HC Deb 29 June 1855 vol 139 cc310-58

Order for the Second Reading read.


, in rising to move the second reading of the Bill, said that, whatever might be the opinion entertained upon the question—whether hon. Members anticipated that the measures he was about to submit to the House would be productive of evil or of the good which he believed would follow from their adoption—no one would deny the importance of those measures as respected the commercial interests of the country. He regretted that he had not had the opportunity, when the Bill was introduced, of stating the reasons which had induced Her Majesty's Government to bring the question before the House. He now proposed to consider the two Bills—the Partnership Amendment and the Limited Liability Bills—together, because, though they related to different branches of the subject, yet those branches were so intimately connected that it was almost impossible to discuss the one without discussing the other in conjunction with it. He proposed to state to the House, with reference to these two measures, what was the present law relating to the subject, what were the objections entertained to it, and what were the remedies which those Bills professed to apply, and the alterations they would introduce. The two Bills were divided, one having regard to private partnership, and the other to Joint-stock Companies, Strictly speaking, a Joint-stock Company was but a partnership; but still there was a substantial distinction between the two. At any rate, the Legislature had treated them as distinct, because private partnerships still rested entirely at Common Law while Joint-stock Companies had been the subject of regulations by Statute. First, with respect to private partnership—lawyers, he believed, defined partnership to exist wherever two or more persons contributed their capital and their labour, or either of them, to a common undertaking, and shared in the profit. The test of a man's being a partner was his sharing in the profits. A man might be entirely unknown to the public, and his name might never have appeared in connection with a certain undertaking, but yet, if he had the remotest share in the profits, the law held him to be a partner, and made him liable as such. There was another rule of law with respect to this question of liability, which it was most material to consider. It was that rule which was held to be absolute that a partner had the power, as the agent of his co-partner, to bind him as if he were acting himself, in all matters concerning their common business. That was a presumption of law which could not be denied. A partner could not say to those who contracted with his copartner, "The person with whom you have contracted is not my agent, and I will repudiate the engagement." A partner was held to be the agent of all those who shared in the profits, and they were all liable to the full extent of their means, for the performance of the engagements he might enter into, in the prosecution of their common concerns. That was really the law, as he understood it, of unlimited liability of partnership in this country, and to that law great and, he believed, in many respects, well-founded objection was entertained. On the 27th of June, last year, the subject was taken into consideration by the House of Commons, and the following Resolution was passed:— That the law of partnership which renders every person who, though not an ostensible partner, shares the profits of a trading concern liable to the whole of its debts, is unsatisfactory, and should be so far modified as to permit persons to contribute to the capital of such concerns on terms of sharing their profits, without incurring liability beyond a limited amount; and such modification is especially necessary in Ireland, regard being had to the peculiar social and industrial condition of that part of the United Kingdom. The objection entertained to the present law was simply—that it was practically a prohibition of a large class of perfectly legitimate, innocent, useful, and profitable undertakings, which, but for the existence of the present law would be prosecuted with advantage to the parties concerned and to the public, but which, in consequence of the state of the law, were altogether prevented from being entered into. It absolutely annihilated many useful enterprises which would otherwise be undertaken, and, with the permission of the House, he would point out two or three instances in which it operated in that way. He thought he might lay down at the outset, as a general rule, that it was inconsistent with the present notions of commercial legislation that a large class of mercantile transactions was to be prohibited, merely because some of them might be tainted with fraud; and that an endeavour ought not to be made to prevent what everybody admitted to be an evil—namely, fraud—by a rule, which would apply to fair and legitimate transactions, indiscriminately with fraudulent transactions, and which would have the effect of preventing altogether a large class of business engagements, which were perfectly just and reasonable. He would give a few examples of the working of the law. He would first take the case of a partner in a commercial undertaking who had been engaged for years in a certain business, and who, for reasons of which he was the best judge, was desirous of leaving it. Such a person would be perfectly well acquainted with the character of the men with whom he had been associated, with their aptitude for business, their probity, their application, and their fitness for carrying on the undertaking. What, then, would be the most natural thing for a man so situated to do? Would he take all his money out of the concern, and bid adieu to the business for ever? Certainly not. No one, unless his notions had been perverted by the present practice with regard to the subject, would say that that was the most natural course for a man to take under such circumstances. On the contrary, the most natural thing for him to do—and it would be perfectly legitimate if the law did not interfere in the matter—would be to leave a large portion of his money in the hands of those in whom he had confidence, merely saying "Give me my share of the profits, and you shall have the use of my money, and the sole management and direction of the concern." Such a transaction could not possibly take place at present, unless the partner so retiring was willing to risk all the money he had made in the business, and to continue liable to the fullest extent of his means for the acts and engagements of his partners. Well, then, take another case—the case of a man who died after having been engaged in business for some years in partnership, and left a family not arrived at an age when they could be taken into the business. The most natural course to follow in such a case would be for the existing partners to take into partnership the family of the deceased partner, in order that the business might be kept alive for the benefit of all parties, and that any advantage to be derived from it might be equally derived by the remaining partners, and by the widow and children of the deceased partner. Now, what did the law say in such a case? In a case that had actually occurred, which was to be found in the Law Reports, and which would be well known to many hon. Members, the executors of a deceased partner continued his share of the partnership property in trade, for the benefit of his infant daughter. They were held partners, although their names were not added to the firm, but the trade was carried on by the other partners under the same firm as before, and the executors took no part of the profit themselves, but carried them to the account of the infant. In this case the executors were taken to be partners in the concern, and the result was the entire prohibition of that class of transactions, because executors in future would take care not to expose themselves to liability in the matter. In point of fact, the law amounted to the direct imposition of a criminal penalty, extending to the whole of the means possessed by a person to prevent his entering into a transaction of that description. But there were other cases that were dealt with in a similar manner. Take the case of a man who was a sole trader, who was not in partnership at all, and who wished to give up the business to a man who had been brought up in it all his life, and who was thoroughly qualified to undertake the management of it. The man, who wished to retire, would be perfectly willing to allow a large portion of his money to remain in a concern, which he knew to be thriving and profitable, on the condition that he received a share of the profits, in lieu of obtaining interest for his money from other sources. No one could say that such a transaction was fraudulent in any respect, and yet it could not be carried out, in the present state of the law. Then, again, there was the case of inventors. It was well known that inventors, as a body, were generally men of small means, for the inventive capacity did not usually appear to accompany great wealth. All the great inventors of the country—Watt, Ark wright, and others—were poor men. Almost the only exception he could call to mind was Mr. Howard, who introduced the great improvement of the vacuum pan in the making of sugar. An invention was essentially a novelty, and until it was tried nobody could say whether it would be advantageous or otherwise. The law, however, said, that no one should assist an inventor in the way in which he might be best assisted—namely, by advancing him money to bring his invention into notoriety, unless he was willing to become a partner, and to render himself liable to the whole extent of his fortune for the engagements entered into by the inventor. Instead of discouraging the bringing out of inventions, as the present law did in point of fact, the House would see at once that it was their duty to endeavour, by every means in their power, to encourage inventors. Perhaps the notions of an inventor as to what might be of public utility might be wrong, but his great object was to introduce something that would be of advantage to the public, either as an entire novelty or as an improvement upon something in existence. It was that very class of inventions which were most likely to succeed, that the law interfered to prevent being introduced. The inventor himself was not always the best judge of the utility of his invention, but when a man of capital was found ready to aid him with money in bringing it out, there was an additional security that the invention would be useful, in the fact that another mind, both disinterested and capable of judging whether it would be profitable or not, had been brought to bear upon it. Thus it would be seen that the law operated most injuriously in those cases which were most likely to be of advantage to the public. He had now mentioned to the House three classes of cases on which the law operated in an objectionable manner, and, in reference to one of those classes—the death of a partner—he would read to the House the evidence of one of the witnesses examined before the Mercantile Law Commission in 1854. The gentleman in question, Mr. Hollams, after referring to certain cases, proceeded to state— It must not be supposed that these are merely imaginary cases. There is little doubt that any solicitor engaged for mercantile clients could readily call to mind many instances in which valuable businesses have been closed and lost upon the grounds stated. At all events, numerous cases of this nature are fresh in my memory, and so apparent has been the evil that in several instances within my own experience it has been determined to disregard the prudent directions of the testator, and to run the hazards of continuing rather than closing a business calculated to produce present income to the widow and young family, and future provision for the latter upon their attaining a competent age. Now these were specimens of a large class of legitimate, reasonable, and profitable transactions which our law in its present shape practically prohibited. If there were a sound reason for the continuance of that law, they might be content to bear the burden with the benefit, whatever that might be, but, when they knew that in all other great commercial countries the law was entirely different and permitted this class of transactions with the greatest advantage to the public, he could not see on what ground it could be urged that the change he sought to introduce would be attended, as was urged, with frightful and irremediable consequences. Before he referred to the French law on the subject now under consideration, he would read to the House the opinion of a gentleman of great authority upon matters of this kind, and who, although not an Englishman, was one who regarded this particular branch of the law with the eye of a philosopher. M. J. B. Say, the eminent French economist, expressed these opinions— It is difficult to understand why the jurisprudence and manners of the English do not allow of commandite partnerships. Among them, every partner who has the very least interest in a concern pledges all his means and his person to the creditors of that concern. They appear to think that whoever shares the lucky chances of an undertaking, whatever they are, ought to share its losses, whatever they are. How does it happen they do not see that he who has no right to manage an undertaking should be permitted to fix a limit to the losses it may cause him—for this reason, that it does not depend on him to put a stop to them by his prudence? The English law seeks to increase the security to the creditor; it really diminishes it; for a sum advanced en commandite, always known to the creditors, is an addition to the value of the funds furnished by the undertaker. If the commandite partner was a simple lender, he would diminish the security of the creditors by sharing with them the assets of the concern. He thought this was a very clear and able statement of the disadvantage of the English law as compared with the French law of commandite. The French law, as hon. Gentlemen who had given their attention to the subject were aware, was not of recent enactment, but had existed for nearly 200 years. The 23rd Article of the Code de Commerce declared that— Partnership in commandite is a contract between one or more partners, responsible for themselves and each other, and one or more partners, simply depositors of capital, who are called commanditaires, or partners in commandite In the same code, title 26, it was stated— The commanditaire is not liable for losses beyond the extent of the funds which he has put or ought to have put into the partnership. This was the foundation of the French law of commandite, and it was well known to those who were familiar with the French practice that this species of partnerships was very frequently adopted. He found from the last official return he had been able to obtain of the various kinds of partnerships registered in France for the year 1852, that the number of common partnerships entered into that year was 2,154, and of commandite partnerships 452, or about 20 per cent upon the common partnerships. That fact, he thought, afforded conclusive proof that persons who were engaged in commerce in France felt the advantage of entering into that description of partnerships. If any further evidence were, however, required on the point, he would refer to the statement of a gentleman named Levinger, made at the time when Mr. Bellenden Ker was prosecuting his inquiries on the subject some twenty years ago. Mr. Levinger wrote— I have myself been a traveller twelve years for one of the first houses in Basle, in Switzerland; we had a sugar refinery on Swiss ground, and, being on the frontier of France, we found it advantageous, under Napoleon, to establish one also on French ground, about twenty miles from our city; our house did not like to run the sole risk, therefore a commandite was established for two active young men, formerly clerks, and well known in the city; a large capital was immediately subscribed and paid down, and it was advertised in the Basle Gazette that so many, perhaps a dozen gentlemen, had subscribed and paid down 500,000 francs as a capital, for which they were to receive 5 per cent interest, and a half-share or two-thirds share of the profit, and the two gerants or managing partners to have the sole management and sole 'signaling.' The concern prospers