SYNDICATES 1. Syndicates defined.—A syndicate is a group of persons who form a combination, not to carry on a business continuously, but to transact some business in connection with a specific piece of property. Thus, it may be formed to take an option on a piece of land and to dispose of the option at a profit; or it may be formed to insure to a corporation the sale of a block of securities at a certain price and within a certain time. Perhaps the chief idea in the minds of the members of a syndicate is to close out the transaction quickly and to make a large profit. Both those ideas are summed up in the phrase "to make a killing." In everyday transactions—those not connected with the sale of corporate securities—the term most fre quently used is "deal." We often hear the expres sion "I have a deal on hand with so and so." When banking houses cooperate in the purchase and sale of securities, the association is popularly known as a "syndicate," tho among the bankers themselves the term "joint account" is growing in favor."fhe tech nical name of all these arrangements in law is "joint adventure." 2. Ilistory.—Recently the joint adventure, or the syndicate, has increasingly come into use as a type of business organization. Perhaps this is due to the fact that the financial syndicates of the last forty years have proved so profitable.
The real reason for the growing popularity of the syndicate is the changed methods of doing business. With the rapid growth of transportation and of the means of communication, has come a general ap preciation of the advantages of mobility in the move ment of large sums of capital. There are now many opportunities to skim off a profit in a quick trade, because advertising has developed the ability to make quick sales. And your clever, astute business man sees that a quick turnover of capital—capital which is perhaps borrowed, or which, as in the case of syndi cate underwriting, is only potential—is more lu crative than a long, complex business process.
3. Legal nature of syndicates.—Because deals are of fairly recent origin, because they have been in the main successful to the extent of satisfying even the most ambitious enterpriser, and because they are gen erally formed by men of means and of high intelli gence, the law of joint adventures is not abundant and the legal relation is not \vell-defined. Law grows out
of litigation, and concerning syndicate ventures liti gation has not been abundant. This, as indicated, has been due to their success, but another reason for the absence of litigation is that a syndicate is generally organized by some influential person whose manage ment is autocratic. Let some member of the syndi cate doubt the Manager's integrity and he may as well at once count himself out of future deals. To in cur such a punishment is usually deemed an expen sive method of insisting upon fancied rights.
'The syndicate, or joint adventure, resembles the partnership. The chief differences are t/ie follow ing: Since the syndicate usually involves merely the investment of money or property, or the assumption of a definite risk, and generally does not require the rendering of personal service, no member may with draw his interest without the consent of all the other contracting parties. Moreover, upon the death of an adventurer, the adventure need not be closed up ; the decedent's capital remains committed to the under taking, which the survivors carry thru, finally render ing an account of the profits to the decedent's estate.
Then, too, on account of its peculiar nature, corpora tions may become members if the object of the syndi cate falls within the general scope of the corporation's charter powers. This fact is in contrast with the fa miliar principle that corporations cannot enter into ordinary partnership relations.
I3ut the chief difference between the partnership and the syndicate lies in the fact that while in the former a member may not sue the partnership or any of the partners for a sum of money on account of a partnership transaction (the only remedy being to seek an accounting in a court of equity), in the latter the members may sue one another at lai,v for a breach of the contract, or for a share of the profits, or to compel others to make a contribution for advances made by some of the adventurers in excess of their agreed share.