152 BONUS SHARES

actual fact better off to the extent of one halfpenny,
because all will be in the same position with regard
to one another; their relative shares in the enter-
prise will not have been altered. If we imagine, by
way of simplifying the problem, that all the Ordinary
shares were in one hand, that one holder would have
had in his Ordinary shares a claim to the total
assets of the company, that is to say, to its earning
power as long as it is a going concern, and to what-
ever its assets realise if it went into liquidation; the
fact that £1,000,000 worth of the assets had been
bought out of past profits or premiums paid on new
issues of shares would have already added to the
value of the claim that he had on the property
of the company, and no addition would be made
to that value by turning the reserve fund into
shares.

In other words, the reserve fund is already the
property of the shareholders, and to convert it from
reserve fund into capital, making them a present of
new shares, which merely represent their claim to
the assets held against the reserve fund, is as empty
a gift as presenting a man with a piece of paper
informing him that he is the owner of his own hat.
All this remains equally true if, besides the ordinary
capital, there is a considerable amount outstanding
of Preference shares and Debenture debt. In any
case, the Ordinary shareholders possess a claim to
the earning power of the company when prior charges
have been satisfied, and to whatever surplus may
remain on liquidation after first charges have been
paid off in full. Whether that interest of theirs is