to this day; and there is a striking case in one general way, which is the city of Mulhausen, on French ground, in the department of Haut and Bas Rhin, which is now a second Manchester, which would not have have risen to one-tenth of the importance and riches it possesses now were it not for these commandites; all the capital they traded with these thirty years, to my knowledge, was lent by Swiss houses of Basle, Zurich, &c., to these French borderers, and has returned more than 100 per cent; in fact, it is become a city of palaces, and now though so much inland, buys the raw materials at Liverpool and Manchester, manufactures, at the utmost north-eastern part of France, printed cotton, and sends it back to England. That, he thought, was a satisfactory instance of the successful mode in which that class of partnerships had worked among their French neighbours. He could quote other testimonies to the successful working of that law in France, but he was unwilling to trespass on the time of the House. The same law had been adopted in America, and Chancellor Kent, the great American lawyer, stated in his Commentaris that this was the only instance in which the people of New York had departed, in any material respect, from the English law. For the last thirty years, however, the law of limited partnership had been in operation in New York, and a similar law, differing in some comparatively immaterial respects from the French law, but substantially founded upon it, had existed in Massachusetts for a somewhat shorter period. The testimony with regard to the working of the law in the United States was equally strong and clear with that with respect to its operation in France. Mr. Minturn, one of the first merchants in New York, and a gentleman with whom he was personally acquainted, said that these limited partnerships commanded as much credit and confidence as any ordinary partnerships. Mr. Curtis, of Massachusetts, a legal gentleman of eminence, expressed his opinion that the system of limited responsibility presented as many advantages to all parties as any within his knowledge. A gentleman of Boston said, that from his experience he was entirely in favour of the system of limited partnership, as one which was of great utility to individuals, without any harm to creditors. He (Mr. Bouverie) would not multiply evidence upon this subject, but he thought he might fairly state that all the testimony received from countries where the law of limited liability was in operation was, almost without exception, unanimously in its favour. Having shown, then, that foreign experience proved the advantages of the law, he thought it was not an unreasonable proposal to ask the British Parliament to adopt a similar principle in their commercial law. The Bill for amending the law of partnership which he had submitted to the House was a very short one, and provided that when persons lent money to others engaged in business, on condition of receiving a sum varying according to the amount of profits, either in lieu of or in addition to any interest on account of such loan, the lenders should not be deemed to be partners with the persons borrowing such money. The Bill contained provisions with respect to the registration of loans, and practically its effect would be to introduce a state of the law very analogous to the French law of commandite, and to the law of special and limited partnership existing in the United States. There was one objection to such a change of the law which was very much dwelt upon, and that was, that the whole of the cases to which he had adverted, and all the evils attendant upon the present system, might be met by resorting to loans at fixed rates of interest; that a retiring partner, for example, might, if he chose, leave his money in the concern to which he had belonged, and receive a fixed rate of interest; and that a man who wished to assist an inventor might lend him money in the same way. He denied, however, that loans at a fixed rate of interest could ever come in as a substitute for the class of transactions proposed to be allowed under his Bill. In the first place, a trader, if he was a prudent man, would never be willing to lend his money at a very high fixed rate of interest, while, on the other hand, a borrower, if a prudent man, would not be willing to stipulate to pay a high fixed rate of interest. It was a very different thing for one person to say to another, "Place so much money in my business, and you shall be paid in proportion to the profits; or, if no profits are made, you and I will share the burden together;" and to say, "I will borrow a sum of money from you, and pay for it a high fixed rate of interest, whether my business yields me any profit or not." It was, in point of fact, the possibility and the legality of such loans being made at a high fixed rate of interest that called for the change which he now proposed to make. So long as the usury laws were in force no one could lend money at a high rate of interest; or, if he attempted to do so by a contrivance of some sort or other, as by an annuity, he was met with this dilemma, that either he was receiving a usurious rate of interest—which was illegal, and the contract void—he would not say, as Lord Mansfield did, that he was guilty of a crime—or that he was a partner, and liable to the extent of his whole means. But the law now allowed loans at a high rate of interest, while it prohibited those the returns of which varied with the profits of a business. It seemed to be a most unreasonable thing to permit the more usurious and prohibit the less usurious bargain in such cases. How were creditors treated in such cases? Suppose a trader, who had not sufficient capital to carry on his business, borrowed two large sums of money—one at a fixed rate of 15 or 20 per cent., and the other at rates varying with his profits—and became a bankrupt. The two gentlemen who lent him the money would meet him in the Bankruptcy Court, when the one who had lent at a fixed rate of interest would be accosted by the Bankruptcy Judge in some such terms as these: —"You are the cause of this man's breaking down; you have sweated the concern for your own advantage, for all the profits of the business have been swallowed up by your usurious bargain; you are an extortioner and an usurer—but I must allow you to claim on the bankrupt's estate, and to share with the other creditors. But, in the case of the man who lent his money, taking his chance as to loss or profit in the business, according as it paid or not, the Judge would say:—"You made a fair bargain—nothing seems more reasonable than your arrangement with the bankrupt—but I must tell you that by law you are a partner; you are not a creditor, and you cannot share in the estate; on the contrary, I hold you liable to the whole extent of your means." Nothing could be more contradictory or unjust than that these two persons should be treated in such a different way; but that was nevertheless the effect of the law as it now stood. This change of the law, then, must follow, he contended, as a necessary consequence of the recent repeal of the usury laws. He could not help thinking that the change would be productive of considerable social advantages to the country. The origin of the law could be traced to the unwillingness of noble families in the Italian States to have it known that they were engaged in trade, and who intrusted their money to large mercantile houses for trading purposes; and he anticipated that in the course of some little time the gentry of England would not be indisposed, if the risk now attached to it were diminished, to advance money, in the same way, to carry on trade. One of the evils that afflicted the country was the want of occupation for the gentry class, and this was one source of the outcry for administrative reform, for the sons of the gentry crowded into the professions and public employments, while there was a gulf between the gentry and the trading class. He thought that if the former were encouraged to invest a portion of their means in trade, with a view of providing an occupation and a livelihood for some of their children in business, it would be found in the long run of considerable social advantage, not only to themselves, but also to the country. So much for the law of partnership. He would now come to the question of Joint-stock Companies. He had already stated, that there was more than a technical distinction between Joint-stock Companies and private partnerships. The shares in a Company were transferable at the will of the holder, in a partnership it was otherwise. A Joint-stock Company was a partnership with a large number of members, ordinarily carried on under a deed of settlement, by a body of chosen directors, the shareholders having no voice in the management of the Company except at stated meetings. The bond of union in Joint-stock Companies was different from that which existed in private partnerships. In the latter the bond of union was personal knowledge and mutual confidence, so much so that a partnership ceased by the death or the bankruptcy of one of its members, but in a Joint-stock Company there was nothing of the kind; a man might be a partner to-day and not tomorrow, and there was no mutual personal knowledge of the members composing it. The measure before the House exempted from its operation Banks and Insurance Companies. With reference to Banks, there were obvious general reasons why they should not be included in the operation of the Bill. They were regulated by a totally different statute, and had always been treated on a different footing from other branches of trading, and the public always regarded them in a different light. With respect to Insurance Companies, one chief reason for not including them was that in the contracts they entered into they took care to limit the liability of their shareholders to the funds of the association; but there was another reason, as expressed by the Select Committee on Assurance Associations in 1853. They reported to the House that "the business of such Companies differed so much from ordinary business that it was advisable to repeal all the provisions of the Joint-stock Companies Act so far as they related to Assurance Societies, and to deal with them in a separate Act." By the Act for the regulation of Joint-stock Companies, 7 & 8 Vict. c. 110, there was a definition given of what a Joint-Stock Company was. Under that Act a large number of Joint-stock Companies had been formed. Since 1844, when the Act passed, no less than 914 Joint-Stock Companies had been completely registered for a variety of objects, and the list afforded some indication of the reasonable course taken by the public in directing their efforts to that class of associations in respect to which Joint-Stock Companies were likely to be most advantageous. The following was a classification of the completely registered Companies, according to their respective businesses— Total number completely registered to March 31, 1855 (still in existence, 723), 914; of which are—Assurance Companies, 198; Railway Companies, eighteen; Gas Companies, 234; Companies for all other public works, forty; Mining Companies (including gold, copper, lead, and coal mining, and stone and slate quarrying and smelting companies), ninety-nine; Companies for conducting manufactures, working patent inventions, &c., seventy-four; Shipping and Steam Navigation Companies, forty-three; Trading Companies, fourteen; Companies for the use and occupation of land, building, loan and investment, aiding emigration, and for improving the dwellings of the poorer classes, fifty-eight; Companies for establishing buildings of a public character, seventy-eight; Conveyance Company, other than railway, seven; and miscellaneous Companies, not reducible under any of the foregoing heads, fifty-one. That list showed that the Act had not been inoperative; but that, on the contrary, a large number of Joint-Stock Companies had come into existence under it. Now, the result of complete registration was, that the Joint-Stock Company was for many purposes incorporated, and could sue and be sued against through a public officer; it could hold land, and had other characteristics of a corporation; but with respect to the grand characteristic of a corporation—namely, the limited liability of the shareholders—there was an express provision in the Act that the shareholders should be liable for the debts of the Company, and should continue liable for three years after they had ceased to be shareholders. That provision of the law with respect to Joint-stock Companies was a subject of complaint. It was alleged, and, he thought, with justice, that the law was injurious to the Companies which were already formed, and that it deterred men of prudence and capital from embarking in such concerns. The law by its existence admitted that, for certain purposes, Joint-stock Companies were reasonable and proper associations; and yet the law was such as to deter from entering into them that very class of persons who of all others it was most desirable should join them—namely, men with large means and with the judgment enabling them to know what they were about, and who were, therefore, the most likely to carry the undertaking to a successful result. Not only was it an objection that prudent and wealthy men were deterred from entering into Joint-stock Companies by this law of unlimited liability, but it was also an objection that, in consequence of that law, the reckless, thoughtless, and extravagant were the parties into whose hands the concerns of those Companies too often fell. The law of unlimited liability, while having that effect, likewise gave to those concerns a very factitious and unjust credit. The foundation of the credit of Joint-stock Companies should be the mode in which the business was conducted and the objects for which the Companies were carried on, and if the attention of the public were diverted from that true indication of credit to a false indication of credit—namely, the whole fortune of the shareholders massed together—the public were tempted to give, and were found in practice to give, to the Companies an unfair and undue amount of credit. The injurious effect of the law of unlimited liability was not only felt by the Companies already in existence, but the law also operated in entirely preventing the formation of other Companies. There were a number of concerns which required for their success the association of persons of large means, experience, and judgment, and if such persons did not join them the undertakings fell to the ground. Mr. Baker, a London solicitor, stated— I have seen so many instances where the inability to constitute a partnership with limited liability has prevented the carrying out of really bonâ fide and beneficial undertakings that I am quite convinced the present law is not merely theoretically but practically an incubus on general commercial enterprise. You cannot induce a merchant of good standing in the city to enter into a joint-stock trading partnership, because he fears the unlimited responsibility. The first question put to a solicitor of a Joint-stock Company by the best men proposed as directors invariably relates to the extent of their liability, and when they are told it is unlimited they withdraw. But these same men are at the same time quite convinced of the soundness of the undertaking, and disposed to embark in it considerable sums. They are the very men of all others whose prudence and judgment would be invaluable in conducting such adventures, and they are wholly debarred from joining them by the existing law. What was the practical effect of prohibiting, by the operation of the law, the formation, of this class of Joint-stock Companies in this country? The consequence was that the persons who were determined to have them would still have recourse to such associations if the inducement was sufficiently tempting; but, instead of establishing Joint-stock Companies in England, they went abroad and, forming Companies there, carried on the business at home. So, while professing to be foreign Companies, they were really English Companies, subjecting themselves to all the other inconveniences of being domiciled abroad, in order to have the advantage of limited liability. Upon this point he would again quote the evidence of Mr. Baker. That gentleman said— So great is the demand for limited liability that Companies are frequently constituted in Paris and the United States