HC Deb 05 March 1867 vol 185 cc1370-87

MR. WATKIN moved for a Select Committee to inquire into the operation of the Limited Liability Acts. He defined them as the "Companies Act, 1862," and the "Partnership Act, 1865." The Commission appointed in 1854, to inquire into the law of partnership, reported that in their opinion the reputation of the British merchant at home and abroad would not be raised, but, on the contrary, might be lowered by the operation of limited liability. The question was one which not only affected special interests but the whole business operations of the country, and also involved the high credit which had hitherto attached to the commercial honour of the merchants and traders of England. The Act of 1862 per- mitted, for the first time, the application of the principle of limited liability to every form of enterprize. The Act of 1865 merely dealt with the relations of partners, and permitted those persons who chose to take a share of the profits of a business instead of a fixed interest to enjoy all the advantages of partnership without making the whole of their fortunes liable in the event of failure. Limited liability had been objected to on the ground that it established competition between a trader whose liability continued unlimited, and another who was able to place his affairs under the Limited Liability Act; that it gave the creditor permission to evade his moral obligations; and that, as a noble Lord in another place said, "it encouraged the demon of speculation." The old law of partnership provided that any combination of men, who went into business, were all liable for the operations of each other; the losses, profits, and mistakes of each partner were shared or borne by the whole. The modern joint-stock principle began by granting limited liability in special cases by Royal charter, letters patent, or special Acts of Parliament. In time the Acts establishing limited liability were passed, and much difference of opinion existed among well-qualified persons at the time as to the probable consequences. The author of the Law and Practice of Joint-Stock Companies, presuming that he was addressing those who might take advantage of the Act, sarcastically said— You are permitted to incur debts without limit, but to prescribe your own limit for payment of them. You may invest £20, and trade to the amount of £250,000; if you succeed, your profits will be enormous; if you fail you can lose only £20; the rest of the loss will fall upon creditors. You are placed by this law in the advantageous position of a man who has everything to gain, and nothing to lose … Again, you enjoy another privilege, greater even than that of speculating for unlimited profits with liability only for limited loss. As you are not liable for debts beyond your £20, so you are equally exempt from performance of inconvenient contracts. With limited liability you are enabled to refuse to perform your contract if the price has fallen, while the person with whom you deal, not being equally privileged with yourself, will be compelled to perform his contract, if it should be for your interest to enforce it. But Mr. Baron Wilde, a great legal authority, has said— It seems to me that the Act of Parliament is framed on principles on which the Legislature now constantly acts—that of making every one take care of himself, and giving the greatest possible latitude to the forming of companies. That is a sound principle. He (Mr. Watkin) presumed that meant that every man must take care of himself and act as he pleased, so long as he did no ill to his neighbour. He, however, was of opinion that Parliament should not lend its sanction to anything which permitted or facilitated deception or wrong-doing, and an enormous amount of wrong bad been done under the provisions of the Act of 1862, if not in consequence of, at least coincident with limited liability. Another distinguished gentleman, Mr. Charles Wordsworth, Q.C., had said, in 1865, in his work on The Law of Joint Stock Companies as Altered by the Act of 1862— The commercial problem of the day was, I think, to find the form of partnership with limited liability, which should unite large capital with unity and promptitude of action, and it has been found by Mr. Lowe and the authors of the measures of 1855 and 1856. He did not wish to question that; but he alleged that by some means the Act of 1862 had failed in the anticipations which were held out with regard to it, and that it had given rise to an amount of speculation unparalleled since the time of the South Sea bubble in 1720.

