Michigan corporation law;

              Bulletin HASKINS & SELLS 107
THE present Michigan law governing
corporations, as amended under Act 267
of the 1929 law, now contains certain pro­visions
which are likely to cause difficulty
of interpretation and application when
questions affecting surplus and dividends
arise.
The law now attempts to define surplus
in the following terms:
"The excess, if any, at any given time,
of the total net assets of the corporation
over the amount so determined to be capi­tal
shall be surplus available for all pur­poses
for which surplus earnings may
properly be applied."
From this, surplus earnings usually being
subject to appropriation for dividends, one
may reason that any excess of net assets
over stated capital may be appropriated
for dividends. If this conclusion is cor­rect,
any surplus, regardless of how de­rived,
may be so treated. This would
apply to capital surplus of any kind, not
omitting that so-called capital surplus
which sometimes is said to result from
appraisals.
In further respects the present law has
been changed to permit of greater latitude
in the treatment of capital. Boards of
directors now may determine, as in Dela­ware
corporations, that only a part of the
consideration received for capital stock
shall be capital. But, as in Ohio corpora­tions,
the determination must be made at
the time of issuance, if cash is the consid­eration,
or within sixty days after the
issuance, if the consideration is property,
or partly cash and partly property. The
limitation of time imposed upon corpora­tions
which had issued capital stock prior
to the date on which the amendment be­came
effective, was fixed at July 1, 1930.
Out of the new law one may read such
provisions as that capital stock without
par value may not be issued except for
some consideration. The consideration
may be that which is prescribed in the
articles of incorporation, or the fair market
value as fixed by the directors, whose
judgment in the absence of fraud is con­clusive,
or such consideration as shall be
consented to by two-thirds of the share­holders
of each class of stock outstanding.
Again, one discovers that premium on
shares having a par value may be treated
as surplus available for dividends. This is
by reason of the passage which reads:
"* * * unless all the shares issued shall
Michigan Corporation Law