in order that they may obtain the security which in this respect the laws of those countries afford. When these Companies are formed in Paris, they pay a heavy duty to the French Government. The duty assessed upon one Company of which my firm were the solicitors amounted to 750 l. In that instance we made a composition with the French Government by which an annual sum was paid instead; but we should have paid the larger sum without hesitation as the purchase-money of the law of partnership en commandite, if the Government had made it a sine quâ non. Besides this duty upon the capital, there are Customs' duties paid to the French Government on the importation of the shares to be stamped in Paris, stamp duties on the acte sociale constituting the company, the hire of offices in France, and the salary of a gerant there, who gives a power of attorney to some one in England, and himself does nothing but live in the offices and receive any communications from the Government. All this expense is incurred simply to get the benefit of the French law of limited liability, and it amounts generally to 400 l. or 500 l. a year. I have reason to believe that one Company's expense incurred in Paris to obtain the benefit of this law amounted to nearly 4,000 l. I am within the mark in saying that during the last two years at least twenty Companies have been formed in France solely for the same purpose. They are, in truth, English Companies, both as to capital and directors, and all this expenditure is just so much money taken from this country and paid to France as a consideration for the use of her laws. If the present Commission does not lead to an alteration in the law, the Companies formed in France and the United States will become more numerous and soon monopolise the whole, at least unless the Joint-stock Registration Act be very considerably altered. There are many undertakings awaiting the decision before they decide on their constitution. I have two in my own office at the present moment for working patents in England, which will be made French Companies if the English law remains unaltered. No statement could be more clear and convincing as to the futility of attempting, at the present time, to keep capital from engaging in those undertakings which really were tempting and advantageous to it. Thus, it was quite clear that those engaged in Joint-stock Companies desired limited liability. All men must desire, on embarking in a Joint-stock Company, that their liability for the acts of the directors should be limited to the amount they staked in the concern. Joint-stock Companies, he repeated, differed from private Companies inasmuch as there did not exist in the one as in the other the same mutual knowledge and confidence among the partners, and in a Joint-stock Company although at a given time a shareholder might have the fullest confidence in the directors, yet the next day a new set might be put in, of whom the shareholder, who would be bound to the extent of his whole fortune by their acts, knew nothing. The advantages of Joint-stock Companies were admitted by the Registration Act, to which he had previously referred, and the number of Companies with the privilege of limited liability conferred on them specially by Parliament was an admission also of the advantage of that system. The following was a list of the Companies incorporated with limited liability by private Act of Parliament during the last five years:—Railways, seventy-six; harbours, piers, docks, bridges and canals, eleven; gas, ten; water, twenty-two; miscellaneous, seventeen; total, 136. Now, he would ask what was the reason on which they justified the concession of this special privilege of limited liability in these cases? It was, because such undertakings were a public advantage, and also because they could not be carried on unless limited liability was granted. But that was not so, for he would undertake to show that with regard to many of these cases in which they granted limited liability, that there was no peculiar necessity for it, because they belonged to the very same class of concerns as those which, having no private Act, were left to the law of unlimited liability. What distinction could be drawn between those Gas Companies which came to the House for a Private Act, and those which were in operation under the Joint-stock Companies Act? There was no distinction between the two cases, and the rule that was pursued was really one of a most arbitrary description. He might also state that this matter practically rested with those who conducted the private business of the two Houses; for, if the Chairman of Ways and Means in the one, and the Chairman of Committees in the other House were to agree that the rule should be that every Company which came for a Private Bill should be granted limited liability, then the House of Commons and Parliament would find that this great change would be effected without their having a voice in the matter. Not only were these privileges granted by Parliament, but the Board of Trade, by the 7 Will. IV. and the 1 Vict., chap. 73—the Letters Patent Act—had the power of determining the liability of shareholders. He found that from the time of the passing of those Acts, 204 applications had been made to the Board of Trade for public charters, and that 113 of them were granted. Why was such a power granted to the Board of Trade? They affected to lay down a rule, and said that they would not give a charter with limited liability unless the undertaking was advantageous to the public, or, from the extent of capital required, and other circumstances, could not be accomplished by private enterprise. But how could the Board of Trade determine such cases, or arrive at a sound conclusion with respect to them? By leaving the decision of these cases with the Board of Trade, Parliament cast upon it a duty which it was not competent to perform. The true test as to whether these undertakings were of public advantage was their success or non-success. If it was right to grant these privileges in the cases to which he had alluded, it was also right to grant them generally, and they ought not to draw the distinctions which they did, or intrust so odious a power to the Board of Trade as to allow limited liability to be granted or not, according to the caprice of those who happened to be at the head of the department. He had no doubt that those privileges ought to be granted generally; for, supposing those parties who argued against Joint-stock Companies had had their own way, or that Parliament had never granted limited liability, or that the Board of Trade had not been intrusted with the power, or had refused in all cases to grant it, what would have become of those vast works which were the glory and the honour of the present time? What would have become of the 285,000,000 l. advanced on railways—of the enormous sum contributed for the completion of docks—or of the immense sums expended on canals? All these works had arisen under the advantageous system of limited liability, and who could say, if the system was more generally extended, and the present restrictions removed, what further advantages might not accrue to the country from this system? He believed that they ought to grant that privilege generally; and all they had to do was to take care, that those who trusted the various Companies should not turn round upon them and say that they had been deceived, with reference to the contracts which were undertaken. If they effected that they would make a very great improvement in the present state of the law. The principle of limited liability was at present in existence with regard to one class of useful enterprises—he alluded to the mines of Devonshire and Cornwall. It had been decided in the Courts of Common Law that the directors of those Mining Companies had not the power of binding the shareholders by the engagements which were made for the Company. The proposal which he had laid before the House was simply that such Companies as chose to carry on concerns on that basis, and to give notice to the public that they did so, should be allowed to trade under limited liability. Many objections had been raised to the proposed plan. It was alleged that it would encourage fraud, and an hon. Friend had told him that the present Bill was a Bill for promoting swindling. He thought that a great deal of misapprehension existed in the public mind with reference to fraud. One of the great objects of the law was to prevent fraud in the dealings between man and man; but it was the duty of the Legislature to prevent fraud, not by prohibiting a class of transactions, many of which were honest and advantageous to the public and the parties concerned, but by taking care that fraud, wherever it existed, should be detected and punished. The misapprehension that existed with regard to the extent of fraud committed was owing to this—that the cases of fraud were those which came prominently before the public, who did not take into account the enormous mass of fair and honest transactions that took place in the ordinary business of life, and of which they never heard. If they argued the question on the ground whether limited or unlimited liability was most likely to lead to fraud, he could but observe that a great number of cases of fraud which arose were in those Companies which were conducted on the principle of unlimited liability, and he thought that it would be quite as fair to argue from the unfortunate case which had lately occurred in the City and other similar cases, that the Legislature ought to put a stop to those transactions conducted on the unlimited liability principle, as it would be to say, that, because cases of fraud arose where limited liability was granted, that that system ought not to he permitted. Another objection raised against Joint-stock Companies was that they encouraged speculation. Now the word speculation had two very different meanings, according to the sense in which it was used. In one sense in meant that spirit of enterprise and progress which had made the people of this country what they now were: but in its bad sense it meant rash and imprudent undertakings, which ought never to have been commenced, or which had been improperly carried out. He did not think it was his duty as a legislator to prevent imprudence in commercial undertakings. The real preventive against imprudence was the loss which it entailed on the imprudent man; no security against it was so great as the punishment which the imprudent man brought on himself by committing it. It was almost impossible to say beforehand whether any particular scheme was rash or not, for an imprudent undertaking, when conducted by a person who had a great genius for business, might be brought to a successful result, while, on the other hand, an apparently prudent undertaking might be so improperly conducted as to end in failure. But at the bottom of all these arguments as to the prevention of fraud and speculation, was the notion that people ought to be protected from the consequences of their own conduct, that shareholders and creditors of Joint-stock Companies ought to be protected from their own imprudence in having joined in and given credit to unsuccessful undertakings. He thought that the best mode of securing the interests of shareholders and creditors, was to call on them to protect themselves, for that he believed, in the long run, would be found to be the most effective means of protection. Joint-stock Companies were not the causes, but merely the symptoms of speculation, they were the results of those accumulations of capital which occasionally took place here as in other countries. Numbers of Joint-stock Companies had, no doubt, been established at all the great eras of speculation. In 1824–25 an enormous amount of speculation took place. The number of schemes started at that time was 160, and 160,000,000 l. of capital was proposed to be raised. The amount actually raised was 27,417,900 l., almost the whole of which was lost. In 1836 there were 300 Companies established, which proposed to raise a capital of 135,000,000 l. Then there was the great railway mania of 1845–6. He believed, however, that if there had not been the opportunity of speculation in those joint-stock schemes, the disposition to gamble would have found vent in other directions, and that those schemes were not, therefore, the causes, but the consequences, of speculation. But if they had a tendency to favour speculation, now, when there was so little disposition to enter into speculation, was the time of all others, when a measure of the nature of the Bill he had introduced could be safely passed. There was only one other argument against the proposed change to which be desired to call attention, and that argument was only important in consequence of its having been put forward by the Commissioners, who, in their Report—which, with all due respect to them, he thought was a very meagre and unsatisfactory one, said— Further, it appears to your Majesty's Commissioners that the benefit to be acquired by the managing or limited partners will be at the expense of a more than countervailing amount of injury to traders bearing the burden of unlimited liability, who will have to enter into competition with those who enjoy the protection to be given by the proposed law. He altogether denied the inference here drawn by the Commissioners. If the public could be served cheaper and better by such an arrangement with regard to limited liability as was now proposed, that arrangement ought to be made, and those who carried on undertakings upon the principle of unlimited liability could have no vested interest in a bad state of the law on account of the injury that would be inflicted on them by a change in the law. But whether the competition to which the Commissioners referred would succeed or not, still remained to be seen. In a large class of trading transactions private traders were sure to succeed against Joint-stock Companies, from the greater facility with which they could arrive at decisions and take advantage of any turn in the market. That great master of economical science, Adam Smith, in considering that question, observed— Without a monopoly, however, a Joint-stock Company, it would appear from experience, cannot long carry on any branch of foreign trade. To buy in one market, in order to sell with profit in another when there are many competitors in both, to watch over, not only the occasional variations in the demand, but the much greater and more frequent variations in the competition or in the supply which that demand is likely to get from other people, and to suit with dexterity and judgment both the quantity and quality of each assortment of goods to all these circumstances, is a species of warfare of which the operations are continually changing, and which can scarce ever be conducted successfully without such an unremitting exertion of vigilance and attention as cannot long be expected from the directors of a Joint-stock Company. The only trades which it seems possible for a Joint-stock Company to carry on successfully, without an exclusive privilege, are those of which all the operations are capable of being reduced to what is called a routine, or to such an uniformity of method as admits of little or no variation. He believed that the change he proposed would prove the wisdom of Adam Smith's doctrine, and would show that in ordinary trading undertakings Joint-stock Companies could not compete with private traders, although there was a large class of enterprise in which those Companies were the most likely to succeed. There ought to be no legal impediments in the way of competition. He believed that the Bill would effect a wise change, because he had confidence in the force of the objections urged against the existing law, and because he was sure that they as legislators ought not to place any dam across the channels in which capital was disposed to run. There was evidently a strong disposition at present to embark capital in joint-stock undertakings, and they could not say, until they had made the experiment, what would be the result of that disposition. If they removed all impediments upon commerce, provided that the contracts entered into by Companies and by individuals were faithfully and honestly fulfilled, and left people to ascertain the relative advantages of the different modes of carrying on business, they would have done their duty as legislators to those whom they represented.

