THE DENOMINATION AND CHARACTER OF SHARES, 1855–1885
AMONG the problems facing the promoters of limited liability companies ,L4 following the general permissive Acts of i855 and I 856 were those of attracting the number and quality of shareholders the company desired and of establishing a sound financial reputation. No well-tried mechanism of company promotion and investment existed, and the concept of limited liability had still to win acceptance in commercial and industrial circles schooled in the concept of partnership liability 'to the last shilling and the last acre'. The denomination of the shares issued by the companies and the character of these shares, whether fully paid up when purchased or left partly uncalled, were held to be of great importance in the solution of these problems. 'Probably no point ought to be more anxiously weighed', wrote an adviser to limited companies in the sixties, 'than the nominal amount of the shares into which the capital of the company is to be divided."' An equal concern was shown as to the proportion to be called up on each share. By the eighties and nineties these considerations were no longer to the fore. New companies accepted without question that the ordinary share denomination should be between fi and ?5 nearly or fully paid up. Instead, attention was centred on the use of -varying types of share, such as founders' and preference, and on the use and misuse of debenture stock. A study of this transition and of the factors leading to it throws some light on the methods of finance of the early limited companies and on the composition and outlook of the investing classes. In the first ten years of general limited liability the share denomination of the majority of companies was high measured against the Li standard. Of 3720 companies formed between i856 and i865 inclusive and believed still to be in existence in the latter year, only 597, or i6 % , had shares below ?5 in value; the remainder ranged between ?5 and ?500o with the largest group (52 %) from J io up to Jjioo shares.2 More than thirty companies had share denominations of iooo and over, the chief types being iron, coal, engineering, land development, and cotton. The panic of i866, for reasons discussed later, discouraged the very high shares and the success of the cotton and 'single ship' companies in raising capital easily with shares of ?5 and Li in the seventies and early eighties encouraged lower shares in other spheres. In i882 W. R. Skinner wrote in the preface to his Stock Exchange rear Book and Directory: 'It is a feature