A somewhat remarkable debate occurred in the House on Tuesday
night, on the question whether the Manchester Ship Canal Company should or should not be set free from the restriction imposed on railways,—That they are not to pay dividends out of capital. Formally, this restitiction does not apply to any but railways, and the reason assigned is this,— that-Railway Companies can open sections of their line before the -whole is completed, and so obtain the means of earning 'dividends before the whole project is completed. As, however, no part of the proposed Ship Canal can -be used at all till the whole is finished, it is said to be a very harsh restriction on a scheme of that kind to insist that those who lend their money to it, in full confidence that the scheme will succeed, should lie out of their interest for seven years, or as long as may be necessary to bring the scheme into working order. There is, of course, force in that objection, and the 'House declined to impose this restriction on the financiers who are finding capital for the scheme. But sufficient attention was not drawn, either by Mr. Mundella or by any one else, to the reason why such restrictions are useful. That reason is, that-there are so many investors who require to be protected- against themselves, and who, so long as they get their interest, assume that the investment is a paying one, without ever in- forming themselves whether the interest is paid out of capital or not, and who are, therefore, greatly misled as to the nature of the investment by receiving interest which is in no sense -earned,aad in no sense an evidence of success.
Previous page
