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LAWYERS AND CORPORATE CAPITALIZATION leave the actual final assessments to sworn statements, which might as well have been required at the outset. In the next place it may be urged that nominal capitalization affords a convenient standard for franchise assessment. I am not familiar with the law of your state in this respect. But in my own state a corporation, in addition to the taxes it pays upon its net actual property, is required to pay the state an annual tax known as the franchise tax as an equivalent for the mere privilege of doing business as a corporation. The New York statute requires, when no dividend is paid, a verified statement of the actual market value of the shares of stock of the corpora tion. When dividends are paid, it pre scribes a tax on the basis of a six per cent dividend, the tax being more or less accord ing as the dividend is more or less than six per cent. I fail to see that the abolition of nominal capitalization would be an em barrassment or even an inconvenience in the administration of such a franchise tax. The franchise tax can be imposed at the rate of so much upon every $100 of actual net assets to be disclosed by a corporate state ment made in the same form as that re quired for general taxes. Or the tax may be fixed upon every share of stock on the basis of annual dividends or earnings of $6, the tax to be increased or diminished accord ing as that dividend is increased or dimin ished. If it be said that, apart from the matter of taxation, the state ought to know the capital of every corporation which it has chartered, I point out that the proposed reform is in no way inconsistent with this. I fail to see that it is of any use to the state to have information which is nominal and may be entirely fictitious. It is within the power and, in my opinion, within the duty of the state to know the actual situation of the corporation. So, as I have already sug gested, if the policy of the state should be to limit the amount of the net capital of any corporation, that can be done by ascer

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taining from time to time what is the actual capital. Nor does any embarrassment arise out of the preference of stock. The two essen tials of preferred stock are generally, first, the preference of such a percentage in divi dends, and, secondly, a preference upon liquidation as to capital. The provision usually is that the preferred stock shall receive a dividend of six per cent or seven per cent or eight per cent a year on the par of the preferred, before the common stock shall receive any dividend. It is equally easy, however, to provide — sometimes it is now provided —ignoring the par of the share, that each share of preferred stock shall receive a dividend at the rate of $6 or $7 or $8 a year. Or, if the estimated value of the preferred stock or the cash payment upon subscription be at a less or greater rate than $100, the annual preference would be accordingly greater or less than the $6 or $7 or $8. So, if the estimated value of the preferred share be $100, the provision may be that upon liquidation it shall first, before distribution to common stock, be paid $100, or if a bonus is agreed upon, then $105 or $no or whatever else is stipu lated. If it be said that a corporation ought, for proposing subscribers to its stock or the investing public, to estimate the value of its shares, I answer that so it ought, or at least to give information as to the actual value of its assets, and that in this very duty is to be found a chief reason for the suggested change. But the corporation in giving such information to those whose sub scriptions or investments it invites or pro motes should be required to give, not a mere guess or fiction, but the underlying reality or truth. If a newly formed cor poration is selling its shares on the basis of $100 or any other sum in cash paid for every share, it should so state. If its shares be issued for property, it should state the cash value of the property; or, if its value be unknown, then ignorance should