There were at present 2,200 joint-stock companies of all kinds in existence, having a nominal capital of perhaps £1,000,000,000, probably 750,000 shareholders, and 12,500 persons of another class which had grown up, and who were interested in them as trustees and directors; in fact, we were approaching the condition of things described by Dr. Channing, when writing many years ago of America. He said— One of the most remarkable circumstances of our age is the energy with which the principle of combination or of action by joint forces, by associated numbers, in manifesting itself. It may be said without exaggeration that everything is now done by societies. The number of joint-stock companies which started in 1863 under the Companies Act of the year before was 807; in 1864, it was 933; in 1865, 995; and in 1866, 745; making a total of 3,480 companies, representing no less than £706,000,000 of nominal capital. Of this enormous number twenty-seven were finance companies, with a capital of £40,250,000, of which £9,500,000 was paid up; seventeen were insurance companies, having a nominal capital of £11,650,000 and a paid up capital of £1,100,000; fifty-four were banks, with £90,000,000 of capital and £17,500,000 paid up; and six were discount companies, with a capital of £10,100,000 and with £2,200,000 paid up. Thus these four classes of companies alone had a nominal capital of £151,900,000, and a paid-up capital of £30,300,000. Turning to the other side of the account, he found that out of this group no less than £42,000,000 of nominal capital was in process of liquidation, and that, he thought, was a very significant fact. But he found the matter were a still more serious aspect. Overend, Gurney, and Co.'s nominal capital was £5,000,000, but when they stopped payment their liabilities were £24,000,000; so that the £42,000,000 of nominal capital now in course of liquidation must he small compared with the liabilities of those companies if represented on the day of their failure. Those liabilities might have been £100,000,000. He asked, therefore, whether it was not expedient to inquire into the operations of the Limited Liability Acts, with a view, if necessary, to improve their principle or machinery, or both. He had ventured last year to speak of the operation of those Acts as included in the large number of causes which produced the panic; he desired, however, to keep the two matters totally distinct for fear of confusion. Considering what had been said by the President of the Board of Trade last July, he thought the House had not been treated quite fairly. In reply to himself and those who supported his Motion for a Commission of Inquiry into the causes of the panic, the right hon. Gentleman said— If the Government were indifferent to the sufferings of the commerce of this country, no doubt they would be greatly to blame. If they were unwilling to investigate the possible application of remedies so far as these sufferings were occasioned or aggravated by legislation, no doubt they would be greatly to be blamed. In assuring the hon. Gentleman that the Government will look into this matter most carefully, and that it is their earnest desire, if possible, to legislate on the subject, or to invite the attention of the House to the subject at the first moment at which they can give practical effect to their views, which cannot be earlier than the commencement of the next Session, I would venture to press upon him the importance of allowing us time to legislate calmly; and, after due consideration, I would press upon him to withdraw the Motion he has now brought forward upon that assurance."—[3 Hansard, clxxxiv. 1741.] That promise had not been fulfilled. The Chancellor of the Exchequer said the other night that the Government bad no evidence to lay before the House, and did not intend to propose legislation, and all that he suggested was that it might be a convenient occasion for mixing up the question with an inquiry into the causes of the panic of 1866. He trusted, however, that if his present Motion were granted, the questions would be kept distinct. He could not allow the right hon. Gentleman to mislead him into mixing up this question with the larger and much more important one; but he hoped that an opportunity would be afforded to the House seriously to debate this most material question.

Of limited companies in liquidation, as it was called, there were at this moment no less than 266, representing a nominal capital of £100,000,000, and the shares of the rest of the limited companies were, for the most part, cither at a discount, or their operations were so circumscribed as to show that they were almost in a state of collapse. After four years' experience of the operation of the limited liability principle which was widely extended in 1862, the time had arrived, be thought, when the House might carefully review a law containing so much that was novel and experimental. Great evils had certainly followed the recent operation of the Act, and it was important to inquire whether these had arisen necessarily from the provisions of the measure itself, or from other considerations outside legislation. It should also be seen whether its very complicated machinery was adapted to the circumstances of the time, or ought now to be altered. Another matter provoking much unfavourable comment was the enormous amount of litigation connected with the winding-up of these companies and the vast number of Chancery suits which had grown out of the system. Occurrences which had cast the deepest discredit on the commercial honour of the country, and which outraged all that men were accustomed to value in the conduct of business, had become notorious, and the House could not long refuse to investigate, and, if necessary, to expose them. It was not, perhaps, to be wondered at that the largo business profits made in banking operations by the Bank of England, by several joint-stock, and by some private establishments between the years of 1844 and 1866, should have led many persons to think that, by engaging in similar pursuits, without the clog of unlimited liability attaching to private banks, they would be upon the high road to fortune. The course of legislation had afforded undue temptation to enter into speculations of the kind. He did not deny that some portion of this evil was to be placed to the account of the Act of 1844.