Motion made, and Question proposed, "That the Bill be now read a second time."


said, the House and the country would be much obliged to his right hon. Friend for having introduced the Bill now under discussion, which, although by no means perfect, was an important recognition of the principle of freedom of contract, which he regarded as a corollary to freedom of trade and freedom of navigation. He should address his observations, in the first instance, to the Limited Liability Bill, which he regarded as far more important, and likely to have a far more extensive operation than the Partnership Bill. The first observation which it occurred to him to make was, that he could have wished it had included a wider range of Companies. His right hon. Friend had said that two classes of Companies, namely, the Banking and Insurance, were exempted from the operation of the Bill, but it would be found that a much larger number of Companies were exempted. The Companies exempted were those to which the Joint-stock Companies registered Act did not apply, and there were not only Banking and Insurance Companies, but schools, scientific and literary societies, friendly societies, loan societies, and, he believed, building societies, and mining Companies conducted under the cost-book system. The exemptions from the Bill were very considerable, and he should be inclined to move a clause to the effect that these Companies should be included, because it seemed to him that if the principle were good as far as it went, it should be extended further. In the next place, the Bill only comprised Companies with a capital of 20,000l., and shares of the value of 25l. each; but his right hon. Friend would, he thought, have been justified, and would have taken a safe course, if he had comprised Companies with a capital of 10,000l. and shares of 10l. each; for it was the poorer rather than the richer classes of the community who required a change in the present law. The hon. Member for Lambeth (Mr. W. Williams) had given notice of his intention to move the introduction of a clause to that effect, and if he did make the proposition, he (Mr. Collier) would support it; if not, he would move the introduction of a clause himself. It might be asked why they should hesitate to apply the principle of this Bill, if it were good, to all Companies, whatever the number of shareholders or the capital they subscribed? Arguing the matter upon abstract principle, he would confess that it was difficult to draw the line; nor, as far as he (Mr. Collier) was concerned, did he shrink from following the principle to all its consequences, at the same time, he was not prepared to blame his right hon. Friend for, in the first instance at least, limiting the operation of the measure to Companies formed upon what might be termed the Joint-stock Company type, as distinguished from that of the ordinary partnership. He should proceed to make one or two observations on the second Bill, which applied to partnerships of all descriptions, without reference to the number of shareholders or amount of capital. By the first provision it was directed that the loan should be registered, and also the name of the lender, but if there was any mistake or omission in the registry, the lender incurred the penalty of unlimited liability. It was also provided that the claim of the lender should be postponed until the claims of the other creditors were satisfied. There could be no objection to persons contracting on that footing if they pleased, but it seemed to him that persons lending on these terms were in some respects in so much less advantageous a position than those who lent their money at a fixed interest, that the Bill was not likely to have a very extensive operation. His right hon. Friend would have done better to adopt the provisions applicable to this part of the subject of the French société en commandite, the parties to which were not required to register the names of the lenders, but only an extract from the deed of partnership, stating that it was a limited partnership, and that a certain amount had been borrowed. He would beg to read a statement of the law of France applicable to those societies by M. Troplong, President of the Court of Appeal of Paris. It showed that the extract from the deed of partnership need not contain the names of the special partners. It was sufficient if it designated the amount of capital (valeurs) contributed, or to be contributed, by them. M. Troplong says— The reason of this provision is very simple. Special partners are not indefinitely responsible. They risk nothing but a certain amount of capital, and are not liable beyond it. It thence becomes useless to present their names to the gaze of third persons; frequently, indeed, such needless exposure would have kept capital out of limited partnerships, for many fathers of families, magistrates, functionaries, freeholders, and professional men only go into thorn on the faith of this condition—not to be published. Further, the extract need not designate the capital introduced by the general partners. Their property, if they possess any, adds nothing to the material strength (forces) which the general partners offer the public by way of guarantee; inasmuch as such property is, under the general law, already a pledge to the public for their indefinite liability. … The Code of Commerce perceived the danger of too much clandestinity in the construction of these associations, and its measures to prevent it were wise and energetic. A plan at once simple and thorough, though unthought of before the code, was adopted in it, which harmonises the publicity required by credit with the secrecy due to the consideration of persons. That is, the capital of the limited partners shall be known, as a pledge to the public, but their persons shall be kept out of view; and the general partners, who have assumed indefinite and entire responsibility, shall alone figure in the published extract, The French did not visit with unlimited liability special partners with respect to whom there had been defective registration, but made "nullity of partnership" a consequence of failure to register.


said, he proposed to make a change in that respect—that defective registration should not expose the party to unlimited liability.


said, he was glad to hear that his right hon. Friend proposed to make that alteration. He would wish, further, to point out that there was this difference between partnerships contemplated by the Bill and the sociétés en commandite. In France the shares were transferable, under the Bill they were not. He was for holding up the French system as perfect, at the same time there were some of its features which he thought his right hon. Friend would have done well to have copied somewhat more closely. The Americans had adopted the French system, but subject to many restrictions, such as were in the Bill. In fact, the plan proposed by his right hon. Friend was more in accordance with the American than with the French system. Mr. Troubat, a distinguished writer upon American commercial law, asked the lawgivers on that side of the Atlantic— To deliberate whether they have not so fettered the system as to render it practically dangerous to embark therein? Why so much rigour against special partners here? Or, rather, why so very much more than in France? To the eye of the author of this work every statute of limited partnership in this country is framed as if capitalists were exceptions from the mass of citizens, and were viewed as a band of rogues who would lose no opportunity to take advantage of the community, or to defraud the law. According to the scale of penal sanctions that is meted out to special partners, dormant partners at common law ought to be viewed in theory as pickpockets, and, when discovered (from the mere rarity and difficulty of discovery), be prosecuted as such, and their gains snatched from them as unholy. If there were any warrant for this severity against special partners in the experience of countries which have tested the system for centuries, the plea would be different, but the reverse is the case. Here there was high authority for saying that the Americans had erred in imposing what Mr. Proubert calls "these severities" on special partners, and his right hon. Friend would do well not to follow their example. He understood that his hon. and learned Friend the Member for Belfast (Mr. Cairns) intended to propose that all the clauses with respect to registration should be struck out; but, in his (Mr. Collier's) opinion, it was expedient that, if a man traded with the capital of other partners, that is to say, of other persons interested in the concern, and participating in its profits and losses, the fact should be announced that he was so trading on such capital, although as an element in the credit to which he was entitled, though, as he had before observed, the names of his partners in the amount of their respective contributions need not necessarily be stated. If it were not so, there would be great difficulty in determining who was a partner and who was not, and much confusion would arise in courts of law. To put the case clearly. Supposing A advanced 19–20ths of the capital and was to take 19–20ths of the profits, and secretly managed the concern, but put forward B, who was the only person known to the public, would it not be hard that the creditors who had trusted B upon the appearance he made with A's capital should have no remedy against A? and would it not be still harder that A should be able to come in pari passu with the other creditors? For a long time there was no registration in France, but it was found to lead to great inconvenience, and, therefore, in the Code de Commerce the system of registration was established which he recommended the hon. Gentleman to adopt. He felt it was extremely desirable that the Bill should pass in the present Session, and therefore took the liberty of recommending the friends of limited liability, who desired to go further than the provisions of the Bill to abstain from moving more clauses and amendments than seemed absolutely necessary, lest they should incur the risk of its falling into that limbo to which the Testamentary and other Bills had already been, and many more Bills would shortly be, consigned. It was most desirable to pass the Bill, in order that the important principle should be recognised by Parliament, that persons had the right to limit their liability without special Acts of Parliament or the special favour of the Board of Trade. The greatest undertakings of which the country could boast were the result of limited liability. He believed its general recognition would be the means of opening new and profitable channels for the investment of capital and the employment of industry—new roads to success for the active and enterprising—new facilities for slipping the right men into the right places, that it would tend to bridge over the gulf which divided capital and labour, the interests of which, seemingly antagonistic, were ever in unison, and would, to an extent which it is difficult to compute, increase the wealth and prosperity of the country.


