COMPANIES BILL.

HC Deb 30 July 1900 vol 87 cc59-140

As amended (by the Standing Committee), further considered.

MR. SYDNEY GEDGE (Walsall)

said he would move the Amendment standing in his name on Sub-section (k) of Clause 12, which dealt with the disclosure required in the prospectus with regard to contracts. The provision in this Bill was to take the place of the clause in the Act of 1867 which they were repealing. It had hitherto been customary to insert a clause in applications for shares whereby the applicant waived his right under that clause, the object being to render it harmless to the directors. They were in the present Bill making such a waiver absolutely void. In the Grand Committee he moved the insertion of the words "in writing," but that was objected to on the ground that the words were unnecessary. He thought the words ought to go in to make the sub-section clear.

Moved—

Amendment proposed— In page 8, line 3, after the word 'contract,' to insert the words 'in writing.'"—(Mr. Sydney Gedge.)

Question proposed, "That the words 'in writing' be there inserted."

THE ATTORNEY GENERAL (Sir ROBERT FINLAY,) Inverness Burghs

I hope the House will not accept this Amendment. If it were accepted it would amount to an invitation to have contracts other than in writing. There are contracts which would be binding although not in writing. It is desirable that every contract of this kind should be in writing.

Question put, and negatived.

Amendment proposed, In page 8, line 3, after the word 'contract,' to insert the words 'made by, or on behalf of, or intended to be adopted by the company."'—(Mr. Sydney Gedge.)

Question, "That those words be there inserted," put, and negatived.

MR. LAWSON WALTON (Leeds, S.) moved an Amendment providing that the requirement to state, among other things, the dates of and parties to every material contract should not apply to a contract entered into in the ordinary course of the business carried on or intended to be carried on by the company, or to any contract entered into more than "five" years before the date of publication of the prospectus. He pointed out that this Bill as originally drawn proposed to make the term five years, but the Committee, for reasons which were not present to his mind, made the term two years. A company as a result of a disastrous contract might be under the necessity of raising more capital, and yet, if the contract were more than two years old, under the operation of this section the very contract which was the cause of the company's misfortune would not be required to be disclosed to the people who were invited to subscribe. If the period of two years was adhered to companies would pass through a term of gradation. Companies would not he brought to maturity until their worst material contracts had gone out of date and there was no necessity to disclose then to the public. Company promoting would be made easy and safe provided the company was registered, and authorised to commence business, and then made a fresh issue of shares after the lapse of twelve months.

Amendment proposed— In page 8, line 8, to leave out the word 'two,' and insert the word 'five,' instead thereof."—(Mr. Lawson Walton.)

Question proposed, "That the word 'two' stand part of the Bill."

THE SOLICITOR GENERAL (Sir EDWARD CARSON,) Dublin University

admitted there was considerable difficulty in fixing an altogether satisfactory period. The original Bill provided a period of five years, but after discussion the Committee came unanimously to the conclusion that it would be better to make it two years. On the whole he thought two years would be as satisfactory as any other period, because the class of contracts it was desired to have disclosed were contracts made and entered into immediately before the formation of the company, such as contracts for the purchase of the subject-matter of the company. Such were really the material contracts about which it was essential the public should know, and certainly the cases would be rare in which that class of contract would extend over a period longer than two years. In the vast number of cases what the public wanted to get at were really the series of deeds which culminated in the bringing out of a company, and for that a period of two years would generally be sufficient.

SIR ROBERT REID (Dumfries Burghs)

regretted the Government were not prepared to revert to their original proposal of five years. The policy of the clause was that intending subscribers should be given notice of all material contracts. If that was the true policy of the clause, and there was a contract older than two years, why should that contract, being avowedly material, not be disclosed? There were very good purposes for the Statute of Limitations, but he could not see why, if it was acknowledged that all material contracts should be disclosed, such a contract, which was ex hypothesi material, was not to be disclosed merely because it was made two years before. He admitted that his argument went further than the Amendment, but in any case a period of five years would be bettor than one of two years.

*SIR ALBERT ROLLIT (Islington, S.)

hoped the Government would accept this most reasonable Amendment. The alteration to two years was a very retrograde stop, and could not be justified by the false analogy of the Statute of Limitations. The basis of that statute was that owing to the lapse of time evidence might not be forthcoming, and doubts might exist as to liability. But here, presumably, the contract was material and existing, and, though material, was not to be disclosed for the guidance of the investor. If a material contract existed and was disadvantageous to a company, what relevancy was there between that condition of things and a limitation in point of time? The principle of the Bill was publicity and the fullest information for the exercise of a reasonable judgment on the part of the investor; and yet the House was told that too much information would be confusing. One thing to be learned by investors was that they must take trouble for themselves, and if a prospectus gave the information it was for them to go through it, and form their own judgment. But the information, so far as material, must be given. He hoped the Government would restore the period of two years, as two was much preferable to live.

THE PRESIDENT OF THE BOARD OF TRADE (Mr. RITCHIE,) Croydon

said the reason the Government altered the period from five to two years was that in the discussion in Committee many illustrations were given of the great difficulty in which those who desired to give full in-formation would be placed. It would be very difficult for anyone, with every desire to give full information, to be sure that every material contract over so long a period as five years was announced to the public. It was considered that two years would be quite sufficient, as it was hardly to be supposed that anyone would enter into contracts which it was not desirable to disclose three or four years before the company was formed, with the idea of withholding from the public the knowledge of those contracts. There was nothing very sacred about five or two years, and if the mover of the Amendment eared to accept three years as a compromise the Government would agree, but otherwise the two years would be adhered to.

MR. HEDDERWICK (Wick Burghs)

thought the right hon. Gentleman was under some misapprehension. The subsection did not compel a company to disclose every contract, but only every material contract. When it was urged that there would be great difficulty in filing material contracts over a period of five years, it appeared to be forgotten that that had to be done under the present law, and so far as he knew, no difficulty had been experienced. Another matter to be considered was in connection with the reconstruction of companies. The reply of the Solicitor General did not really touch that point, as he seemed to think that the object would be secured if material contracts for two years before the formation of a company were required to be disclosed. A reconstructed company would be a new company in the eyes of the law, but it was quite possible that a company requiring reconstruction might have been in existence for five or ten years, and many of the contracts might be of five, six, seven, or ten years standing. Was it not material that investors who were invited to put their money in the reconstructed company should have notice of those very material contracts? Under the Bill those contracts would not be disclosed at all. By accepting a period of five years the Government would really not be imposing any greater task upon directors than was at present the ease, and therefore he hoped the period would not be cut down to two or even three years.

MR. BRYCE (Aberdeen, S.)

thought the Government hardly appreciated the fact that under this sub-section persons who did not disclose material contracts were given an absolute protection which did not at present exist. If there were no provision enacted, as now proposed, any promoter or director bringing out a company would be bound under the ordinary law to disclose all material contracts, whatever they were; but to insert a provision dispensing with the necessity of disclosing a contract if it was more than two years old positively gave an encouragement to concealment which did not at present exist, and the intending investor was subjected to a danger from which he was now exempt. Under the ordinary law, if a material contract was not disclosed it would be possible for the investor to claim that he had been misled and deceived. He thought, therefore, it would be a pity to narrow the time for disclosure and to depart from the period approved by both the Departmental Committee and the House of Lords. The danger was not so much that persons would begin to construct their designs two years before a company was brought out, as that, when they had made up their minds to bring out a company, if it was found there were some contracts they would rather not disclose, they would postpone the time for issuing the prospectus for a month or two in order to bring those contracts within the protection of this clause. The whole basis of this Bill was to secure the intending investor by giving him the maximum of information, and it would be a pity if, merely for the sake of making the prospectus in some cases a little shorter, that protection should be materially lessened.