One of the things which this Act of 1862 permitted was extraordinary; the Act did not prescribe any minimum or maximum amount of shares, which might be issued at the nominal value of one farthing each, and the consequence was that any seven persons might subscribe a piece of paper, each taking a share merely to this nominal amount, and upon presenting a memorandum of incorporation to the Registrar who was bound to register it, the company might be constituted, and the statement might be made that the capital of the company was £500,000. Mr. Wordsworth gave an account of the law as existing upon this point, which would hardly be credited if asserted of any other country. The statute, he said, does not prescribe any minimum or maximum amount of a share, and it is a fact that shares may be issued of the nominal amount of a farthing each. The statute grants incorporation—that is, makes the members a body corporate in perpetuity, which there is no power to dissolve unless it gets into difficulties and is subjected to winding-up. The result is, that any seven persons may subscribe a piece of paper, each engaging to take one share only of the nominal amount of one farthing, and thus by presenting the paper (called "Memorandum of Association") to the Registrar of Joint-Stock Companies become entitled to a certificate which incorporates the company in perpetuity. There is no power in the Registrar to refuse a certificate. The same memorandum so signed and thus framed may at the very time contain a statement that the company's capital is £500,000. This seems an absurdity, but the law is so. The amendment required would seem to be to fix a minimum sum which each share is to represent, and a minimum number of shares to be held by every person signing the memorandum of association. This is the more reasonably necessary, because the parties so signing and having so little interest in the concern may advertise to the world that it is a company with £500,000 of capital. The absurdity is still greater when it is considered that by the law, as it stands, the same seven persons, each having one share only of a farthing, are the directors of the concern, unless there are articles of association (in conjunction with the memorandum of association) providing otherwise, and may the very next day transfer their shares and yet remain directors. There is nothing in the Act to the contrary, They may also borrow as much money as they please. [An hon. MEMBER: If they can get it.] Difficulties at present would be experienced, no doubt; but till very recently, what with the system of deposits and the high interest allowed by finance companies, directors not only could but did borrow money very largely. But, further, the law required that the capital of a limited company should be stated in its memorandum of association, and allowed that capital to be increased, but prohibited any other alteration of the memorandum. There was consequently no power to diminish capital, or reduce the shares without winding up. There ought to be a provision to meet this difficulty. Tate the case of a £50 share, upon which the holder had paid £5; although the necessities of business might require only a further payment of £20, yet he would have the remaining liability of £45 hanging over his head, and the result was that capital had to be kept in reserve which might have been employed for useful purposes thus capital was kept locked up, and uncertainty was extended. All this showed the necessity of an inquiry into the operation of the Act, to see if protection could not be introduced, and alterations in the machinery made, which would prevent the recklessness, wrong, and abuse which resulted from the operation of a system founded on a principle essentially sound. It was a question whether the principle could not be so modified, as, for instance, by the adoption of some of the provisions contained in the French law, that its working might be rendered just and equable. A great defect in the principle now adopted in English operations was that the managing partner upon whom the great responsibility rested had no interest distinct from those of the sleeping partners. In France the combination of the principle of limited with unlimited liability was very effective. The person who was commandite was under no liability except to audit the accounts, whereas the commanditaire, a person who took the most active part, was under unlimited liability. But the moment the person under limited liability in France interfered actively in the concern, and took any part in the operations of buying and selling, his position changed, and with it the extent of his liability. The promoters of those companies did not ordinarily put all they had into the concerns, and therefore the breaking up did not involve the ruin of those parties; but persons who led others into such speculations were bound to do all in their power to save those who had invested on their advice. It was notorious that a great number of concerns, which had been rotten from the first, were floated in the market entirely on false representations. Such things could not happen if the directors and promoters of these companies were under unlimited instead of limited liability. He did not mean to argue that in many cases very good results had not followed from unlimited liability. He had recently received a letter giving details of the operation of a limited company whose works had been carried on with such success that, after large profits had been made, an adjoining property was purchased. In this case the purchasers would not have gone into the affair at all, except on the principle of limited liability. The letter stated— Some years ago, Mr.