§ Order of the Day read for the consideration of the Report from the Chairman of Committees under Standing Order No. 109A.
§
The Lord Chairman reported as follows:
This Report is made in pursuance of the duty placed upon the Chairman of Committees under the new Standing Order adopted by your Lordships on Tuesday the 16th instant, to report to the House on any Bill to which it appears to him that the attention of the House should be specially directed.
The South-Eastern Gas Corporation Limited which is promoting this Bill is a company registered under the Companies Acts. It has no statutory power to supply gas, but it holds a controlling interest in twenty-four subsidiary companies which are gas companies having such statutory powers and carrying on the ordinary business of supplying and distributing gas.
The Bill seeks to give to these subsidiary companies certain additional powers of a kind frequently applied for by and granted to gas companies by Private Bills promoted by such companies. A Bill promoted by a parent or holding company to confer such additional powers upon a number of other controlled or subsidiary companies is a novel form of Private Bill legislation and is outside the types of Private Bills provided for or contemplated in the Standing Orders of your Lordships' House. The cases dealt with by Standing Order 71, which does require what are usually called 'Wharncliffe meetings' of a company other than the promoting company, are not analogous: that Standing Order applies only where the powers sought to be conferred on the non-promoting company are powers such as those of amalgamation, sale or abandonment of their undertaking, or the purchase of another undertaking.
In the case of this Bill the most important point would appear to be that under its provisions the subsidiary companies would be granted the proposed additional powers without its being necessary for each of those companies to comply with the Standing Orders relating to the submission of the Bill to the shareholders of the company, and obtaining a three-fourths majority in value of the shareholders present at the meeting, as would be necessary if each of such companies had promoted such a Bill to obtain such
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powers for itself. Therefore the Bill was certified by the Examiners as having complied with Standing Orders.
In so far as the present Bill is concerned, the promoting company holds more than 75 per cent. of the issued share capital in all but three of the subsidiary companies, and a little less than 75 per cent. (viz., 72 per cent., 68 per cent. and 63 per cent.) in the remaining three companies. Moreover the promoters have expressed their readiness to submit the Bill to special meetings of all the subsidiary companies in the same way as would be required under Standing Orders had separate Bills been promoted by the several companies. But if the principle were established that Bills of this kind are legitimate it would cover cases where only 51 per cent. of the capital was so held, unless Standing Orders were altered requiring what are usually called 'Wharncliffe meetings' of all the subsidiary companies in such cases.
The most important of the additional powers sought under this Bill to be conferred upon the subsidiary companies are financial powers, such as powers of raising additional share capital, and powers of raising additional loan capital by increasing the percentage which the loan capital may bear to the share capital. The other powers proposed to be conferred on the subsidiary companies are for the most part of an administrative nature mainly affecting the internal economy of the companies. But the attention of your Lordships should be called to Clause 31 of this Bill which proposes to alter the voting rights of shareholders in the subsidiary companies. In this Bill the effect of the alteration proposed would be to give one vote for every £1 in nominal value of the shares or stock held; which is much more favourable to the large shareholders than the scale of voting laid down by the Companies Clauses Acts which would be superseded.
The advantage of permitting this type of legislation is that it would result in a very substantial saving of expense, and thus facilitate the business of the companies concerned: to take this Bill as an example, it would save the promotion of separate Bills in respect of all the 24 subsidiary companies concerned, and several of the companies are so small that the cost of promoting Bills would be prohibitive. It would thus not only save expense, but save time and a certain amount of trouble. On the other hand careful consideration should be given to the position and effect of the Bill in regard to every one of the subsidiary companies concerned.
Though the present Bill may of itself be innocuous, the precedent which it would create is one to which I think it my duty under the Standing Order recently adopted by your Lordships to call the attention of the House.
I propose under Standing Order 110 that this Bill which is unopposed to proceed, should be proceeded with as an opposed Bill and with your Lordships' approval to invite the Committee to give their special attention to the considerations which I have ventured to lay before your Lordships.
THE CHAIRMAN OF COMMITTEES (THE EARL OF ONSLOW)My Lords, this is the first time that it has fallen to me to invite your Lordships to consider a Report on a Private Bill, a Report made under the Standing Order which your Lordships adopted at my suggestion a short time ago. On that occasion I explained why it seemed to me that such reports would be of value in the consideration of Bills of this kind by your Lordships' House. The Report in question, which is before your Lordships, deals with the South-Eastern Gas Corporation Limited (Associated Companies) Bill. The reasons why it seemed to me that it was my duty to make this Report to your Lordships are these. The most important point under the provisions of the Bill is that the subsidiary companies would be granted proposed additional powers without it being necessary for each of those companies to comply with the Standing Order relating to the submission of the Bill to the shareholders—what is called the "Wharncliffe meeting." The companies which are affected by this Bill are owned by the holding company in twenty-one cases up to 75 per cent., while in the other three cases 72 per cent., 68 per cent. and 63 per cent. respectively of the shares are held by the holding company. As a matter of fact, the promoters have no objection to the subsidiary companies holding special meetings to comply with the Standing Order as if there was an obligation on the holding company to provide for such meetings in the case of this particular Bill.
The Bill is unopposed, and I do not see any points in it which are of outstanding importance, apart from one to which I will call your Lordships' attention.in a moment. It is, however, a question of principle. This is the first time that a holding company has promoted a Bill for subsidiary companies in which it holds the majority of the shares. If the principle were established, it would mean that Bills of this kind would be legitimate if the promoting company held only 51 per cent. of the capital; and that, I think, is a matter which should be gone into carefully. The other point relates to Clause 31 of the Bill, where it is proposed to alter the voting rights of the shareholders in a manner which was not contemplated by the Companies 216 Clauses Acts, which would be superseded in this case.
In those circumstances, it seems to me that it would be desirable that the Bill should receive rather more careful consideration than could be given to it under the ordinary procedure. I do not want to comment upon any of the other clauses in the Bill. I should like to say that this type of legislation would certainly save money and time and would have considerable advantages in that, for example, there might be one Bill instead of twenty-four; but I think that the two points which I have ventured to place before your Lordships are of importance and should receive rather more consideration, as I said before, than can be given under the ordinary procedure. Therefore, with your Lordships' permission, I suggest that I should return this Bill under Standing Order No. 110 as an opposed Bill, and that it should be carefully considered by a Committee of your Lordships. There is a Report from the Board of Trade which would go before the Committee. I move that the Report be referred to the Select Committee to which the Bill is to be referred under Standing Order No. 110.
§ Moved, That the Report be referred to the Committee on the Bill.—(The Earl of Onslow.)
§ On Question, Motion agreed to, and ordered accordingly: the Committee to be proposed by the Committee of Selection.