said, he would beg to call attention to the measures that had been adopted from time to time with reference to the subject now under discussion, up to the Report of the Committee appointed in 1853, in pursuance whereof a Commission was issued by the Crown. He would also beg to call attention to the Report of that Commission, who had decided, not that a Bill should be introduced, but that the subject was unripe for legislation. They were induced, in the first place, to make the Report because they had great doubt—from the evidence produced before them—of the success of the measure in the two foreign countries where it was most in operation, namely, in France and in America. It would appear from the evidence produced before them that although it was not denied that a certain measure of success had attended those companies, yet it was stated that the success was not of that paramount and decided nature which should lead them at once to follow the example of those countries. But there was another point that pressed upon the minds of the Committee, and also upon the minds of the persons who had acted upon the Commission, and it was this—that before anything was done with regard to the alteration of the law of partnership and limited liability, it would be necessary that a great alteration should take place in the present system of bankruptcy law. The state of their bankrupt law was as different as it possibly could be from the law in France, and it might be difficult to assimilate them, knowing as they did how much the feelings of the people in this country were opposed to the introduction of stringent measures, or any of the means by which it was deemed necessary to carry out the law as it existed in France. He would also ask whether the examples of France and America were in reality analogous examples? When the law was introduced into France the commercial character in that country was at such a low ebb that no person would assume commercial responsibility of any kind, and therefore it was necessary to use every possible effort to induce capital to come into the service of partnerships. What was the case in America? In America the case was exactly the reverse. There the commercial character stood high; but commercial capital was required, and they did everything they could to induce capital to come into play there. But he appealed to any Member in that House whether there ever had been a want of capital to carry out legitimate measures of commerce in that country? He would admit, however, that the law respecting joint-stock companies required reform, and upon that ground he was willing to vote for the Bill of his right hon. Friend. Many of the witnesses who had been examined on the subject laid down the principle that "there was no sufficient reason why people should not be allowed to employ their capital in any way they pleased, provided the terms upon which they did so were known;" and certainly, with that qualification, any one might readily subscribe to that doctrine. But then it would be quite impossible to carry out the condition of requiring the terms of the partnership to be known. How, for instance, could it be applied in its entirety to bills of exchange passing from hand to hand by endorsement?—a class of instruments forming a great part of the circulation of a country like England. The Bill was, therefore, objectionable, because it provided no adequate security in those respects; and it would open the door to fraud to the greatest possible degree by allowing persons to carry on engagements, under the idea of a registered capital, after that capital had long been withdrawn from the concern. Undoubtedly the system of granting charters through the Board of Trade to Joint-stock Companies demanded alteration; but let not the House for that reason hurry into rash legislation upon mere abstract principles, especially when the question was one involving the commercial character and credit of the country. The measure could not be fairly taken as an instalment of improvement, because it began at the wrong end, and would destroy the security essential in all business transactions, while, on the other hand, it would also tend to alienate the support of many who were favourable to the proper adjustment of the question at a legitimate opportunity. If his right hon. Friend would carry out in his new Bill the provision that the terms of the contract should always be known, he would willingly subscribe to the doctrine of Mr. Mill; but that was a perfect impossibility. His right hon. Friend seemed to wish to legislate on partnership as if all the rest of the world were as honest as he would wish them to be, but his conviction was that the measure would open the door for fraud to the greatest possible extent. Let them not be in too great a hurry to legislate on a subject on which so much of the commercial character of the country depended. The Bills could not be matured during the present Session, and the only effect must be to prejudice many who were favourably disposed to a change in the law.


said, he would beg to express his thanks to the Government for introducing the measures now under the consideration of the House, for he could not but think that, after the subject had been undergoing examination before Committees and Commissions for the last twenty-one years, it was at length fully ripe for legislation. The law of partnership which prevailed in the United Kingdom was a disgrace to any civilised community. They were not now about to deal with partnerships in which A and B carried on business in their joint names, and were, of course, both liable for the debts of the concern to the fullest extent; but with partnerships in which A conducted the business in his own name, and had B for a dormant partner. The principle of the law, that every man who had a share of the profits should also bear a share of the losses, had been pushed to an unreasonable extent, and made the dormant partner, who might have joined A only the day before his failure and taken but 20l. out of the profits, liable to the last farthing of his fortune for the whole of A's debts. The injustice of this was put in a very forcible manner by Mr. Bramwell, one of the Commissioners who inquired into the subject, and whose opinion was entitled to the greatest weight. That Gentleman, in his Report, stated— I take the case of a dormant partner as an example:—A has entered into partnership with B; he has bargained that B shall not pledge his credit; he has agreed to find certain capital; he has performed his engagement faithfully. C has sold goods to B; B's fraud, folly, or misfortune makes him insolvent. The existence of the partnership is discovered, and A is called on by C, who had never heard of him and never trusted him, to pay. This claim is, in my judgment, inconsistent with common sense and common honesty. It was to remedy this hardship that it was now proposed to alter the law. The extent to which one partner could pledge the credit of the rest was already limited in the case of the Cornish mines, conducted on the cost-book principle, which was a species of limited liability, where the directors could not bind the other partners by drawing bills of exchange or borrowing money. The Bill provided the requisite security to those who might have dealings with a firm carrying on business under limited liability by requiring notice to be publicly given that their partnership was based on that principle. The hon. Gentleman who spoke last asked, in regard to bills of exchange, how limited liability would apply to them? But a man usually took a bill of exchange from his knowledge of the party who endorsed it, or of the person from whom he immediately received it; and, if he knew them, he would also know the extent of their liability. On the other hand, if he did not even know so much as their names, he would have no right to complain that he did not know the extent of their liability. Under the proposed Bill notice would be given that if "Smith and Co," endorsed a bill, it must be taken as "Smith and Co. with limited liability;" and, therefore, that fact would be distinctly understood by the acceptor, and every other party interested. ["No."] Well, then, if that notice was not given, then they could provide that it should be by amending the Bill when it got into Committee. It was a case of common occurrence that a loan was made to an individual member of a partnership firm, and for which the lender received as security a bill of exchange or a promissory note of the firm. It did not follow that the lender thereby acquired the liability of all the firm. If a jury in a court, or a Judge in equity, should be of opinion that the circumstances under which the money was borrowed amounted to a notice to the lender that he was dealing with the individual partner, and not with the firm, the law was, that the lender had not obtained the legal liability of the firm, but only that of the individual partner. The only difficulty that could arise in such a case was the question whether the lender had notice or not? The law in fact affirmed the principle of limited liability; but the difficulty in practice was the necessary notice in each case. It was to make this notice general by Act of Parliament, when limited liability was the principle that the Bills before the House were addressed. It was said there were dishonest debtors; but it had also been said there were dishonest creditors. Mr. Bramwell said so in his Report, and he added that limited liability would have the effect of rendering them less dishonest than they were empowered to be under the present law. Under the provisions of the Bill goods would be delivered or money lent, with distinct notice where the liability was intended to be limited. It was to enact that it should not be necessary in every individual transaction to give notice, but that there should be a general law enacting that a partnership did not necessarily involve an unlimited liability; but that it might be either unlimited or limited, and, if limited, that then notice should be given thereof. Could anything be more reasonable than such a proposition? The Bill proposed that A might carry on business, and B supply the capital. If those who dealt with A had no notice of B being a partner, what ground had they for complaint that they had not his liability for any credit given by them to A? But if they had notice of the fact that B supplied capital, then they would have whatever advantage might arise from the terms on which B's liability existed. The present state of the law had long been deplored, and the proposed alteration of it would effect the greatest possible amendment in the commercial transactions of the country. What were the disadvantages which were apprehended would arise from the proposed alteration of the law? It was said it would encourage fraud and swindling; but who was to be defrauded? Was it the person who sold goods or lent money? There could be no fraud where the party had notice. But these prophecies of ill were not new with regard to amendments in the law. He remembered that when it was proposed to abolish arrest on mesne process it was contended that it would ruin the commercial credit of the country, but he believed his hon. Friend the Member for Kendal (Mr. Glyn) would agree with him that the commercial credit of the country was as stable now as before 1838, when that power of arrest on mesne process was taken away. It was not, therefore, upon any of these stringent laws that the stability of your commercial undertakings depended; they would and must, after all, depend upon the character of those who were engaged in them. He did not agree with the hon. and learned Member for Plymouth (Mr. Collier) that there should be no registration; but he did agree with him that there should be due notice given in all cases of limited liability. It appeared to him that what the promoters of the Bills were anxious to do was, not to hold out inducements to traders to give reckless credit, but, on the contrary, to prevail on them to conduct their business with prudence and with foresight, and to take care that those with whom they dealt were worthy of credit, instead of relying upon the liability of a dormant partner to pay debts which ought never to have been incurred. A point was once raised before Lord Eldon in which the following decision was come to by that high legal authority— If you employed an agent and agreed to pay him a certain proportion of the profits of your business, that constituted a partnership; but if you agreed to pay a clerk a sum equal to a certain proportion—say one-fourth of the profits—that did not constitute a partnership. Now, ought such a state of things to exist in a great commercial country? His hon. Friend the Member for Kendal could scarcely maintain such anomalies in the law. The changes contemplated by the Bill were most desirable; he had long advocated them, and he rejoiced to see that there was at last a prospect of carrying them out. He approved also the Limited Liability Bill, though he was of opinion that its scope might be very much enlarged. He saw no reason why Banks and Insurance Offices should not be included in it. Insurance Offices did at present possess a sort of limited liability, because in every policy of insurance there was a provision that the directors signing it pledged the funds of the Company only, and not their own property; but by extending the operations of the Bill to those Companies they would be enabled to avail themselves of the principle in a far better manner. So with Banks—Joint-stock Banks more especially—he thought there should be a provision for a substantially subscribed capital, and along with it limited liability. If it had not been for that principle there would have been few or no railroads or canals. If, then, these limited liabilities were created in such cases every day, he did not see why that principle should not be generally applicable. The objection to limited liability rested on a morbid sensibility for the creditors. Why should not the creditors be left to take care of themselves? The present state of the law with regard to Joint-stock Banks had involved hundreds of families in ruin. The Australian Banking Company, at present winding up in the Court of Chancery, was a notable instance. That bank was established in 1842 for the purpose of carrying on business operations between this country and Australia; the directors, shortly after its formation, deceiving themselves perhaps—certainly deceiving others—as to their position, borrowed money to the extent of 300,000l. The bank completely failed, and at this moment the process was going on of calling on the shareholders to pay up their last farthing to meet the debts of the bank; and probably not less than from 100 to 150 families would be utterly ruined by their connection with the Company. Of course the parties from whom the money was borrowed did not trouble themselves before they lent it to inquire into the state and prospects of the company; they saw on the list of shareholders perhaps 100 men whom they thought perfectly competent to repay them, and they lent the money in the full security that, if the directors did not pay, they could pounce on the shareholders. But if the law of limited liability had been in operation the case would have been far different. The money lenders would have inquired into the condition of the company, its assets would have been their only security, and if they had not been satisfied with them, they would not have lent their money. In the same way the Newcastle Bank and the Monmouth and Glamorganshire Bank had been the ruin of hundreds of families. Why was it that men lent their money on railway debentures, or invested it in railway shares, only because, in the first case, they were satisfied with the position and the administration of the company, and, in the second case, because they knew that if they paid up the full amount of their shares they were liable for no more. Though often consulted on such matters, he had never in his life advised any one to invest in a Joint-stock Company, for he could not understand how any man in his senses could make up his mind to run the risk of being involved by the managers of such a company to the full extent of his fortune, however small his real stake in it might be. The present state of the law deterred prudent men of capital from embarking their money in business, and who was it that profited by such a state of things? The only people who were benefitted were the great capitalists. He believed those most opposed to a change in the law were those whose great capital gave them great power, and who feared that, if capital generally became more diffused, their influence would be reduced. Those who supported the Bills were desirous of bringing about the union of skill and capital, which the present law did all it could to keep separate. He gave his most cordial assent to the measures, of course reserving to himself the right of discussing details at a future stage, but he was quite prepared to say that he regarded their principle as most admirable.