SIR ROBERT FINLAY

reminded the right hon. Gentleman that it was only if there was actual fraud, if the omission of any reference to a material contract was part of a suggestion or untrue statement with regard to the condition of a company, that there would be a common law liability. Apart from that, there would be no liability for mere omission. He asked the House to appreciate the consideration which weighed with the Committee when this matter was discussed. It was pointed out that if a period of five years were adhered to a very difficult task would be imposed upon those who were responsible for bringing out the prospectus. If there was no limitation, or if the limitation was as wide as five years, it would be a very serious matter to go through all the contracts for the purpose of ascertaining which were and which were not material. No one wished this Bill to bear so hardly upon those who might be in the position of directors as to prevent persons of the respectable and solid class assuming the responsibilities of that office. The matter had also to be considered from the point of view of the intending investor. Sometimes the easiest way of conveying practically no information to a man was to be so extremely copious that he overlooked that which it concerned him most to know. Whether the matter was looked at from the point of view of the directors or from that of the investing public, it seemed that two years was a reasonable period, and he therefore hoped the Amendment would not be agreed to.

MR. SYDNEY GEDGE

supported the Government view. While it might be right to go back two years to cover the possibility of contracts having been entered into with the fraudulent intention of concealing them, it would be very unreasonable to enforce the publication of every contract which might be material in the eyes of an investor extending over a period of five years. He therefore hoped the two years would be adhered to.

MR. LAWSON WALTON

intimated his willingness to accept the suggestion of the President of the Board of Trade that the period should be three years.

Amendment, by leave, withdrawn.

Amendment proposed— In page 8, line 8, to leave out the word 'two,' and insert the word 'three' instead thereof.'—(Mr. Lawson Walton.)

Amendment agreed to.

Other Amendments made.

MR. SYDNEY GEDGE

explained that the object of the Amendment he was about to move was to render it unnecessary, in the case of a prospectus published more than a year after the date at which a company was entitled to commence business, to comply with the requirements of paragraphs (e) and (h) of Sub-section 1 of the clause. The provision as it stood applied not only to companies which had been in existence and carrying on business for one year, but also to companies which had been carrying on business for twenty or more years. There were a large number of very honest companies which had been formed by taking over industrial concerns, a certain number of paid-up shares or debentures being given to the vendor as purchase money. There were a number of excellent companies in which a man carrying on an industrial concern had found himself unable to pay his way, and had called his creditors together and formed a limited liability company, the creditors being paid in preference shares and he himself taking a certain number of ordinary shares for his own good-will. Some such companies paid exceedingly well; the creditors had got all their money back, and the man himself had been able to get on his legs again and, by good management, his ordinary shares had become of considerable value. If twenty years later such a company went to the public for more capital, what possible object could there be in stating the particulars required under paragraphs (e) and (f)? Such information would be utterly valueless to the investor, and he hoped the already numerous difficulties which lay in the way of issuing an honest; prospectus under this clause would not be added to in the case of a company which had been in business for more than one year.

Another Amendment proposed— In page 9, line 2, after the word 'expenses,' to insert, the words 'and the requirements contained in this section, sub-section (1), paragraphs (e) and (h).'"—(Mr. Sydney Gedge.)

Question proposed, "That those words be there inserted."

MR. RITCHIE

expressed his unwillingness to omit any of the requirements which had been considered necessary by the Departmental Committee by whom this subject was very carefully considered. It was quite possible to conceive cases in which this information would not be really necessary to enable an investor to make up his mind, but there were also cases in which it would be very important indeed. He therefore hoped the Amendment would be rejected.

Question put, and negatived.

MR. LAWSON WALTON moved to amend that part of the clause which deals with the case of an existing company making a new issue of shares or debentures and provides that in the case of a prospectus published more than one year after the date at which the company is entitled to commence business the obligation to disclose all material contracts shall be limited to a period of one year immediately preceding the publication of the prospectus. They had no proper definition of the word "material." He contended that what applied to an issue by a new company would apply equally to a new issue by a company in esse. The extremely narrow restrictions reduced the operation of this clause almost to an absurdity. It had been suggested that an embarrassing duty was cast upon the directors, because they had to disentangle contracts connected with the ordinary business of the company from contracts material to the share issue, and contracts connected with the ordinary business need not be disclosed, while contracts relating to the share issue must be disclosed. Under Sub-section 10, if the contract had relation to the company's ordinary business, there was- no obligation to disclose it, but if the contract was not more than three years old and was important surely it ought to be disclosed.

Amendment proposed— In page 9, line 9, to leave out the words 'one year,' and insert the words 'three years,' instead thereof."—(Mr. Lawson Walton.)

Question proposed, "That the words 'one year' stand part of the Bill."

MR. RITCHIE

The House will recognise that there is a very material difference between the two cases. In the case of a new company the appeal to the public is not upon the results of previous business operations, but altogether upon facts which are drawn from the previous existence of the business formed into a company, and also all matters connected with the formation of the company. All these are very necessary and proper things for an investor to know, as well as contracts, in order that he may be in a position to judge for himself as to what the prospects of the company are. Things are very different after a company has been going on for many years, for many of the things which were material in the original prospectus sink into the background, and the material points are the manner in which the business has been conducted, the profits made, and many other considerations of that kind. It must be borne in mind that with regard to the disclosure of contracts up to one year, those who desire to make themselves acquainted with contracts before that date could make themselves acquainted with the contracts made for three years previous to the formation of the original company. So that in the case of a company coming out a year after its formation, while they would only have to disclose material contracts for one year, the investor would have the guidance of three previous years, and would practically have four years. The Committee of the House of Lords considered that this limitation of one year was sufficient in the case of new issues, and I hope the House will agree to it.

SIR ROBERT REID

said it would be a very great pity if this clause was marred by limiting it to one year. The right hon. Gentleman had given way on this point in the previous clause, and he could not see what the difference was here. He had stated that in the latter case the company would have had the experience of one year's trading, but there was no such provision in the clause, and there was no necessity to trade at all. He would put a case in point, of which there were many to be found in the dark history of companies during the last fifteen years. Take the case of a man who had a thoroughly bad business, and who turned it into a company. The person who had a thoroughly good business was, as a rule, most reluctant to part with it to a company. The Board of Trade records were full of instances of men parting with rotten businesses to companies in order to cheat creditors. This thing was one of the most common evils in connection with company frauds. A man made a material contract of such a character that nobody would be induced to take up shares if he knew all the facts. If this clause was passed, the man with a thoroughly bad business would start his company, take a sufficiently large number of shares himself, and qualify himself to commence business. Of course, he would take very good care that nothing important happened for twelve months, and then he would offer the business to the public in the form of a company. By virtue of this clause, which was intended to make the law more rigid in order to avoid cheating, he would be entitled to have recourse to the limitation of one year; therefore he would not be compelled to disclose what might be the most material thing in the world, and which, if known, would have spoiled the chance of any shares being taken up. Thus by waiting for a year he would be able to get out of his obligations. He thought if the right hon. Gentleman considered this carefully he would see that it was a thing that would very commonly happen. He hoped the right hon. Gentleman would show the same willingness to meet them in this matter as he had done in the previous case, and allow the period to be three years.

