Liability of directors for loans to stockholders;

              Bulletin HASKINS & SELLS 39
Liability of Directors for Loans to Stockholders
IT is obviously impossible, with the vast
number and variety of corporation
laws, for the accountant to have in his
mind all of the statutes governing corpora­tions
in the various states. The out­standing
features of corporation law are
covered in various text-books which the
accountant studies and consults; but in­vestigation
in special cases frequently
brings to light points which constitute
more or less of a surprise, because of the
infrequency with which such cases arise
in accountancy practice.
The accountant probably overlooks
many violations of corporation law be­cause
of his inability to give the time
necessary to cover all the refinements of
such law. It is not to be supposed that
he will have all the legal equipment of
the lawyer, and he is not charged with
such knowledge or experience. When,
however, cases involving a fine point of
corporation law bring to light certain
statutes of particular interest, it seems
worth while to call attention to such pas­sages
in the law. The following is quoted
from Section 29 of the New York Stock
Corporation Law:
"No loans of moneys shall be made by any
stock corporation, except a monied corpora­tion,
or by any officer thereof out of its funds
to any stockholder therein, nor shall any
such corporation or officer discount any note
or other evidence of debt, or receive the same
in payment of any installment or any part
thereof due or to become due on any stock in
such corporation, or receive or discount any
note, or other evidence of debt, to enable any
stockholder to withdraw any part of the
money paid in by him on his stock. In case
of the violation of any provision of this sec­tion,
the officers or directors making such
loan, or assenting thereto, or receiving or
discounting such notes or other evidences of
debt, shall, jointly and severally, be per­sonally
liable to the extent of such loan and
interest, for all the debts of the corporation
contracted before the repayment of the sum
loaned, and to the full amount of the notes
or other evidences of debt so received or dis­counted,
with interest from the time such
liability accrued."