. Legislative regulation of railway finance in England . tal. The principal object of this rule was that the mort-gage creditors of a railway company might have the security of adefinite undertaking, on which a subscribed capital was to be laidout of an amount not less than throe times as great as the sum tobe borrowed. If a company were empowered to borrow on the basisof an increase of its share capital to be used for subscribing tothe undertaking of another company, the lender of money so borrowedwould not derive any additional security whatever from such cre-ation of new capital, for this a
. Legislative regulation of railway finance in England . tal. The principal object of this rule was that the mort-gage creditors of a railway company might have the security of adefinite undertaking, on which a subscribed capital was to be laidout of an amount not less than throe times as great as the sum tobe borrowed. If a company were empowered to borrow on the basisof an increase of its share capital to be used for subscribing tothe undertaking of another company, the lender of money so borrowedwould not derive any additional security whatever from such cre-ation of new capital, for this additional share capital would notbe laid out in the subscribing companys undertaking?on whichalone the lender would have a charge, but elsewhere. Thus, thespirit of the rule of Parliament would be destroyed. Moreover, ifthis request of the railways were permitted, the additional share The 126th standing order of the House of Commons and the 189thstanding order of the House of Lords. See General Report ofthe Board of Trade on Railway Bills, 1861, p. i/sr * capital would be made the basis by both the subscribing and the receiving companies ior an extension of their powers. Accordingly the Board of Trade recommended that such requests should not be1 granted. 1855 About as has been seen in a previous chapter, debentureS stocks came into vogue as a security in place oi debenture bonds,and Parliament took steps to reduce the borrowing powers of thecompanies in proportion to the amounts represented by the debenturestocks issued. In every railway bill seeking power to issue suchstocks, provisions were made to the effect that after the issiie ofsuch debenture stocks or the conversion of any mortgages or bondsinto such stocks, it shall not be lawful for the company to issuemortgages or bonds, or any other securities, or again to borrow thesum so converted, and the borrowing powers of the company shouldto the extent of the sums so borrowed or converted or raised by the a issue of deb
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