Where two roads have consolidated whose shares have different market values, it has been the custom to equalize the difference by the issue of extra shares of the consolidated company to the owners of the higher priced stock. This practice has always tended to produce increase of capital issues, and may readily cause the new stock to be issued for a consideration less than

its par value. The only alternative was to scale down some of the old stocks; and this often involved serious difficulties, both of business policy and of law. By the simple expedient of omitting the dollar mark from the new shares, the number can be adjusted to the demands of financial convenience, without danger of misrepresentation or suspicion of unfairness to anyone.

In the case of reorganizations the advantage of shares without par value is even more obvious. It is here that the necessity and justice of getting money from stockholders is greatest. It is here that the impossibility of getting them to pay par for new shares is most conspicuous. We believe that in such cases the public interest would be subserved and the speedy rehabilitation of the roads promoted by requiring the conversion of the common stock and encouraging the conversion of the preferred stock into shares without par value; the certificates simply indicating the proportionate or preferential claims of the holders upon assets and upon such profits as might from time to time be earned.

All of these considerations seem to apply with equal force to the securities of railroads under State incorporations, and we believe the laws of the several States could with advantage be modified so as to provide for the issuance of stock without par value.

The form of the Great Northern Ore Certificates referred to by the Commission is given in the foot note.*

*Total Number of Shares 1,500,000.

Number 3464

Shares 100

GREAT NORTHERN IRON ORE PROPERTIES
TRUSTEES CERTIFICATE OF BENEFICIAL INTEREST.

The undersigned, as Trustees under a certain Indenture entered into between them and the Lake Superior Company, Limited, on the seventh day of December, A. D. one thousand nine hundred and six, do hereby certify that ... is the owner of One Hundred shares of the beneficial interest therein specifically described. This certificate is transferable only upon the books of the Trustees in person or by attorney and upon the surrender of this certificate. This certificate shall not become valid until countersigned by the Register of Transfers.

By

} Trustees (sd)

Countersigned and registered this

IN TESTIMONY WHEREOF, the Trustees have signed this certificate this 23 day of Mar A. D. 1907.

Trustees and as
attorneys for the
other Trustees.
A. D. 1907.

day of
MANHATTAN TRUST COMPANY,
Registrar of Transfers,
By

Secretary.

These recommendations are in substance the same as those presented to this Association by its committee in 1892.*

*Report to N. Y. State Bar Association, 1892, Proceedings page 138: Extract there from read in testimony of F. L. Stetson, before the U. S. Industrial Commission in 1899 as follows (vol. i, p. 976):

"A REMEDY FOR STOCK WATERING-Q. (By Senator Mallory). Have you any suggestions to offer? A. I had only one point which I thought proper. I have not obtained information, but only impressions, as to what was going on in this commission from the public prints. In January, 1892, a report was made by a committee, of which I was a member, on the question of corporations, to the Bar Association of New York; and the third provision of that report is the only one I think, that I should like to bring before this commission for its consideration. As it is addressed to a subject about which a great deal of complaint has been made, namely stock watering, I should like to indicate a remedy or relief which we thought was desirable (reading):

"THIRD. To permit the formation of a distinct class of business stock corporations whose capital stock may be issued as representing proportional parts of the whole capital without any nominal or money value. The effect of such amendment would be to provide for the measurement of the interest or shares of the members of such a corporation by a statement of proportion, as in the case of the part owners of a ship, and not by an arbitrary assignment of money value, which is delusive in the case of every corporation whose capital stock has a market value either more or less than its nominal par value. Such an amendment, though somewhat radical, is not altogether novel. It embodies a principle adopted in corporation laws in Germany. It would relieve any possibility of injury to the public from misleading representations as to the money value of corporate stock, and would

Governor Hughes' approval of the principle of the bill of 1909 already has been noted and the legislative support of the measure in 1910 and 1911 has been such as to justify a further attempt to enact it into law substantially in the form (Exhibit A) hereunto annexed which has been drafted with the view of obviating every objection heretofore made.

Accordingly your committee, acting under its continued authority, will cause a bill to be introduced in the present Legislature, and respectfully submits, with the recommendation for its passage, the following resolution:

Resolved, That the report of the Committee on Corporation Law be and it is hereby received, and the committee is continued and is authorized to proceed in accordance with the recommendations of the report.

Respectfully submitted,

FRANCIS LYNDE STETSON,

VICTOR MORAWETZ.
LOUIS MARSHALL.

Dated January 5, 1912.

Chairman.

also relieve from embarrassment conscientious corporate officers often compelled to deal with legal fiction as to which they have no personal knowledge, as though it were a realty within their own observation.' (Proceedings of New York State Bar Association, January, 1892, p. 138.)"

AN ACT

TO AMEND ARticle two of THE STOCK CORPORATION LAW, IN RELATION TO CORPORATIONS HAVING SHARES OF CAPITAL STOCK WITHOUT NOMINAL OR PAR VALUE

The People of the State of New York, represented in Senate and Assembly, do enact as follows:

SECTION I. Article two of chapter sixty-one of the laws of nineteen hundred and nine, entitled "An act relating to stock corporations, constituting chapter fifty-nine of the consolidated laws," being the "Stock Corporation Law," is hereby amended by adding at the end of said Article two five new sections, to be sections nineteen, twenty, twentyone, twenty-two and twenty-three, and to read as follows:

§ 19. ISSUANCE OF SHARES OF STOCK WITHOUT NOMINAL OR PAR VALUE. Upon the formation or the reorganization of any stock corporation, other than a moneyed corporation, 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 and the amount of each share thereof, which shall be five dollars or some multiple of five dollars, but not more than one hundred dollars.

(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 five dollars or to some multiple of five dollars 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 five hundred dollars.

Such statements in the certificate shall be in lieu of any statements prescribed by the law under which the corporation shall be 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 may state the amount which the holders 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 may state any other rights or preferences given to the holders of such shares.