ABSTRACT

The mere power concentrated in the hands of, a parent corporation, or of the management itself, appears to be tested by rules almost exactly like those applicable to boards of directors. Transactions have been steadily enjoined unless the corporation can justify its purchase on the ground that the controlled corporation may furnish facilities or materials in carrying out its objects, or is engaged in substantially the same enterprise, or that the purchase aids a corporation usefully to the buyer's business. Leaving aside special restrictive statutes of which there are many, and assuming a full kit of statutory and charter powers to purchase stock, courts have, nevertheless, limited the use of this power almost from the beginning of corporate history. The purpose of the corporation is investment; but the power to purchase stock has been used, not for investment purposes, but to forward the control of the managing group in extraneous fields.