case, 45 Law J. Ch. 488. Cf. In re British & American Tel. Co. Law R. 14 Eq. 316.

6 Kincaid's Case, 11 Eq. 132; Browne & Theobald's Railway Law, 101. Cj. Portal v. Emmens, 1 Ccm. P. Div. 201, 664.

7 Caruth's Case, Law R. 20 Eq. 506; Taylor on Corporations, § 614.

2

§ 460. Disqualification after election.-If a director at any time sells the shares upon which his qualification for the office depends, he thereby ceases to be a director.1 But a pledge of his qualification shares by a director does not disqualify him to act.2 And it seems that an equitable assignment by a director of his qualification shares will not deprive him of his office till the equitable title is completed by notice to the company. Under the English Companies' Clauses Act of 1845, if any of the directors at any time subsequently to his election accept or continue to hold any other office or place of trust or profit under the company, or be either directly or indirectly concerned in any contract with the company, or participate in any manner in the profits of any work to be done for the company, or if such director at any time cease to be a holder of the number of shares in the company prescribed by the act of incorporation, then in any of the cases aforesaid the office of such director shall become vacant, and thenceforth he shall cease from voting or acting as a director.1

1 Easterly v. Barber, 65 N. Y. 252; Craw v. Easterly, 54 N. Y. 679.

2 Cumming v. Prescott, 2 Younge & C. Ex. 483.

3 Ex parte Littledale, 24 Law J. Q. B. 9; Browne & Theobald's Railway Law, 102.