MR. COHEN (Islington, E.)

said upon this question he shared the views which had just been expressed by his hon. friend. He felt sure that his right hon. friend would perceive on reflection that the Amendment suggested would not in the least interfere with legitimate companies, and he had not established clearly the difference between cases of old and new companies.

MR. RITCHIE

The House will remember that in the House of Lords the Committee made a very clear distinction between the two cases. I am willing to make a concession with regard to this point, but it is one which will still retain the distinction, and I am willing to alter the limitation from one to two years.

MR. LAWSON WALTON

Then I will withdraw my Amendment.

Amendment, by leave, withdrawn.

Amendment proposed— In page 9, line 9, to leave out the words 'one year' and insert the words 'two years.'"—(Mr. Ritchie.)

Amendment agreed to.

MR. SYDNEY GEDGE

said he had not the faintest hope of inducing the Government to accept this Amendment, but as an old-fashioned free trader he wished to vindicate his character. Business people very often availed themselves; of contracting-out clauses, and such a clause as this was necessary in order that people might, if they thought fit, contract themselves out of any further legal obligation in the matter.

Amendment proposed— In page 9, line 11, to leave out Sub-section (5) of Clause 12."—(Mr. Sydney Gedge.)

Question proposed, "That the words proposed to be left out stand part of the Bill."

MR. RITCHIE

As I understand that my hon. friend has had the opportunity of vindicating his character as a free trader—which I understand is his prime object—and as he says he does not expect the Government to accept this Amendment, I do not wish to disappoint my hon. friend. For reasons which hon. Members will well understand, I think they will agree that this Amendment is one which would make a change which the House is not prepared to accept.

Question put, and agreed to.

MR. LAWSON WALTON

said he proposed to ask the House to accept an enlargement of Clause 12—

SIR ROBERT FINLAY

I rise to a point of order. The Amendment of my hon. and learned friend is to insert at the end of line 15 the words— Nor shall any condition purporting to relieve a director from the obligations imposed upon him in his capacity as a director, or as an officer of or trustee for the company, under the general law be valid unless the same be approved by the court or a judge as fair and reasonable. I submit that that proposal is out of order. Sub-section 5 deals with the proposal to waive compliance, and this is really a new clause. I think it was down on the Paper as a new clause, but my hon. and learned friend was unfortunately absent when it was reached.

*MR. SPEAKER

I do not understand that this Amendment applies to Articles of Association, which was the effect of the new clause set down by the hon. Member for South Leeds. The words "nor shall any condition," I understand, mean any condition in the prospectus; the words are used already in that sense in this very clause.

MR. LAWSON WALTON

It is quite true that in the new clause I put down I sought to do away with the making of fictitious contracts by means of the Articles of Association. I propose by this Amendment to put an end to the practice of making contracts equally fictitious by means of the prospectus. It is also a common practice to insert in prospectuses themselves language of waiver for the purpose of creating implied contracts and of relieving directors from the obligation of disclosing contracts. That is now a very common practice, and it was foreseen by the authors of this Bill that that practice will be extended when the Bill comes into operation, because the many requirements with which directors will be called upon to comply will naturally lead to the practice of inserting in the prospectus clauses by which they may be waived, thereby depriving the shareholders of their right to enforce compliance with this section as against the company or the directors. Inasmuch as that practice will be largely increased, I think it is not unnatural to suppose that we shall find also on the face of the prospectus a clause relieving the directors under the general law, and not merely of the obligations prescribed under this section. I have seen Articles of Association providing that the directors may enter into contracts without any of the obligations of the existing law attaching to them. Such a clause is never discovered until the company goes into liquidation, and a number of discreditable transactions are disclosed. I hope a clause such as the clause I proposed will be introduced in another place, but I am anxious now to get a small instalment of a beneficial reform. If, however, the Attorney General will give me some assurance that the whole subject will receive proper consideration elsewhere, I shall be very pleased to withdraw the Amendment. Meantime I beg to move.

Amendment proposed— In page 9, line 15, after the word 'void, to insert the words 'nor shall any condition purporting to relieve a director from the obligations imposed upon him in his capacity as a director, or as an officer of or trustee for the company, under the general law he valid unless the same he approved by the court or a judge as fair and reasonable.'"—(Mr. Lawson Walton.)

Question proposed, "That those words be there inserted."

SIR ROBERT FINLAY

I hope the House will not accept this Amendment of my hon. and learned friend. The other Amendment, which he embodied in a new clause, was an Amendment directed against what was in some cases undoubtedly a very considerable evil. That was that the Articles of Association should guard against the directors being enabled to do things which under the law would otherwise be illegal, but the present Amendment of my hon. and learned friend would be almost entirely useless, and is only in order because it is directed against a state of things which can hardly be said to exist. I do not say that conditions of this kind may not have been included in certain prospectuses, but I have never seen them. I would ask the House moreover to consider how this Amendment would work if inserted in the Bill. It is that the conditions contained in the prospectus purporting to relieve a director from the obligations imposed upon him under the general law, shall not be valid unless the same be approved by the court or a judge as fair and reasonable. What is the moaning of "approved by the court or a judge "?

MR. LAWSON WALTON

When the condition is relied on to relieve a director, the court will have an opportunity of determining whether it is fair and reasonable.

SIR ROBERT FINLAY

That is not so, because the Amendment says "approved by the court or a judge." What it should say should be "disapproved by the court or a judge." I submit to the House that my hon. and learned friend has put down his Amendment not with any idea of its being adopted, but in order to ventilate another subject which cannot be dealt with because it is not in order.

SIR ROBERT REID

said that what his hon. and learned friend was pressing for, and what he also ventured to press for, was that the Attorney General should be good enough to inform the House that when the Bill appeared in another place they would be helped out of their present dilemma. The Bill was building up a new code imposing certain duties on directors and other officers of companies, which experience had shown to be necessary in order to prevent fraud. The Bill prevented shareholders from waiving the benefit of those necessary precautions; but was it not equally necessary to prevent the directors from escaping from the effect of those precautions? It was no use preventing shareholders from waiving the now conditions if the directors were able to escape by a clause in the Articles of Association. The necessary corollary, therefore, was to make some corresponding addition preventing directors by a clause in the Articles of Association from escaping. If the Government looked upon the Amendment from that point of view they would see that it was essential in order to carry out the policy of their own clause. If the Amendment was not accepted directors would be able by a clause in the Articles of Association to give the go-by to the whole of the provisions of the Bill.

MR. RITCHIE

So far as the principle of this Amendment is concerned, I think it would be a very bad thing if, having imposed certain obligations on directors, which we think ought to be imposed on them in the interests of the investing public, they should be permitted to set them aside by some course such as that which has been suggested. But I agree also that the Amendment is one that cannot properly be accepted. The hon. and learned Gentleman asked me whether I could give any pledge with regard to the action to be taken in another place. I am afraid I am not in a position to give any pledge of that kind, but I am quite sure that the object the hon. and learned Gentleman has in view is one that must commend itself to the Lord Chancellor, and all I can say, is that I will take care to draw the attention of the Lord Chancellor to the Amendment, but of course I must leave the whole of the responsibility with him.

MR. LAWSON WALTON

asked leave withdraw the Amendment.

Amendment, by leave, withdrawn.

