SECOND READING. (Hansard, 3 August 1888)

THE EARL OF CRA WFORD
, in moving that the Bill be now read a second time, said, that its object was to do away with certain doubts which had arisen as to whether certain shares had been issued by certain Companies in a legal manner. Public Companies might be mainly treated as falling under two 1380 heads, those incorporated by special Acts of Parliament and the Companies which had arisen under the Joint Stock Companies' Act. The 25th section of the Companies' Act, 1867, provided that shares in any Company should be deemed and taken to have been issued and to be held subject to the payment of the whole amount thereof, unless the same should have been otherwise determined by contract made in writing, and filed with the register. That clause had been read as empowering a Company to issue shares with a certain amount written off as nominally paid up. Until the year 1882 that understanding was not called in question; but in that year there was a celebrated case—the Ince Hall case—in which a liquidator of the Company which was being wound up called upon the shareholders to pay up in full on certain shares which they had taken with a certain amount of money credited as paid up. The case was taken before Mr. Justice Chitty, who decided that the law had been properly carried out. Since that time a very large number of Companies had taken advantage of that rendering of the law, and something like £15,000,000 or £16,000,000 of capital had been taken up upon the faith of Mr. Justice Chitty's decision. However, the Lords Justices Cotton, Lopes, and Fry had this year decided that Mr. Justice Chitty's decision was erroneous, and had laid it down that shares in a Company under the Companies Acts must be paid for in full, either in money or in money's worth, and that the section only provided for cases in which payment was made in some other mode than in cash—for instance, in the transfer of property or in the supply of goods. There was no desire in any way to dispute the correctness of the law as laid down in the High Court of Appeal. But, on the other hand, those for whom he spoke asked with confidence at their Lordships' hands that they might receive what might be called a Bill of Indemnity for having unwittingly offended against the law while following the law as laid down by one of Her Majesty's Judges. No harm would be done to anyone if they were relieved. He would point out to their Lordships that they had this very Session passed a Bill for the purpose of rendering certain marriages legal, and he thought that, in asking their Lord- 1381 ships to given a second reading to this Bill, he was doing no more than an act of justice to those who had done wrong. If their Lordships were so good as to read the Bill a second time, he should not ask them to go into Committee before the Adjournment; but he hoped he would be allowed to proceed with the Bill in the Autumn.

LORD BRAMWELL
said, he thought that it would be a very good thing if this Bill were passed into law. The Companies had done what the Court of Appeal had held to be ultra vires, and probably their Lordships would consider themselves bound by that decision. Unfortunately, the Court had not decided anything else but that a plaintiff in a particular case, and in particular circumstances, was entitled to the return of his money. All that had been decided was that, in allotting shares in a particular case at a discount, the defendant Company had acted ultra vires. Many cases might arise from such an allotment. First, there might be the ordinary case of the man to whom the shares had been allotted claiming his money back. Then, if there was a liquidation, the liquidator might call upon the man to whom the shares had been allotted at a discount to pay up the residue so that he should be in truth a holder at par. A third possible case was that other shareholders might complain and say—"You, the Directors, have issued these shares ultra vires, and we are entitled to indemnity from you for having introduced into this concern men who have not paid their shares in full." He thought these cases opened up a large field of possible litigation, and it seemed to him that if this Bill were passed into law it would really be for the benefit of all parties concerned, and would prevent an immense amount of litigation. He believed that, at the present moment, there was no appearance of dissatisfaction at what had been done on the part of any persons concerned that made it likely there would be any objection to this Bill passing into law. If their Lordships read the Bill a second time, and postponed the Committee stage, it would give time for any expressions of dissatisfaction to be made.

§ LORD FITZGERALD
said, he did not rise for the purpose of opposing the Bill, for he thought it should be now read a second time, in order to affirm the principle that something ought to be done in the matter. He must, however, confess that he would not himself be satisfied to pass a Bill embracing property to the extent, as the noble Earl had pointed out, of some £13,000,000, without sufficient inquiry. He, therefore, suggested that the Bill should be referred to a Select Committee, in order that the interests of the various parties might be thoroughly gone into and considered.