ness, except such as are issued for money only and payable one year or less from the date thereof, until it shall have first obtained authority for such issue from the commission.1

In case stocks, certificates of stock, bonds, notes, or other evidences of indebtedness, payable more than one year after the date thereof, are to be issued for the purpose authorized in paragraph (d) of subsection 1 of section 1753-5 (see p. 227), the corporation shall file with the commission a statement signed and verified by its president, or vice president, and secretary stating the fact that the issue is to be made for such purpose and setting forth—

(a) The amount and character of the stocks, certificates of stock, bonds, notes, or other evidences of indebtedness proposed to be issued.

(b) The terms on which they are to be issued.

(c) The application which is to be made of the proceeds, if any, derived therefrom.

(d) The total assets and liabilities and the previous financial operations and business of the corporation, in such detail as the commission may require.

If the commission shall determine that the proposed issue complies with the provisions of this act, such authority shall thereupon be granted and it shall issue to the corporation a certificate of authority stating (a) the amount of such stocks, certificates of stock, bonds, notes, or other evidences of indebtedness reasonably necessary for the purpose for which they are to be issued, and the character of the same; (b) the purpose for which they are to be issued; (c) the terms upon which they are to be issued; (d) the application which is to be made of the proceeds, if any, derived therefrom; and (e) the true value of the property upon which such issue is based. Such corporations shall not dispose of such stocks, certificates of stock, bonds, notes, or other evidences of indebtedness, or apply the proceeds derived therefrom, on any terms or in any manner not specified in such certificate.2

No public-service corporation shall issue any stocks, certificates of stock, bonds, notes, or other evidences of indebtedness for money, property, or services, or for the purpose authorized in paragraph (d) of subsection 1 of section 1753–5 (see p. 227), until there has been recorded upon the books of such corporation the certificate of the railroad commission.3

The commission shall have the power to require public-service corporations to account for the disposition of all stocks, certificates of stock, bonds, notes, and other evidences of indebtedness, and of the proceeds of all sales of stocks, certificates of stock, bonds, notes, and all other evidences of indebtedness issued pursuant to sections

1 Wisconsin, Stats., 1913, sec. 1753-9, subsec. 1. 2 Wisconsin, Stats., 1913, sec. 1753-9, subsec. 8.

a Wisconsin, Stats., 1913, sec. 1753-12.

1753-1 to 1753-22, inclusive, in such form and detail as it may deem advisable, and to do and perform any and all acts necessary to carry out the provisions of said sections.1

No public-service corporation shall declare any stock or bond dividend, or divide the proceeds of the sale of any stock or bonds among its stockholders; provided that where stocks, certificates of stock, bonds, notes, or other evidences of indebtedness shall be issued for the purposes authorized in paragraph (d) of subsection 1 of section 1753-5 (see p. 227), such new stocks, certificates of stock, bonds, notes, or other evidences of indebtedness, or any part thereof, or the proceeds or any part of the proceeds derived therefrom, may be distributed equally, share for share, among the holders of stock or certificates of stock of such corporation already issued.2

Other sections of the law provide that any corporation, its agent, director, or officer who shall cause to be issued any stock, bonds, or other evidences of indebtedness in violation of the law, or who shall apply the proceeds of the sale thereof to any purposes other than specified in the certificate of the commission, shall be fined not less than $500 nor more than $10,000 for each offense, and all stocks, bonds, etc., so issued shall be void.3

New York Law-Stock Without Par Value: New York has a law providing for the issuance by certain corporations of shares of stock without any nominal or par value. This is a provision not found in the laws of any other State. That part of the law relating to the issuance of the stock is substantially as follows:

Upon the formation or the reorganization of any stock corporation, other than a moneyed corporation, or a corporation under the jurisdiction of any public-service commission, the certificate of incorporation may provide for the issuance of the shares of stock of such corporation, other than preferred stock having a preference as to principal, without any nominal or par value by stating in such certificate

1. The number of shares that may be issued by the corporation, and if any of such shares be preferred stock, the preferences thereof. If such preferred stock or any part thereof shall have a preference as to principal, the certificate shall state the amount of such preferred stock having such preference, the particular character of such preferences, and the amount of each share thereof, which shall be $5 or some multiple of $5, but not more than $100.

2. The amount of capital with which the corporation will carry on business, which amount shall be not less than the amount of preferred stock (if any) authorized to be issued with a preference as to principal, and in addition thereto a sum equivalent to $5 or to some multiple

1 Wisconsin, Stats., 1913, sec. 1753–13. * Wisconsin, Stats., 1913, sec. 1753–14.

3

a Wisconsin, Stats., 1913, secs. 1753-17 and 1753-19.

of $5 for every share authorized to be issued other than such preferred stock; but in no event shall the amount of such capital be less than $500.

Such statements in the certificate shall be in lieu of any statements prescribed by the law under which the corporation shall have been formed or reorganized as to the amount or the maximum amount of its capital stock or the number of shares into which the same shall be divided, or of the amount or the par value of such shares.

