said, he wished to ask the President of the Board of Trade, Whether he purposes to introduce into the Joint Stock Companies Act of 1862 such modifications as will enable Limited Liability Companies prospectively to reduce their nominal capital, and proportionally the denomination of their shares, reserving all the rights and securities of existing creditors?
§ MR. MILNER GIBSON
did not understand whether his hon. Friend intended his question to apply prospectively?
§ MR. MILNER GIBSON
said, he had formerly introduced a Bill, enabling companies, without diminishing their capital, to divide that capital into a greater number of shares. It was thought that creditors would not be prejudiced by such subdivision, and that it would enable companies to have a larger proprietary without any diminution of their registered capital, in respect of which they were properly 500 responsible to creditors for any liabilities incurred. Unfortunately, that Bill was thrown out in the other House of Parliament. At some future time he hoped to be able to re-introduce it in perhaps rather an improved form. Indeed, some Amendments would have been proposed in the other House, if the Bill had gone on. One of these Amendments would have provided that notice should be given to the creditors of an intention to divide the shares, because it was contended that, though creditors would be nominally in the same position as to the fund available for meeting their claims, they might be put to additional expense in obtaining payment from a larger number of contributories than before existed. While a certain notice would thus have been provided for in the case of existing companies, it was thought desirable that in the case of future companies the memorandum of association should contain the words "with power to reduce the amount of their shares." His hon. Friend now said, "Allow companies by special resolution to alter their registered capital." Now, if provisions could be adopted which would be practically effective in giving to creditors the same security as they had when the liabilities of the company were incurred, one could see no objection to this proposal. But the question depended mainly on the possibility of thus practically protecting creditors, and as he confessed that, acting under the most competent advice, he did not see his way to the framing of such provisions, he must decline to go to the extent proposed by his hon. Friend, and allow companies to reduce their capital. When the Joint Stock Companies' Act was passed it was distinctly laid down that, although companies might make such arrangements as they thought fit at the outset, two things especially must be declared in their memorandum of association—first, the amount of their requisite capital; and next, the division of this capital into a certain number of shares of a fixed amount. It was said that companies might re-constitute themselves, and divide their capital and shares as they thought fit. No doubt companies were in this way put to great inconvenience, and he should be quite ready to support any Bill which would enable them to do in a most expeditious manner what the law said they might do. As at present advised, however, he could not support any proposal for enabling companies to alter their original memorandum of association so as to reduce the capital regis- 501 tered, though he would allow them to divide that capital into a larger number of shares.