BILL PRESENTED. FIRST READING. (Hansard, 10 February 1859)

THE LORD CHANGELLOR

presented a Bill for the Incorporation, Regulation, and Winding-up of Trade Companies and other Associations. It would not be necessary on the present occasion that he should trespass at any great length upon the time of the House, because it would be found that his statement would be chiefly historical and referred mainly to a consolidation, with very few alterations and amendments indeed, of all the existing laws upon the subject. On the introduction of the Bankruptcy Bill the other evening his noble and learned Friend the Lord Chief Justice complained very much that he did not propose to consolidate, as well as to alter and amend the law on the subject. Now, he might perhaps explain that there was a very material difference between the present Bill and that which he submitted for the amendment of the Bankruptcy law. The latter measure had for its object a complete alteration of the system as contained in the Bankruptcy law of 1849, and in introducing it he ventured to say, and still was of opinion that, when you were making a very great alteration in the law, it was not desirable, until you knew whether the amendment you proposed would be accepted by Parliament, to consider the system as complete, and to propose consolidation. But he had intended 216 to explain that, if those alterations in the law to which he asked their Lordships' assent received the sanction of both Houses of Parliament during the present Session, he hoped that he might then be able, before the termination of the Session, to introduce a Bill for the consolidation of the whole of the Bankruptcy law, and he did not despair of yet accomplishing that object. With regard to the present measure, their Lordships would find that the alterations which were proposed in the state of the present law were all of minor importance and related principally to details. He would now endeavour to explain to their Lordships how the law stood with regard to the regulation and winding-up of Joint-stock companies, so that the nature of the measure which he now proposed might be more perfectly understood. Until the year 1844 there was no Act of Parliament which regulated associations of large numbers of persons for trading purposes. Such associations were dealt with just as private partnerships, and hence great inconvenience was found to result, when their affairs got into the Court of Chancery, from the necessity of summoning so many individual partners, and of introducing so many interests; which rendered it very difficult to deal with these companies. In 1844, therefore, was passed an Act for the incorporation and regulation of joint-stock companies, by which, under certain restrictions, parties were enabled to associate, to register that association, and thereupon to sue and be sued through a public officer. In the same year an Act was passed to facilitate the winding-up of joint-stock companies unable to meet their engagements. This was accomplished through the medium of the Court of Bankruptcy, and the Act might be called the creditors' Winding-up Act. In 1848 was passed another Act, which might be distinguished from that just mentioned as the shareholders' Winding-up Act. Under that Act any shareholder might petition the Court of Chancery for an order to wind up the company, and then followed various provisions, an official manager being appointed, all the shareholders being made contributaries, and calls being made upon them, until all the debts of the company were as far as possible satisfied. The creditors, however, were no parties at all to this winding up under the Act of 1848. If bankruptcy had intervened before the petition for winding up was presented, there could their be no petition of this 217 kind except from the official assignee acting under the orders of the Bankruptcy Court. But it might happen there had been a petition for winding up under the Act of 1848, and then a bankruptcy might take place under the Act of 1844, and a collision of jurisdiction thereupon arose, of which, perhaps, their Lordships might have some recollection from the proceedings connected with the Royal British Bank, in which there was a contest between the Bankruptcy Court and the shareholders under the Winding-up Act, which led to enormous litigation and expense, and, it must be added, to very great scandal. The creditors were no parties to the proceedings for winding-up companies under the Bill of 1848 until 1857, when an Act was passed which enabled the Judge or the Master to call a meeting of the creditors, and to require the creditors to appoint a representative, who should act for them in the proceedings under the winding up. The intention of the Legislature was, that the two systems should thus be drawn into one. But until 1855 the shareholder of a company was liable to the full extent of his means for all the company's debts. Creditor after creditor might sue the same shareholder if he were a wealthy person, and he, on the other hand, had the greatest possible difficulty in getting contributions from his co-shareholders. In 1855, however, the Limited Liability Act passed, by which shareholders were allowed to limit their liability to the amount of their subscriptions; and in 1856 all the Acts for the formation, the regulation, and the winding up of companies were incorporated and consolidated. The object of this Act was to make incorporation the principle upon which these partnerships should be regulated, to prevent the personal liability of each shareholder, and to provide for the winding up of companies. Two modes of winding up were provided for in the Act of 1856—one being a voluntary, the other a compulsory process under the orders of the Court of Chancery. In either case liquidators were appointed; those persons being the nominees of the parties interested where the winding up was voluntary, but where they were appointed under the orders of the Court they acted as officers of the Court and according to its directions. That Act of 1856 did not apply to banking or insurance companies; but in 1857, an Act passed to enable banking companies to register themselves with unlimited liability, and in the same or the 218 following year, another Act was passed to enable banking companies to register with limited liability. The only companies therefore, excluded from the operation of these Acts were insurance companies. They seemed to be excluded on the notion that there was something peculiar in the nature of their business, which ought to prevent them from having the benefit of the Act; and he believed that in a Report of a Select Committee of the House of Commons it was stated to be necessary to repeal the Act of 1844 before insurance companies could be brought within the operation of the provisions he had referred to. He did not think it necessary to mention the few other Acts which had been passed, one of them for the purpose of compounding in some degree the two systems of voluntary and compulsory winding up; by directing that where proceedings began under the voluntary system, but the creditor afterwards petitioned, the voluntary proceedings should be continued, but under the control and direction of the creditors. All these different Acts of Parliament, to the number of thirteen he proposed to consolidate in the Bill he now presented to their Lordships. Only such companies as had a share capital had hitherto been enabled to take advantage of the Acts from 1844 downwards, and there had been great difficulty in bringing the Act of 1856 into operation, as the companies taking advantage of it had to observe all the regulations in the Act of 1844. The leading feature of the proposed consolidating Act was to enable all companies, whether having a share-capital or nut, to take advantage of the Act to be registered, to become incorporated, and to have facilities for winding up in case of necessity. The Bill would embrace mutual building societies, mutual loan societies, and insurance companies, because there was no reason now that the Act of 1844 was to be repealed, why insurance companies should be excluded from the operation of the present Bill. Their Lordships were aware that the present companies were established on the principle either of limited or unlimited liability. With respect to the unlimited, the persons who dealt with them had only to ascertain the shareholders, and if they found them to be men in whom they could have confidence, of course they would trust the companies. With respect to the companies of limited liability, persons intending to deal with them looked to the registry of shareholders, 219 to the calls made, and to the circumstance of whether the shares were paid up or not, because they knew that if shareholders had paid up all their shares the liability ended, and they trusted the company then at their own risk. But it was proposed to include in this Bill a kind of intermediate companies—namely, companies where the shareholders guaranteed, in the event of the winding up of the concern, to contribute a certain amount beyond their shares for the purpose of liquidation. Probably the provision Would not be of any great effect, but it was desirable that in every possible way every description of company should be brought within the compass of the Bill. The other matters in the Bill were so entirely matters of detail, and would be so much more properly dealt with in Committee, that if he addressed their Lordships with respect to them, he conceived he should be occupying the time of the House unnecessarily. The Bill was a consolidation of all the provisions contained in all the former Acts, and included every description of company. The noble and learned Lord concluded by presenting the Bill, and moved that it should be read the first time.