JOINT-STOCK COMPANIES ACTS AMENDMENT BILL—COMMITTEE. (Hansard, 17 June 1858)

MR. WILSON
said, no general statement had been made of the objects of this Bill, but as he understood the law, there were at present two modes of winding up joint-stock companies; one compulsory, through the agency of the Court of Chancery, and the other optional, by the creditors themselves. But then, he believed it was provided by another measure, that the optional mode might be rendered compulsory by going into the Court of Chancery. If he understood rightly there were different views as to the legality of that proceeding; and the object of this Bill, he believed, was to clear away those doubts by stating the means by which the optional process of winding up should be rendered compulsory through the Court of Chancery.

THE SOLICITOR GENERAL
said, this Bill was read a second time at a very late hour in the evening, because it was considered desirable that there should be no delay in the legislation of the House on the subject, and therefore no explanation of the measure had been given. The circumstance which led to its introduction were shortly these. The legislation of this country in reference to joint-stock companies was by no means in a creditable state. There were a number of Acts in existence which were not b altogether consistent with one another, and difficulties had occasionally arisen in consequence of the extent to which the contradictions went between them; but he hoped that another Session would not elapse without every one of those Acts being swept away, once and for all, and one general consolidated Act passed in their place, which creditors and shareholders would be able to read and understand without having to arm themselves with a number of small volumes for the purpose of searching out what was the law on the subject, and perhaps after all take a view of the law, which upon going into a court of justice they found was altogether incorrect. The immediate object of the clause and of the measure was this. In the Act of 1856 certain clauses were introduced which enabled the companies to whom that Act was applicable, when they got into difficulties to wind themselves up by a voluntary process, and that was a very convenient 2272 process so far as the shareholders were concerned. So long as the matter rested with them alone they might ascertain their liabilities, make contributions, raise as much money as was necessary to pay off their creditors, and so close up and liquidate the affair. But then the difficulty arose, that a creditor might not be content with that process and might desire to come into court and have a compulsory winding up over which he would have some control. The Act of 1856, therefore, left matters in this position, that they must either have a compulsory winding up, in which the creditors had nearly all the control, or else a winding up that was purely voluntary, and which might be superseded any day by an application on the part of a creditor for a compulsory winding up. To remedy that state of things a short Act was passed in 1857, containing a clause which provided that where there was an incipient voluntary winding up, and a creditor applied for a compulsory winding up, and the court was of opinion that the voluntary winding up was a bonâ fide proceeding, and for the interest of the creditors and shareholders, and would be well conducted and worked out by the liquidators appointed by the shareholders, it had power to take into its own hands that voluntary winding up, and make it available for the protection of the creditors. The clause to which he alluded was the 19th, and upon reading it the hon. Gentleman would see that it was one of the most meagre description, and gave rather the idea of instructions for a clause to be hereafter drawn than of a clause itself. When therefore, companies which subsequently fell into difficulties endeavoured to avail themselves of the clause, they found that it was most imperfect in its operation; that it did not go far enough; and that it was rather a hint for a future clause than a clause which contained within itself the provisions which were necessary. Now, what the Bill before the House proposed to do was simply this. It supplemented that 19th clause in the Act of 1857, and went in detail through the various matters with which, in winding up, liquidators, creditors or shareholders had to do, and in every one of these cases it provided that where the Court had taken into its hands one of those voluntary proceedings in winding up a company, there should be on the part of the liquidator and the Court the power of completely exhausting the proceeding, compromising debts, ascertaining liabilities, and settling all suits and 2273 actions which might interfere with the complete liquidation of the company, and which would have existed had there been a winding up that was from the beginning compulsory.

§ SIR RICHARD BETHELL
said, the hon. and learned Gentleman had given a correct explanation of the object of the Bill, and it was not his intention to oppose it, because he regarded it as an unfortunate but necessary result of past legislation. It was a result, too, which would constantly occur until such time as Parliament should awake to the necessity of appointing some department to take a comprehensive view of legislation on such matters. Piecemeal legislation had taken place from time to time without reference to any general principle, and at present there were several winding-up acts which proceeded in parallel directions; but so great was the natural antagonism of the different processes that parties were obliged to go to one tribunal to accomplish one object, and to another tribunal to accomplish another. The fact was, that the whole state of the law in reference to this subject was not only unworthy of the greatest commercial community in the world, but was really unworthy of any body of men who conceived that the administration and improvement of the law were among the first duties of the Legislature. He would recommend the establishment of one general tribunal armed with all the powers now possessed by different tribunals for the disposal of these cases.