—,an eminent coal master in South Wales, died. He had with great care, and during many years, brought his collieries into such a state of working as to be capable of yielding large annual profits. He had previously been obliged to expend large sums and take great trouble to make the produce of his collieries known and appreciated in all parts of the world, and was about to reap the fruit of his arduous labours when he died. The business was left to his three sons, of whom one only took an active interest in the colliery. The difficulties of distribution of property and the unequal interest taken by the sons soon made it necessary to realize the estate, and I doubt very much whether that realization would have proved beneficial to the family. After some attempts to value and distribute among the parties, Mr.—,of—,the eminent colliery engineer, was called in, and he valued the colliery at £300,000, and found parties who were willing, on the principle of limited liability, to become purchasers of the concern. The purchase money was spread over a period of years, so as to make the payment easy for the new proprietors. The company has been eminently successful. They paid their first instalment out of their subscription, and I am informed that the whole of the other instalments, now amounting to nearly the whole sum, will be paid out of current profits. Besides this, they have purchased large adjacent properties—and given in one instance £125,000. You may take this, then, as an instance of the successful application of the principle of limited liability. I know the parties on both sides. It suited the vendors to find parties willing to buy, and the purchasers are perfectly satisfied with their purchase, but they would not have gone into it except on the principle of limited liability. He was far from wishing to be understood as expressing a general condemnation of that principle; what he contended for was that in the interest of the public generally the law required amendment. The abuse of the articles of association was very serious. When the case of Barned's Bank came before the Master of the Rolls it appeared that, after a recital of the various objects for which the company was formed, the articles had a recital to this effect:—"And for such additional or extended objects as the directors may from time to time decide on." Lord Romilly remarked that this was almost equal to a bank taking to brewing. Something should be done to lessen the difficulty, the litigation, and the costs connected with compulsory winding up. The law should be made more explicit, and greater power should be placed in the hands of shareholders and creditors. He found it stated that Vice Chancellor Wood in a late case, when refusing to convert a voluntary winding-up into a compulsory one, commended the discretion of the shareholders in voting for a voluntary winding-up. He said— He could not see that any course could be so beneficial both to creditors as well as shareholders (unless there were strong reasons to the contrary on the circumstances of the case) as a winding-up under supervision. By that means they would command as much of the control of the Court as could be wanted; they were able to submit questions of law to the judgment of the Court, and they were able to interfere instanter with the official liquidator if they thought the assets were about to be wasted; and it had always appeared to him that those persons who were interested in the concern—shareholders on the one hand and creditors on the other—must best know their own interests, and must be much better capable of managing them than the Court could ever be. Considering the weight of the applications that had been made to him with reference to the management of mercantile concerns, where he was in one case asked to authorize the advance of £200,000 by telegraph to India, he felt himself wholly incompetent to deal with such interests. Four courts were now engaged in the solution of questions connected with public companies, and their decisions had been by no means uniform. In some cases they had been conflicting. To the process of compulsory winding up there was attached an official called the chief clerk. His offices were crowded. His fees were very oppressive, but in that respect he was nothing to the official liquidator. Without mentioning names he might refer to the case of an important banking company, which, owing to misfortune rather than to imprudence, got into difficulties. After much struggling among the official liquidators, one of them succeeded in getting charge of the concern. After he had carried on operations for some time, the shareholders thought it advisable to re-construct the company. The official liquidator claimed a vested interest in it but ultimately, on putting his demand in figures, his bill amounted to £38,000, the concern having been five months in his office, and twelve clerks having been employed by him. It was to be remembered, too, that in all probability this official liquidator was engaged in a host of other matters, besides those of the bank, at the same time that the bill of £38,000 was being run up. He was informed by a gentleman of high reputation in the City that the cost of winding-up all the different companies which came to an end in that way last year was not less than £1,000,000. Some liquidators thought it their duty to get as much as possible for the creditors, while others believed that it was to the interest of the shareholders they ought to look. He was told that the new arrangement of paying the liquidators