CAPITALIZATION (WISCONSIN) In its report for 1909-10, the commission pointed out weaknesses in the provisions of the law giving it jurisdiction over stock and bond issues. When a corporation desired to issue stocks, bonds, or other evidences of in debtedness for money only, the scope of the commission's inquiry was limited to ascer taining merely whether such an issue would be legal or not. The commission makes this criticism: The law as it now stands is of little value as a means of ascertaining many important facts relat ing to the past issues of the securities of public service corporations, which should be matters of record in connection with any new issues of securi ties. The financial history of such corporations is vital to investors, and if made a matter of record, will accomplish much in the way of preventing over-capitalization of such corporations. . . . It might be well to strengthen the law in other re spects. At present the corporation determines the amount and character of the securities it wishes to issue, also the purposes for, and the terms upon which, the same are to be issued. The legislature could prescribe the purposes for which such secur ities could be issued, determine the character and limit the amount of the same to that which would be reasonably required for such purposes, and leave to the commission to ascertain whether the proposed purposes are within the terms of the statute and whether the character and amount of the issue are reasonably required for such pur poses.
The law as amended in 1911 would seem to be proof against any of the defects of the former law complained of by the commission. It reads: — No public service corporation shall issue any stock or certificate of stock except in considera tion of money, or of labor or property, at its true money value as found and determined by the commission, actually received by it equal to the face value thereof; or any bonds, notes, or other evidences of indebtedness, except for money or for labor or property at its true money value as determined by the commission, actually received by it equal to 75 per cent thereof. No bonds, notes, or other evidences of indebtedness shall be issued at less than 75 per cent of the face value thereof, plus the amount of any discount paid or incurred upon the issuance of such bonds, notes, etc.
No stocks, bonds, or other evidences of in debtedness, except such as are issued for money only and payable one year or less from the date thereof, shall be issued without the consent of the commission.
In case of an application for the right to issue stocks, bonds, etc., for money only, the corpora tion shall file with the commission a statement setting forth: (a) purposes for which they are to be issued; (b) the amount and character of the proposed issue; (c) the terms on which they are to be issued; (d) the total assets and liabilities, and the pre vious financial operations and business of the corporation, in such detail as the commis sion may require.
For the purpose of enabling it to determine whether the proposed issue complies with the provisions of the act, the commission may make any such inquiry or investigation, hold such hearings and examine such witnesses, books, papers, documents, or contracts as it may deem important in enabling it to reach a determination. It may also make a valuation of all the property of the corporation.
If the commission decides that the pro posed issue complies with the law, it gives the corporation a certificate of authority stating (1) the amount of such stocks, and bonds, reasonably necessary; (2) the purposes for which they are to be issued; (3) the terms upon which they are to be issued. The cor poration must not apply the proceeds to any purposes not specified in the certificate.
In case of an application for an issue in re turn, as a whole or in part, for anything other than money, the corporation shall file a cer tificate showing also (4) the description in detail and estimated value of the property or services for which they are to be issued; (5) the amount of money, if any, to be received in addition to such property, services, or other consideration.
The commission shall obtain the true valu ation in detail of such property, service, or other consideration, and shall make examin ations and investigations as before.
The commission's certificate of authority in these cases shall contain, in addition to (1), (2), (3), the true value of the property or service or consideration other than money as found and determined by the commission.
A corporation may issue stock, bonds, or other evidences of indebtedness, when neces sary f or organization expenses and all other expenses reasonably required in connection with all the financing and construction of the property; for the acquisition of property, and for the construction, completion, extension, or improvement of its plant; or other facili ties for the improvement of its service; or for the discharge or refunding of its legal obliga tions. No corporation shall make such issues for any purpose not chargeable to its capital account. If it should make such an issue for purposes not chargeable to capital account, it must set aside annually such a sum as to amortize the amount by the time the obliga tions become due.