To John C. Gray.
Downing College,
Cambridge.
4 Oct. 1903.
I should like to take this opportunity of asking you a question which you will be able to answer very easily. In 1862 our Parliament made it possible for any seven or more persons associated for any lawful purpose to form themselves into a corporation. But this provision was accompanied by a prohibition. For the future the formation of large partnerships (of more than 20 persons) was forbidden. In effect the legislature said that every big association having for its object the acquisition of gain must be a corporation. Thereby the formation of "unincorporated joint stock companies" was stopped. I may say in passing that now-a-days few Englishmen are aware of the existence of this prohibitory law because the corporate form has proved itself to be very much more convenient than the unincorporate. Now what I should like to know is whether when in your States the time came for general corporation laws there was any parallel legislation against unincorporated companies. I have some of your American books on Corporations and I gather from them that the repressive or prohibitory side of our Companies Act is not represented among you. But am I right in drawing this inference, and (if so) should I also be right in supposing that you would see constitutional objections to such a rule as that of which I am speaking: i.e. a rule prohibiting the formation of large partnerships or unincorporated joint-stock companies? A friend in New York supplied me with some very interesting trust deeds which in effect seemed to create companies of this sort. Should I then be right in supposing that in the U.S.A. the unincorporate company lived on beside the new trading corporation?
I am endeavouring to explain in a German journal how our law (or equity) of trusts enabled us to keep alive "unincorporate bodies" which elsewhere must have perished. Of course I must not speak of America. Still I should like to know in a general way whether the development of the "unincorporated company" which we repressed in 1862 was similarly repressed in the States, and a word or two from you about this matter would be most thankfully received.
By the way—and here I enter your own particular close—I observed that those New York deeds were careful to confine the trust within the limits of the perpetuity rule. Is it settled American law that this is necessary? We explain our clubs by saying that as the whole equitable ownership is vested in the original members there can be no talk of perpetuity—and I believe that there are some extremely important unincorporated companies with transferable shares (formed before 1862—in particular the London Stock Exchange) which are built up on this theory: the theory is that the original shareholders were in equity absolute masters of the land, buildings, etc. Does that commend itself to you?
There! you see what comes of writing to me! A whole catechism! Please think no more of it unless a very few words would set my feet in the straight road.
Most of my time is being given to the Year Books. The first volume is with the binder.
I often look back with great pleasure to the few hours that you and Mrs Gray spent with us in Gloucestershire. Would that I could see you again, but all my journeys have to be to the Canaries.