MR. RITCHIE

The Amendment which I now move was put down with a view to meeting a point which was raised in the Grand Committee. There was a very unanimous feeling that something should be done to reduce the enormous expense that would be involved if the whole prospectus had to be set out in every advertisement, and this is a proposal by which an abridged prospectus may be published as a newspaper advertisement, provided that reference is made to a convenient place where the full prospectus can be seen and obtained.

Amendment proposed— In page 9, line 15, after the word 'void,' to insert the words—'(7) Where any such prospectus as is mentioned in this section is published as a newspaper advertisement it shall be sufficient to publish it in an abridged form, with a reference to a full prospectus complying with the terms of this section, specifying a convenient place where the full prospectus can be inspected and obtained.'"—(Mr. Ritchie.)

Question proposed, "That those words be there inserted."

Amendment proposed to the proposed Amendment— At the end, to add the words 'and the provisions of this section shall not apply to such abridged prospectus.'"—(Mr. Tomlinson.)

Question proposed, "That those words be there added."

MR. RITCHIE

I am afraid I cannot accept my hon. friend's Amendment. We do want the provisions of this section to apply in a sense to an abridged prospectus—that is to say, it must be an honest abridgment. It must be governed to some extent by the provisions of this section, and the Amendment, to my mind, is one which would have a somewhat misleading effect, and I hope it will not be pressed.

Question put, and negatived.

Main Question again proposed.

*SIR ALBERT ROLLIT

On the Amendment of the right hon. Gentleman, I should like to point out to the House the very great danger that would be created by it. The object of this Bill and the principle upon which the Bill has been built up, in the Departmental Committee, in the Standing Committee, and up to the present in this House, has been the principle of the fullest publicity, in order that investors may have full knowledge of the facts for forming a fair judgment. What is proposed by this Amendment is that an abridgment of the prospectus may be inserted as an advertisement on one condition, namely, that reference must be made to a convenient place where the full prospectus may be seen and inspected. We know what the present practice is with regard to contracts mentioned in prospectuses, and the places where they may be seen. I venture to say that the number of cases in which investors take the trouble or incur the expense of informing themselves by reference to these documents is almost infinitely small. It may be said that it is their own fault; but the whole of this Bill presupposes unwillingness to incur trouble and expense, and the purpose of the Bill is to be an instrument by which persons may be protected against frauds contained in documents which they will not take the trouble to peruse. I venture to think that a similar practice will grow up in connection with prospectuses if this Amendment is accepted. What would prevent the abridged prospectus being reprinted and issued? I think this Amendment will kill the publication of the full prospectus, because people will object to going perhaps long distances and incurring expense in order to examine the complete documents. I hope, notwithstanding the desire of the right hon. Gentleman to meet the objection raised in Committee, that he will not press the Amendment, because it would lead to the suppression of information, and would be the means of perpetuating that fraud which this House is so desirous of preventing.

MR. BOUSFIELD (Hackney, N.)

said he should like to suggest a way in which some of the obvious dangers of this new sub-section might be avoided. It might be found that an abridged prospectus was in form a full prospectus, but that it left out, perhaps, one thing which might be material. What he suggested was, that it would be quite easy to specify the things which might be abridged. He would therefore move to leave out in line 2 of the sub-section—

*MR. SPEAKER

An Amendment to add at the end has been already negatived, and we cannot now go back. If the hon. Gentleman intended to move an Amendment he should have moved it before the Amendment of the hon. Member for Preston.

MR. BOUSFIELD

said he was not aware that that rule applied to Amendments of Amendments as it did to Amendments of clauses, but he would suggest his proposal to the consideration of the Government, as it would be quite easy for them to carry it out if they thought fit. His suggestion was that certain things should be specified, such as the Memorandum of Association, which might appear in an abridged form. Some things were short and terse, and could not be abridged at all, and other things might be omitted, which, although making the prospectus an abridged prospectus, would put the public off their guard. He hoped the Government would carry out his suggestion.

SIR HENRY FOWLER (Wolverhampton, E.)

I quite recognise the disease which we are trying to cure by this Amendment, but it appears to be that the remedy is worse than the disease. If the principle of having two prospectuses is once admitted, a very serious blow will be struck at the efficiency of this whole Bill. The real argument in favour of the Amendment is the saving in expense in newspaper advertisements, and there is no other advantage. But if we are to admit the principle that there are to be two classes of prospectuses, one complying with all provisions we have been elaborating with such care, and I believe with sound sense, but which is only to be found somewhere else, and the other class in an abridged form, you will find that the general rule will be, as has been pointed out by the hon. Member for South Islington, that the newspaper advertisement will be reprinted and sent round through the country. The Amendment states that where any such prospectus is published as a newspaper advertisement it shall be sufficient to publish it in an abridged form; therefore, it can be published by reprinting it. I would appeal to the right hon. Gentleman not to persist in the Amendment, which would be a dangerous loophole leading to the evasion of the law.

SIR ROBERT FINLAY

In answer to what has been said I will point out that this sub-section would only apply where the prospectus is published as a newspaper advertisement, and would not apply if that advertisement were reprinted and sent round as a circular. The expense of printing all the particulars required by this section in every newspaper advertisement might be overwhelming, and in some cases would prevent a company advertising in newspapers altogether. I would further point out to the House that the abridged prospectus must be a fair abridgment, and that it would not do to insert statements that might suit the company. Any such abridgment would be evidence of actual fraud; it would not be in an abridged form at all but in a selected form, and would not comply with the requirements of the clause. Further, there must be in the abridged prospectus a reference to the full prospectus, with a statement as to where it can be inspected, so that anyone wanting further information has only to apply personally or by letter in order to obtain the full prospectus. It has been suggested that certain particulars damaging to the company might be left out. All I can say is that such an omission would be evidence of actual fraud. If some particulars damaging to the company were left out, it might go hard with the persons responsible. It has also been suggested that there should be some enumeration of the matters which might be abridged, but the House will be sensible that that would lie quite impossible. Unless the Amendment be accepted, many honest companies may be prohibited altogether from advertising.

SIR ROBERT REID

said he thought that after the statement of the Attorney General the House would regret that this new provision was proposed. Who were the persons who took shares in a company? Some took them for the purpose of dealing and gambling with them, and those gentry required no protection of any sort or description. It was the honest investing public that required protection. A large number of people would not take the trouble to examine a full prospectus if they saw an abridged prospectus, and would take everything for granted. People of simple good faith (erroneously enough, Heaven knows) imagined that corresponding good faith existed on the part of others. All such possibilities had to be met. The Attorney General had stated that it was enough that the abridged prospectus should specify a convenient place where the full prospectus might be inspected. So it was under Section 38 of the Companies Act of 1867, which provides that all particulars of contracts might be examined at certain stated places; but everyone knew that such contracts were never examined. Then the Attorney General said that it was necessary that the abridgment should be a true abridgment, and that if any matter of importance were omitted it would be evidence of fraud. Nothing of the kind. The Attorney General himself laid down the law that the non-disclosure of a material fact was not evidence of fraud unless it were a fact which if known would make untrue a statement which had been made. That would not be the case in connection with the proposed abridgment, and to his mind the arguments of the Attorney General did not prevail. Why was the House labouring this clause about prospectuses? It was because they wished that in the interests of the investing public certain things should be stated. They wanted whenever the public were invited to subscribe for shares to be sure that the person invited should have brought to his notice certain particular facts. That was the whole object of the clause. But an Amendment was now proposed stating that an abridged prospectus, from which every single thing the House had been insisting on might be omitted, might be published. That, in his opinion, would be fatal to the whole clause. He did not dare to hope that the right hon. Gentlemen would give way, although he trusted he would; but, if the right hon. Gentleman would not, he would propose an Amendment, if he were in order. It was to add at the end of the proposed subsection the following words, "Provided that none of the matters required to be disclosed by this section are abridged in such advertisement." Newspaper adver- tisements contained copious laudations and glowing descriptions of the property to be floated, and a great deal of such matter might be abridged, but what he objected to being abridged were matters which they now said ought to be disclosed.

