The Liverpool Standard and General Commercial Advertiser.
Liverpool, Merseyside, England, 1840-01-07 00:00:00

RAILWAY INTELLIGENCE.

It would be of little use'now to inquire into the particular
circumstances which have produced the present ruinous de-
preciation of railway property, unless by doing so we could
at the same time hit upon a remedy for the evil. A variety
of causes, acting together, aided in their effect by a pressure
for money, more severe and of longer duration than any
within our remembrance, have contributed jointly in creating.

the embarrassments under which we labour; but even if we
could discover all these and trace their various workings, we
must not suppose that merely their removal—the lifting up
of the weight which has- prostrated our energies—will pro-
duce at once and of necessity the healthy revival. which is so
greatly to be desired.. We cannot expect that the injudicious

investments, made during the delusion and over excitement
of speculation, will, on the return of prosperitk, reaSsurne
their original features, and again hold out their golden pro-

mises to our grasp,—that the entanglements of bad manage-
ment will unwind themselves, or that the mushroom capital,
the fictitious names, the compounds of insolVency and fraud

which have been introduced into our various lists of share-

holders can be got rid of without the use of stringent and

well-directed measures. A certain aniount of loss lutist of

necessity be endured. Sacrifices--in some instances heavy
ones—must be submitted to before the market for railway

property can arrive at anything like steadiness ; and it will
require all the judgment and circumspection which we can

command to determine in what manner and to what extent
these sacrifices must be made.

Of the numerous railways for which Acts of Parliament
have been passed since 1836, and which are now in course of
formation, not more than half a dozen can be enumerated
whose shares are at a premium. Upwards 'of twenty are at a
ruinous discount, and nearly the same number are not even
quoted in any of our markets, and are probably unsaleable at
any price. In most or these undertakings a considerable

outlay has been made. In some the works are half com-
pleted ; in nearly all the land has been purchased, contracts
entered into, and capital sunk, the conversion of which into
anything except that for' which it has been embarked is. now

impossible. The question then remains to be solved7--wbat
course must-be pursued with respect to these undertakings ?
Can they all be carried through and completed, or ought

some of them to be abandoned for the present, even at the

loss of the capital already sunk? If their completion, at the
enormous individual sacrifice which, must ensue, is resolved

upon, what course must the directors pursue in order to raise
the necessary funds fiOn the most favourable terms, and
what must those share4ohlers thi Who. are Pledged aud.legally
bound, although.from eireutnstatleys unable, to supply those
funds ? These questions require serious consideration, and
it is fully time that they should beconsidered. Let us there-
fore look our position fairly in the face and grapple boldly
with its difficulties.

We shall postpone for the present the inquiry as to the
possibility of completing all the different undertakings, which
having sprung into existence during a season of almost un-
paralleled excitement, are now languishing under the revul-

sion of feeling which has succeeded it. So far as some
_Ol

these are concenied, time may possibly solve the difficulty
for us. But with respect to those, the prosecution of which
at all hazards is determined upon, we will endeavour to point
out the course of proceeding which is open both to directors
and their shareholders.

The present position of most railways which have called up
15 or 20 per cent. of their capital, is this :—The parliamentary
deposit, say £5 per share, has been fully paid, or nearly so ;
but on making a call for a second £5, a deficiency arises.
Shareholders, perfectly solvent perhaps, have sold out, but
in the haste of speculation have not completed and registered
their transfers so as to become relieved from responsibility ;

whilst those who have purchased, not being recognised by
the company, do not feel themselves compelled to pay. Other
shareholders, who have purchased merely for the temporary
purposes of speculation, cannot conveniently pay, yet still
hold on in hopes of a change ; and from both. these causes
arises the first symptom of difficulty for the directors. Fur-

ther calls increase the arrear and the entanglement, until at
length the concern is placed in a dead lock. In the meantime
the price of its shares has gone on decreasing, and (worst

symptom of all) dissension has arisen between directors, and
their shareholders, who, instead of working together, relying
upon each other for the support necessary to enable them to
attain their mutual object, have become antagonist bodies.
The directors have contracted liabilities, and must have
funds; the shareholders have lost confidence, and will not,
or have speculated rashly, and cannot supply them.

Under these circumstances, the act of parliament points
out two courses of action for the adoption of the directors.