§ MR. AYRTON
said, that as he read the clause its effect would be to compel the Attorney General to establish a sort of State prosecution against the directors when any creditor required it. Considering the great expense of these prosecutious, as had been evidenced in a recent case, which was said to have cost £10,000, he thought that the Bill should not render it compulsory upon the Attorney General to undertake them, but that the matter should be left to be dealt with in ordinary course of law.

THE SOLICITOR GENERAL
said, that the clause did not make it compulsory on the Attorney General or the Court to undertake these prosecutions. On the contrary, it left it entirely in the discretion of the Court to say whether the 2274 offence which was laid to the charge of any director, manager, public officer, or member of the company was of so grave a nature that a report of it should be laid before the Attorney General, in order that proper proceedings might be taken for its punishment. After the laying of such report before the Attorney General that officer would be responsible for the prosecution if it were undertaken.

§ MR. AYRTON
said, in charges of perjury the Attorney General did not prosecute; the Judge sent the case to a police court like ordinary cases, and instead of costing thousands of pounds it only cost a few pounds. His objection was to those being made State prosecutions.

§ MR. MALINS
suggested, that this clause should undergo further consideration, and that shareholders and liquidators should not have the power given them of rushing into criminal proceedings. Where fraudulent acts had been committed—where, for instance, dividends had been declared when there were no profits, and directors went to work systematically to deceive those who had entrusted their interests to their care—no doubt there ought to be a short inexpensive proceeding by which such men might be brought to punishment; and it would be a great national calamity if that end could not be obtained without such cumbrous proceedings as had been instituted in the case of the British Bank Directors. It was a disgrace to the administration of justice in this country that in a case so simple it became necessary to spend as much as £10,000 to convict men who had been guilty of declaring a dividend of 6 and 7 per cent at a time when they were struggling with difficulties, and did not know from day to day that they would be able to open the bank again. The proceedings ought to be more simple; but as they were not, he would not consent to trust shareholders, or liquidators, with the absolute power of deciding whether there should be a criminal prosecution or not. It would too frequently happen that they would be disposed to institute prosecutions with a view to obtaining costs rather than bringing delinquents to justice, and he would recommend, therefore, that the clause should either be further considered on the next stage of the Bill, or that it should be so altered as to place those prosecutions under the control of the Court.

§ SIR RICHARD BETHELL
said, he was not aware of the expense of the proceedings in the case of the British Bank, but he had to observe that that prosecution had taken place under the old state of the law, but that under the, he hoped beneficial, Act which he had brought in, and which was passed in the last Session of Parliament, the cumbrous proceeding by indictment for conspiracy would no longer be resorted to. Every step, however, in connection with that prosecution, was taken under the immediate direction of eminent Members of the late and present Governments, and he believed no expense was incurred beyond what was necessary to ensure a conviction. He approved the suggestion of the hon. and learned Gentleman that no prosecution of such a nature should be undertaken without the previous sanction of the Court.

MR. BRAMLEY-MOORE
said, he thought liquidators ought not to have the power of instituting prosecutions against delinquent directors, for a colourable prosecution might be got up and the guilty parties might escape. Neither did he think that the expense should be paid out of the funds of the company. He thought it would be as well if the clause were omitted.

§ MR. ADAMS
said, he thought it would be an unsafe power to leave in the hands either of liquidators or of a meeting of shareholders. The difficulty might, however, be removed by adding to the words, "It shall be lawful for the liquidators," the words "after they have obtained the sanction of the Court, as provided by section 13 of this Act."

The SOLICITOR GENERAL
—The hon. and learned Member for the Tower Hamlets (Mr. Ayrton), has suggested upon Clause 19 that some less expensive and solemn mode of instituting a prosecution of this kind than through the medium of the Attorney General might be adopted. Now under the Bankrupt Act there was a less formal and expensive mode, and the Court might direct a prosecution of a bankrupt for any of the offences therein specified. Upon the next stage of the Bill, therefore, he should propose that the nineteenth clause should run something like this:—That it should be lawful for the Court, on application, to direct the liquidators to institute and carry on a prosecution for any of those offences in a manner similar to that which was provided in the Bankrupt Act. With regard to the clause now before the Committee, he agreed that it would be unde- 2276 sirable to trust to a general meeting of shareholders the power of sanctioning or refusing such prosecution. Therefore, in line 42, he should propose to insert the words "it shall be lawful for the liquidators with the previous sanction of the Court."

§ SIR RICHARD BETHELL
said, that he did not think there was any necessity for its retention.

THE SOLICITOR GENERAL
said, that as he believed that the object sought to be obtained by this clause was secured by clause No. 5, he would agree to its being struck out.