so much a day was not working in a manner satisfactory for either the creditors or the shareholders. As long as the liquidators had so many guineas a day, it was probable they would continue to find matters constantly arising which required great deliberation and grave consideration. He wished the House to consider the enormous amount of money which was kept in people's pockets and tills, because of the overhanging weight of uncalled capital which might be called for by these concerns. He hoped the President of the Board of Trade would give his attention to some immediate legislation whereby a company which had an overhanging liability of £1,000,000 when £500,000 was amply sufficient to carry on all their operations, would be allowed to reduce their liabilities by a simple resolution of proprietors, instead of by the process of winding-up, care being of course taken to provide for the rights of present creditors. Hitherto, the corner-stone of British commerce has been a feeling of entire reliance upon the faith and honour of the British merchant. It was necessary that events which had seemed to cast a stigma upon that faith should be brought to light, so that we might see who was to blame. He believed it would then be shown that the area of irregularity was very small, and that the evil approached with boldness might with case be removed.

Motion made, and Question proposed, That a Select Committee be appointed to inquire into the operation of the Limited Liability Acts."—(Mr. Watkin.)


said, he thought this was a peculiarly opportune moment for an inquiry of this sort. Our new law of partnership had lasted a sufficient time to enable us to judge of its character and results, and, above all, we were last year affected by a monetary crisis that was distinguished from all other crises in this, that while the general trade of the country was hardly at all affected, the ruin had fallen upon these limited liability companies, and especially those of them which dealt in monetary transactions. The facts of the crisis were fresh in our memories; while, having passed through the panic, we were not now likely to form any other than a calm judgment upon the facts before us. Having passed the crisis, and weathered the storm, we might also fairly believe that the great body of the companies left were placed upon so firm a basis that they need not fear an inquiry. It must be admitted that in one great division this limited liability bad been productive of an enormous amount of good; he alluded to those enterprizes that were more or less of a philanthropic character, and carried out for public purposes rather than individual profit. Such were the numerous associations for improving the dwellings of the working classes, and the companies which were formed for supplying gas and water to provincial towns. These were enterprizes upon which many would not enter if they were to risk their whole fortunes by so doing, although they might be perfectly willing to risk a certain fixed sum. No doubt the hon. Member's inquiry would be more particularly directed to those companies which were formed from private motives for the purpose of obtaining as large an interest as they could. One thing connected with the late panic was the extended scale of its effects, and indeed it affected classes which were wholly different from those which had suffered in prior crises. The ruin which last year brought down so many families to the ground, had affected classes which before had never been known to be much connected with joint-stock enterprizes; and, in fact, all classes were involved in it—farmers, tradesmen, domestic servants, peers, and peasants; and those who were least able to take care of themselves were most deeply involved, because they had in many cases invested their last penny. In addition to the limits of the inquiry which had been sketched out, he would suggest one or two other subjects of inquiry. The hon. Member (Mr. Watkin) had spoken a great deal about the evils of the present system of liquidation under the supervision of the Court; but it was to be hoped that he would also carry his inquiry into the evils of the system of voluntary liquidation, without the supervision of the Court, also. The practices which were said to have been adopted, the extortions said to have been attempted, should be brought to the test of truth, and if they proved to be true—though it was of no use crying over spilt milk—they would serve as a very useful warning to the companies that should come after them. He trusted also that the mode of getting up companies would also be inquired into. There were a race of men who were known as "promoters," and whoso business it was to get up companies. All business men were acquainted with the system, but that knowledge was not quite so widely extended as one could wish it to be. The stock-in-trade of a company promoter was very limited. A Directory by the help of which he might send out his circulars, and the countenance of some Finance Company, were pretty nearly all he wanted. But then he had to get together a board of directors. Now, to speak of this in the House of Commons was probably to tread upon delicate ground. He (Mr. Morrison) would only say that during the few years he had been in the House he could have turned the prestige of his position as Member of Parliament to very good account, and could have made thousands of pounds if he had consented to sell his name for the purposes of these company promoters. He repeated that this was a delicate matter, and he believed that the hon. Member (Mr. Watkin) could do no greater good than by going thoroughly