Open main menu

Page:Harvard Law Review Volume 2.djvu/175

This page needs to be proofread.


ber of shares, the owner of a large number having more votes than the owner of a few, but not proportionately more. Thus, in the Greenland Company, each subscriber of ^^500 had one vote, each subscriber of J^iQQO or more had two votes, and in no case could a shareholder have a greater number, however great his holding might be ; ^ and in other charters are similar provisions. Except for some such provision, no doubt, each shareholder would have been entitled to but one vote. It did not take very great ingenu- ity to devise a plan by which owners of large amounts of stock could, in effect, secure a number of votes in proportion to their holdings. All that was necessary was to make temporary trans- fers of stock to a number of friends, — a practice called " splitting stock." The preamble of an act passed in 1766 ^ shows the cus- tom at that time. It recites " certain publick companies or cor- porations have been instituted for the purpose of carrying on particular trades or dealings with joint stock, and the management of the affairs of such companies has been vested in their general courts, in which every member of each company possessed of. such share in the stock as by the charter is limited, is qualified to give a vote or votes ; " and it is further recited that ** of late years a most unfair and mischievous practice has been introduced, of splitting large quantities of stock, and making separate and temporary con- veyances of the parts thereof for the purpose of multiplying or making occasional votes immediately before the time of declar- ing a dividend, of choosing directors, or of deciding any other im- portant question, which practice is subversive of every principle upon which the establishment of such general courts is founded, and if suffered to become general, would leave the permanent wel- fare of such companies liable at all times to be sacrificed to the partial and interested views of a few." It is then provided by the act that in future members who have not held their stock for at least six months shall not vote.

As an instance of the conservatism of the English law in matters of form it may be mentioned that by the English Companies Act of 1862 the votes of shareholders are limited, so that one vote is allowed for every share up to ten, for every five shares between ten and one hundred, and for every ten shares beyond that.^ But

1 4 and 5 Wm. & M., c. 17, 1. xvii,

2 7 Geo. 111., c 48.

  • Buckley on the Companies Acts (^

lies Acts (4th ed.), 436.