K; HANKKIi; HANK 



; : 



: l'.\\KIN<;. 



upon the dissolution ol an ordinary partnership. The consequences 

 arising upon transfer at shares miut be sought for in the pro- 

 TMions of the dead of settlement, or in aome rule of law not 

 repugnant to too** provisions. (See the law stated, Urant's ' Law of 

 Banking/ A 



Joiml-Sloft Campamitf an regulated by an Act of 1844, 7 A 8 Viet, 

 c. 1 13, according to which the mode of becoming a Joint-Stock Banking 



Company is the following : The persons who wiah to be formed into 

 such a company an to petition the Queen in council, and on the 

 report of the Board of Trade that the statutory m|uireinenU have 

 bean complied with, a charter will be granted : then a deed of nettle- 

 went U to be executed, containing a number of provisions wt out in 

 a. 4 ( the statute (which (till continue to be Uw, with this exception, 

 that now by a subsequent itatute, 10 A. 20 Viet., c. 100, the re-election 

 at retiring'directon U permitted), which deed must be execuUxl l.y 

 the holder* of at least one-half of the shares into which the capital of 

 the company U divided. But the liability of the shareholders in thin 

 claat of joint-stock bank* u not to be limited (we shall ipeak preaantly 

 of the new legislation permitting the eatabliahment of joint-stuck bank- 

 ing companie* with limited liability of shareholder*} ; and actions may 

 be brought by, or against, the company or shareholders reciprocally, 

 and every judgment against the company being enforcible against it, 

 and under certain restrictions prescribed in the first-mentioned 

 statute, against shareholder* and former shareholders, of which the 

 effect is. that a shareholder is not liable to be sued upon the dealing*, 

 covenants, and undertakings of the company ; he is only liable upon a 

 judgment against the company. If a judgment is obtained against the 

 company, and execution against it proves unproductive, then by 

 certain legal processes execution may be had against any shareholder, 

 and in the event of tkat proving unavailable to realise the sum due, 

 the creditor may proceed to execution against any person who was a 

 nhareholder at the time the cause of action arose, with the limitation of 

 three years, and a shareholder who has been so obliged to pay a debt 

 of the company may be reimbursed either out of the assets of the com- 

 pany or by contribution from the other shareholders. It is necessary 

 also, that the body of persons who wish to be formed into one of these 

 companies should be provisionally registered within three mouths 

 after the grant of the charter ; and before the company shall begin 

 business a memorial is to be made out, setting forth the title of the 

 company, the names and places of abode of all the members and of 

 every director and manager, or other like officers, and the name or 

 firm of every bank established by the company, and the name of every 

 town or place where the business shall be carried on. This is to be 

 repeated every year as long as they carry on business as bankers, and 

 the memorial is to be delivered to the Inland Revenue Office, where it 

 is to be registered, Ac. Also a printed list of the registered names 

 and places of abode is to be made out from time to time, and kept in 

 a conspicuous place in the company's principal place of business, A 

 like memorial is also to be made out and delivered to the above-men- 

 tioned Board, containing the same particulars of every new director, 

 manager, or other like officer, and the names of all persons who have 

 become members, either in addition to, or instead of, any former 

 members ; and the name of every new town in which the company 

 carry on business, and the names of all who have ceased to be members ; 

 and such farther account is to be registered, Ac., as before. All these 

 memorials are to be signed by the manager, or one of the directors, and 

 verified by his declaration before a magistrate, Ac. ; and the persons 

 whose names appear at any time in the then last delivered memorial 

 shall be the existing shareholders, so that a person whose name is in 

 the memorial is liable as a shareholder, although the memorial may 

 not have been framed in all respects in the prescribed form. These 

 companies are also required to make the returns required by the 

 statute 7 A 8 Viet, c. 32, a. 21, to be made by every banker in England 

 on the 1st of January, or within fifteen days after, in every year, under 

 a penalty of 60V. 



. The capital stock of a joint-stock banking company under this 

 statute 7 & 8 Viet c. 118, is in no caw to be leas than 100,0001., and 

 the shares are not to be less than lOOi. each, and every deed of settle- 

 ment must contain specific provisions for preventing the company from 

 purchasing any of the shares or making advances of money, to any 

 person, on the security of shares. In general, there are no means by 

 which a shareholder can be enabled to withdraw from the concern, 

 except he can find some one who will purchase his share, and it is 

 actually transferred to such person. No share can be transferred until 

 all sums due for calls upon it, and upon every other share which the 

 owner of it holds, shall have been paid. From time to time the direc- 

 tors may make such calls on the shareholders in respect of the amount 

 of capital stock respectively subscribed by them, as the director! 

 shall think fit ; and, besides being liable to pay calls by way of action, 

 shareholder! are liable to forfeit their shares, by leaving calls unpaid, 

 if the directors, at any time after six calendar months from the day 

 appointed for the payment of such calls, declare them to be so forfeited : 

 the shareholders still remaining liable for the calls due before the 

 forfeiture. 



The deed of settlement or partnership must contain specific pro- 

 visions for the management of the affairs of the Bank and the election 

 and qualification of the directors. Any one of the directors U em- 

 powered to sign bills of exchange or promissory notes, made, accepted, 



or endorsed on behalf of the company, provided it be therein expressed 

 to be so made, Ac. l.\ hint on U-half of the company. 



