1843.] 



THE CIVIL ENGINEER AND ARCHITECTS JOURNAL. 



251 



NOTES ON EARTHWORK, &c, UPON RAILWAYS. 



ARTICLE 7. CAPITAL, SHARES, AND TRANSFERS. 



The previous papers that have appeared in the Journal on the 

 above subject, have reference to the constructive operation in the for- 

 mation of railways, which is more in my line than the title or heading 

 of this paper ; yet, lam induced, however imperfectly, to give some 

 account of the ways and means by which the necessary funds have 

 been raised, as I know of no work where any information is to be ob- 

 tained, except in isolated and unconnected passages of various works 

 bearing more or less on railways. 



The necessity of a railway for the public convenience being fully 

 established, and the probable cost of the works ascertained, the num- 

 ber and amount of shares necessary to be raised is then considered, 

 which are proportioned to the magnitude of the undertaking, the lia- 

 bility of calls being limited to the amount of share. The amount of 

 each share has been generally fixed at 100/.; in some instances at 50/., 

 and in a few cases as low as 20/. per share, the greater or less amount 

 giving the undertaking a more or less speculative character. The legis- 

 lature require the whole capital to be subscribed to the deed before 

 any step is taken in the execution of works, and in 1836, to check the 

 mania for railways, a standing order was passed requiring ftlis of 

 the cost of the undertaking to be subscribed for, and a deposit of 10 

 per cent, paid thereon, before an application could be made to Parlia- 

 ment for a Bill, which was evaded in 1S37 by the Edinburgh and 

 Glasgow Railway Companies, who borrowed the money from their 

 bankers, the Company at the same time claiming exemption from the 

 standing order, on account of the project being started before the 

 framing of the order. The amount of capital being fixed, Parliament 

 as a general rule allow a third to be borrowed by the executive as a 

 mortgage. In almost every case the capital has been found to be ineffi- 

 cient for the construction of the works, and application to Parliament 

 a second, third, and fourth time, has had to be resorted to, and fresh 

 powers obtained for raising more money, either by issue of new shares 

 to pay off loans, or to obtain further loans on mortgage, or bond on the 

 credit of the company, by way of loan notes, or promissory notes of 

 the director under the seal of the company, also by debentures, which 

 are mortgage bonds according to act of Parliament, the interest of 

 which has preference of any dividend, and if not paid within 30 days 

 after due notice, two justices of the peace may appoint a receiver of 

 the tolls and profits of the railway ; and the same course may be taken 

 with respect to the principal, unless paid within six months after it is 

 due. The company reserve power to pay off bonds any time after 

 three or six months' notice. The debentures are very convenient, as 

 interest warrants or coupons are attached for the whole period, made 

 payable every six months at the bankers of the company, during the 

 whole period for which the money has to remain, which is generally 

 for three, five, seven, and never more than ten years, being at the 

 same time transferable like shares, a form for which is provided in 

 the acts of Parliament. 



In the second Report on Railways, from a select committee of the 

 House of Commons, printed August 9, 183'.), where much valuable 

 information is to be had on this subject, the Committee particularly 

 direct attention to the course pursued by the different companies in 

 coming to Parliament, for the purpose of raising sums rather than 

 enforce payment of money empowered to be raised under former Acts. 

 It has been already stated, that in the second application to Parlia- 

 ment, the companies have been empowered to raise further sums, by 

 issue of new shares, and conversion of bonds into shares. The amount 

 of the shares has been reduced in these cases by the companies, and 

 rendered more speculative in character, perhaps purposely so, by the 

 100/. share being divided into halves, quarters, thirds, fifths, tenths, 

 and so forth. In such straits have some concerns been, that after all 

 means fur raising money by bonds or mortgage, and loans on credit of 

 the company, have been exhausted, new shares have been issued at a 

 discount of 50 per cent, and in some instances preference or privileged 

 shares have been created, with a guarantee of interest at the rate of 

 G per cent., and bonds have been converted into shares with a gua- 

 rantee of 5 per cent, in priority of original shareholders, to be received 

 out of the paid up capital of the company. 



In only one instance has a public railway been offered for sale by 

 auction, and this was by the seizure of a line by the Exchequer Loan 

 Commissioners, who can suddenly sell to the detriment of all other 

 lenders; but the sale was prevented by an arrangement with Govern- 

 ment for the liquidation of the debt and accruing interest, by instal- 

 ments during a period of 20 years. 



Scrip shares are certificates for shares prior to their legal creation, 

 and pass from hand to hand without registration, and are not trans- 

 ferred by deed, the payment of duty on transfer is thus evaded, but 



registration is necessary to receive a dividend. Privileged or prefe- 

 rence sHares have a fixed interest or dividend secured upon the paid 

 up capital, in priority of any dividend to original shareholders. 



