because of their controlling power that they seldom lose their value completely so long as an attempt is made to continue the business. The Principle of "Securitization" of Ownership. Enough has been said of the nature, extent and effect of securities to show the importance of the rôle that they play in modern business organization. It is, indeed, very doubtful whether the great establishments found today in the fields of industry, commerce, transportation, finance, mining, etc., could operate at all under a system of private ownership of capital, but for the existence and general use of securities. Thus far, however, only the nature of securities themselves has been discussed, and nothing has been said about the principles that underlie securitization of business capital; that is to say, the use of securities as instruments of organization to give the holder thereof a claim to the designated business capital and to the income accruing to it. Elimination of Personal Control, the Keystone.Under the forms of organization that have thus far been described, the ownership, management and direction of the plant and equipment of the business remains in the hands of the natural entrepreneur, regardless of whether he is an individual proprietor or a partner. The power to withdraw is his, but when he exercises it he breaks up the organization. Such types of organization do not assure to the business a continuity of existence for a definite period of time, because they do not entertain the concept of the existence of the business separate and apart from the lives of the owners. Here, then, we find the first and most important point of departure from the principles underlying the personal ownership organizations. Through the use of securities the existence of the business becomes divorced from the life and being of the natural entrepreneur. It endures for a definite period of time, or in perpetuity, unless voluntarily and lawfully abandoned by the operating and owning body. This body is interposed between the entrepreneur and the business in which he is interested. It is not a conscious, tangible being, but merely a hypothetical one; and thus, it is incapable of conscious action, except through the agency of natural persons. This delegation of authority is provided for, and the responsibility therefor allocated, through the medium of stock certificates. These, as already stated, incorporate in themselves a claim on income and assets and a right to participate in the management, etc., of the enterprise. It is the person of the holder of this stock, who exercises the rights that belong to it. The securitization of business, thus, results in the introduction of a new principle of entrepreneurial organization the interposition of a securities-issuing body between the entrepreneur and his business capital. Technically speaking, the securities-issuing body itself is the entrepreneur of the business that it owns and operates. But, since it can function only through natural persons to whom also part of the liability may carry over, this technicality may be disregarded. Types of Securities-Issuing Organizations. — Up to the present time three important types of securities-issuing organizations have been evolved. For all of them, the underlying principle, as explained above, is the same. The characteristics and qualities that distinguish one from the other are of a legal nature and of such importance to a thorough understanding of each of the types that they are reserved for fuller consideration and explanation in succeeding chapters. The first of these types is a development of the partnership. A voluntary association, or company, is formed in whose managing board is vested the control of the business, while the ownership for all practical purposes is in the asso ciation itself. Membership in this association constitutes entrepreneurial participation in the business. This is obtainable through the acquisition of the shares of stock that are issued by the association, and that have all of the earmarks of securities. Creditor's interest is represented by bonds or notes. Such associations are known as joint stock companies or joint stock associations. The second type is formed by interposing between the entrepreneur and his capital an artificial person, created by the state and existing only in contemplation of law. The right of ownership, and the power of operation of the business, is vested in this person who depends for conscious action upon policies dictated by the stockholders and carried out by directors and agents. This form is the corporation. The third type rests upon the transfer of title to the property, together with power of management or direction, in trust to a person or body of persons. The entrepreneurs thus become the beneficiaries of the trust and share in the profits according to the number of units of trust certificates (securities) that they own. This form is called the securities-issuing trust or trust on shares. It is under these three types of entrepreneurial organization, that the great business undertakings of today are conducted. Of the three, the corporation offers the greatest inducements to the undertaker of a business. The joint stock company has seen its best days, and the use of the securities-issuing trust has as yet not come into general favor. Thus, the corporation is, today, the ownership foundation upon which have been erected the world's big business establishments conducted as private enterprises. CHAPTER VI THE JOINT STOCK COMPANY THE principle underlying all securities-issuing organizations is the creation of a business organization that shall enjoy an existence separate and apart from the members that compose it. To accomplish this there must be formed an organization that has more or less permanent control over a definite amount of business capital contributed to it by its members, and that will at the same time permit a member freely to withdraw without disrupting its unity. The earliest approach to the realization of this idea was the joint stock company.1 Definition. From the legal standpoint, the joint stock company is a partnership, created by a contract in the form of written articles of association that set forth clearly the conditions under which the company is to be formed and operated. It may be defined as a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is a condition of membership, directed by a board selected by the members and operated by its agents. In other words it is a securities-issuing partnership that, in a limited respect, has an existence apart from the lives of its members. Thus, it is essentially a common law organization. Formation. In the United States a joint stock company may generally be formed under common law rules by 1 In France the nearest approach to our joint stock company is the société anonyme par actions, in Germany the Aktiengesellschaft and in Italy the società per azioni. drawing up articles of association which are subscribed to by the organizers. However, in most of the states these laws have been reduced to statutes. In a few, special requirements regulating capitalization, securities, registration, method of bringing suit, etc., exist. In New York, for example, these companies must be formed under the same general laws that govern the formation of a corporation. That is to say, the organizers must frame their articles of association, submit them to the secretary of state, pay a franchise tax and have the company properly registered with a designated official in the county and the state. In addition to this, every stock company formed under the laws of this state must, within sixty days after its formation, and thereafter in each January, file with the secretary of state and with the county recorder a written certificate giving its name, date of organization, number of stockholders, names and residences of its officers, and its place of business. In England and the countries of Continental Europe the formation of these companies has been regulated more or less strictly ever since the great stock swindles of the early eighteenth century which were brought to a climax by the company formed by John Law to finance France. Thus, the common law rules for the formation of joint stock companies have been almost universally superseded by statutory regulations. In some countries, as in Germany and Belgium, these are very strict and exacting, while in England and the United States the tendency is to adhere more closely to the common law practice. The Articles of Association—the name applied to the written contract by virtue of which the company is created -usually contain statements setting forth (1) the name under which the company is to do business, (2) its place of business or main office, (3) the objects for which it is organized, (4) its capital, number of shares and their manner of assignment or transfer, (5) the number, manner of |