The Equivalent Company, company of debenture holders, 1721-1851

Article fifteen of the Treaty of the Act of Union of 1707 stipulated that Scotland would be paid a lump sum of £398,085 10s - known as the Equivalent - which was to compensate Scotland for taking on a share in England’s national debt. This sum was also to be used to cover, among other items, losses ‘privat persons may sustain by reducing the coin of Scotland to the standard and value of the coin of England’ and to repay dividends on stock held in the Company of Scotland Trading to Africa and the Indies which became defunct at the time of the Union.

Distribution of the Equivalent was entrusted to 25 commissioners and was paid in notes, coin and exchequer bills. The distribution proved controversial, with the Commissioners being accused of favouring themselves and the wealthiest creditors. There was no annual subsidy for woollen and other manufactories as promised, while payments due to a variety of creditors including salaries due to army officers, state officials and tradesmen remained unpaid. To placate these claimants an Act of Parliament was passed to issue debentures with an interest of five per cent from June 1708. However, the debentures carried vague details about the date of paying interest and remained unpaid for the next six years when they were called in by Parliament. Further attempts to meet the debts were piecemeal and, amid rising discontent, one of the Commissioners, Patrick Campbell of Monzie, was sent to London to put the Commissioners’ case to Parliament. His mission was unsuccessful and it was not until 1719 that an Act was passed for making provision of a yearly fund of £10,000 to be paid out of Scotland’s customs and excise as interest on £248,550 worth of debentures.

By this time over £170,000 worth of these debentures were in the hands of English debenture holders, who quickly formed themselves into a society, based in London, to facilitate the collection and distribution of interest payments, which previously were made only in Edinburgh. The society also aimed to purchase further debenture stock and granted loans on the security of its debenture holdings. Among its first directors were William Paterson and Patrick Campbell of Monzie. Soon after, a similar society was established in Edinburgh, promoted by many notable men including the Earl of Ilay, Sir Hew Dalrymple, Duncan Forbes of Culloden and, once again, Patrick Campbell of Monzie.

In the years following the formation of these two societies, several attempts were made to increase the scope of the debenture holders’ activities. Initially it was proposed that they should be incorporated as a company, but this idea met with considerable opposition from the Bank of England, who rightfully feared that this new company would consequently try to carry out banking operations. This idea being temporarily thwarted, the debenture holders next made overtures to the Bank of Scotland, which were all rebuffed, in an attempt to bring about an amalgamation between themselves and the bank.

Eventually the situation resolved itself, when, in 1724, both the English and Scottish debenture holders’ societies were wound up following the establishment of a new ‘Equivalent Company’ by royal charter. This company had a capital of £248,550 and was based in London, although it also had a subordinate office in Edinburgh. It had a total of thirteen directors, two of whom had to be resident in Edinburgh and these directors were elected every two years by the proprietors of the company. The first directors of the company were James Campbell, Paul D’Aranda, John Drummond, Edward Harrison, Daniel Hays, Benjamin Longuet, John Merill, Bulstrode Peachy, Christopher Tilson, Robert Williamson, Patrick Crawford, Sir Hew Dalrymple, Lord President of the Court of Session and Patrick Campbell of Monzie. The company was managed by a court of directors, consisting of any five or more of these directors. In addition the two directors who were resident in Edinburgh formed a separate committee of management controlling the affairs of the Equivalent Company there, assisted by the company’s Edinburgh agent.

In addition to receiving the £10,000 annual interest payment established by the 1719 Act, which was now to be given out as a dividend to the debenture holders, the company also received £600 per annum to cover the costs of its administration. It was, however, still keen to extend its powers, which remained the same as those of the earlier debenture holders’ societies, and in 1727 the Equivalent Company received a charter which granted banking powers in Scotland to a new company to be known as The Royal Bank of Scotland. By 29 September 1727 around £110,000 of the stock of the Equivalent Company had been subscribed and transferred to the capital of The Royal Bank of Scotland and in 1770 a third charter gave the Royal Bank free use and command of this £110,000 subscribed Equivalent stock.

Nevertheless, the Equivalent Company and The Royal Bank of Scotland remained distinct companies. The Royal Bank of Scotland developing its banking activities, and the Equivalent Company continuing to manage the Equivalent stock and distribute interest payments to its members. The relationship between the two was always a close one, however, and the Equivalent Company was one of the Royal Bank’s first customers. In addition, many officers of the Royal Bank also worked for the Equivalent Company - John Campbell, for example, cashier of The Royal Bank of Scotland from 1745 to 1777 also worked as the Equivalent Company’s agent in Edinburgh. In 1850 an Act of Parliament ‘to provide for the redemption of an annuity of ten thousand pounds payable to the Equivalent Company’ was passed expressing the intention that the Equivalent debentures should finally be paid off. A sum of £248,550 plus all outstanding monies relating to the annual interest payments was therefore made over to be distributed to the Equivalent Company’s members. The Equivalent Company itself was enacted to continue for the next twelve months for the purpose of winding-up its affairs, but it was formally dissolved in 1851. Upon the dissolution of the Equivalent Company in 1851 the Edinburgh records of the company were transferred to The Royal Bank of Scotland.