er words if they are tainted with fraud, they
can be set aside provided proper action is taken as soon as the fraud
is discovered.

Suppose directors had defrauded their corporation, but the fraud was
not discovered until several years afterward. Once it was held that
they could shield themselves behind the Statute of Limitations (see
_Statute of Limitations_) if the discovery of the fraud did not occur
until after the Statute had become effective to protect them. This is
no longer the law. Action however must be begun against them within
the proper time after discovering the fraud, otherwise the Statute may
be interposed as a bar to proceeding against them.

The complication of business has led to the adoption of another
principle in managing corporations. A majority of the directors may
lawfully act as opposed to the minority; in other words if a majority
are not interested in a matter that concerns one or more of the
minority directors, the interests of the corporation are supposed to
be properly safeguarded. Yet an illustration discloses the dangerous
character of this method of doing business. Suppose each director of a
bank wished to obtain a loan of money from it. They could not legally
make such loans, for no one would represent the bank. Suppose a
single director made such an application, that would be a proper thing
for him to do and for them to grant, for the bank would be represented
by all the directors except the applicant. Suppose it were agreed in
advance that each would make an application at different meetings that
should be favorably regarded, the series of loans would be in fact
only a single transaction in which the bank was not represented.

The knowledge of a director or other officer is imputed to, or
regarded in the law as known by the bank on all matters relating to
it. Thus if a director knew that a note was signed by a minor which
was afterwards presented for discount at a directors' meeting at which
this director was present, and he forgot to tell the directors what he
knew and it was discounted, the bank would be regarded as having
knowledge that the maker was a minor, who of course could not be held
on the note. This principle has a very wide application, yet is very
difficult to apply. The tendency of the law is to narrow the
application of the rule, for directors do not in many cases impart
their knowledge, either through forgetfulness or other cause, and it
is not just to hold their