28 December 1867. N. 395.

The Money Market Review, 28. Dezember 1867. S. 671/672.
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Winding up of Joint Stock Cos. in Courts of Chancery. Scandal and Waste attending it.

About 1846 was started a Railway Project called the Warwick and Worcester Railway Co., did not succeed in raising its capital, came never to anything except being wound up in the Court of Chancery. May 1849, order made to wind it up, and it is not quite wound up yet. After nearly 19 years of protracted and costly litigation, a circular issued this month, December 1867, announcing the payment of a first and last dividend. Dieß durchaus keine Exception. Many cases, originally of the simplest character, have lasted 1/4, 1/2 oder 1 whole century. Another Joint Stock Co. – the Agriculturist Cattle Insurance Co – was also started about 1846, fell into the jaws of this insatiate Court, not yet wound up, without any nearer prospect of that most desirable end than when it first entered. Of all the tribunals of the Country, Chancery Court least adapted for winding up Joint Stock Cos. Yet, in spite of all this, und trotz experience of the utter incapacity of the Bankruptcy Courts, which were modified Courts of Chancery, to administer the simple estates of ordinary traders, the Legislature committed the far more complicated estates of Jt. St. Cos. to the Courts of Chancery. Have no officers for such administrative duties. Can only act through official liquidators und their attornies, their counsel and their witnesses, so that every step in the process of winding up is encumbered and embarrassed by the needless forms and ceremonials of the Court, and the costly array of its adjuncts, both in 19 cases out of 20, nothing but expensive, dilatory, and wasteful impediments. Public at this moment experiencing, to their heavy cost, the result of this legislative folly and judicial blundering. Cos. are being continually drawn within the vortex of the Court of Chancery, where engulphed, hopeless for either shareholders or creditors to expect a final release. These torments and delay, calls and costs, and dread of them, verlängern our present financial paralysis. London, Chatham und Dover Railway Beispiel of extent to which the assets are likely to be squandered in actions at law and suits in equity, in preposterous conflicts on technical grounds between the various opposing parties. As City Editor in Times remarks: „every writer on the subject correctly points to the trade which a certain set of accountants and attorneys are enjoying upon the general ruin.“ The liquidators are encouraged to place themselves, and their clients, and the estate, in the hands of the attornies. The attornies very naturally relieve themselves from all responsibility by „taking the opinion of counsel“, and counsel, quite as naturally, are continually advising bills and petitions and motions and applications to the Court which, if not wholly unnecessary, might be avoided. In this way liquidators are constantly occupied in embroiling their clients in litigious proceedings, and involving the estate in the cost of it. Year after year the various Chambers of Commerce have been clamouring for an Act to confer upon the creditors and their official nominee the right and the power to administer themselves the estates of their bankrupt debtors, but their object always frustrated and postponed. There is a „lawyer power“ in Parliament which is wholly inimical to the „commercial influence“ there. Hence the difficulties in obtaining either a bankrupt law or Jt. St. Co. Law at all adapted to mercantile requirements.

The Money Market Review, 28. Dezember 1867. S. 674/675.
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Joint Stock Co. Law. Misrepresentation in Prospectus. Sir Edmund Lacon’s Case.

„Great Yarmouth Royal Hotel Co.“ (Lim.) promoted und got up by a certain Hawes, Febr. 1865, for the purchase, „upon very advantageous terms“ of most valuable properties on the Esplanade at Great Yarmouth, including the „Royal Hotel which for many years had been so well conducted by Mrs. Sizeland“. Capital £25,000 in 2,500 shares of £10 each; defendant named in the prospectus as one of the directors. Hawes was to receive £2,500 for promotion money, out of which, by arrangement mit den directors, he was to pay the first directors’ qualification in the shape of 10 fully paidup shares each, the qualification of the subsequent directors being stated in the articles at 30 shares. It was not „a bubble“. There was a good and bona fide business, but not successful; on 24 Febr. 1866 a winding up order was made. Present proceedings originated in Bill filed by Rev. Mr. Henderson, against Sir. E. Lacon et the other directors, to have his name removed from the list of contributories, and his allotment and deposit money repaid to him, on ground of misrepresentation in prospect, and through the subsequent stages of the Co’s career. Case came before Vice Chancellor Sir W. Page Wood. Wood decided for the plaintiff against Lacon et other directors.

