MASSACHUSETTS ELECTRIC COMPANIES.
By Treasurer.
Countersigned: Old Colony Trust Company, Transfer Agent.
Bv Assistant Secretary-.
By Transfer Clerk.
Countersig,ned: American Trust Company, Agent to Register Transfers. By Assistant Secretary'.
(Form of Transfer) For value received, I hereby sell, assign, transfer and de liver to of the within named shares of the Massachusetts Electric Companies ; and I hereby request that said transfer be recorded on the books of the Companies.
Witness my hand, this day of 19...
, Witness.' 11. Kinds of business trusts.—When the Corpora tion Income Tax Law of 1909 was pn,ssed, the Su preme Court held that the act did not apply to these business trusts. Immediately, this form of organiza tion became popular. It seemed to give all the bene fits of the corporation without its disadvantages. But even before this the trust had served as a method of organization for many different kinds of enterprises. Indeed, as Mr. John H. Sears points out,' Alexander Hamilton's "Merchants' Bank," founded in 1803 was in effect a business' trust. It was not a corporation, nor a joint stock company, and tho called a limited partnership, was in legal effect a trust. In recent times these trusts have been used largely as security holding companies, especially where the securities held have been those of public utility companies. Some other notable examples are the Mackay Companies and the Great _Northern Ore Trust, the certificates of both of which are listed on the New York Stock Ex change.
In England trusts of this kind are frequently used, their genesis being well described in Cushing's "Vot ing Trusts," as follows: In the past, as now, large blocks of American stocks were so held abroad that the voting power was separated from what some would probably call the legal ownership. Thus, of large American issues earlier held in England, it was at one time estimated that probably less than five per cent were registered in the names of the actual owners. As some of these stocks did not then pay dividends, it simply amounted at that time to an abandonment of the right to vote, the successive purchasers not troubling to have the stock prop erly transferred on the books of the companies. Later, as
some of these stocks began to pay dividends, the obvious de sirability of sending the certificates to this country for regis tration occasioned much inconvenience. In addition to this circumstance, it bad even then been customary to send such American stocks abroad principally in ten share certificates, which, once endorsed in blank, were transferred repeatedly by delivery; but this practice was abandoned in England as the result of a holding that such certificates were not nego tiable instruments.
These two factors seem to have led to the adoption by the English of the practice, already known in Holland, by which large blocks of stock were registered in the narne of some "administration,' association or trust, which in turn issued its certificates (either of its own stock or of beneficial inter est in the particular securities held by it) in smaller de nominations and these latter served the purpose of local trading. The individuals whose money was invested in these American securities had no power of voting on the stock it self, and often had not even the power of stockholders in a "holding" companv.1 12. Voting trusts.—Voting trusts are devices for placing the voting power attaching .to corporate stock in the hands of a group of individuals usually in order to permit such individuals to continue in office the directors and officers who will be best able to carry the corporation thru some difficult period of its ex istence. The stockholders turn the.legal title to their stock over to the trustees who issue in exchange ne o•otiqble certificates of beneficial interest. If the stockholders of several competing corporations select the same trustees, thus insuring elimination of com petition and the formation of a monopoly. the agree ment will be against public policy and will be void. 13ut in most states, if the trust is not to be for an un limited period, if it is intended to carry out a legal purpose and if all the stockholders may join, thus pre venting the formation of an exclusive majority, the courts do not hold these agreements void. In NCIV York they are expressly permitted by statute.