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A History of William Paterson and the Darien Company
Chapter II. The capital of the Darien Company

Unlike the Act of the Bank of Scotland, passed about three weeks later, the Act constituting the Darien Company did not limit the amount of capital to be raised for carrying on the undertaking. It merely spoke in general terms of "the fund or capital stock that shall be agreed to be advanced and employed by the said undertakers and their co-partners." It was stipulated, however, that the amount of capital which might ultimately be agreed upon was to be subscribed not later than the 1st day of August 1696; that at least half was to be set aside for Scotsmen resident in the kingdom; and that the shares originally so subscribed could be transferred only to other Scotsmen similarly resident there. Failing half the stock being quite taken up by resident Scotsmen, then Scotsmen living abroad and foreigners were to be allowed to subscribe for the residue. No one could hold less stock than 100 nor more than 3000 sterling.

At first Paterson and his associates proposed to fix the total capital at 360,000, but ultimately the amount was raised to 600,000 sterling—one half, as stated, to be reserved for Scotland, and the remaining 300,000 to be offered in London. From his previous experience of the remarkable success which had attended the subscriptions of the Bank of England, Paterson anticipated little difficulty in raising the moiety assigned to London. He therefore addressed himself to quickening the speculative interest of his countrymen in the proposed enterprise, and in this connection it is interesting to read the correspondence which passed between Paterson and the Right Honourable Sir Robert Chiesly, the Lord Provost of Edinburgh, who represented the Scottish portion of Directors appointed by the Act. Paterson's letters are dated from London, and in the correspondence he stands out as a financial expert far ahead of his time—being, in fact, quite abreast of the astute company promoters of our own day. In his letter of 4th July 1695 he suggests that the information about to be furnished to the people of Scotland should not be too detailed. "And for Reasons, we ought to give none but that it is a Fund for the African and Indian Company. For if we are not able to raise the Fund by our Reputation, we shall hardly do it by our Reasons." This method of floating a company on the reputation of the promoters is in keeping with some of the prospectuses of the numerous bubble companies launched a few years afterwards (in 1720), one of which stated that the company about to be promoted was "for an object to be hereafter revealed."

On the 9th July Paterson urges that a limited time only should be allowed to the public for giving in their subscriptions. He writes: "The Bank of England had but six weeks' time from the opening of the books, and was finished in nine days, and in all subscriptions here it's always limited to a short day. For if a thing go not on with the first heat, the raising of a Fund seldom or never succeeds, the multitude being commonly led more by example than reason." Continuing, he says: "They" (the gentlemen promoters in London) "hope, all things considered, that this, as it's designed, is one of the most beneficial and best grounded pieces of trade at this day in Christendom, and we must engage some of the best heads and purses for trade in Europe therein, or we can never do it as it ought to be."

Paterson several times complained of Lord Provost Chiesly's delay in forwarding to him an authentic copy of the Company's Act "as it passed the Seals," his aim being to get the Company established before the English Parliament met. On the 6th of August he writes somewhat warmly: "The life of all commerce depends upon a punctual correspondence, and we shall not fail at any time to return our thoughts upon your demands, so we hope you will keep up to the exactness of correspondence on your part." A week later Paterson intimated to the Lord Provost that it was proposed to convene a General Meeting of the Corporation, to be held in London, for the purpose of making the arrangements necessary for opening the subscriptions there. At the same time he drew attention to two errors that had crept into the Act—viz., Mr James Smith, merchant, London, being misnamed John Smith, and Mr Joseph Cohen D'Azevedo's name being printed as if it represented two separate individuals. It would therefore be necessary—in fact, it was urgent —that three from among the Scotch promoters named in the Act should be present at the proposed meeting in London, so as to make a majority and quorum, and have the errors referred to rectified. Paterson had to repeat this request several times; and in compliance therewith, although somewhat tardily, Lord

Belhaven, with Mr Robert Blackwood and Mr James Balfour, proceeded as a deputation to London and attended several meetings there, commencing on 9th November. The London subscription book was opened on 13th November 1695, and was closed on the 22nd—the day on which the English Parliament met. Thus in nine days the entire issue of 300,000 stock was subscribed, of which one-fourth— 75,000 — was paid up at the time of subscription. In point of fact, the stock was over-applied for, and the applications had to be cut down. Included in the list of subscribers was Paterson's own name for 3000, and that of his servitor for 100 stock. The English promoters proceeded to business at once, not waiting until the Scotch subscriptions were taken. One of their first deeds was to pass a resolution that the Court of Directors, besides those named in the Act of Parliament, should be increased by thirty additional Directors — making fifty in all. The qualification for each of these additional Directors was fixed at 1000 stock or more, along with proxies from other proprietors amounting to 20,000, including the new Director's own holding. Under this rule several new Directors got seats on the London board during the month of November. On 4th December they passed a resolution — "That one or more ships be fitted out for the East Indies from Scotland with all convenient speed." This resolution, however, was not given effect to, as it was ultimately thought better to delay sending out ships until the Scottish subscriptions were taken.