said, he thought it was rather late in the day to be arguing at any great length the principle upon which the important Bills now under consideration were founded. If the principle was not settled by public opinion, the principle was settled by the actual state of practice, and had been so for the last twenty years. Up to the time when Mr. Poulett Thomson was President of the Board of Trade, but more particularly at the time when Lord Eldon was Lord Chancellor, there was the greatest possible difficulty in inducing the Crown to exercise its prerogative of granting incorporations, but in the year 1837 an Act of Parliament was passed which has had a most important practical effect in respect to Joint-stock Companies. He referred to the Act, which prescribed that before the Crown exercised its prerogative of granting incorporations to Joint-stock Companies for trading purposes a reference should be made to the Board of Trade, and a Report from that Board be laid before the Crown. The practical effect of that measure had been to vest in the Board of Trade the power of granting or withholding charters, and that power had been exercised with liberality at some times, and with jealousy at others. As Member for Liverpool he had had an opportunity of seeing the objectionable nature of that system, and his experience in the office which he lately held had afforded him a still better opportunity of becoming yet more convinced of its extremely objectionable character. It was not necessary to appeal to experience, however, for common sense must point out to every one that it was for Parliament to make laws, and not for individuals. If Parliament did all it possibly could to place the law on a footing which might be available with perfect eqality to all persons, then the officers who carried it into effect were the ministers and not the dispensers of the law, and, no matter what the tendency of the mind of the persons holding office might be, the benefits of the law would be open to all the Queen's subjects without distinction. Such being, he believed, the almost uniform feeling of the House and the country, Parliament was compelled to pass a law upon the subject of limited liability; for if they could—which they could not—resist the combining tendencies of the age—the associative tendencies of men to unite for great undertakings—they could not emancipate themselves from the further difficulty, that by no better title than the will of an individual Minister a series of great corporations had already been established. How then could they refuse to other Companies having equal claims the same privilege which had been accorded to those established corporations. They had determined that they would not permit the present system to go on, and they were therefore tied to the conclusion, that they must as soon as possible pass some Bill,—and he trusted a satisfactory Bill—upon the subject. Thin as the attendance in the House had been all the evening, and thin as it was then, there was probably no subject of domestic legislation which attracted more general attention. He entirely agreed with his hon. Friend the Member for Kendal (Mr. Glyn) who spoke with such authority upon questions of this kind, that it was extremely important that they should not be led into anything precipitately and prematurely, for they were dealing with that which, although it seemed so simple to some, who argued it as a question of debate, involved the whole fortune, the whole substance of those who were to be subjected to its operation; and he was inclined to hope that they might, even during the limited period which now remained of the present Session of Parliament, succeed in putting the Bill into such a shape as would enable them to enact a self-acting and sufficiently elastic law, known and understood by the creditor and the debtor, and giving to the new incorporations that which it was desired to give them—the exact amount of credit, and no more, to which from their respective character and capital they might be entitled. The real subject for them was not to enter into general disquisitions as to the desirability of a state of the law which should require unlimited liability, or which should admit of limited liability; but, if they were to do that which was practical and useful, they must address themselves to the precise detail of the measure submitted for their consideration, and in an honest and earnest spirit to support the Bill in those particulars in which they thought it should be supported, or to submit to his right hon. Friend (Mr. Bouverie) those Amendments which, if supported by reason, he was sure the right hon. Gentleman would accede to. It was the more desirable they should do so, because they had now arrived at the second reading, and because this was the first opportunity that the House or the public had had of hearing the subject discussed or of knowing what the Legislature proposed. The subject necessarily divided itself into the two heads into which his right hon. Friend had divided it in the two Bills—viz., the subject of partnership, and that of Joint-stock Companies. That was not an arbitrary distinction, but one which arose from the nature of the question and from the circumstances of human transactions. A partnership meant a number of persons associated, so small that they could communicate with each other upon every important transaction of the joint concern, and that each partner was therefore a party to every transaction of the partnership; while a Joint-stock Company, requiring the aid of the law for its constitution, was a body of persons associated for the same objects, but so numerous that it was impossible for them to communicate with each other; and, therefore, it was necessary for it to have an entirely different organisation. It would probably be admitted that in the circumstances of this country the Bill affecting Joint-stock Companies was the more important measure of the two. Some imputation had been cast upon the present state of the law, which it did not deserve. An hon. and learned Gentleman opposite (Mr. Malins) had stated that it was altogether discreditable to a civilised community; but, nevertheless, the principle of the law was extremely simple, and if it were not possible to adopt a measure which would establish limited liability by an Act supplementary to the existing law, instead of by one which would entirely subvert that law, he should not be so sanguine as he was of a satisfactory settlement of this question. By the theory of the present law, individuals might limit their liability as much as they pleased; but the country had never yet instituted any mechanism by which a Joint-stock Company could give a general notice that they elected to avail themselves of this privilege of the law. That was not a mere idea or theory, for it was acted upon every day by many of the most influential Companies in the City of London. The Insurance Companies all acted upon that law, because, from the nature of their business, it was possible for them to enter into a separate written contract with each of their customers; and there was, therefore, no difficulty in their applying the principle of limited liability to every one of their contracts. But in the multiform transactions of most other Companies it was impossible to give a specific notice to each customer, and therefore as the law now stood, in their case the principle of limited liability was practically inoperative. That was a state of things which they were now, he trusted, about to remedy, it was a very difficult question, and one quite sufficient to occupy their whole time and attention. What they had to do was to construct a system of specific notice by which every Joint-stock Company that desired to limit its liability should be able—not to give a separate special notice to each individual customer, for that had been proved to be impossible—but to frame a general form of notice which should be understood to operate, and which should secure to them all the benefits resulting from limited liability. The mere statement of that fact would prove to the House the difficulties that had to be encountered; for it was obvious that a general notice—unless very careful provision were made—would not come home to the individuals concerned, and they would suffer from want of perception of the notice. The question then was—what form of notice would be adequate? He felt bound to make some explanation to the House on that particular point, because, at the very commencement of the Session it had been his duty to introduce a Bill on the subject which agreed with the Bill of his right hon. Friend in some respects, but presented some points of difference, which he hoped would meet with consideration, in order that the Government Bill might be rendered as perfect as possible. In the first place, if the titles and official documents of the Companies included the word "limited," that would at least be a clear notice to persons dealing with them that they proposed some limit to their liability; and, with respect to negotiable paper, he would suggest that if acceptances or endorsements terminated with the words "limited liability," ample notice would be given to persons discounting such paper that there was some limitation to the credit which the bills demanded. Then came the question of fixing the quantum of the liability. Registration at the offices of the Joint-stock Companies and publication in the Gazette which circulated through all the commercial portions of the country would afford the greatest information; and, if the hon. Member for Kendal (Mr. Glyn) said they cast upon the traders of the country the necessity of going to look at the register, the answer was, that it was for the advantage of themselves and the Company that persons discounting Bills should know the particulars of their expenditure and income, and be enabled to satisfy themselves of the position of the parties who rendered themselves liable. The name of Mr. John Stuart Mill, who was a man of very great eminence, and who had taken much interest in the subject, carried with it such weight, that when they were considering changes of this description in the law, it might be well to know how far they were sustained by his authority. There was no point on which commercial men more agreed than in the necessity of keeping up the capital of a Company when once subscribed, for, if they dispersed the capital as soon as raised, they would run the risk of creating fictitious credit, and it was to avoid that difficulty that one gentleman suggested that the Board of Trade should audit the accounts of every Joint-stock Company in the kingdom; but Mr. Mill was of opinion that all Joint-stock Companies, with limited responsibility, should have the capital on which they professed to carry on business actually paid up, or security given, and also that the accounts should be accessible to individuals, and, if needful, be published to the world. He remembered being present at a remarkable trial some years ago at Liverpool, relating to one of the Manchester banks which had failed, and occasioned the greatest misery among a large number of persons. Nothing could have been more flourishing, however, than the accounts of that bank. He feared that any person who trusted to the published accounts of a bank trusted to that which was worse than worthless, because it could do nothing but mislead; and he believed that any system of publishing accounts or of compulsory audit of Joint-stock Companies would be altogether useless, if not eminently mischievous. A great security, however, would be afforded if they followed the course which was now taken by the Treasury in granting charters to Banks in the Colonies. A person becoming a shareholder might be liable for as much as he chose—he elected his own liability; but when was the period when that liability should come into operation? Clearly, his liability was not wanted when the concern was commencing, but it was useful when the concern met with a catastrophe and the creditor desired his responsibility. Then there was another difficulty to be guarded against; a shareholder would know when the Company was likely to become insolvent, and, being aware that he would be liable at the time of the catastrophe, he would make over his shares and his liability with them to a man of straw. The existing law provided, however, that he should continue liable on the amount of his shares in a secondary degree for a certain time after he had parted with his shares; and that was a provision which ought to be continued, although possibly three years after he had parted with them was rather too long a period. The Bill, therefore, which would embody the provisions to which he (Mr. Cardwell) had referred would enable all persons associating themselves in a Company to obtain limited liability upon complying with certain simple and intelligible conditions. In the first place, the name of the firm should indicate that it was a limited liability Company; in the second place a published list at the registrar's office and in the Gazette should show the quantum of liability of each partner; thirdly, when a Company failed to meet its engagements, every person should be liable for the amount for which he was entered; and, lastly, every person should be liable for a limited period after he had parted with his shares. Instead of those safeguards, the proposed Bill provided that the capital of every Company which came within its operation should be of the nominal amount of 20,000l., that the subscription contract should be signed to the extent of 15,000l., and that 20 per cent. of that amount, or 3,000l. should be actually paid up. There were, however, numerous objections to those provisions. In theory there was this manifest objection, that it was not right to give a legal privilege to 20,000l. which was refused to 19,000l.; but it was not more objectionable in theory than he believed it would prove to be in practice. The object, of course, was to include none but respectable Companies, and it was supposed that a capital of 20,000l. would insure something like respectability; but he believed there were many Companies in rural towns for small purposes—such as gas works and local improvements which, if they raised themselves to a nominal capital of 20,000l., must evidently do so with the sole object of availing themselves of the privileges of the proposed Bill, inasmuch as so large a sum would never be required for the legitimate purposes of the Company. But take the case of a set of swindlers engaged in a fraudulent Company desiring to avail themselves of the benefits of the law at the same time that they evaded its provisions: all that they would have to do would be to sign their names at the registrar's office for 15,000l.; to obtain for a temporary purpose the sum of 3,000l., and their object would be gained. Another provision of the proposed measure was that when a certain amount of capital was lost the Company must wind up. If it were a bonâ fide Company, it appeared to him that the provision was unnecessary; but if it were a fraudulent Company, seeking to evade the law, how long would it be, he asked, before they would appoint auditors who would show that three-fourths of the capital had been dissipated, which would thus occasion them to wind up? For himself, he believed that the true principle was to be found in an elastic law, which, fixing the liability of the individual at a time when the concern in general failed to pay its debts, should tell a simple story to the public, and should enable the public to examine the list at the registrar's, to see who the persons were, and how much they were liable for, and, if they liked the names, to proceed against the men. He wished now to say a word with respect to the exemptions contained in the Joint-stock Companies Bill. He did not see why Insurance Companies should be exempted, seeing that they were the only Companies to which it was a matter of perfect indifference whether the Bill passed or not. They could do already what the Bill enabled them to do; and, for the sake of harmony in legislation, he thought that it was undesirable to make an exemption in their favour. With regard to Banks, the case was different. They were not under the control of the Board of Trade, but of the Treasury. It was natural, therefore, that his right hon. Friend should have exempted them, and he (Mr. Cardwell) thought, if the House should succeed in settling this Session the whole of the law in relation to those Joint-stock Companies which were under the control of the Board of Trade, it might be prudent to wait for another Session, when they would have the experience of the present Bill to guide them, before calling upon the Treasury to apply the same law to Banks. He now came to the other measure—that with regard to partnerships—which he considered to be of very subordinate importance to the one which he had just been discussing. The hon. and learned Member for Walling-ford (Mr. Malins) objected to there being a registration of any of those who came in to make privileged loans. This reminded him that his right hon. Friend (Mr. Bou-verie) had appealed to the example of France and America to show the salutary working of limited liability; but he thought, if the evidence taken before the Commission were to go for anything, that it was by no means the result of universal experience that the law worked well in those countries. Mr. Slater, a gentleman of great legal as well as commercial ability, had stated that it was by no means certain that the system had worked in so satisfactory a manner as was generally supposed. To establish a principle which in reality would be one of special loans without registration would be to enable men to play at the game of heads, I win—tails, you lose; for any man could enter a partnership and receive all the profits until the concern began to break, and could then emancipate himself from all liability. He would impress upon the House that, when they were about to change the commercial law, and to follow the laws of countries which had not enjoyed such a high degree of commercial prosperity and reputation as this country had enjoyed, it was of the utmost importance to consider what was the operation of the law in those countries, and not to follow it without seeing if part at least of it had not been matter of regret to its framers, and to those who adopted it. A reference had been made to Massachusetts, but, with regard to that state, Mr. Slater stated that limited partnership did not prevail there to any very considerable extent. The hon. and learned Member for Plymouth (Mr. Collier) had called the machinery of the Bill before the House a defective application of the French law; but, in his opinion, instead of being a defective application, it was a decided improvement, for the French law contained provisions with regard to bankruptcy of a character so severe that they could not be tolerated by the Legislature or by the feeling of the people of this country. As to the law of commandite, perhaps the House would allow him to point out what it originally was. It was not originally a law of partnership, but more resembled a law to regulate loans. It was originally introduced at the time of the Crusades by the commercial people on the shores of the Mediterranean, and he believed that the first record of it was to be found in the Statutes passed for the government of Jerusalem. Until the year 1673 it was a system of loan, and then it was incorporated into the French law, and afterwards found its way to Louisiana, and to some of the northern States of America; but it was in its passage through France that that which was originally a system of loans acquired the character of a law of partnership. The House should not lose sight of the fact that in the French law the law of partnership did not stand by itself but was contained in the general system of law, and therefore, if the French law of partnership were adopted in this country, to interpret it by the general principle of the law of England would be impracticable. The security to the creditor of the system now proposed was in the registration; for if a person were allowed to advance money, and to say you have repealed your usury laws, and if I may lend money at an extortionate rate of interest, why may I not as well lend money to a concern at a rate of interest fluctuating with its profits, what would be the consequence? Persons might advance money to a concern to an extent that would make them the chief persons interested. He would put a case to the House. Suppose a house in London desired to establish a speculation in some out port, and sent a man of straw there, providing him with a sum of money to enable him to acquire credit in the district. He was aware that it was said that the credit of any one was derived from his mode of carrying on business, but the mode in which a man carried on his business depended upon the capital which he had at command, and a person sent to any place in the way he had mentioned might be furnished with capital quite sufficient to enable him to acquire a large amount of credit. It might so happen that, in such a case, the London house might receive profits larger than the original advance, and if after that the concern began to fail, they might withdraw without incurring any liability; surely the House would not sanction such a principle as that. In dealing with this question the House should remember that, however well various systems had worked in other countries, there was not in the world such a cumulus of commercial prosperity, or such commercial credit, as there was in England, and they should be particularly careful that, in breaking down the barrier between labour and capital, and enabling the poor and enterprising to better their condition, they did not, at the same time, by neglect of simple precautions, undermine the foundation of that prosperity and of that credit which, whatever good it might do to the rich, did still more for the poor, the enterprising, and the industrious,