Amendment proposed to the proposed Amendment— At the end, to add the words, 'provided that none of the matters required to be disclosed by this section are abridged in such advertisement.'"—(Sir Robert Reid.)

Question proposed, "That those words be there added."

MR. RITCHIE

We cannot possibly accept the hon. and learned Gentleman's Amendment, because it simply proposes to add at the end of the proposed Amendment that the Amendment shall have no effect.

*MR. SYDNEY GEDGE

said it was impossible for anyone to apply for shares in a company without having the full prospectus brought before him, which always contained the application form. That was the answer to the objections which had been taken.

MR. GIBSON BOWLES

said that the Government had drafted a long measure setting forth the particulars which should appear in every prospectus for the protection of the simple-minded persons to whom the hon. and learned Gentleman opposite had referred. They then reflected that every prospectus advertised in the future would run into about five columns, and that if a newspaper contained very many prospectuses it would be impossible for it to contain anything else. The Government, having with great ingenuity and much culinary skill concocted their salad, came to the conclusion that they would throw it out of the window. What was the use of saying that certain particulars should be set out with the utmost minuteness in a prospectus, and then saying in this Amendment that a promoter need not do anything of the sort, and could adopt the beautiful device which the House of Commons frequently resorted to—namely, the device of reference? Then the hon. and learned Gentleman opposite, seeing that the Government had thrown over their own proposals by the Amendment of the President of the Board of Trade, moved an Amendment allowing things to remain as they were before the Amendment of his right hon. friend. If he might be permitted to say it to his right hon. and learned friend, his best way would be to vote against the Amendment now proposed. Speaking as a person who had never promoted a company, he maintained that it was absurd for the Government, after the Committee upstairs had spent a great deal of time in setting forth all sorts of particulars which ought to be disclosed to the public, to come down here and say, "After all, an abridgment and a reference will do." That was not the right way of treating the subject under discussion or the Bill, and he hoped the right hon. Gentleman the President of the Board of Trade would withdraw his. Amendment, which would destroy the whole effect of this clause.

*MR. LAWSON WALTON

trusted the right hon. Gentleman would withdraw the Amendment, which the Committee upstairs had not had an opportunity of discussing, and which had met with such diverse criticism. No need of such a clause had ever before been suggested. What had been suggested upstairs was that the Memorandum of Association was often so prolix in length and full of immaterial matter that it would be to the advantage of the newspapers that a document of that kind must be incorporated in every newspaper advertisement; and it seemed to be the view of the Committee that there should be some provision for relieving the directors of a company from publishing the Memorandum of Association. But the Committee never for a moment thought of relieving the directors of the obligation of furnishing the very material particulars embraced in the prospectus. The Amendment assumed that it was necessary to insert an advertisement of the prospectus of a. company in a newspaper in order to advertise that company, but it was quite possible to have a newspaper advertisement which did not indicate that it was a prospectus; and if the advertisement did not say it was a prospectus, the public might not be misled, but if the advertisement appeared as a prospectus as such, though abridged, it was obvious that it might lead to misconception in the minds of the public. It was evident that the word "abridgment" offered considerable latitude. It might not be complete from an analytical point of view, and it might be said to be unfair for not bringing before the public all that was necessary to be known. It was impossible to imagine what litigation might result to determine whether the abridged prospectus was fair or not, or what actions might be brought charging directors with fraud. So that by this Amendment they were inducing a company, in publishing an abridgment of a prospectus by means of advertisement, to lead intending shareholders to undertake the exceedingly difficult duty of distinguishing between an abridgment and the larger prospectus. Could anything be more effective in bringing about litigation? Then it was said that the full prospectus was to be inspected at some convenient place. Suppose an inquiry for an inspection of the prospectus was met with a refusal? A few years ago a Rhodesian company was registered in Ireland; indeed, Ireland seemed to be a favourite place for registering certain companies. If an address was given in some Irish county as the place where the prospectus might be inspected it might be convenient from the company's point of view, but inconvenient to the proposed shareholders. He hoped the House would reject the Amendment for another reason. It was a very important derogation from the existing law. Under the existing law, if the directors of a company published an abridged prospectus they did so at their peril, and any contract entered upon on the faith of that abridged prospectus might be voided by the shareholders. It might be said by the directors if this Amendment was passed, "We abridged the prospectus, it is true; but we are entitled to do so. We may have abridged it badly; but we did our best. We left out important parts, it is true; but that did no harm to the shareholders, because at some convenient place there was the full prospectus for them to inspect." In fact, the moment the Government allowed two prospectuses—one which complied with the Act and the other not—the most stringent provisions of the Act would be obviated and become a dead letter. He trusted the Amendment would be withdrawn.

SIR ROBERT REID

said he would withdraw his Amendment, as he thought it would be more convenient that the division should be taken on the Government Amendment.

Amendment to Amendment, by leave, withdrawn.

Main Question again proposed.

MR. H. S. FOSTER (Suffolk, Lowestoft)

could not help thinking that there was some confusion in the mind of the hon. Gentleman who had just sat down, and of others who preceded him, as to the purpose and scope of the Amendment. The House, in the clauses already passed, had laid down the most express conditions as to what was to be in the prospectus, and the company must get it filed with the registrar of joint stock companies, and until so filed it was not to be issued. There could be no doubt what the Bill meant by the prospectus. Then Section 12 went on to say what the particular document must contain. But there arose a very serious difficulty, which the hon. Member for South Leeds himself recognised—namely, the difficulty of enacting not only that the prospectus should contain a vast amount of information, but that every public notice drawing attention to that prospectus should also contain all that detailed information. As he understood the Amendment, it was for the purpose of meeting that difficulty. Then came another question. In the issue of a prospectus it was customary to call public attention to it through the medium of the press. That might be done in a dozen different ways. The advertisement might be an abridgment, referring the reader to where he could see the full prospectus. As an illustration, John Smith and Co. issued half a million of preference shares; they advertised that fact, and added that the full prospectus might be obtained at the office of the company at so-and-so street. The hon. Gentleman would say that that was not the prospectus; but if he looked at the definition clause he would find that a prospectus meant "any prospectus, notice, circular, advertisement, or other invitation offering to the public for subscription or purchase any shares or debentures of a company." One might imagine from what had been said that the public subscribed for shares without reading the prospectus. [An HON. MEMBER: Yes.] It was very rarely that they did not read it, and he said that with some knowledge of the general practice of companies. The object of the advertisement was to call the attention of the public to any undertaking, and the practice of the public was to apply for a full prospectus and an application form. He knew that the practice had grown up recently, to a limited extent, of filling in the application form before the prospectus reached the hands of the proposed investor, but that was very rarely done. The hon. Gentleman spoke as if, by passing the Amendment, they were going to deprive the inquirer of the opportunity of knowing the contents of the contract. He said that in practice nobody ever went to see the contract. But how was the Bill going to affect that?

*SIR ALBERT ROLLIT

said that what he did say was that, except in the smallest number of cases, people did not go to inspect the contracts, and that would be equally the case with an abridged prospectus in which a general reference had been made to the full document, to be consulted elsewhere.

