§ Order for Second Reading read.
§ MR. STEPHEN CAVE
, in moving that the Bill be now read a second time, said, by the Companies Act of 1863 it was enacted that companies authorized to issue debenture stock might raise the whole of the money which they were empowered by Parliament to raise, by means of such stock—that was, they were empowered to convert the whole of their debentures into debenture stock. That enactment was rendered practically inoperative by the provision that that debenture stock should not be issued at a higher rate than 4 per cent. That limitation was put an end to, as far as railway companies were concerned, by the Railway Companies Act, which it was his duty to bring into the House in 1867. Since then the advantage had been taken of that provision to such an extent that almost all the principal railway companies had converted their debentures into debenture stock as far as they had been able to do so. By that means an effect had been produced which did not at the time occur to himself, nor, as far as he knew, to anyone else—namely, that considerable embarrassment and inconvenience had been occasioned to trustees, who, being authorized to invest in debentures which they had 576 been in the habit of renewing from time to time, as they fell due, found themselves obliged to resort to some other, and perhaps inferior investment, in consequence of the offer being made to them to be paid off, or to accept debenture stock in place of the debentures: and it having been held, though he believed high legal authorities were not unanimous, that debenture stocks were not within the terms of their trust. Complaints having been made to him from various quarters, he thought himself to some extent bound, as the innocent cause of the difficulty, to devise some remedy. He now proposed that in all cases where trustees were allowed to invest in debentures, they should, unless expressly forbidden by their trust deeds, be empowered to invest in debenture stock. The course which he had taken was not without precedent, as two Acts of Parliament had been passed, the 22 & 23 Vict., c. 35 (1859), and the 30 & 31 Vict., c. 132 (1867), by which trustees were empowered, whatever their trusts were, to invest in Bank Stock, and various India Stocks, and he thought that no danger could possibly arise from this much more limited proposition. In fact, the bar which now existed had in many instances driven investors from railways of the highest class which were converting their debentures into stock to those of inferior reputation, which were obliged to borrow in every way they could. It might, of course, be objected that the holder of stock could not claim his capital, and if he wanted it he must undergo the risks and chances of the money market. That was undoubtedly the case, and trustees would have to consider it in chosing their investments; but the same inconvenience attached to Bank and India Stock, and even to Consols, and he believed he was not wrong in saying that in times of political crisis there was more fluctuation in all those stocks than in first-class railway debenture stocks, and the risk of loss in that way must be set against the loss of income, which was suffered when a 5 per cent debenture was paid off at a time, perhaps, when the Bank rate was at 2 per cent. That that was the feeling of the public was evinced by debenture stock being almost invariably included in modern settlements, drawn up since 1867. He might explain that debenture stock did not make the holder 577 a shareholder, nor gave him any right to interfere in the management of a company. He was as much a simple creditor as if he held the old form of debentures. He might say, in conclusion, that he had mentioned his intention to several leading legal authorities, learned Judges, and others, to eminent solicitors, and mercantile men, and he had heard but one opinion as to the advantage of such a modification of the law. Indeed, the fact that his right hon. and learned Friend (Mr. Russell Gurney), and his hon. Friend the late Governor of the Bank, Member for the City (Mr. Crawford), had allowed him to place their names at the back of his Bill, was sufficient warrant that this was no ill-judged or dangerous experiment.
§ Motion agreed to.