(8 THE WORK OF THE STOCK EXCHANGE
governmental unit or company acknowledges that it owes the
holder a certain sum of money, and agrees to repay it by a
certain date and under certain conditions, meanwhile promising
to pay a stipulated rate of interest. Bonds whose maturity
date is in the near future are sometimes called “notes.” If
a bond is unsecured, it is called a “debenture.” Many bonds,
however, are secured by mortgages or specific pledges of prop-
erty or sources of revenue, which the holders of such “mort-
gage bonds” may seize if they do not regularly receive their
interest, or at the bonds’ maturity the repayment of their
principal.
With company bonds, the bondholder is thus a creditor of
the concern but not a partner or participant in it. Normally,
the bondholder has no voice in the councils of the company,
nor can he be said to own any part of the business. But his
interest must be paid to him before stockholders can receive any
dividends, and should the company default upon these interest
payments on its bonds, the bondholders may take over the busi-
ness or see that it is reorganized so as to protect their claims
against it as fully as possible. In any case, the company owes
to its bondholders not only this interest but also the nominal
value of the bonds, or this nominal value plus a premium to be
paid on their retirement. But the company owes its stock-
holders nothing, and in the liquidation of a business they can
lay claim only to what may remain after the concern’s debts
have all been paid.
There is an almost infinite variety in the exact terms under
which bonds are issued, and the preceding paragraphs are open
to the same criticism to which generalizations concerning a
complex and subtle subject frequently are. It is not within the
scope of this study to discuss the innumerable variations in
bond indentures comprehensively, and only a few of them will
be mentioned here.
A few bond issues abroad have no maturity date, and rep-
resent a perpetual debt; the 215% British Consolidated Debt