MR. H. S. FOSTER

said there was no analogy between the cases. He agreed that certain classes of people did not take the trouble to read a prospectus, and never would. But these people did not need any protection, and did not deserve it. They thought the shares in a company were going to a premium, and they applied for a certain number in order to throw them on the shoulders of somebody else. There could be no doubt that in the absence of the Amendment the expense of inserting the advertisement in the newspapers would be so great that it would never be put in practice.

MAJOR JAMESON (Clare, E.)

hoped the Government would show some backbone, and insist on the adoption of the Amendment. They had had arguments from both sides of the House in defence of the investors, but it seemed to him that the object of the Bill was to secure large incomes to the lawyers and large profits to the newspaper proprietors. An abridged prospectus, however short, would lead to much expense. If every line of the prospectus and every detail of an agreement had to be advertised, it would be impossible for anybody but a millionaire to bring out a company, and the result would be that company promoting would become a millionaires' monopoly. He thought the Amendment a very fair one, and he trusted that the right hon. Gentleman the President of the Board of Trade would not give way upon it. The right hon. Gentleman had already made too many concessions to the lawyers. He was sorry to say that there were more lawyers present that night than any of the rest of hon. Members.

MR. BOND (Nottingham, E.)

agreed with the hon. Member opposite, and hoped his right hon. friend would not give way on this Amendment. In his judgment it did not go quite far enough, although it was a concession to good sense and general convenience. It was quite evident that there had been a good many fingers in the pie in framing Clause 12. No doubt those who framed the clause had in mind the initial prospectus, which was put forward when the company was first started, and in which all the particulars which might reasonably be asked for were required to be disclosed. But the word "prospectus" included every notice issued by the company after it had started, inviting the public to subscribe for shares. He put it to the House that when a company wished to increase its capital by the issue of debentures or additional shares, it did not desire to go in for an immense advertising campaign, but only put a modest line or two in such papers as it was thought would bring custom, pointing out that full information could be obtained at the company's office. It would be preposterous to demand that all the full information that was demanded in the original prospectus should be set out in extenso in these advertisements. It would put an end altogether to the practice of advertising for subscriptions, and thereby inflict great inconvenience on honest, struggling companies. The concessions which the Government had made had not gone beyond what was intended in Committee.

MR. MAURICE HEALY (Cork)

said that, having regard to the very wide terms of the definition of "prospectus," it was difficult to avoid the conclusion that some such Amendment as that pro posed by the Government was necessary. Apparently "prospectus" was to include not merely the ordinary advertisement by which the company invited the public to subscribe, but if a man concerned in the promotion of the company, no matter how long previously, had shares and wished to sell them, he would be compelled to advertise the full prospectus. But in endeavouring to meet the difficulty that existed the Government had selected a singular way to do it. They limited it to an advertisement published in a newspaper. It was not the advertisements in the newspapers that ought to be treated the most leniently. If any distinction was to be drawn it ought not to be in favour of the way which drew most money into the pockets of the company. A differentiation ought to be drawn between the mode of publishing the advertisement and the character of the advertisement. Some Gentlemen had addressed the House from the point of view of the investor, some from the point of view of the company promoter; he would say something from the point of view of the lawyer. If this Amendment passed into law he should never be entrusted with the duty of drawing an abridged prospectus, because he would say that the prudent thing to do was to publish the prospectus as a whole. It was possible to test this matter in a very simple way. Would the Government tell them what class of matter it would be safe to omit from the abridged prospectus? The difficulty was to tell what was to be abridged; if matter was not material it need not appear in the abridged prospectus at all; if, on the other hand, it was material, could it be omitted from the abridged prospectus? Was it intended to protect people who deliberately omitted from a prospectus something that was material? It the clause was examined it would be found that nine-tenths of the matters could not be abridged. It was plain that by unduly enlarging the scope of Clause 12, the Government had got into a very great difficulty. Some amendment was necessary, but, looking at it from a lawyer's point of view, this Amendment was most dangerous.

MR. BRYCE

said he did not propose to follow the arguments which had been urged in respect of the clause, although he was satisfied that no answer had been given to them by the Government; he merely rose for the purpose of making a suggestion. If the clause were carried upon a division the House would have no opportunity of amending it, but in another place there would be an opportunity, and as the clause seemed to be ill-fitted as it stood to attain the objects of the Government he suggested that the clause should be carefully considered by the Law Officers of the Crown in order to see whether its form could not be improved with a view to its amendment in another place.

MR. RITCHIE

thought the suggestion of the right hon. Gentleman was one well worthy of consideration.

SIR JAMES WOODHOUSE (Huddersfield)

expressed the opinion that the Amendment was a most important one. It struck at the root of the section, and rendered nugatory all those provisions which the section provided. The section provided that the prospectus of a company should contain many things, and laid down certain penalties in event of its not containing them. The difficulty which was sought to be met by the Amendment ought to be met in the interest of all honest companies. No one wanted to kill legitimate enterprise, but it was going to be seriously hurt unless some provision was made to insert in a newspaper such an advertisement as would be necessary. The only difference with regard to the newspaper advertisement was that the expense would be enormously increased, because the prospectus would contain a great deal of common form matter which nobody required to see and which was never read. Of such a character was the Memorandum of Association, which contained in legal phraseology every power which a company might think fit to exercise. The public at large did not desire to see that, and would not read it if it appeared in a newspaper; but the extra expense of printing it in a newspaper would mean thousands of pounds to every company which was brought out; the difficulty might be obviated by omitting Memorandums of Association from the advertisement. The only other point in which it would be proper to abridge the prospectus was in the schedule of contracts, which in the case of a largo company like Lipton's, with an immense number of establishments, would mean a tremendous cost to the company. He ventured to suggest, therefore, that instead of the words "in an abridged form," there should be inserted, "without inserting the Memorandum of Association and schedule of contracts."

Main Question put, "That the words, '(7) Where any such prospectus as is mentioned in this section is published as a newspaper advertisement it shall be sufficient to publish it in an abridged form, with a reference to a full prospectus complying with the terms of this section, specifying a convenient place where the full prospectus can be inspected and obtained,' be there inserted."—(Mr. Ritchie.)

The House divided:—Ayes, 102; Noes, 64. (Division List No. 247.)

