TRUST COMPANIES
There has grown up in this country a class of financial institutions which take a sort of middle ground between the commercial bank and the savings bank, so far as their service to the public is concerned. These are what are known as trust companies. National banks are prohibited by law from making loans on real estate, and though State banks are not hedged in this way, as a matter of good banking they usually avoid loans of this character. The policy of commercial banks is to make a great many comparatively small loans on short-time paper, while that of the trust company is to make large loans on long-time securities. The deposits of trust companies consist largely of undisturbed sums such as might be set aside by administrators, executors, trustees, committees, societies, or from private estates. They are such as are not likely to fluctuate greatly in amount. From the very nature of their deposits trust companies find it convenient and profitable to make larger loans and at longer periods than do ordinary banks. Trust companies not only receive moneys upon deposit subject to cheque and for savings, and loan money on commercial paper and other securities, as do commercial banks; but they also act as agents, trustees, executors, administrators, assignees, receivers for individual properties, and corporations. They frequently assist as promoters or reorganisers of corporations and in the sale of stocks, bonds, and securities. They act also as agents for the payment of obligations maturing at future dates, such as the premiums on insurance, interest on mortgages and bonds, etc. Trust companies are organised under the laws of the State in which they exist and are usually subject to all the supervision required in the case of State banks.
III. CORPORATIONS AND STOCK COMPANIES[9]
CORPORATIONS
Stock companies are usually referred to as corporations, though all corporations are not stock companies. A corporation is a body consisting usually of several persons empowered by law to act as one individual. There are two principal classes—(1) public corporations and (2) private corporations. Public corporations are not stock companies; private corporations usually are. Public corporations are created for the public interest, such as cities, towns, universities, hospitals, etc.; private corporations, such as railways, banks, manufacturing companies, etc., are created usually for the profit of the members. Corporate bodies whose members at discretion fill by appointment all vacancies occurring in their membership are sometimes called close corporations.
POWER TO BE A CORPORATION IS A FRANCHISE
In the United States the power to be a corporation is a franchise which can only exist through the legislature. There are two distinct methods in which corporations may be called into being: First, by a specific grant of the franchise to the members, and, second, by a general grant which becomes operative in favour of particular persons when they organise for the purpose of availing themselves of its provisions. When the specific grant is made it is called a charter. In the case of private corporations the charter must be accepted by the members, since corporate powers cannot be forced upon them against their will; but the charter is sufficiently accepted by their acting under it. When special charters are not granted individuals may voluntarily associate, and by complying with the provisions of certain State laws may take to themselves corporate powers. In some of the States private corporations are not suffered to be created otherwise than under general laws, and in others public corporations are created in the same way.
FOOTNOTE:
[9]For a preliminary treatment of the subject of this lesson the student is referred to Part I. of this book, entitled "General Business Information," especially Lessons XII. and XV.