said, he considered that there was a broad distinction between the question of limited liability and that of amending the law of partnership. With regard to the question of limited liability, he would very briefly state his opinion to the House. If a project were formed to carry out what would require 100,000l. and 100 persons joined together and made up that amount, each of those persons would only be entitled, in the event of the project succeeding, to a profit upon the 1,000l. which he had advanced, and therefore it did not appear to him to be just that, in case of the failure of the project, he should be liable to lose more than the sum upon which only he could receive a profit.


said, that, although the question had reached its twenty-first year, he saw many symptoms which showed that it was still only in its infancy, and the proof of that was that no hon. Gentleman who had yet addressed the House had ventured to follow out his own principles to their logical conclusion. That, however, was a symptom with which we were familiar in all cases. People took a principle, the abstract truth of which they adopted, but shrank from the application of that principle, introduced all manner of exceptions, and cut it down until you could not tell whether they most trusted or distrusted it. As an instance of what he had stated he might refer to the speech of the right hon. Gentleman (Mr. Cardwell), which, in the beginning, was very strong in favour of limited liability, but, at the conclusion, was equally strong against it, so that you could hardly tell on which side the right hon. Gentleman argued with greater cogency. Now, ho (Mr. Lowe) differed in opinion from every Gentleman who had addressed the House, but, though he thus differed from them, he should not have to seek for a single new argument in support of his views. He could cull them all from the speeches of those who had preceded him. First, as to the Partnership Bill of his right hon. Friend. It appeared to him I that that was a very simple matter. The question as to whether a man was to be allowed to lend money on the terms of receiving profits instead of interest was just a simple variety of the question the House settled last year when it repealed the Usury Laws. The House had found out that they must leave people to settle for themselves what rate of interest should be paid, and last year they consequently agreed to repeal those laws. But they had got into exactly the same question again now. The right hon. Gentleman (Mr. Cardwell) would not allow people to deal as they pleased on the footing of profits, because, he said, to do so would be to open the door to all sorts of frauds. That was exactly what people said about the Usury Laws. So with his right hon. Friend below him (Mr. Bouverie). He said, that Parliament had thrown open the usury laws entirely, and that there could be no reason why a man should not also be allowed to deal for any sum he liked, provided he would only fix the amount. Nothing could be more reasonable or proper, and he adopted entirely that principle; but where was the logic of his right hon. Friend when he came to apply it? His right hon. Friend drew between these two species of contracts, which he had just proved to be the same, the widest possible distinction, leaving one as free as air, while he loaded the other with every kind of restriction. His right hon. Friend asserted that it was quite a different thing whether you took profits or not; and then there was the hon. and learned Member for Plymouth (Mr. Collier), who said he would prove the difference, but who did not. The hon. and learned Gentleman said, the man who dips his hands into the profits ought to be made liable if the concern failed; but he ought to have gone further and to have said, the man who dipped into profits as profits, because the person who lent money at 50 per cent ranked pari passu with the other creditors if the concern failed, whereas a man who lent money on the profits, it might be only at 10 per cent. was postponed to all the other creditors. Having first proved that the two cases were perfectly identical, his right hon. Friend proceeded to make a distinction between them wide as the poles asunder, and this showed what he (Mr. Lowe) called the infancy of the question. The best that could be said of the Bill now before the House was, that in the form in which it at present existed it would not work at all. They ought to stand on some principle or other, and he thought they should consider this a branch of the usury laws and should leave private persons to deal with it as well as they could. With regard to the other Bill, he was not going to argue the propriety of a limited liability in partnership; he took that for granted; but it was necessary to inquire on what principle they founded their adoption of limited liability. This principle he took to be freedom of contract—that men might contract as they pleased, provided it was a contract in which each party had a perfect knowledge of the whole state of the case. That was the principle upon which limited liability was based—the right of association and the freedom of contract. All they had to do, then, was to insure that persons should know on what grounds they were contracting, that they should have complete notice of that, and then he contended that people should be left to act as they pleased, without being fettered in any way. But was that principle carried out? Was not the Bill encumbered with all manner of restrictions beyond that particular one? Why limit it to Joint-stock Companies, and partnerships consisting of twenty-five, or five, or twenty, or any number? Why limit it to capital of any particular amount? Parliament did not do so with partnerships of unlimited liability. In any such case they left people to do as they pleased; and why should they make such a restriction here? The only difference between the two cases was that with regard to unlimited liability you knew that you had to deal with a man liable for all he was worth, while in the other case, the individual was only liable for that which he had guaranteed. Now, all you wanted to know was the sum for which persons professed to deal—whether it was for all they were worth, or merely the amount of their guarantee; and, when that was known, the difference between the two kinds of lability ceased altogether. He did think that the Bill was not a very creditable specimen of the manner in which they legislated in this country. Parliament was always accused—perhaps with too much justice—of passing one law for the rich and another for the poor; and why was it in this instance that they had a law which gave to the rich an enormous advantage which they withheld from the poor? Had any hon. Gentleman that evening given a shadow of a reason for conferring on a Joint-stock Company an advantage which was not given to a grocer's shop? There was no real distinction between the two cases. He was surprised to hear the hon. and learned Gentleman (Mr. Collier) talk about their marrying labour and capital by the adoption of the proposed Bill. It was exactly the fault of the measure that it did not attempt to do that. It certainly favoured large applications of capital, but the aggregation of labour and capital was not aimed at at all.


