K; ItANKKIi; HANK 



Kj IiANKr.ll: l:\NI-. 



upon the dilution .<f MI ordinary partnership. The consequences 



ruing upon m transfer at shares 

 vuoou. of the deed of settlement, 



repugnant to those provisions. (Sea the Uw cUted, Uranfs ' Law of 

 Bulking/ Ac.) 



Joimt-Suxt Campania are regulated by an Act of 1844, 7 A 8 Viet., 

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



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

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

 report of the Board of Trade that the statutory raquirementa have 

 been complied with, a charter will be granted : then a deed of settle- 

 meat is to be executed, containing a number of provisions set out in 

 s. 4 f the statute (which still continue to be law, with this exception, 

 that now by a subsequent statute, 1! A 20 Viet, c. 100, the re-election 

 of retiring 'directors is permitted), which deed must be execuU-d l.y 

 the holders of at least one-half of the shares into which the capital of 

 the company is divided. But the liability of the shareholders in this 

 class of joint-etock banks is not to be limited (we shall Hpeak presently 

 of the new legislation permitting the establishment of joint-stock bank- 

 ing companies with limited liability of shareholders) ; and actions may 

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

 and every judgment against the company being enfomble against it, 

 and under certain restrictions prescribed in the first-mentioned 

 statute, against shareholders and former shareholders, of which the 

 effect is, that a shareholder is not liable to be sued upon the dealings, 

 covenant*, 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 l.y 

 certain legal processes execution may be had against any shareholder, 

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

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

 shareholder 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 months 

 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 

 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 

 hall 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 respect* in the prescribed form. These 

 companies are also required to make the returns required by the 

 statute 7 A 8 Viet, c. 32, s. 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 6XM. 



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

 statute 7 A 8 Viet. c. 1 13, is in no case to be less than 100,0001., and 

 the shares are not to be less than 1001. 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 directors 

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

 hareholders 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 stall remaining liable for the calls duo before the 

 forfeiture. 



The deed of settlement or partnership must contain specific pro- 

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

 and qualification of the directors. Any one of the directors is cm- 

 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. b\ dim <>n U-lmlf oi tin- company. 



The deed of settMBMBt might to contain provision* 

 prevent any declaration of dividends on the capital )<y tin- .lirectors, 

 without ilu'i- regard to the actiul state of the company's affitir. The 

 liability incurred by directors, who declare and divide dividends when 

 the profits made by the company do not authorise their il.'iim - > 

 very heavy. (See 1 A 20 Viet, c, 47, a. 3, compared with i!" A i!l 

 4f>. s. 18. See also Grant's Law of Banking/ Ac., p. 884 ; ll 

 A: L'n Viet. c. 47, s. 14 ; 20 A 21 Viet c. 49, s. 18.) It is no excuse for 

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

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

 to pocket the dividends on their own shares, but with a deaire of 

 representing the affairs of the Bank to be in a prosperous .-. .million, no 

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

 and stimulate the demand in the market for tin in. 



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 shareholders, and not being directors : also, : 

 publication, once at least in every month, of the assets and lial.il 

 the Bank ; and for the yearly communication to every shorchoi 

 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 tin- 

 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, wl.il.- 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 . 

 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 accounts, 

 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, beep 

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

 overreaching. The accounts given, it has been alleged, are not 

 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 transaction*, wliirh is 

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

 material improvement in the account* 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 

 bankers 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 dim-tors. In 

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

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

 and manager. But if the periodically published statements are 

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

 accomplish an effectual audit of the afiairs 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 *t. 

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

 that they can do, is to examine the balance sheet laid before them )>y 

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

 they can merely vouch for the fact of the balance sheet being com-, t 

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

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

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

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

 with the principles of the art of banking. A bill of exchange is fit In r 

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

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

 good or bud. 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 1 

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

 local knowledge of the parties in the auditor 1 He ought to be in a 

 condition to follow every transaction, especially with reference to bills 

 of exchange, which might be rediscounted at the moment of the mi. lit 

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

 securities, so as to tell whether they would ultimately turn out an 

 asset of the Bank or a chum upon it ; in fact, ho 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 - 



