The holders of debenture bonds have a priority both as regards capital and interest, not only over the shareholders, but also over the other creditors.

Very often debentures are issued in several series, first debentures, second debentures, and so on. In this case the claim of the holders of the second debentures to payment of capital and interest is postponed till the holders of the first debentures are satisfied.

Next in priority to the debenture holders as regards the payment of interest come the preference shareholders; in the case of cumulative preference shares they obtain a right to the payment of any arrears of interest which may exist before the holders of ordinary shares obtain a dividend. Lastly, behind the ordinary shareholders come the holders of deferred shares, whose claim to interest or dividend is postponed to that of all the preceding. In the case of debentures and preference shares, as well as in ordinary shares, if deferred shares have been created, the rate of interest is fixed, either absolutely or proportionately, and the deferred shareholders, or if there are none, then the ordinary shareholders, divide the residue of the profits which have been appropriated for dividend purposes.

The holders of shares or stock are not entitled to the return of their capital except in the case of the liquidation of the company; they have only a right to the interest or dividend on a nominal amount; but debenture bonds are in nearly all cases redeemable, either at a time mentioned in the bond, or by drawings spread over a number of years. The numbers of bonds which have been drawn for payment are advertised in the leading papers, but in the case of bearer bonds the owners cannot of course be notified. If the bonds are kept with a banker, he will usually inform his customer in case one is drawn for payment, but there is no legal obligation on a banker to do this, and he is not responsible for any loss incurred by his omission to do it. In the great majority of cases, if the bond is not presented, the next coupon is returned unpaid with the answer "bond drawn," but in a few cases, notably in Russian Government bonds, the coupons are paid and the amount deducted from the total of the bond. It is therefore necessary to keep a sharp look out for Russian drawings, for the neglect to do so may entail the repayment of the whole of the principal in the form of what the holder fondly imagines to be interest.

Consols, instead of being inscribed in the books of the Bank of England, can, at the option of the proprietor, be held in a form varying very little from bonds. What are called "consol certificates to bearer," with coupons for interest attached, have of recent years been issued, thus avoiding the formalities of transfer which, in the case of continental holders especially, was a serious bar to dealings in the stock, though the increased convenience is to some extent counterbalanced by the risk attaching to securities negotiable by delivery only, and to which the holder of the certificate has a prima facie title.

"Scrip" or "scrip certificates" are provisional certificates issued by a company or other body to bridge over the interval before the definitive bond or certificate is ready. A new issue of capital or a newly-floated Government loan is usually payable in instalments spread over a period of some months, and until all these instalments are paid, full certificates will not be issued; but in order that the issue may be dealt in on the Stock Exchange, scrip is issued, usually payable to bearer and with receipt forms attached for the various instalments. When these are all paid, upon production of the scrip with the receipts duly signed, definitive certificates are issued in exchange. Bearer bonds and bearer scrip are by mercantile custom negotiable instruments, that is to say, the individual who obtains possession of them for a valid consideration and without knowledge of any defect in the transferor's title, acquires a good title, notwithstanding any defects in a previous holder's title. This is an exception to the general operation of English law. If a man purchases any article which is not a negotiable instrument and the person from whom he bought it has no title to it, as, for instance, when the article has been stolen, he is liable to the true owner for its value, except only when the sale was in "market overt." But negotiable instruments are transferable by mere delivery, and the bona fide transferee for value gets a good title in spite of any previous theft or other bar to a good title.

We can now return and follow the operations on the Stock Exchange mentioned at the beginning of the chapter. After the broker has made his bargain with the jobber, a contract is prepared and despatched the same day to the broker's customer. This contract note states the nominal amount of stock or the number of shares bought or sold, the price to be paid, and the commission charged by the broker, varying from one-eighth per cent. upwards according to the nature of the security; it also states when the bargain has to be settled. Securities are bought and sold on the Stock Exchange either for cash or for "the account." If for cash, the bargain must be paid for and the securities delivered at once. Consols and other British Government stocks are frequently dealt in for cash, as well as bearer bonds in small amounts; but in other cases the bargain is completed on the next settling day.

Settling days for Consols are once a month, on days fixed by the Committee of the Stock Exchange; for other securities there are two settlements in the month. Besides these, "special settlements' are granted in the case of new companies or issues. All bargains in a new stock or company are made for this special settlement, which may not take place until some months after the allotment of capital; after that, bargains are settled at the usual fortnightly settlement.

The settlement occupies three days: the first, the "carrying over' day, called also "continuation' or "contango" day; the second, the "ticket" day; the third, the settling or pay day. In the case of mining shares two days are allotted for the business of carrying over.