Weekly North Carolina standard. [volume] (Raleigh, N.C.) 1850-1858, 1858-11-03
For the Standard.

The time is drawing nigh for the usual convention
of stockholders Of the Railroad companies of the
State and the past year has not been very favor
able for receipts, the likelihood is that there will
not be money enough in hand for a usual dividend.
What will be done? This l fear is as easily an
swered the question what ought to be done?
Every prudent and honest man knows what ought
to DO done He knows that the debts and liabilities
of the companies ought to be promptly and honest
II met, that the roads and running apparatus ought
to be kept in good and safe order and as ali Of
them are in debt, they ought not only to keep down
the interest upon their funded debt but of such as
is due, pay off mnch possible and augment
the sinking fund for payment of such as is payable
hereafter
Every company that borrows money to pay divi.
dends, or for that purpose, wthholds the payment
of just debts diminshes its ability to discharge its
deferred debt and grossly violates its charter.
Nothing but the profits can be lawfully divided.
II a company may borrow money to declare six per
cent, it may, with equal justice, borrow money to
declare twelve twenty fve fifty or one hundred per
cent. A honest man can difference in the
principles and all that is thus raised dimnishes the
ability of the company to discharge previously ex-
listing debts. Thus, suppose company Of $1OO 900
capital, of half par value to owe $4,000 borrowed
money, and Sc 900 are borrowed to make dividends;
it is plain that the loan Of $50,O0O is become less
secure. In plain words there is a subtraction by
the stockholders for their use of sc in each
500 subscribed stock. Such operation is
merely dividing out the stock, and dwarfing against
the terms of the charter the artificial being created
by the legislature with full and complete stature.
II it were necessary that the corporation should
have the strength of its entire stock in order to rem
der it fit instrument to effect the purposes design
ed, then such a subtraction is not only unwarrana-
BILE, but is fraud the public, if it be true that
charter is contract between the public and the
company
To illustrate this forcibly and give a practi-
cal turn to the matter, suppose the company does
not borrow the money to make dividends, but issues
promssory note to each stockholder to the amount
in the aggregate of $4,000, and suppose the notes
are not redeemed before the next meeting. then a
set of promssory notes is issued for the
dividend. and the first notes having got into other
hands, the company is sued thereupon and ultimate.
ly funds the debt. IT. at the next convention, the
| company should not be able to meet its debts,
(aong ,chich the notes issued for dividends 1oiU be
reckoned0 then there must be sudden stoppage of
| dividends and an exposure of the poverty of the
company, and down goes the stock. To avoid this
still to make false dividends by borrowing again. the
device is left. This time the money lender will de-
mand security and mortgage is given on the road;
thus the first debts Of the company due strangers
and created on the faith Of the corparate property
postponed to the last debt debt really created
to enrich the stockholder, and, is in truth,
subtraction pro tanto by the stockhoder of the cap
ital which he at first paid in.
There is another device sometimes resorted to to
give falacous value to the stock which is equally
cupable and destitute of good faith to the creditor
and the sovereign, and that is to issue promissory
notes for the dividends payable at distant day,
say a! three, four or ten years even.
! Now it is palpable that in short time these little
notes payable at distant day will greatly depre
ciate and fall into the hands of money dealer, who
will take special care to bring the company to q
reckoning the moment they become due. The
stockholders have more right to raise money in
this way than they have to procure from the com
/ pany q note to each for the whole amount o.
his stock and sell them in market to a note shaver
1t may be said that this mode Of issuing promis
sorry notes scrip in payment of dividends is
scarcely suferabe. would myself have thought
so, but have lately had the most irrefutable evi
| one company at least