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in the background. No one who buys a property at one price should be allowed to palm it off on the public at another, unless he states clearly and without reservation what are his interests and what benefits he derives from it, also what brokerage and commission is charged for promoting; for, as those who take the shares have ultimately to defray these charges, they should be made aware of their full extent.

FOURTH.— The prospectus being now ready, the public can be got at in different ways. Sometimes the plan is resorted to of sending it marked Private and confidential,and offering the shares at par. This is the confidence trick," pure and simple, the impression to be conveyed to the mind of the receiver being that, as a special favour, he is assured priority of allotment; but that, should he fail to subscribe by a certain date, when the business will be published, then he must take his chance along with the general public, and that this is an opportunity that very seldom occurs. You are, perhaps, appealed to as a personal friend ; but your name and address are either culled from directories, or from lists prepared by share and advertising brokers, who call at the offices of other companies and get the names and addresses of investors (for any one can inspect the list of subscribers for a small fee). These gentlemen have stock lists of addresses they supply at so much per hundred, and all householders and shareholders, as well as postmen, know the influx of prospectuses when a floating mania is on. The brokers or solicitors occasionally issue with the prospectus a notice telling you that the shares are either at so much premium already, or are sure to go over par as soon as the scheme is advertised,—they generally get a commission on every share they place as promotion money, and this item eventually comes out of the pockets of shareholders themselves, the capital being reduced by that amount.

The "getting up" of a prospectus is quite a work of art, and in most cases, where it is at all reliable, is also sure to be misleading, -some things are suppressed, and others overstated. Where it could be done in a few words, observations on each point raised in this chapter have been made as it came up; but the preparation of the prospectus is such an arduous undertaking, and so much depends on it for attracting subscriptions, that a chapter on “word painting” has been specially devoted to it, and the other baits held out are so plausible and well-concealed, that they have been treated of separately, under the heading, “ Baits for the Unwary."




“ Last scene of all, that ends this strange eventful history."


E will suppose that all the preliminaries have now

been arranged, that striking advertisements had brought in numerous applications, that the shares have been duly allotted and the company fairly floated, and are now in a position to see what the next moves lead to. It would be wearisome to wade through all the intricacies of the rules that govern the future well-being or ill-being of the vessel which has just been launched, and trying to the patience of those who have followed the thread of the story thus far ; but some few indications of its probable career must be given.

FIFTH.—The management and administration, so far as directions on paper go, are well provided for. Minutes of board meetings have to be carefully preserved, and the first OFFICIAL MEETING of the concern must take place within four months from the date of allotment and every year afterwards. This first meeting is often considered by the board to be a frivolous freak and hardship imposed by the Act for the purpose of troubling directors, and not, as it is meant to be taken, a safeguard to shareholders. The chairman's speech on the occasion, given in an aggrieved tone, commonly takes this form :-“Well, gentlemen, this is the statutory meeting, which we are bound to hold. Why it has been appointed I don't know, only Government says it must be held, and so we are here to meet you. We went to allotment on the 21st January and our shares were all well taken up and are firmly held. Everything is going on as well as can be expected, and we hope before another year comes round to have something more to say to you. I haven't anything particular to mention now,—this, you understand, is merely a formal meeting appointed by the Act ;-but if any gentleman has questions to ask I shall be glad to give him all the information I can," which, to judge by his remarks, will not amount to much.

If any member fails to pay up his calls at stated times, his shares are liable to be forfeited; but his responsibility for full payment remains, even if his refusal arises froin

apparent fraud on the part of the projectors of the scheme. The company, too, can fight the members with their own funds, which gives directors a certain leverage not possessed by the members for fighting them.

Banking and insurance companies, deposit, provident, and benefit societies, have to make out lists of assets and liabilities and suspend them in their offices on the first Monday of February in each year, and this is the time when many other companies elect to have their annual meetings.