Each share of such stock without nominal or par value shall be equal to every other share of such stock, subject to the preferences given to the preferred stock, if any, authorized to be issued. Every certificate for such shares without nominal or par value shall have plainly written or printed upon its face the number of such shares which it represents and the number of such shares which the corporation is authorized to issue, and no such certificate shall express any nominal or par value of such shares. The certificates for preferred shares having a preference as to principal shall state briefly the amount which the holders of each of such preferred shares shall be entitled to receive on account of principal from the surplus assets of the corporation in preference to the holders of other shares, and shall state briefly any other rights or preferences given to the holders of such shares.

Such corporation may issue and may sell its authorized shares, from time to time, for such consideration as may be prescribed in the certificate of incorporation, or as from time to time may be fixed by the board of directors pursuant to authority conferred in such certificate, or if such certificate shall not so provide, then by the consent of the holders of two-thirds of each class of shares then outstanding given at a meeting called for that purpose in such manner as shall be prescribed by the by-laws. Any and all shares issued as permitted by this section shall be deemed fully paid and nonassessable and the holder of such shares shall not be liable to the corporation or to its creditors in respect thereof.1

The act also provides that in case the amount of capital stated in its certificate of incorporation shall be increased, such corporation shall not increase the amount of its indebtedness then existing until it shall have received in money or property the amount of such increase. The directors assenting to the creation of any debt in violation of this provision shall be liable jointly and severally for such debt, and no such corporation shall declare any dividend which will reduce the amount of its capital below that stated in its certificate. Provision is also made for the increase or reduction of the capital of such corporations.2

1 New York Stock Corp. Law, sec. 19.

2 New York Stock Corp. Law, secs. 20, 22.

CHAPTER V.

TRUST LAWS IN FOREIGN COUNTRIES.

Section 1. Introductory.

The laws in foreign countries concerning trusts, or combinations to control the market, present a great variety of governmental policy, extending from prohibition under the criminal law to compulsory obligation to form such combinations in certain specific cases. The three chief types of policy, however, with regard to the legal status of such combinations are (1) prohibition under the criminal law, (2) invalidity under civil law, and (3) validity under the civil law. Where combinations are prohibited under the criminal law they are generally invalid under the civil law also. Among the countries in which such combinations are prohibited by the criminal law may be specially mentioned Canada, Australia, New Zealand, France, and Russia; among those in which such combinations are invalid under the civil law merely, Austria should be specially noted; while among those which generally give free scope to monopolistic combinations Germany, Belgium, Switzerland, and Italy are the most important. According to the English law combination agreements may or may not be invalid, according to the circumstances. Laws of a compulsory character, tending to the establishment of monopolistic conditions in a particular industry, are found in Germany, Italy, Roumania, Russia, Brazil, and recently, for a brief period, in Austria also. It may be noted further that some countries which have laws generally permitting monopolistic combinations, such as Germany, prohibit under the criminal law particular forms, such as combinations with respect to bidding on contracts. Some countries have, apparently, no general legislation on this subject.

With respect to the particular provisions of the laws which are quoted or referred to below, it should be noted that in some cases they are special statutes expressly relating to combinations of competitors, etc., while in other cases they are merely parts of the general criminal and civil law. Provisions of the general criminal law which are relevant to such combinations are usually so expressed as to make their application obvious. The relevant provisions of the general civil law, however, are chiefly those regarding the validity of agreements, and these do not usually refer expressly to such combinations. Their application to this subject depends, therefore, on judicial interpretation. In most countries where such provisions are cited

judicial interpretations have been found and some of the cases are referred to in the text. In other countries where substantially identical provisions exist such judicial interpretation does not appear to have been made. Inasmuch as the judicial interpretations of similar provisions of law in different countries are often unlike, the meaning and effect of the law is sometimes doubtful where the courts have not defined it.

In most foreign countries monopolistic combinations are generally formed on the basis of agreements between competitors for fixed periods (cartels); consolidations of competitors by means of a holding company or merger are comparatively rare. For this reason the laws respecting the right of one company to hold the stock of a competing company or the right to merge competing companies, are not of great practical significance in this connection and are not included in the following discussion. No instances have been noted where a combination has been declared unlawful on either of these grounds.

In foreign countries which forbid combinations that restrict competition the prohibition generally does not extend to those which are regarded as reasonable in extent or in their practical operation. The fact, therefore, that such combinations frequently exist in most of the countries mentioned does not afford a safe basis for judging of the effectiveness of the laws.

A proper appreciation of the effectiveness and the results of the legislative policies of foreign countries would require, of course, a very comprehensive knowledge of the economic facts and the way in which the laws are administered. No attempt is made to discuss these aspects of the subject.

The following discussion of legislation regarding trusts or other monopolistic organizations is limited to private industry, and the subject of Government monopolies is not considered. Various countries have established such monopolies in particular industries, as, for example, France for tobacco. This discussion, moreover, does not cover legislation according to which various Governments have engaged in industry in competition with private concerns, though this may have had for one of its purposes the placing of a check on monopolistic tendencies of private industry. Furthermore, no attempt has been made to include any special measures adopted by belligerent countries since the outbreak of the present war, which relate to this general subject.

While the legislation and judicial decisions on unfair competition do not have necessarily any relation to the question of combinations and are treated separately in this report (for foreign countries, see Chap. X, p. 529), yet in some instances certain combination practices directly tending to destroy competition have been declared unlawful and are therefore noted in this connection.