Legislative Regulation of Railway Finance in England

Purchase of this book includes free trial access to www.million-books.com where you can read more than a million books for free. This is an OCR edition with typos. Excerpt from book: CHAPTER IV CONTROL OP THE BORROWING POWERS OF RAILWAY COMPANIES In early years borrowing powers were granted to railway companies for the purpose of relieving the pressure of calls upon shareholders for new capital. There was no idea then that borrowings should become a permanent charge upon capital....
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Purchase of this book includes free trial access to www.million-books.com where you can read more than a million books for free. This is an OCR edition with typos. Excerpt from book: CHAPTER IV CONTROL OP THE BORROWING POWERS OF RAILWAY COMPANIES In early years borrowing powers were granted to railway companies for the purpose of relieving the pressure of calls upon shareholders for new capital. There was no idea then that borrowings should become a permanent charge upon capital. Parliament and the companies alike were of the opinion that the vast profits to be derived from railways would speedily enable the latter to pay off their debts and in addition to declare dividends of a much higher rate than is now expected. The general belief was that railways were to be constructed with capital raised from subscriptions, plus a small proportion of loans for temporary purposes. It is hardly necessary to say that these illusions as to railway profits were soon dispelled. The idea of being able to pay off borrowed money, however, was retained for many years, and was not abandoned until the constant and increasing requirements for renewals, replacements, and improvements had grown beyond all expected proportions.1 With such a conception of railway borrowing in mind, Parliament endeavored, from the beginning, to limit the borrowing powers of railway companies as well as to lay down strict rules governing their exercise. Thus, in one of the standing orders,2 which guided early railway legislation, it was provided that no railway company should be authorized to raise, by loan or mortgage, a sum of money larger than one-third of its share capital, and that until fifty per cent of the share capital should have beenpaid up, it should not be in the power of the company to raise any money by loan or mortgage. 1 Rattway Times, August 22, 1863. 2 Standing Order No. 84. Cf. Remarks on Standing Orders by a Parliamentary Agent, London, 1837, p. 55, and Railway Time...