The influence obtained bv the possession of a great number of 

 shares, varies in almost every company, but the general average may 

 be about twenty votes for twenty shares, and an additional vote for 

 every five more shares ; in other cases four and five shares are requi- 

 site to obtain even one vote: and to prevent the leviathan swamping 

 the minnow, no one person is to have more than from 10 or 15 and up 

 to 60 votes ; the latter is the greatest latitude allowed in any com- 

 pany. The qualification for becoming a director, is the possession of 

 from 10 to 20 shares, which also differs in various companies. The 

 estate of shares is declared in all railway acts to be personal pro- 

 perty, and a form of transfer is prescribed, which, however, cannot be 

 acted on until calls are paid, that is during the collection of a recent 

 call ; neither can shares be transferred for some days previous to the 

 general meetings of the company. Shares may be forfeited at general 

 meetings on neglect to pay calls after notice by post, or left at the 

 abode of the owner. The defaulter is subject to be fined for neglect, 

 and three months' notice of forfeiture; but the company must not sell 

 more than will pay the calls that are due. The forfeiture of shares 

 is an indemnity against actions for calls (the other resource of the 

 company against defaulters) and absolve the defaulter from further 

 responsibility after, but not before, forfeiture. 



The companies may purchase shares to merge into the company, or 

 to be held in trust; when this is done, and held in the name of indi- 

 viduals, a power is obtained very detrimental to the interest of the 

 small holders of shares. The calls are stipulated in the acts of Parlia- 

 ment to be made at intervals of from sixty days to three months, and 

 from 20/. up to 100/. is the limit to be called for in one year; the mini- 

 mum amount has been more generally acted on, and money borrowed 

 in anticipation of calls. Notice of calls are to be advertized from 10 

 to 21 days previous, and the amount of each varies in different com- 

 panies from 3/. 5/. 10/. 15/. to 20/. per share, but the executive have 

 in this case also preferred the smaller amount. With respect to 

 transfer of shares, it is provided in railway Acts to be done by deed, 

 which is, to be registered in the books of the company, but no time is 

 stipulated within which such registration must take place. This has 

 been taken advantage of by the public, and the deed is completed 

 between the vendor and purchaser, except as to the insertion of the 

 purchaser's name, and bearing the stamp of the ad valorem duty, at 

 the time it passes from hand to hand without the payment of any 

 more duty until a purchaser thinks proper to register; then the trans- 

 fer is taken to the office of the company, and his name inserted as the 

 purchaser. This system is connived at by the companies, who, to 

 give an assurance to a purchaser of the validity of a transaction, do 

 not hesitate to give a memorandum, under the hand of the secretary, 

 of a long bygone transfer, which, to all intents and purposes, answers 

 fully as well as a recent actual transfer; although the companies pre- 

 fer giving out a filled up transfer. A transfer with a good stamp is 

 accepted without inquiry. The purchaser, on the receipt of the 

 trausfer, can hold it as long as he likes, the seller having no means of 

 compelling registration; the seller is, therefore, liable to the calls 

 after he. has sold his interest in the company, and without any means 

 of compulsion in his hands whereby he might regain his shares ; 

 again, provided he paid the call, the vendor may sell his share a 

 second time, and the second purchaser, upon priority of registration, 

 would be entitled to the share ; he, the vendor, is at the same time 

 liable for calls upon his share after its sale, so long as his name is 

 retained on the company's books; also so long as his name is retained, 

 his share is liable to be taken in execution for the debt of any indi- 

 vidual creditor, or in the case of bankruptcy his creditors would claim 

 it as part of the general estate, in preference to the title of the first 

 purchaser. These are the legal difficulties that accrue from the use 

 of the blank transfer (that is blank as regards the name of the pur- 

 chaser) in addition to the loss to the revenue of the stamp duty on the 

 increase of the share's value, and on each transaction subsequent ; 

 there is also the uncertainty and inconvenience to which the company 

 are put in ascertaining the opinions of their proprietary. 



The new registry of shares has also been turned to account by the 

 executive of the Companies, so as to increase individual influence. 

 It has been previously stated that no one person is to have more than 

 from 10 to (50 votes, and that 20 shares are entitled to 20 votes, with 

 an extra vote for every five shares in addition, but not to exceed, in 

 all, 60, whatever the number of shares held may be. In a recent case, 

 quoted in the Railway Times, an individual held 299 shares in a 

 Company, and was registered for only 25, holding the remaining 

 274 shares in different names in lots of 20 each ; by this means his 

 number of votes was increased by 220 votes, in addition to 25 votes 

 which he was entitled to by the act, which in question decided by vote 



34 