But the progress of the Company soon sustained a check. The powerful London East India Company took alarm, and they petitioned the House of Commons, setting forth the encroachment in their Indian trade. This resulted in the Lords and Commons holding a joint conference and unanimously concurring in an Address to the King, complaining of the establishment of the Scots East India Company with privileges which it was apprehended would ruin the English East India trade, and animadverting upon the action of the Scottish Minister and the Scottish Parliament in passing the Act. The Act of the Scottish Parliament, however, could neither be recalled nor suspended. On 17th December 1695 both Houses waited on King William at Kensington with their Address, to which his Majesty made the memorable reply—"That he had been ill-served in Scotland, but he hoped some remedies might be found to prevent the inconveniences which might arise from the Act"; and followed this up by dismissing the Lord High Commissioner Tweeddale and Secretary Johnston. The Commons went further. They ordered production of the London books of the Company, made a searching inquiry into its actings, and finally threatened Paterson and his English colleagues, along with Lord Belhaven 1 and the other two Scotch deputies, with an impeachment, which, however, was afterwards abandoned. The ground of the impeachment was that the Directors were guilty of a high crime and misdemeanour in raising monies and administering an oath de Hdeli in England under colour of a Scottish Act of Parliament.

The House of Lords, on their part, also took extreme steps. On the 20th December they resolved to prepare a Bill to provide remedies against the inconveniences attending the Scots Act, two of the heads of which were—(1) That the subjects of England be discouraged, under severe penalties, from engaging in the stock or management of the Scots East India Company; and (2) that all seamen of England, Ireland, or the Plantations be prohibited, under severe penalties, from navigating or serving in the Company's merchant ships, and that the shipwrights and builders of ships in or belonging to England, Ireland, or the Plantations be likewise restrained, under severe penalties, from repairing to Scotland, or from building any ships for their service within those Kingdoms or the Plantations.

[When the summons citing Lord Belhaven to appear at the bar of the Commons was served, "the messenger was informed at my Lord's house that his Lordship was gone to Scotland."

Roderick Mackenzie, the Secretary of the Company, having refused to give certain evidence, the House ordered him to be taken into the custody of the Sergeant-at-Arms. Mackenzie eluded the search officers, and a Government proclamation was issued for his apprehension; but he also fled the country and escaped the storm.]

This hostile action on the part of the Government alarmed the English subscribers, and they reluctantly withdrew their subscriptions, and so relinquished the design. The scheme, so far as regards an East Indian trade, was now knocked on the head. It has been alleged that Paterson all along had been lukewarm to the East India trade, and instead secretly hoped to carry out his long-cherished idea of establishing a great settlement in Central America.

[In April 1697 a similar fate attended a subscription of 200,000 offered to the merchants of Hamburg, whither Paterson had gone to enlist subscribers in lieu of those withdrawn in London. After the books had been opened and subscriptions promised, Sir Paul Rycaut, the English Resident at Hamburg, and Mr Cresset, the English Envoy to the Court of Lunenburgh, presented a Memorial in King William's name to the Senate of Hamburg, stating that his Majesty would regard such proceedings as an affront, which he would not fail to resent. The Hamburgers, wishing to avert the displeasure of England, reluctantly withdrew their promised support. The Directors of the Company addressed several appeals and remonstrances to King William on the subject, but they got no redress.]

In a letter (Bannister's 'Life of William Paterson') dated 5th September 1696, from Mr Robert Douglas, a Scots merchant in London, he says—

"I found Mr Paterson in several particulars opposing everything that tended to promote the Scots East India trade, when under consideration in England, and industriously bringing in some that were concerned in the English East India Company (five of whom had taken oaths to the said Company—were then in Committee) to be Directors of the Scots East India trade. So I considered he must be treacherous to the interest he seemed to espouse, ... or else, knowing his ignorance in the East India trade, might have some West India design of his own to promote."

This allegation, as to assuming as Directors certain proprietors who were also members of the London Company, is partly confirmed by the evidence given by Colonel Robert Lancashire, one of the newly assumed Directors, in his examination before the Committee of the House of Commons in January 1696.

"Mr Lancashire, being examined, said that he was a member of the English East India Company, and of the Scotch East India Company, and subscribed 3000 to the stock, and gave a note for one-fourth part to Mr Foulis and Mr Chiesly, dated 8th November. That it was proposed to send out a ship as an interloper, but he refused to consent to it, saying it was against his oath to the English East India Company."

Meantime, prior to the subscription books being opened in Scotland, care had been taken to arouse the interest of the Scots nation in the proposed foreign trade by the circulation of pamphlets on the subject. One of these bore the title, 'Proposals for a Fond to cary on a Plantation,' which stated that "persons of all ranks, yea, the body of the nation, are longing to have a plantation in America." This probably was inspired by Paterson. The "Address" of the two Houses to the Crown, which directed special attention to the ample privileges conferred by the Scottish Act, but without the king's damaging reply to it, was also printed and reprinted at Edinburgh, and being widely circulated, had much influence in moving public opinion in favour of the scheme.