into this question, and showing how the system worked; and possibly a remedy might be found for a good deal which was complained of. As to giving to companies power to reduce the amount of their shares, he did not altogether agree with the view which bad been taken. They all knew that since the panic many Companies had taken the step of reducing the amount of their liability, but this was a thing which might be carried too far. If too large a portion of the capital of a company were paid up, there would be no reserve to fall back upon in an emergency, and the credit of the company would be altogether gone. It was always a delicate matter to interfere in commercial enterprize in any way; but Parliament had interfered by placing the word "limited" upon the names of these companies, and it might be a question whether some limit should not be placed to the amount of capital to be paid up. Another question was whether it would not be desirable to carry into limited companies generally the provisions as to publishing the names of the shareholders, the same as those provisions existed in reference to banks. It was known that one of the practices of promoters was to fill up the list with the names of men of straw, so as to induce those who had capital to follow the example thus set of taking shares, and there was at present no protection by law against practices of this sort. He most cordially supported the Motion for the Committee; but whilst doing so he must say that he firmly believed in the principle of limited liability, and that it had nothing to fear from investigation. Further, he believed that as time went on this principle would tend more and more to supersede private enterprize in carrying out commercial undertakings in the country. The change which had been made in the law of liability enabled the poor to invest their savings, and was the means of effecting that for which social philosophers so much longed—namely, uniting together the interests of all classes. Its operation was destined to grow to such an extent that no time should be lost in improving the law before the transactions in connection with it became so large that it would be almost beyond the power of Parliament to deal with it.


said, that the House was greatly indebted to his hon. Friend the Member for Stockport (Mr. Watkin) for having brought this important and difficult subject under its consideration. The old law of unlimited partnership was such as to deter rich men from entering into trading companies, whilst the new law of limited liability had rendered such undertakings extremely popular. He was one of those who looked favourably on the system of limited liability, notwithstanding all that had occurred, provided that the business was conducted by capital and not by credit. But, instead of that, what did they see? There was only an inconsiderable amount of capital called up, and the conductors of those enterprizes relied for the rest upon bills of exchange, and credit accommodation of a similar kind. When rash and immoral speculators saw that the law made it easy to set on foot companies with small paid up capitals and enjoying limited liability, they immediately rushed into the making of them, and the only wonder was, that more calamities had not taken place. It was believed that great mistakes had been committed in drawing up the Act by which limited liability companies were constituted. If they looked to France, where the principle of limited liability was well understood, everything there was made to depend on publicity. But here, while there were several documents connected with such associations which shareholders ought to see, one only, perhaps, was made public, and the rest were kept out of sight. In France, on the other hand, all the documents were obliged to be published, and everybody was made acquainted with the minutiœ of the concern. There was not such a separation of documents to be sought out by shareholders, as first a prospectus, next a memorandum of association, and third, articles of association, which had to be studied before a person could ascertain what were the objects and constitution of a company of which he proposed to become a member. He thought, however, that his hon. Friend (Mr. Watkin) was mistaken as to what he said in reference to the system of having gérants in France. He said that companies there were administered by means of persons who were wholly responsible and whose liability was unlimited; but if they were responsible, they had also all the control of the capital of the company; and he believed that they would be simply going from the frying pan into the fire if they altered the constitution of our joint-stock companies so as to give to one or two gérants the whole power over the capital of a company. He believed that a well-chosen Committee would investigate this matter much better than it could be investigated in any discussion in the House. Very great discredit had fallen upon the commercial character of this country in consequence of the ruin into which many of those companies had sunk, and of the difficulties which the law threw in the way of reaching the insolvent parties. As to liquidators they were reputed as nothing more nor less than a nuisance—not only from the extraordinary delays which they occasioned, but also from the fact that no information was to be obtained from them. Nothing more important could engage the attention of the House than an inquiry into the mode in which these companies were got up and conducted, and providing remedies for the defects of the law but without interfering with the principle of limited liability.