said, if the hon. Member (Mr. Lowe) were let alone, as he said he wished to be, he could not practically carry out limited liability. When Parliament was asked to confer a benefit, it had a right to impose such terms as it thought to be demanded by a regard to the public interest. On that ground alone could the provisions as to registration, capital, and persons contained in the proposed Bills be justified. The object of the Bills now before the House was to give to the mercantile community a legislative declaration that a particular process should act as a notice with regard to all partnership contracts that might be entered into. If the interference of the Legislature was not required, all the discussion that had taken place upon the subject would be useless; but if the interference of the Legislature was required, then it was perfectly fair for Parliament to impose upon, as the condition upon which they would grant the benefit asked for, such terms as might be thought best calculated to promote the public interests. He believed that the House were almost unanimously agreed as to the propriety of reading the Bill a second time, but he trusted that, after they had been read a second time, the Government would proceed with them as speedily as possible, in order that the larger and more important Bill at least might pass into law that Session. He knew of no social question so important to settle as that which was now brought before the House. A stop had virtually been put to the granting of charters by the Crown on the advice of the Board of Trade, because it had been justly considered that the shades of difference between the cases in which a charter ought to be granted and the cases in which it ought not to be granted were so small, that the responsibility of deciding between the two cases was one that ought not to rest upon the Board of Trade. A return was made last Session of the applications which had been made for a charter, and the instances in which they had been granted, from which it would easily be seen that the Board of Trade had got into great confusion upon the subject. In some cases in which a charter was granted there was no evidence that it was granted to promote objects of public utility, and the capital in several instances was of the most insignificant and miserable description. But a stop having been put to the granting of a charter, the public required some measure which migt be substituted in its place, and, in order to meet the wishes of the public, the two Bills now before the House had been introduced. With regard to the first and more important of the Bills, he thought the basis of the measure was not sufficiently broad, and that, if the right hon. Gentleman persevered in the limitation which had been fixed with respect to the registration of Joint-stock Companies, he would only be offering an inducement to companies, smaller than the fixed limit, to avail themselves of the provisions of the Bill, by fraudulently establishing a limit that would come within those provisions, and then subsequently changing it. Then, again, he objected to the Bill because, though it provided that a certain amount of capital should be paid up on the various shares, no security was given to the public, when a crisis came, that anything would be forthcoming in the shape of assets to answer the demands made upon the Company, He thought that the public ought to have security at the time of the crisis, and not at the time of the formation of the Company, as was recommended by the right hon. Member for Oxford (Mr. Cardwell). It would be quite idle to make a provision for the paying up of capital, because there were means innumerable by which capital might have the appearance of being paid up when it was not really paid up. If the right hon. Gentleman (Mr. Bouverie) would consent to adopt as a security for the public the principle that when a crisis came the capital should be forthcoming, he would avoid many difficulties which would attend the measure as it stood at present. With regard to the second Bill, he thought that certain alterations and extensions introduced into the larger measure would render it altogether unnecessary. If, however, the second Bill were proceeded with, it would require some modification, as at present it contained provisions which would create considerable discussion and would render it almost impossible to pass the measure this Session.


said, though thinking that the measures were not founded on a sufficiently wide basis, and did not fully carry out their principle, yet he rejoiced that a step had been made in the advancing of a great people, and was willing to accept them as an earnest of what might follow. The principle of the Bill might be traced to the Roman law.


said, he was one of those who had taken exception to the abstract Resolution adopted by the House on the subject last Session, and he had done so mainly because the evidence taken before the Commissioners and their Report, by which the House was expected to be guided, at least to some extent, had been only a few days in the hands of hon. Members. The Bills had been described as a concession to popular feeling, but he believed that a majority of the commercial community of the country were opposed to their principle. For his own part, he approved, to a great extent, the Bills, but he thought if the right hon. Gentleman the Vice President of the Board of Trade would take into consideration the views which had been propounded by the right hon. Member for Oxford (Mr. Cardwell) he would meet the wishes of all parties by adopting in the present Session the Bill relating to limited liability, and allowing the other Bill to stand over until the next Session. He must say, in justice to the important commercial community he had the honour to represent, that the general question of limited liability had been fully, fairly, and openly discussed at a meeting of the Liverpool Chamber of Commerce, which, after a protracted discussion of several days, came to a decision adverse to the principle of the Bill by a majority of about 200 to 100. The strongest protest against the principle of the Bill that he had seen was contained in a petition which had been presented to the House from the Manchester Chamber of Commerce. The Bills, therefore, were not to be regarded as concessions to any clamour on the part of the commercial interests of the country.


said, the discussion had shown that the House was not in a position to legislate upon the subject without a great deal of care and inquiry. He hoped this country would never lose the vantage which it possessed arising from the high character of its merchants, which they had earned by their honourable dealings, and by their never having sought for a limitation of liability which should enable them to make large fortunes at the expense of other persons. It had been stated that some of the American jurists were in favour of the principle of limited liability, but he could cite the names of others who were opposed to it. He hoped that if the Bills were referred to a Committee upstairs, Amendments would be introduced which would render them less objectionable than he now considered them to be.


said, he entirely concurred with those hon. Members who had said that the Bills were not concessions to popular clamour, for they were concessions to the progress of enlightenment upon questions of domestic, social, and political economy. They were, indeed, in perfect accordance with the real principle of the existing law, for, as they had heard from hon. Gentlemen who were thoroughly conversant with the subject, the principle of the present law, if it were properly carried out, would enable parties associated together to protect themselves by a limitation of liability. He thought the general concurrence of opinion which had been expressed by those who had taken part in the debate as to the expediency of the principle of the Bills was highly satisfactory. Some hon. Gentlemen thought the Bills were fenced round with too great and unnecessary restrictions. He confessed that in dealing with a subject on which there existed, he trusted he might say, without offence, great and strong prejudices, the Government had surrounded the measures with restrictions and limitations which, in other circumstances, their own views might have led them to dispense with. But their great object was to pass the Bills, and it was of infinite importance that they should be passed into a law in the present Session if possible. He would urge upon those who thought they had not gone far enough in the way of giving perfect freedom to trade, to concur with the Government in making some sacrifice by not pushing to an extremity their just and theoretical opinions, for the purpose of obtaining a law on this subject, without any further delay. They were told they ought to be cautious, because this was a subject that had occupied the attention of Parliament for upwards of twenty years; but surely if they had been upwards of twenty years without doing anything on the subject, it was now high time that they should do something. He knew there were Gentlemen whose opinions were entitled to the greatest weight who still clung to existing prejudices on this subject; but all improvements had been met by opposition on the part of persons whose station and influence entitled them to great deference and weight, and if no improvement was ever made till everybody was unanimous in supporting it, he was afraid the progress of human society would be slower than it was desirable it should be. He hoped therefore that the Bills would receive the attention of the House in Committee, and if any hon. Gentleman should propose improvements in them, or should be able to point out better methods of carrying out the principle on which they were founded, the Government would be perfectly ready to give such propositions their most deliberate attention. The right hon. Gentleman the Member for Oxford (Mr. Cardwell) seemed to think that the limitation of 20,000l. was too great, but that was a matter of detail for the Committee. He must express his satisfaction at finding that the general principle of the Bills was agreed to by so large a majority of those who had spoken, and that those who had expressed doubts on the subject had applied those doubts rather to particular details than to the principle of the measure. It appeared to him that the question was one between free trade and the contrary, and that the practice of insisting on unlimited liability was one that had impeded the application of capital that might otherwise have been employed for the advantage of those who would have subscribed it, and for the improvement of the country at large. He anticipated therefore great advantage, both socially and commercially, from the passing into law of these measures.


said, that instead of regarding the proposed measure as a march in advance, as the noble Lord seemed to think it, he looked upon it as a march of retrogression. No country had ever risen to the commercial eminence which that country had acquired, and that was not the result of limited liability, but quite the reverse. France had been referred to by the right hon. Gentleman the Vice President of the Board of Trade; but he told them that the Returns of 1852 showed that there were 2,000 partnerships registered in France which had not limited liability, and that there were only 400 with limited liability. That, he thought, showed that the system of limited liability created discredit in France. To justify his measure, the right hon. Gentleman should have shown that there was a deficiency of capital to carry on the commercial interests of the country; but he could not show that, the fact being quite the reverse. Those nations that had limited liability were forced to come to this country for credit when they wished to buy the goods and produce of foreign nations; and he maintained that to introduce the system into the United Kingdom, would go far to destroy that credit which it had uniformly sustained. Indeed, to set up limited liability would be, in his opinion, neither more nor less than to introduce a licence for swindling. In America, France, Italy, and those other countries in which the system prevailed, it was the uniform source of deception.


said, he must deny that the system of limited liability led to deception in America, and his conviction was, that the operation of such a measure as that now proposed would be extremely beneficial to the commerce of this country.


said, there was a very strong feeling in Liverpool in favour of limited liability, and he hoped that the measure would be carried through both Houses of Parliament during the present Session.


said, he had come down to the House determined to oppose the Limited Liability Bill, but was reconciled to it by the excellent speech of the right hon. Member for Oxford (Mr. Cardwell), and by the announcement of the Amendments he proposed to introduce. He therefore trusted that full time would be given to the commercial community to consider the Amendments before the Bill should be discussed in Committee.


said, that he only intended to commit the Bill on Monday pro formâ, for the purpose of introducing Amendments.

Motion agreed to.

Bill read 2°, as was also the Limited Liabilities Bill.