The withdrawal of the London subscribers,— men experienced in large commercial undertakings,—and the pronounced hostility of the English Government, should have made Paterson and the Directors in Scotland hesitate before proceeding further in the affair. But the insult attending the opposition of the English Government, and the disavowal of the project by the king, wounded the honest pride of the Scots, who patriotically resolved " to stand upon their own bottom," and to pursue the undertaking, although on different lines, with their own resources. They aimed now at a capital increased to 400,000, in place of 300,000.

[A capital limited to 400,000, even although the money could have been raised in Scotland, foredoomed the Darien scheme to failure. Paterson realised this when it was too late. In his subsequent plan to revive the Darien enterprise, given at length in Dalrymple's ' Memoirs,' he proposed a capital of two million pounds sterling, one-fifth part to belong to Scotland and the other four-fifths to England. On 5th February 1696 the House of Lords resolved that the English East India trade be carried on by a company, under Act of Parliament, with a joint-stock of 3,000,000.]

On the 26th February 1696, within a few weeks after the denunciation of the English Parliament, the subscription book of the Darien Company was opened in Edinburgh. The scheme immediately became a national concern, and people of all classes pressed forward to participate in the emission. In his 'History of England,' Macaulay says: "From the Pentland Firth to the Solway, every one who had a hundred pounds was impatient to put down his name."

[The Lord Justice-Clerk, writing to Lord Tullibardine on 18th December 1697, says : " 'Twas the notice the Parliament of England first took of it [Darien Company] made the whole nation throng in to have some share, and I'm of opinion the resentments people are acted by are the greatest supplies that furnishes life to that afi'air." support. On the 30th, Mr Thomas Scott, merchant, Dundee, came as a deputy from that town with 42 subscriptions besides his own. On the 31st, a large contingent came forward. To meet the pressure that day the subscription book was kept open in the afternoon, and 176 applications in all were received. A separate book was opened at Glasgow on the 5th of March, and the total amount received there was 56,325. At a General Meeting of the Company held on 3rd April—Lord Belhaven in the chair—it was reported that upwards of 300,000 had been subscribed. By the end of May the capital of 400,000 was all taken up excepting 25,000. In June and July the applications dropped away, and several days frequently passed without an entry. The list was kept open until 1st August, the last day fixed by the Company's Act, when the grand total of 400,000 was completed. (Macaulay, in his ' History of England,' says four hundred thousand pounds probably bore as great a ratio to the wealth of Scotland in 1696 as forty millions would do at the time he wrote his History.) This result, however, was accomplished with some difficulty, as the books of the Company reveal the fact that on the closing day certain subscribers, by arrangement with the Company, temporarily increased their original applications, so as to enable the Directors to make the announcement that the total issue had been taken up. On the first day, 26th February, 50,400 was subscribed, and daily, till the end of March, the list filled up steadily.]

The names of the various subscribers — all "residenters in Scotland" — are noteworthy. They comprise nobles, landed gentry, merchants, ministers, surgeons, lawyers, &c., including all the royal burghs of Scotland. Paterson's scheme appealed strongly to the ladies of Scotland, the first five names put down on the list being—

The "Good Town of Edinburgh" (per Lord Provost Chiesly) took the maximum subscription of 3000, and the Merchant Company of Edinburgh took 1200, while the little "Town of Queensferry" went in for 100 stock. On the closing day the "Royal Burghs," as a body, ventured 3000, and the last to sign the list was "Sir Archibald Mure, in name of the burgh of Cowpper of Fyfe," for 100 stock.

The various calls made on the stockholders were as follows :—

Note.—The first call of 25 per cent was to bear interest from 1st August 1698, and the remaining calls from their respective dates of payment.

The first instalment of 25 per cent was well met. It should have produced 100,000, and it actually realised the sum of 98,223, 17s. 2d. In connection with this call, the Directors offered a discount of 12 per cent on prepayments, whereby they drew in the sum of 34,006, 13s. 4d. before the due date, 1st June. This proved to be bad business, as the Company, in their assumed role of bankers, commenced shortly afterwards to lend money to their proprietors at the modified rate of 4 per cent. They had to make this concession in competing with the Bank of Scotland, whose directors at this time had reduced the interest on loans from 6 per cent — the legal rate — to 4 per cent.

As mentioned above, the various calls made by the Directors amounted in all to 42 per cent of the total capital of 400,000 subscribed, and this should have realised 170,000. The actual cash paid up by the subscribers in respect of calls was 153,448, 5s. 4d., along with 65,646, 3s. 2d. of overdue interest. This large amount of interest indicates the great difficulty experienced by the subscribers in meeting their calls. In the extraordinary national enthusiasm evoked at the time, the Scottish people subscribed for much more stock than they were able to pay calls upon. In the final years of the Company, subscribers all over the country had to be sued at law for payment of their calls, and when the Company was dissolved in 1707 a considerable balance then still due by the proprietors had to be cancelled.

The call-money paid up, together with the interest, amounted in all to 219,094, 8s. 7d., and this sum represented the grand total which Scotland stood to lose in the ill-fated concern.

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