Sir, I agree with the hon. Member who has just sat down, that this question can be more profitably discussed before a Select Committee than in this House. After hearing the statement of the hon. Member (Mr. Watkin) as to the grounds on which he asks for this inquiry, and finding that it is not his intention to impugn the principle of the Limited Liability Acts, the Government make no objection to granting this Committee. They think, indeed, that good may arise from it. There is no doubt that there has been of late great uneasiness, and very naturally so, in the public mind in reference to the proceedings that have been referred to, and many of these unfortunate transactions have been, perhaps hastily and without sufficient consideration, attributed to the operation of the limited liability laws. I think that these laws have been made to bear a greater amount of the burden than is really clue to them, and it is one of the advantages of having a Committee of Inquiry that we may learn to distinguish between that which is good and sound in the principle on which they rest, and those things which are only incidental accessories to the working of the principle, but which have perhaps conduced to results we all deplore. We may thus perhaps find safeguards that may prevent some of those effects I allude to. I am only anxious to have it understood distinctly that in assenting to inquiry we do not intend to impugn in any way the principle of limited liability, and to say that we are quite aware that there are many points upon which it is desirable that inquiry should take place, and that those points that have already been referred to are well worthy of consideration. As to the question how far it would be possible for companies to reduce the amount of their nominal capital, it is one that has been seriously pressed upon the consideration of the Government. I think that the attention of the House was directed to it last year; and it may become our duty to direct the attention of the House again to the subject. At the same time, it is obvious that it is a question of some difficulty, for it is very essential in giving such a privilege to companies that great care should be taken to prevent injury to the creditors, and that considerable precaution must be used as to the form of notice to be given, so as to prevent any fraudulent transaction in the shape of a reduction of a company's liability. I think that this is one of those points that might be very well considered before the Committee; and from the labours of that Committee perhaps some plan may be suggested to provide sufficient notice of a reduction of capital. As to the mode of liquidation of companies, the hon. I Member has made out a good case. I think that it should be looked into, and that this inquiry also might with advantage take place before the Committee. As to the general ground of complaint—that the system gives rise to a great deal of speculation, and that a certain amount of fraud has taken place since the passing of the Limited Liability Acts, and that therefore we are to attribute that speculation and fraud to the operation of these Acts, I may say that I should be disposed to question the accuracy of that suggestion. If we carry our recollections a little farther back we shall remember that, at a time before this principle of limited liability was introduced, there were inquiries into the law connected with the establishment of joint-stock companies, and that similar complaints of fraud and undue speculation were then made. But I will not enter into that question. I am glad that the hon. Gentleman directs his attention rather to practical points of detail, and into those we are quite ready that an inquiry should take place. I think it is unnecessary that I should enter into a general discussion of the subject, especially as the general feeling is that inquiry is desirable; and therefore there is only one other remark that I wish to make. It is with reference to a matter that is, perhaps, not strictly connected with the Motion before us. The hon. Gentleman has reminded the House of some expressions that were used in a speech of mine made upon another Motion of his last year, and also to observations of my right hon. Friend the Chancellor of the Exchequer, with regard to his present Motion. Towards the end of last Session, during that melancholy period of commercial and 'monetary pressure from which the country was then suffering, the hon. Gentleman brought forward a Motion for an Address to the Crown to issue a Commission to inquire into the causes of the commercial distress, and also into the operation of the currency and banking laws. At that time I was authorized, on the part of the Government, to say that, although we objected to the appointment of a Commission, we would under- take to inquire