DOWNING COLLEGE,
CAMBRIDGE.
_4 Oct. 1903._
I should like to take this opportunity of asking you a question which
you will be able to answer very easily. In 1862 our Parliament made
it possible for any seven or more persons associated for any lawful
purpose to form themselves into a corporation. But this provision was
accompanied by a prohibition. For the future the formation of large
partnerships (of more than 20 persons) was forbidden. In effect the
legislature said that every big association having for its object
the acquisition of gain must be a corporation. Thereby the formation
of "unincorporated joint stock companies" was stopped. I may say in
passing that now-a-days few Englishmen are aware of the existence of
this prohibitory law because the corporate form has proved itself
to be very much more convenient than the unincorporate. Now what I
should like to know is whether when in your States the time came for
general corporation laws there was any parallel legislation against
unincorporated companies. I have some of your American books on
Corporations and I gather from them that the repressive or prohibitory
side of our Companies Act is not represented among you. But am I right
in drawing this inference, and (if so) should I also be right in
supposing that you would see constitutional objections to such a rule
as that of which I am speaking: i.e. a rule prohibiting the formation
of large partnerships or unincorporated joint-stock companies? A friend
in New York supplied me with some very interesting trust deeds which in
effect seemed to create companies of this sort. Should I then be right
in supposing that in the U.S.A. the unincorporate company lived on
beside the new trading corporation?
I am endeavouring to explain in a German journal how our law (or
equity) of trusts enabled us to keep alive "unincorporate bodies" which
elsewhere must have perished. Of course I must not speak of America.
Still I should like to know in a general way whether the development of
the "unincorporated company" which we repressed in 1862 was similarly
repressed in the States, and a word or two from you about this matter
would be most thankfully received.
By the way--and here I enter your own particular close--I observed
that those New York deeds were careful to confine the trust within
the limits of the perpetuity rule. Is it settled American law that
this is necessary? We explain our _clubs_ by saying that as the whole
equitable ownership is vested in the original members there can be
no talk of perpetuity--and I believe that there are some extremely
important unincorporated companies with transferable shares (formed
before 1862--in particular the London Stock Exchange) which are built
up on this theory: the theory is that the original shareholders were in
equity absolute masters of the land, buildings, etc. Does that commend
itself to you?
There! you see what comes of writing to me! A whole catechism! Please
think no more of it unless a very few words would set my feet in the
straight road.
Most of my time is being given to the Year Books. The first volume is
with the binder.
I often look back with great pleasure to the few hours that you and
Mrs Gray spent with us in Gloucestershire. Would that I could see you
again, but all my journeys have to be to the Canaries.