AYES.
Allhusen, Augustus Henry E.	Fisher, William Hayes	Morrell, George Herbert
Ashmead-Bartlett, Sir Ellis	Flannery, Sir Fortescue	Morton, A. H. A (Deptford)
Atkinson, Rt. Hon. John	Foster, Harry S. (Suffolk)	Murray, Rt. Hon. A. G. (Bute)
Balfour, Rt. Hn. A. J. (Manch'r	Garfit, William	Nicol, Donald Ninian
Balfour, Rt Hn Gerald W (Leeds	Gedge, Sydney	Peel, Hn Wm. Robert Wellesley
Bartley George C. T.	Gibbs, Hn A. G. H. (City of Lond.	Phillpotts, Captain Arthur
Beach, Rt. Hn Sir M. H. (Bristol)	Giles, Charles Tyrrell	Purvis, Robert
Blundell, Colonel Henry	Gorst, Rt. Hn. Sir John Eldon	Remnant, James Farquharson
Bond, Edward	Goulding, Edward Alfred	Richards, Henry Charles
Bousfield, William Robert	Hamilton, Rt. Hon. Lord G.	Ritchie, Rt. Hon. C. Thomson
Brodrick, Rt. Hon. St. John	Hanbury, Rt. Hn. Robert W.	Robertson, Herbert (Hackney)
Bullard, Sir Harry	Haslett, Sir James Horner	Round, James
Burns, John	Hoare, Ed. Brodie (Homestead	Russell, T. W. (Tyrone)
Butcher, John George	Hornby, Sir William Henry	Sharpe, William Edward T.
Carson, Rt. Hn. Sir Edw. H.	Howard, Joseph	Sidebotham, J. W. (Cheshire)
Cavendish, V. C. W. (Derbyshre	Hudson, George Bickersteth	Sidebottom, William (Derbsh.)
Cayzer, Sir Charles William	Hutton, John (Yorks, N. R.)	Sinclair, Louis (Romford)
Cecil, Evelyn (Hertford, East)	Jameson, Major J. Eustace	Smith, James Parker (Lanarks.
Cecil, Lord Hugh (Greenwich)	Jessel, Captain H. Merton	Spencer, Ernest
Chamberlain, J. Austen (Worc.	Johnstone, Heywood (Sussex)	Stirling-Maxwell, Sir J. M.
Chaplin, Rt. Hon. Henry	Kimber, Henry	Stone, Sir Benjamin
Charrington, Spencer	King, Sir Henry Seymour	Tabot, Rt Hon. J. G (Oxf'd Univ.
Clare, Octavius Leigh	Knowles, Lees	Thornton, Percy M.
Cohen, Benjamin Louis	Lafone, Alfred	Tomlinson, W. E. Murray
Collings, Rt. Hon. Jesse	Laurie, Lieut.-General	Tritton, Charles Ernest
Cornwallis, Fiennes Stanley W.	Lawson, John Grant (Yorks.)	Warr, Augustus Frederick
Davies, Sir H. D. (Chatham)	Lonsdale, John Brownlee	Welby, Lt.-Col. A. C E (Taunt'n
Digby, John K. D. Wingfield-	Lopes, Henry Yarde Buller	Williams, J. Powell- (Birm.)
Dixon-Hartland, Sir F. Dixon	Lowe, Francis William	Wortley, Rt. Hn. C. B. Stuart-
Douglas, Rt. Hon. A. Akers-	Lowles, John	Wrightson, Sir Thomas
Doxford, Sir William Theodore	Macdona, John dimming	Wyndbam, George
Dyke, Rt Hon Sir William Hart	M'Arthur, Charles (Liverpool)	Wyvill, Marmaduke D'Arcy
Fellowes, Hon. Ailwyn Edw.	Martin, Richard Biddulph	TELLERS FOR THE AYES—Sir William Walrond and Mr. Anstruther.
Finch, George H.	Middlemore, J. Throgmorton
Finlay, Sir Robert Bannatyne	Monckton, Edward Philip
NOES.
Abraham, William (Cork, N. E.)	Douglas, Charles M. (Lanark)	Macaleese, Daniel
Asher, Alexander	Drage, Geoffrey	MacDonnell, Dr MA (Queen's C
Ashton, Thomas Gair	Duckworth, James	MacNeill, John Gordon Swift
Austin, M. (Limerick, W.)	Fenwick, Charles	Molloy, Bernard Charles
Bryce, Rt. Hon. James	Fowler, Rt. Hen. Sir Henry	Morgan, W. Pritchard (Merth'r
Burt, Thomas	Gladstone, Rt. Hn. Herbert J.	Morton, Edw. J. C. (Devonport)
Buxton, Sydney Charles	Griffith, Ellis J.	Moss, Samuel
Caldwell, James	Haldane, Richard Burdon	Moulton, John Fletcher
Crilly, Daniel	Hayne, Rt. Hon. Charles Seale-	O'Brien, Patrick (Kilkenny)
Cross, Alexander (Glasgow)	Healy, Maurice (Cork)	O'Connor, J. (Wicklow, W.)
Dalziel, James Henry	Hedderwick, Thomas Chas. H.	O'Dowd, John
Dewar, Arthur	Holland, William Henry	O'Malley, William
Dilke, Rt. Hon. Sir Charles	Horniman, Frederick John	Pickard, Benjamin
Donelan, Captain A.	Jones, Wm. (Carnarvonshire)	Pickersgill, Edward Hare
Doogan, P. C.	Leigh-Bennett, Henry Currie	Powell, Sir Francis Sharp
Power, Patrick Joseph	Soames, Arthur Wellesley	Wilson, Hy. J. (York, W. R.)
Price, Robert John	Strutt, Hon. Charles Hedley	Wolff, Gustav Wilhelm
Roberts, John Bryn (Eifion)	Sullivan, Donal (Westmeath)	Woods, Samuel
Robson, William Snowdon	Tanner, Charles Kearns
Rollit, Sir Albert Kaye	Tully, Jasper	TELLERS FOR THE NOES—Sir Robert Reid and Sir James Woodhouse.
Royds, Clement Molyneux	Wallace, Robert
Samuel, J. (Stockton-on-Tees)	Walton, J. Lawson (Leeds, S.)
Scott, Chas. Prestwich (Leigh	Whiteley, George (Stockport)

Another Amendment made.

*MR. SYDNEY GEDGE

expressed strong hopes that the Government would accept the Amendment which he proposed to move. In framing it he had taken as a precedent the Act limiting the liabilities of directors. He was quite sure that the Government did not desire to prevent honest business men from becoming directors of joint stock companies, but they certainly would be deterred from becoming so unless some such Amendment as ho proposed was made. He begged to move.

Amendment proposed— In page 9, line 15, at end, to insert '(6) In the event of non-compliance with any of the requirements of this section a director or other person responsible for the prospectus shall not incur any liability by reason of the non-compliance, if he proves that (a) as regards any matter not disclosed, he was not cognisant thereof, and could not with reasonable diligence have discovered it; or (b) the non-compliance arose from an honest mistake of fact on his part.'"—(Mr. Sydney Gedge.)

Question proposed, "That those words be there inserted."

MR. RITCHIE

thought that some such provision ought to be made, but at the same time he thought the whole burden of proof ought to lie upon the individual. He accepted the Amendment, which he thought was reasonable.

Amendment agreed to.

*MR. SYDNEY GEDGE

trusted that his next Amendment would meet with a like fate at the hands of the Government for the same reason. At present, if an action of tort were brought against several defendants who were all guilty, and one defendant was proceeded against, and had to pay the full damage, he could not compel those equally guilty with himself to contribute a shilling towards what he had had to pay, therefore the whole loss fell upon one man. There was a prece- dent for the alteration he proposed, because the courts had laid down a principle similar to that in the Amendment in the case of trustees and executors, who could compel their co-trustees or co-executors to make contribution. That had been done in a case where the breach of trust had been committed by an active trustee, and the passive trustee was held to be equally liable. In this case the directors were really trustees for the shareholders, and such an Amendment was, under the circumstances, only right and proper. He hoped the Amendment would be accepted.

Amendment proposed— In page 9, line 18, after the word 'section,' to insert the words 'and every person who is made liable to pay damages in respect of any infringement of the provisions of this section shall be entitled to contribution as in cases of contract from every other person who, if sued separately, would be liable to pay such damages.'"—(Mr. Sydney Gedge.)

Question proposed, "That those words be there inserted."

SIR ROBERT FINLAY

hoped his hon. friend would not press the Amendment. The provision to which he had alluded had never been put into force, and consequently there had been no opportunity of testing the principle. He was not very much enamoured of these special exceptions to the general law of the land, which might result in great and manifest inconvenience. He therefore thought the Amendment ought not to be adopted.