The first is, to forfeit and sell all shares upon which the calls
made are two months. in arrear ; and the second, to'proceed
at law against each individual shareholder for the amount
which may be dile from him in respect of the shares for which
he is' regikered. It the .former course were adopted, no
difficulty would arise, provided the shares forfeited were
worth the amount paid upon them, or any part of it. But

iu most cases sueli shares are at present at so 'great a discount
that their forfeiture would be an actual bonus in favour of
the non-fulfilment of his contract on the part of the share
holder. Directors must therefore consent to relinquish a

emtsiderable portion of .their estiniated calm lof resort tt
the_?alternative of law proceedings. This-.alternative it is
which most companies are at present einbrileindjand its con-
sequenees- amidst a mer'eantile eiimmunify thretito to be, so
serious. that we may be excused If)':.exprgsg Akin& 01 of
its policy and its justice. :0 so!
In the first place, witiraysPeet-talhe- plicY- of Ctinipelling
or attempting to compel 'evercj,'tshareholder of 4 public .un-
del:taking, without discrimina,k,L*we do not see how
discrimination can be madewiiheOlhe, imputation of undue
preference); to perform what, tiretitmitances, whether arising
from previous indiscretion or unforeseen wants, have ren-
deted hini unable to accomplish without involving himself in
ruin, we think that serious difficulties present themselves.
We must confess that we should snot envy the situation of a
director, who in the excercise of his duties, was compelled
thus to drag on an unwilling constituency ; neither should
we be able to look with pleasure upon an undertaking, every
step of whose progress_ towards completion was marked by
individual suffering. To enable any undertaking to proceed
Satisfactorily, there must be a mutual confidence between
those who administer and those who provide funds ; and in
the case of a company so situated this could never be the
case. It is true, payment Might be compelled and works
might go on to some extent ; but expenses would accumulate
at every step. The shareholder who one day had yielded to.
the powers of the law, would, on the first opportunity, get
rid of his shares and his liability, by transferring both to
some man of straw, whom it would be in vain to sue. Others
would be driven to insolvency or bankruptcy, and their shares
thrown back upon the hands of the directors. A constant
struggle would exist between those who wished to escape
from their liabilities, and the directors whose aim would be to
retain them in those liabilities, and the. market would be con-
stantly glutted with an unsaleable and unpopular stock.
But this is not the whole of our case. We have-proceeded
on the supposition that the .directors and a large portion of
the shareholders were unanimous in favour of the stringent
Course pursued. But how long, we ask, would such unanimity
remain? As the share list got diminished by the constant
secession of disgusted or ruined parties, would the remain-
der continue to pay up with ready cheerfulness ? We think
not. Some portion might wish to pause, and for this purpose
would strive to secure the election to the board, of those en-
tertaining the same views, and hence recrimination and dis-
sension would arise, and sink the undertaking yet further in
the eyes :of the public. We must remember too that a
portion of the capital of all railways is to be borrowed upon
the security of its stock, and upon the stock of such a com-
pany who would lend ?

It may be said this is too black a picture. It may be, but
we do not acknowledge it to be so. To a greater or less ex-
tent all these difficultiei will arise, and some of them have
already arisen, and, it must be recollected, that we have not
as yet the experience of ally railway having been completed,
where the means have had to be drawn compulsorily from its
shareholders.. We have, however, this fact in evidence, that
on lines merely unpopular where additional capital has been
required for stations, locomotive power, or warehouses, (and
what line has been completed without such additional means
being required ?)that new capital has had to be procured at a
sacrifice, in some instances, of one half the amount paid by
the original shareholders ; and it will be sufficiently obvious
that any line of conduct which tends to produce unpopularity
is detrimental to the true interests of the company which

adopts it.
With respect to the justice of the compulsory measures
now adopting towards shareholders, we shall not trespass
much upon the attention of our readers. It is true that on
the part of those who haie embarked in any public under-
taking, a contract has been made which ought to be binding ;
but it is also true that many such contracts have been made
under circumstances of delusion and misapprehension, as to
their extent and nature, from which those who originated the
undertakings in question, can scarcely acquit,thernselves of
some degree of blame. It is well known that many schemes
have received the sanction of the legislature, the sterling
value of which is more than doubtful ; and where the judicial
powers of two houses of parliament have confessedly failed in
detecting imposition, the more limited opportunities of coun-
try shareholders may well have allowed them to be led into
unwary and unwise engagements The nature of railway pro-
perty, its liabilities, and the legal modes of transfer have been
little understood; and many ignorant persons have been in-
.duced, by the persuasion of others, to embark their little sa-
vings in schemes of which they knew as little as the pen with
which they signed their ruinous engagements. Others hav-
ing so embarked have afterwards sold, but for want of proper
information have omitted to transfer;,and although their in-
terest in the undertaking has long ceased, their. liability re-
mains, and they can be compelled to pay calls upon their
shares, whilst they cannot legally regain an interest in the
property for which they are paying.

Under all circumstances we think that there exist strong
grounds both of policy and justice to induce directori of any
public undertaking to weigh well their steps before com-
mitting themselves to extreme measures. They had a duty
to perform towards the body of shareholders, whose repre-
sentatives they are, but they have also a duty to perform to-
wards society ; and in the exercise of that duty they are
bound to use the great powers entrusted to them with mode
ration and forbearance. They may possess the previoqs. in

structions, or receive the subsequently expressed approba-
tion of the companies they represent' for the course which
they are pursuing ; but this fact—and it is a strong one—
should be present in their remembrance, that the act of par-
liament which authorizes their proceedings, and legalizes the
meetings of proprietors from which their power is delegated,
expressly provides that those whose inability to pay, or whom
want of confidence has placed in the position of defaulters,

. .
haVe no voice either td advise or .control, their power of vot-
ing, either in the choice of directors or on any other matter,
ceasing whenever they have become in arrear of payment.
The acts of those directors are consequently not those of the
body which constitutes the company, or of the representa-
.tives of: that. body, but only those of a portion—the richer
portion perhaps.--;-using their power against the other.
We fear that we have trespassed upon the patience of some
of our readers, but the subject is painfully interesting to
many. In our next we shall endeavour to suggest a course
of proceeding which may prevent some of the evils which we
deprecate.

