ART. VIII.-ON THE REPUTED OWNERSHIP OF SHARES IN JOINTSTOCK COMPANIES, TRANSFERRED OR PLEDGED BY THE DELIVERY OF THE CERTIFICATES ONLY.

SHARES in public Companies have lately become a very general form of temporary or permanent investment. The title to such shares is evidenced in the early stages of the undertaking by the possession of bankers' receipts, or scrip, and, when it is matured, ordinarily by certificates transferable by assignment. The proprietors who execute the constituent deed of the association, commonly called the deed of settlement, are registered in the books of the Company, and regulatio to the effect that no assignment shall be valid as against the pany, until approved and registered, and that none but the persons so registered shall be recognized by the Company as proprietors, are in some form or other common to all or most of such joint-stock associations.

Investments in the shares of substantial undertakings of this kind, as railways, banking companies, and the like, present many attractions to a trader. In prosperous times he has frequently more money than is necessary for his immediate occasions. A large balance at his bankers is unprofitable, and government securities afford little interest; but shares, whilst markets are rising and money plentiful, can be disposed of immediately, and generally at a profit. Even as permanent investments of surplus capital they are naturally preferred to the government funds, the interest on which scarcely exceeds three per cent., and they are infinitely more advantageous both to the holder and to the country than the foreign loans or mining adventures, in which a portion of the accumulated wealth of England has heretofore been uselessly, and indeed mischievously, dissipated. By degrees also, as the mania of mere speculation subsides into bonâ fide undertakings with substantial returns in the shape of annual income, the wholesome prejudice which at one time existed, in the Courts of Law especially, against Joint Stock Companies giving way, a disposition is now perceptible to remove, rather than multiply, the difficulties which the constitution of such associations presents. Indeed, any attempt in the present day to choke'

up the channels into which the overflow of circulating capital naturally finds its way, would be as ineffectual as impolitic; and upon the whole there seems to be no reason why shares in established public Companies should be regarded with less favour than any other species of stock or marketable securities.

Now to a trader the value of stock or securities of all kinds depends on their convertibility into money, or the facility with which credit can be obtained upon them as securities. On occasions of temporary pressure upon individuals, and much more in the shock of a general re-action, investments in shares would be ruinous if capital represented by them were entirely locked up, and no means existed for making them available for present exigencies. It is a striking and indisputable fact that in the late monetary and commercial crisis, shares to an almost incredible amount found their way into the hands of bankers and monied capitalists, nor is it any exaggeration to say, that unless the tangible representatives of such property had been accepted as securities, either for advances or in reduction of existing balances, the ruin would have been far more extensive than happily it proved to be.

On some of these transactions a legal question arose of great importance and interest to the mercantile community, and, as it happened to the writer to be more than once consulted upon it, he ventures to think, that a few observations. suggested by his inquiries may not be unacceptable.

In depositing property for advances, it is evident that a twofold object is to be attained. The banker or lender is to be secured, and the general credit of the borrower is to be . sustained. Without valid security the requisite aid will not be given-unless an exposure of the temporary necessities of the borrower can be avoided, the assistance itself may be useless. Suppose then a trader, under a temporary pressure, to be desirous of raising money on shares, as in a banking or railway Company of which he is a registered proprietor, and to tender the certificates of his shares to his banker as a security for an advance. Will the banker be safe in taking these certificates as a pledge, and can he, in case the borrower become bankrupt, hold them against his assignees, unless the transfer be completed by registration in the books of the

Company, or at all events notice of the transfer be given before the bankruptcy?

The question is evidently twofold: first, as regards the validity of the pledge or transfer as between the borrower and the lender, and between the latter and the Company; and, secondly, as regards the conflict between the lender and the creditors or assignees of the borrower.

With respect to the first point, we apprehend that the transfer, though incomplete, is, nevertheless, so far as it goes, valid. The delivery of the certificates in pledge is of itself an equitable assignment of the interest, binding upon the property of the assignor, without any further step for the completion of the transfer, and even without notice to the Company. A Court of Equity would at any time enforce the execution of a transfer, according to the forms prescribed by the Company, subject of course, where the transfer was not absolute but by way of pledge only, to the right of redemption on repayment of the sums advanced; and even if the Company were to withhold its assent and refuse to register the transfer-a case, however, of the most remote possibility, under the circumstances of our hypothesis-still the registered proprietor would be regarded in equity as a trustee for the holder of the certificates to the extent of the interest of the latter in the shares.