The regulations of a company can be altered by special resolution passed by three-fourths of its members at a general meeting, who may vote either personally or by proxy. The proxy rule often proves a very bad one,-it puts too much power in the hands of directors, or persons with a purpose of their own to serve, and interferes seriously with freedom of action on the part of those who attend the meetings. Directors and others circularise shareholders who live at a distance, and ask for their proxies to be used by them at the meeting, which puts those who take so much interest in the affairs of the company as to attend and discuss matters at a decided disadvantage. No matter what turn the discussion takes, if, on a show of hands, the decision goes against those holding these papers, they demand a poll and use the speechless proxies of shareholders who never heard the question discussed and probably know nothing of its merits, to drown the pronounced voice of the meeting. This was instanced not long ago, when, at a meeting of the Brush Light Company, the mismanagement of the directors was so patent to those present that a resolution was come to by a show of hands to appoint a committee of the shareholders to inquire into its affairs, which resolution the then chairman would not declare to be carried, but demanded a poll, adjourned the meeting, and used up the proxies, with the usual result. We should recommend voting on all important matters to be managed the same as at a general election, in person, and not by proxy; and although this might be construed into a hardship by those living too far away to attend, the fact of their absence should not be permitted to negative the result of a free discussion deliberately arrived at. It is a shameful law that allows the shareholders who have the courage to come to these meetings, many of whom travel long distances at considerable expense and personal inconvenience, to find that when they come to a conclusion its effect is nullified, because absentees have bartered away their votes to those who are not always too careful to make a proper use of them. The publicity of a company's affairs, so far as the Act can prescribe, is also carefully provided for. Any member can see the list of other members and make application at the office for any information he stands in need of, and outsiders may even obtain this convenience for a small fee; but these facilities, like many others, only exist in name. If any real information is wanted by a shareholder his path is not“ strewn with roses.” He may enter an office tastefully decorated with part of his own money, see a roaring fire, witness rows of officials seated on high stools, who, if they at length deign to throw off the all-absorbing influence of their daily sporting papers, feel rather piqued if you ask them “leading questions” concerning the status of the company, how trade is being pushed, and what prospects there are of early dividends. The idea of dividends is rather an amusing one, and the other particulars are only known to the secretary or the managing director, both of which officials happen to be out at the moment or are deeply engaged. "Would you mind looking in again ? " If the concern be a flourishing one, of course these inquiries either do not require to be made, or, when made, are met promptly with copious explanations from a bland secretary, who is never so busily occupied that he cannot spare a moment to see you.

There "all goes merry as a marriage bell," and the Companies Acts are found to work smoothly. Alas, how few there are which go on in this way! Only a very small minority! What of the majority ?

SIXTH.—This brings us to the last act, the WINDING UP, of which there are three different forms. The first variety is the winding up by the court, which may take place

1. If the company has passed a special resolution to that effect. II. If the company does not commence its business within a year

from its incorporation. III. If the members are reduced to less than seven. IV. If the company is unable to pay its debts (which is held to be

the case when a creditor to whom more than £50 is owed has served on the company a demand for payment, and the

company for three weeks afterwards has not paid that sum). V. If the Court is of opinion that it is just and equitable that it

should be wound up.

The court appoints a functionary called an official liquidator,-very often an accountant,—who receives and pays out all monies on behalf of the company, for which he has to account to the court. He may raise or defend actions, carry on the business, and appoint a solicitor to assist him in the liquidation, and his salary or remuneration is fixed by

the court. The court settles the list of contributories,-i.e., those who, being shareholders, have to contribute or receive monies during the liquidation,-makes calls for costs, adjusts the rights of the contributories among themselves, and distributes any surplus. In practice it is seldom much troubled in dividing the surplus after the lawyers and accountants have had their quota of the funds. A second method is termed a voluntary winding up, which may happen

(a.) If the period fixed for the duration of the company has expired. (6.) If a special resolution has been passed that it is desirable to

wind it up voluntarily: (c.) If an extraordinary resolution has been passed that, by reason

of its liabilities, it is expedient that it should be wound up.

The company here may fix their own liquidators, who settle the list of contributories. The third form is called winding up under supervision of the court, which virtually is managed in the same manner as the first-named method. By Section 144, all liquidation costs are to be paid out of assets in priority to other claims; so that, no matter what becomes of the shareholders, the liquidators are always rendered secure. Many other technicalities could be gone into here had this aimed at being a text-book on the subject; but to those of inquiring minds we would simply remark, before touching on the last item in this chapter, “Are they not written in the Acts themselves ? '

It has been already seen that the extreme facilities which these statutes afford, and the easy avoidance of subsequent penalties, have largely led to the introduction of a body of men called promoters, who prey upon their fellow-men and suck up whatever capital they can attract by means of specious advertisements and bogus prospectuses. So prone are men to extract the tares of evil from the many grains of good strewn around them that the winding up of companies has given birth to another genus, known as WRECKERS, who are also promoters, but promoters of litigation and liquidation. The old wreckers, who used to light beacons on our shores, and allure vessels to their destruction, were not greater scourges of society than those produced by this “enlightened age” for the destruction of companies. It is only fair to state that, for obvious reasons, they allow the best companies, with strong and popular boards of directors, to go on undisturbed ; but they are liable to pounce upon concerns less known, and if they cannot find a flaw in their proceedings, they will soon make one. The modus operandi is as foliows :

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