Since the above was in type we have been led to notice some
remarks upon the same subject, contained in the leading
article of a contemporary—the Railway Magazine—to the
whole tone of which we strongly object, as evincing too much
the spirit of a partisan. We shall not here attempt to con-
travert his views, having already admitted the abstract justice
of some of them ; but to one opinion of our contemporary
we must strenuously demur, and the more so as its too ge-
neral entertainment by railway boards has contributed to
many of the difficulties under which they and their share-
holders arc now labouring.
The opinion to which we allude is, that " If a man takes
shares in a railway to become a permanent holder, it can be
of no importance to Inn whether the shares are at a high
premium or at a heavy discount : he cannot gain by the one
or lose by the other." Now we cannot imagine a more
mischievous error than this, although conveyed in the shape
of a truism. To a man who takes shares to become a perma-
nent holder—that is with a view to receive certain dividends—
the market price can be no object, until that man wants to
sell or mortgage. The market price of shares during the
progress of an undertaking cannot directly interfere with the
amount of its dividend when completed, although, indirectly,
we have shown that it may affect the cost of its completion.
But, we may ask, how many men arc there who embark so
permanently in any investment as to leave out of their calcu-
lations the possibility of changing their minds ? Who will
embark in an undertaking to-day whose shares to-morrow he
expects to be able to buy for half the price ; or who, taking
into consideration the chances of mortality, and the strange
turns of fortune even during life, will invest. his capital in
any property which, in case of emergency, cannot be made
available ? Why, no one but a madman.

The fact is, that this very inattention to public opinion, as
it operates upon the value of all share property, has been one
of the main sources of injury to the progress of the railway
system. The merchant, the small capitalist, and the trades-
man, looking round them for an investment for their savings,
might select the shares of a sound railway undertaking, pro-
vided they saw value for value. In the opinion of such men
a thing is worth just what it will sell fur; and the article
which they buy must be one which, like other property, can
be readily sold, or upon the security of which they can pro-
cure funds if required. They have no faith in the security of
an article, the value of which is purely imaginary, and de-
pendant upon contingencies to be determined some four or
five years hence ; and consequently these, the most valuable
description of shareholders, will carry their capital to another
market.

We deprecate, as much as the Editor of the Railway
Magazine can do, the truckling of directors to the whims of
every shareholder, or the convenience of every needy specu-
lator. Their duty is a plain and straightforward one, from
which no inducement should lead them to deviate. • If their
course of proceeding is right, public opinion will go with
them, and if it does not the cause can only be found in a
want of correct information as to their views and prospects,
and that information they are bound to supply. We have no
wish to see directors of railways operating in the share mar-
ket to create exaggerated hopes of profit ; but we do think it
their duty to prevent, if possible, the circulation of un-
founded prejudice, by which their undertaking, and those
embarked in it, may be depressed, and that duty can be per-
formed without in the least degree overstepping the path of
proper dignity, or exceeding the powers confided in them by
their shareholders. It is of paramount importance to the
successful progress of a public undertaking that its shares
should always bear a fair, and if possible a steady, and even
a high market price ; and we think that, on consideration,the
Editor of the Railway Magazine will admit that be has
been somewhat hasty in his assertion to the contrary.
4,` NORTH MIDLAND RAILWAY. —The directors of this

railway have bee►► induced, by the progress of the works, and
the approaching completion of many contracts, as well as
the payments becoming due for engines, carriages, &c., now
in course of delivery, to issue the £5O shares which they are
empowered by their last act to create. L► the present state
of the money market, however, they have thought it right.
tO'Offer. the 'new shares of £5O each to the proprietors or
original shares, at, the price of. £.40 per share ; the new £5O
shares will be entitled to the same dividend, pro rata, as the
original £lOO Aares, that is, one-half. The first instalment
of £lO per share on the new shares is payable on the 15th
of January ; and we understand• that the other instalifwnts
will be called for at short periods. The directors are confi-
dent that the capital' raised' by the new shares will coMpldte
the untlertaking-Leeds Intellipencer.

We have here a striking' instance of the 'SaCiid'ei which
public companies were compelled to make in raising capital,
whilst their shares are at a discount. The North- Midland
Company's shares are now at a discount of about 12 to 15
per cent.,' and to raise the additional capital required, they
have to present to those who accept these new shares a bonus
of 20 per cent.