[»]The prospectus represented that the directors had „concluded an agreement“ for the purchase of the properties; that the Co. would enter into full possession of the hotel „early in the ensuing spring“; that the house, „prior to the ensuing season“, would be remodeled and enlarged; and that „the directors and their friends had subscribed a large portion of the capital“, and offered the remaining shares to the public.« Henderson darauf applied for 50 shares, on 15 March 1865 |284 allotted to him. But May 1865, from circumstances which came to his knowledge, Henderson began to doubt the bona fides and prospectus of the Co.; and having found upon inquiry that only 762 shares had been allotted and only about 430 more agreed to be taken; that the directors were not duly qualified, and that such shares as had been taken had not been subscribed for by the directors and their friends, he wrote, July 1865, for return of his allotment und deposit money, which was refused. On 25 July (65), therefore, he had failed filed this bill. It appeared by the evidence that „the agreement for purchase“, so far from having been „concluded“ in February, was not concluded until August, and that the business of the Co in the hotel did not commence until July. As to the other statements, Wood, the Vice Chancellor, said it was clear that there had been a misrepresentation in the prospectus as to the „directors and their friends having subscribed a large portion of the capital“. In fact, at the time when the plaintiff made his application no one of the directors had subscribed for shares in any sense of the word, and the friends of the directors, i.e. their business connections, consisted of no more than one firm at Norwich. Wood said „it surprised him that gentlemen of position should consent to authorise what in their private affairs they never would have consented to permit – namely, that their names should be used in this way to carry out a speculation of this kind … it was their plain duty when, on 15 March, they heard of the plaintiff’s application, to have returned to him his proposal, which they must have known had been made upon misrepresentation.“

Mercantile men frequently permit themselves to do, or participate in the doing of things, in their corporate capacity, which they would shrink from in their individual or personal capacity. This is the foulest blot, und the most pernicious und fatal drawback upon the progress and success of Joint Stock Enterprise in this country.

The Money Market Review, 28. Dezember 1867. S. 677.
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Limited Liability. Joint Stock Cos. Parliamentary Return. (66’–67’) (1 June ’66 to 31 May 67)

Danach: von June 1, 1866 to May 31, 1867 (12 months since Panic ’66): England registered as limited 469, unlimited 5, 474 Cos, dazu 6, which existed prior to passing of Act of 1862, but subsequently registered under the Act as Limited. Nominal Capital about: £35,000,00 £35,000,000.

Scotland: limited Cos. registered 22, nominal Capital £897,800; Ireland 22, nominal Capital £400,400, thus making the total number of the Cos. registered under limited liability in U. Kingdom 524. Dazu 13 Cos. for working mines within jurisdiction of the Stannaries’ Court, nominal Capital of £221,000.

There is no longer any doubt that the principle of combination applied to the development of industrial wealth is far more powerful in its influence upon the progress of nations than that of mere individual enterprise. But, when exercised without any legitimate restraint, may be used for the worst of purposes. Under limited liability the nation has, during the last few years, been intoxicated with visions of rapidly acquired wealth. The eagerness, with which a number of speculative persons have sought to enrich themselves at the cost of others has carried with it the seeds of self-destruction, which only required time to develop their fatal results.


  • London. 1868.
  • 1866 „The Economist“ (Jahrgang 1866) vol. XXIV.
  • The Social Economist, 1. Oktober 1868
  • „The Economist“ (Jahrgang 1866) (Fortsetzung)
  • Jahrgang 1867.
  • Register der obigen Auszüge aus dem Economist für 1866 und 1867.
  • The „Money Market Review“. Jahrgang 1866.
  • The Money Market Review. Jahrgang 1867.
  • Register Money Market Review Jahrgänge 1866 und 1867