into the subject during the recess, and in the beginning of the present Session we should be prepared to state our views on the matter, whether we would propose legislation or assent to the appointment of a Committee of Inquiry. On the occasion of the hon. Gentleman's Motion, although the operation of the Limited Liability Act was mentioned as one of the causes of the distress that prevailed, great stress was laid by the hon. Gentleman, and other hon. Members who supported him, on the operation of the banking laws as that to which the distress was mainly attributable. The Government fulfilled their promises, and during the recess they carefully discussed the operation of the banking laws. They did not make any formal inquiry, or take any formal evidence; but they communicated with several gentlemen of high position, who were intimately acquainted with the subject, with a view of, as far as possible, ascertaining the operation of the banking laws and to consider whether it was desirable that legislation should be proceeded with this year, or an inquiry should take place. The inquiries which we made, and the consideration we gave to the subject, tended to strengthen our view of last Session, that the present monetary laws of the country were founded upon a sound principle, and that it would not be wise to propose any legislation to reverse them. At the same time, we felt that there were many points connected with those laws, on which an inquiry might take place with some advantage, and that there were many points of detail which deserved the consideration of the House with a view to legislation. If the circumstances of the present Session had been other than they are, it was our wish that there should be an inquiry into the banking and currency laws, and we were prepared to state to the House those particular points to which we thought it desirable to give attention. The matter, however, did not appear to Her Majesty's Government to be one of such urgency that it might not be postponed for a short time and considered at our leisure. On the very first day of this Session the hon. Member for Stockport gave notice of his intention to bring forward the question which he has opened to-night; and, shortly after such notice by the hon. Gentleman, he put a question to the Government as to their intentions respecting the banking laws. My right hon. Friend the Chancellor of the Exchequer said that he would himself take an opportunity of submitting a Motion on the subject, when he would state the views of the Government respecting it. Now, it was the intention of my right hon. Friend at that time to suggest that the two inquiries asked for, being to a great extent on kindred subjects, should be joined. My right hon. Friend thought it would be difficult, if not impossible, to have two Committees sitting at the same time which perhaps would require the presence of the same gentlemen. But the more we considered the matter the more we felt the difficulty of combining together the two inquiries. Looking, therefore, at the peculiar circumstances of the present Session, feeling the impossibility of my right hon. Friend being able to give that attention to the subject which he wishes, and the inability of many Members well qualified to do so to take part in the inquiry, we have abandoned that course and postponed the intended inquiry into the currency laws. In doing so, however, let it not be supposed that we ignore the importance of the subject. By no means; but considering that it is one upon which there is no immediate hurry to legislate, because we are agreed in the general soundness of the principle on which the currency system rests, we feel it is much better to legislate upon it cautiously and leisurely rather than hastily. In respect to the constitution of the Committee which the hon. Gentleman proposes to appoint, I have only now to express a hope that he will communicate with us in respect to the constitution of such Committee, in order that gentlemen the most experienced and best qualified to investigate the question shall be placed upon it. That object being obtained, I think the best results will follow, and that we shall obtain from this inquiry a large amount of useful information.

Motion agreed to. Select Committee appointed, "to inquire into the operation of the Limited Liability Acts.—(Mr. Watkin.) And, on Friday, March S, Select Committee nominated as follows:—MR. WATKIN, MR GOSCHEN, Lord FREDERICK CAVENDISH, Mr. GEORGE GRENFELL GLIN, Mr. BRETT, Lord ROBERT MONTAGU, Mr. STEPHEN CAVE, Mr. HUBBARD, Mr. GRAVES, Mr. SOLICITOR GENERAL, Mr. LOWE, Mr. FINLAY, Mr. Alderman SALOMONS, Sir GRAHAM MONTGOMERY, and Sir. VANCE:—Power to send for persons, papers, and records; Five to be the quorum. And, on March 11, Mr. W. E. FORSTER added; March 12, Mr. KIRKMAN HODGSON added.