The deed of settlement ought to contain |.i..\i-;..ii- :id.ij-- 

 prevent any declaration of dividends on the capital l.\ th.' directors, 

 without due regard to the actual state of the '! .iii - The 



liability incurred by directors, who declare and divide dividend- 

 the profits made by the company do not authorise their .loimf ~>. i 

 very heavy. (See IB A 20 Viet c. 47, s. 3, compared with 20 A 21 

 Viet c. 4, a. 18. See also Grants ' Law of Banking,' Ac., p. 594 ; 19 



ict c. 47, a. 14 ; 20 A 21 Viet c. 49, a. 18.) It U i. 

 directors so declaring dividends when the concern is not in mieh a state 

 as to admit of it, that they did not act under the influence of a desire 

 to pocket the dividends on their own shares, Lut with a desire of 

 representing the affairs of the Bank to be in a prosperous con !. 

 as to attract an increase of custom, and to raise the value of the shares, 

 and stimulate the demand in the market for them. 



A manager, or other officer, to perform the duties of manager, must 

 be appointed in all cases. 



The deed of settlement must contain provisions for the yearly audit 

 of the accounts by two or more auditors, chosen at a general meeting 

 of the shareholder!*, and not being directors : also, provisions i 

 publication, once at least in every month, of the assets and liabilities of 

 the Bank ; and for the yearly communication to every shareho! 

 the auditor's report, of a balance sheet and profit and loss account As 

 regards the requirement of the law, that these banks should make 

 periodical statements of their affairs, experience has shown these 

 documents to be capable, by dexterous management, of conveying the 

 most fallacious impressions of the real state of things : by the simple 

 expedient, for instance, of not writing off bad debts, and of considering 

 those to be good engagements which, though perhaps not wholly with- 

 out value, may be utterly unavailing as banking securities, a fair 

 statement of assets may be presented on the balance-sheet, while in 

 truth a company may be in any thing but a prosperous condition. 

 Such a process, it must be remembered, is always available, almost 

 without any risk of immediate detection ; indeed, to a certain extent, 

 it may be a question of opinion when to write off a debt as bad or 

 irrecoverably lost ; but still the public, who confide in these account*, 

 have no available means of ascertaining how far the statements in the 

 periodical balance-sheets or states of liabilities and assets have been 

 framed with judgment and honesty, and how far they are designedly 

 put forward with a view of attracting depositors, keeping oj 

 price of the shares in the market, and generally of deceiving and 

 overreaching. The account* given, it has been alleged, are not suffi- 

 ciently explicit : to be serviceable, so as to enable persons consult- 

 ing them to get a practical insight into the nature of the business, 

 they ought to go into details to some extent, not inconsistent 

 with the secrecy in regard to individual transact;. .us, which U 

 iudispenaable in banking. For instance, it has been urged that a 

 material improvement in the accounts would be, that they should 

 state the amount of over-due bills held by the company at the 

 time of making out the account, together with the sum they were 

 estimated to be likely to realise. Still, in the opinion of experienced 

 bonkers no form of account could be framed, with due regard to 

 secrecy, which would enable the shareholders of a bank in which there 

 was anything going wrong to discover where the fault lay, or to put 

 any check on any misconduct or mismanagement of the directors. In 

 the opinion of the best authorities on the subject, you must in the 

 end trust to the honour and integrity and capacity of the directors 

 and manager. But if the periodically published statements are 

 fallacious, what is the case of the audit ? How can it be possible to 

 accomplish an effectual audit of the affairs and transactions of bodies 

 of such a magnitude of business as is done by some of the London 

 Joint Stock Banks, some of which hold from 8 to 13 millions sterling 

 of deposits I In general it is probable all that auditors do, indeed all 

 that they can do, is to examine the balance sheet laid before them by 

 the directors, with the help of such vouchers as they can pi 

 they can merely vouch for the fact of the balance sheet being 

 on the data supplied to them. But an effective audit of a lank is 

 something very different from this ; it- ought to include a full view of 

 the real jxwition of the affairs. Now in taking an account of the assets 

 of a bank, the highest judgment is requisite, founded on acquaintance 

 w ith the principles of the art of banking. A bill of exchange i.- 

 the very best or the worst asset of a bank, and it depends on tlie 

 judgment of the person examining the asset whether he counts it as 

 good or bad. For an auditor to give a full account of the actual state 

 of a bank, he must value every security ; and how is this to be done 

 in cases, for instance, of securities given by persons unknown beyond 

 the district over which the operations of the Bank extend, without a 

 local knowledge of the parties in the auditor ? He ought to 1 

 condition to follow every transaction, especially with reference t<> Kills 

 of exchange, which might be redisoouuted at the moment of the audit 

 and so out of the hands of the Bank, and to be able to judge of all the 

 securities, so an to toll whether they would ultimately turn out an 

 asset of the Bank or a claim upon it ; in fact, he must acquire a know- 

 ledge of all the affairs of the concern as intimate as that possessed by 

 the directors, or the manager himself, before he would be able to 

 report much more with certainty than whether the book-keeping was 

 right, and that the balances were right, on a comparison of the 



