DEBENTURES
AND
DEBENTURE
STOCK
395
and Ascomycetes,—Eurotium, Erysiphe, Peziza, &c.,—but water-works, or gas-works, and governed by the Companies also established the existence of Parthenogenesis and Apo- Clauses Acts, have only limited powers of borrowing. gamy on so firm a basis that it is doubtful if all the The indefiniteness of an implied power of borrowing, combined workers who have succeeded him, and who have even when it attaches, has led to a general power of borrowbrought forward contending hypotheses in opposition to ing being usually inserted in a company’s memorandum of his views, have succeeded in shaking the doctrine he association. It is left to the articles to define the amount established before modern cytological methods existed. to be borrowed, the nature of the security, and the condiIn one case, at least (Pyronema conjluens), the most tions, if any, such as the sanction of a general meeting of recent and skilful investigations, with every modern appli- shareholders, on which the power is to be exercised. ance, have shown that De Bary described the sexual Under the Companies Act, 1900, a company cannot organs and process accurately. exercise any borrowing power until it has fulfilled the It is impossible here to mention all the discoveries conditions prescribed by the Act entitling it to commence made by De Bary. He did much work on the Chytridiem, business. A person who is proposing to lend money to a Ustilagineje, Exoascese, and Phalloidese, as well as on that company must be careful to acquaint himself with any remarkable group the Myxomycetes, or, as he himself regulations of this kind, and to see (1) that the memorandum termed them, Mycetozoa, almost every step of which was and articles of association authorize borrowing, and (2) that of permanent value, and started lines of investigation which the borrowing limit is not being exceeded, for if it should have proved fruitful in the hands of his pupils. Nor turn out that the borrowing was in excess of the company’s must we overlook the important contributions to Algology powers and ultra vires, the company cannot be bound, contained in his earlier monograph on the Conjugate and the borrower’s only remedy is against the directors for (1858), and investigations on Nostocaceae (1863), Char a breach of warranty of authority, or to be surrogated to the (1871), Acetabularia (1869), &c. De Bary seems to have rights of creditors paid out of the borrowed moneys. A held aloof from the Bacteria for many years, but it was company proposing to borrow usually issues a prospectus, characteristic of the man that, after working at them in similar to the ordinary share prospectus, stating the amount order to include an account of the group in the second of the issue, the dates for payment, the particulars of the edition of his book in 1884, he found opportunity to bring property to be comprised in the security, the terms as the whole subject of Bacteriology under the influence of to redemption, and so on, and inviting the public to subhis genius, the outcome being his brilliant Lectures on scribe. Underwriting is also resorted to, as in the case Bacteria in 1886. De Bary’s personal influence was of shares, to insure that the issue is taken up. There immense. Every one of his numerous pupils was en- is no objection to a company issuing debentures or dethusiastic in admiration of his kind nature and genial benture stock at a discount, as there is to its issuing its criticism, his humorous sarcasm, and his profound insight, shares at a discount. It must borrow on the best terms it knowledge, and originality. can get. A prospectus inviting subscriptions for debenMemoirs of De Bary’s life will be found in Bot. Centralbl. 1888, tures or debenture stock comes within the terms of the vol. xxxiv. p. 93, by Wilhelm; Ber. d. d. bot. Ges. vol. vi., 1888, Directors Liability Act, 1890, and persons who are parties p. viii, by Reess, each with a list of his works ; Bot. Zeitung, 1889’ to it have the onus cast upon them, should the prospectus vol. xlvii., No. 3, by Graf zu Solims-Lftiibach. contain any misstatements, of showing that, at the time when they issued the prospectus, they had reasonable Debentures and Debenture Stock.— grounds to believe, and did in fact believe, that the stateAn advantage incident in Great Britain to incorporation ments in question were true; otherwise they will be liable under the Companies Acts is found in the facilities which to pay compensation to any person injured by the misit affords a trading concern for borrowing on debentures statements. nr debenture stock. More than four hundred millions of The usual mode of borrowing by a company is either on money are now invested in these forms of security. Borrow- debentures or debenture stock. Etymologically, debenture ing is not specifically dealt with by the Companies Acts is merely the Latin word “ debentur, ”—the first word in a at all, but that it was contemplated by the Legislature is document in common use by the Crown in early times evident from the provision in sect. 43 of the Act of 1862 admitting indebtedness to its servants or soldiers. This for a company keeping a register of mortgages and charges. was the germ of a security which has now, with the exThe policy of the Legislature in this, as in other matters pansion of joint-stock company enterprise, grown into an connected with trading companies, was apparently to instrument of considerable complexity. leave the company to determine whether borrowing should The Floating Debenture.—The form of debenture chiefly or should not be one of the objects defined expressly in use at the present day is that known as the floating or by implication in the memorandum of association. A debenture. By it the company covenants to pay to the company cannot borrow unless it is expressly or impliedly holder thereof the sum secured by the debenture on a authorized to do so by its memorandum. In the case of specified day (usually ten or fifteen years after the date of a trading company borrowing is impliedly authorized as a issue), or at such earlier date as the principal moneys benecessary incident of carrying on the company’s business. come due under the provisions of the security, and in the Thus a company established for the conveyance of passengers meantime to pay interest until repayment, or until the and luggage by omnibuses, a company formed to buy and security becomes enforceable under the conditions; and run vessels between England and Australia, and a company the company further charges its undertaking and all its whose objects included discounting approved commercial property and assets, including its uncalled capital, with bills, have all been held to be trading companies with an in- the payment of the amount secured by the debentures. cidental power of borrowing as such to a reasonable amount. The word “ property ” by itself will not cover uncalled A building society, on the other hand, has no inherent capital. This is the body of the instrument; on its back power of borrowing, though a limited statutory power is endorsed a series of conditions, constituting the terms was conferred on such societies by the Building Societies on which the debenture is issued. Thus the debentureAct, 18/4; nor has a society formed not for gain but to promote art, science, religion, charity, or any other holders are to rank pari passu with one another against security; the debenture is to be transferable free useful object. Public companies again, formed to carry the from equities between the company and the original holder; out some undertaking of public utility, such as docks, the charge is to be a floating charge, and is to be enforce-