But the more important question regards the conflict between the holder of the certificates and the creditors of the registered owner in the event of the bankruptcy of the latter. It is a well known principle of the bankrupt law, that ordinarily nothing passes to the assignees to which the bankrupt had not at the time of his bankruptcy both the legal and the equitable title. Now the deposit of the shares in the manner supposed gives, we have contended, an equitable title to the pledge, and if this be so the case falls within the above rule, and the property would be exempted from the grasp of the creditors but for the well-known exception as to reputed ownership.

The words of the important clause creating this exception are as follows: "If any bankrupt, at the time he becomes bankrupt, shall, by the consent and permission of the true owner thereof, have in his possession, order, or disposition,

any goods or chattels, whereof he was the reputed owner, or whereof he has taken upon himself the sale, alteration, or disposition, as owner, the Commissioners shall have power to sell and dispose of the same for the benefit of the creditors under the commission." The question, therefore, is whether the transaction we have supposed, being kept secret between the immediate parties, is within this exception. If it be, then of course the value of shares as a temporary investment for a trader is greatly lessened; for as by the supposition it is an immediate necessity which induces him to make the pledge or transfer, it is obvious that publicity would defeat the object, and probably precipitate the very crisis which he is seeking to avert.

"The purpose of the enactment," to adopt the words of Mr. Deacon, in his valuable digest of the law and practice of bankruptcy, "was to remedy the mischief arising from a trader holding out a delusive responsibility to the world by appearing to be possessed of a stock in trade or other valuable articles which were the subjects of sale and immediate transfer." Taking this exposition to be the true one, it is evident that the statute, which in this particular is almost a literal transcript of the original act of Jac. I. c. 19, had in its immediate contemplation such personal property and effects only as could be exhibited by visible and notorious possession to the public.

The term "chattels," however, being comprehensive enough to include every species of personal property, the enactment has been held to apply not only to all symbols of property, such as dock warrants, bills of lading, bonds, policies, and other securities of every kind, but even to book debts owing to the bankrupt, shares held by him in any public company or undertaking, and all other incorporeal effects, not connected with land, or, as they are ordinarily termed, choses in action. Whether this was not itself an undue extension of the enactment beyond its original intention, it is now too late to inquire; and it remains only to determine whether upon the facts supposed the shares are to be considered as remaining, notwithstanding the delivery over of the certificates, "in the possession, order, or disposition of the bankrupt, as the reputed owner thereof."

The answer to this question seems to depend in some measure on the regulations of the Company to which the shares belong. In most of the companies which issue certificates of shares, the act of parliament or deed of settlement provides that the transfer shall be executed by a formal instrument of assignment, and in a particular mode. If in such transfers the production of the certificates be not required, and the registered proprietor be capable of executing a valid assignment without regard to them, as is not unfrequently the case, then it can scarcely be denied that the possession, order, and disposition, are in the bankrupt, as apparent and reputed owner. In that case there would be no impediment to the obtaining a further credit upon the security of the same shares after the pledge of the certificates, inasmuch as upon application to the office he would still be represented as the owner for all purposes whatever.

But if by the regulations of the Company, the certificates themselves be made the evidence of title, if no transfer can be recorded or made effectual without the production of them, then the case seems to assume a somewhat different aspect. It is clear, in the first place, that after the delivery of the certificates the bankrupt would no longer have the “order and disposition" of the shares. But as the words of the enactment are in the disjunctive, this is not sufficient, and it is necessary also to negative his possession as reputed owner.

Now although in common speech we are accustomed to associate with the term "possession" some palpable object, and though the possession in that sense would be his who was the holder of the only corporeal indicia of the property, viz., the certificates, yet it cannot be doubted that in the larger and more correct meaning of the term the party pledging the certificates would still be to some extent in possession of the shares. He would be entitled to receive the dividends, to vote as proprietor, and to exercise other privileges of a member of the Company, and would thus publicly appear, or would have the opportunity of appearing, as a shareholder. It is true that, if inquiries were pushed further, he would not be able to make good his pretensions, and that he could not obtain credit or money specifically on the security of his supposed shares. But would he not, to some extent at least, be enabled to ma