A bond is evidence of debt, specifying the interest and stating when
the principal shall be paid; a certificate of stock is evidence that
the owner is a part owner in the company, not a creditor of the
company, and having no right to regain his money except by the sale of
the stock or the winding up of the company's business. Bonds issued by
stock companies and corporations are really mortgages upon their
resources. Such a bond is usually secured by a mortgage upon the
company's plant, franchises, and assets, or some part thereof.
Corporate bonds can only be issued by the consent and direction of the
shareholders of the company or corporation.
At the present time a mortgage securing the payment of corporate
bonds is usually placed in the hands of a trustee--generally
some trust company--which is supposed to act in behalf of the
bondholders as a unit and which is empowered by the language of
the bond, in the event of the failure of the corporation to
perform the obligations it assumes in said bond, to foreclose
the mortgage and divide the proceeds of sale among the
bondholders.--CARROLL.