MR. CALDWELL (Lanarkshire, Mid)

said that as the Bill was to apply also to Scotland the Scotch Members were very much interested in the clause. It was a well-known principle in Scottish law that when a wrongdoer had been guilty of an act, and other wrongdoers had been equally guilty with him, and he had been convicted and fined, he could not recover any contribution from his co-wrong-doers. There were many illustrations of that principle. In England the law was precisely the same in that respect as the law of Scotland. It did not recognise the right of one wrongdoer to any contribution from his co-wrongdoer. In this case it had been argued as if this was a case of liability under a contract. That was not so. It was a case where the parties had been guilty of an offence of a quasi-criminal

MR. BOND

said the only way in which this clause would affect companies which had come into existence previously to the

nature—a breach of the statutory law—and he thought the acceptance of such an Amendment would very much weaken the clause. He submitted that there was no ground whatever for the Amendment.

Question put.

The House divided:—Ayes, 42; Noes, 97. (Division List No. 248.)

AYES.
Abraham, William (Cork, N. E.	Jameson, Major J. Eustace	Rollit, Sir Albert Kaye
Austin. M. (Limerick, W.)	Lloyd-George, David	Samuel, J. (Stockton-on-Tees)
Bond, Edward	Macaleese, Daniel	Scott, Chas. Prestwich (Leigh)
Bryce, Rt. Hon. James	MacDonnell, Dr. M.A. (Q. C.)	Soames, Arthur Wellesley
Crilly, Daniel	MacNeill, John Gordon Swift	Sullivan, Donal (Westmeath)
Dewar, Arthur	Morgan, W. Pritchard (Merthyr	Tanner, Charles Kearns
Dilke, Rt. Hon. Sir Charles	Morton, Edw. J. C. (Devonport)	Tomlinson, Wm. Edw. Murray
Donelan, Captain A.	Moss, Samuel	Tully, Jasper
Doogan, P. C.	Moulton, John Fletcher	Wallace, Robert
Evans, Sir F. H. (Southampton)	O'Brien, Patrick (Kilkenny)	Wolff, Gustav Wilhelm
Fenwick, Charles	O'Dowd, John	Woodhouse, Sir J. T. (Hudder'd)
Griffith, Ellis J.	O'Malley, William	Woods, Samuel
Healy, Maurice (Cork)	Power, Patrick Joseph	TELLERS FOR THE AYES—Mr. Sydney Gedge and Mr. Harry Foster.
Holland, William Henry	Price, Robert John
Horniman, Frederick John	Reid, Sir Robert Threshie

NOES.
Allhusen, Augustus H. Eden	Finch, George H.	Nicol, Donald Ninian
Asher, Alexander	Finlay, Sir Robert Bannatyne	Phillpotts, Captain Arthur
Ashmead-Bartlett, Sir Ellis	Fisher, William Hayes	Pickersgill, Edward Hare
Balfour, Rt Hn Gerald W (Leeds	Flannery, Sir Fortescue	Purvis, Robert
Bartley, George, C. T.	Garfit, William	Remnant, James Farquharson
Blundell, Colonel Henry	Gibbs, Hn. A. G. H (City of Lond.	Richards, Henry Charles
Bonsfield, William Robert	Giles, Charles Tyrrell	Ritchie, Rt. Hn. Chas. Thomson
Brodrick, Rt. Hon. St. John	Gorst, Rt. Hon. Sir J. Eldon	Roberts, John Bryn (Eifion)
Bullard, Sir Harry	Goulding, Edward Alfred	Robertson, Herbert (Hackney)
Buxton, Sydney Charles	Hanbury, Rt. Hon. Robert W.	Round, James
Caldwell, James	Haslett, Sir James Horner	Royds, Clement Molyneux
Cameron, Robert (Durham)	Hornby, Sir William Henry	Russell, T. W. (Tyrone)
Carson, Rt. Hon. Sir Edw. H.	Hudson, George Bickersteth	Sharpe, William Edward T.
Cavendish, V. C. W (Derbyshire	Hutton, John (Yorks, N. R.)	Sidebotham, J. W. (Cheshire)
Cayzer, Sir Charles William	Johnstone, Heywood (Sussex)	Sidebottom, William (Derbys.
Cecil, Evelyn (Hertford, E.)	Kimber, Henry	Sinclair, Louis (Romford)
Chamberlain, J. A. (Worc'r)	Knowles, Lees	Skewes-Cox, Thomas
Charrington, Spencer	Labouchere, Henry	Smith, J. Parker (Lanarks.)
Clare, Octavius Leigh	Lafone, Alfred	Spencer, Ernest
Cohen, Benjamin Louis	Laurie, Lieut.-General	Stone, Sir Benjamin
Collings, Rt. Hon. Jesse	Lawson, John Grant (Yorks.)	Tritton, Charles Ernest
Cook, Fred. Lucas (Lambeth)	Leigh-Bennett, Henry Currie	Vincent, Sir Edgar (Exeter)
Cornwallis, Fiennes S. W.	Lonsdale, John Brownlee	Warr, Augustus Frederick
Cross, Alexander (Glasgow)	Lopes, Henry Yarde Buller	Welby, Lt.-Cl. A. C. E. (Taunton
Davies, Sir for. D. (Chatham	Lowe, Francis William	Whitmore, Charles Algernon
Digby, John K. D. Wingfield-	Lowles, John	Williams, Joseph Powell-(Birm
Dixon-Hartland, Sir F. Dixon	Macdona, John Cumming	Wrightson, Sir Thomas
Douglas, Rt. Hon. A. Akers-	M'Arthur, Charles (Liverpool)	Wylie, Alexander
Douglas, Charles M. (Lanark)	Martin, Richard Biddulph	Wyvill, Marmaduke D'Arey
Doxford, Sir Wm. Theodore	Middlemore, John T.
Drage, Geoffrey	Monckton, Edward Philip	TELLERS FOR THE NOES—Sir William Walrond and Mr. Anstruther.
Duckworth, James	Morrell, George Herbert
Dyke, Rt. Hon Sir William Hart	Morton, Arthur H. A. (Deptford
Fellowes, Hn. Ailwyn Edward	Murray, Rt. Hn. A. G. (Bute)

passing of this Bill would be in the event of their requiring to raise fresh capital either through a further issue of shares or by debentures after the Act had come into force. Old companies had been formed without knowledge that any such provisions as were comprised in the Bill were contemplated, and every such company which desired to raise money by a new issue of shares or by debentures would have to modify their Articles of Association. That was a matter which would involve a great deal of explanation, which shareholders wore, perhaps, not willing to understand or believe. No injustice could be done by the adoption of the Amendment he proposed, and, therefore, he hoped it would commend itself to the right hon. Gentleman. He begged to move.

Amendment proposed— In page 9, line 18, after the word 'section,' to insert the words 'This section shall not apply to a company registered before this Act comes into operation.'"—(Mr. Bond.)

Question proposed, "That those words be there inserted."

MR. RITCHIE

thought it would be a mistake to open the door to the issue of new capital, to which the public were invited to subscribe, without the necessary information being given. The case of a company issuing fresh capital to its own shareholders was provided for already, if that was what his hon. friend desired.

MR. BOND

said he would withdraw the Amendment, but ho would like to make one suggestion, which was that the right hon. Gentleman should add the statement about the minimum subscription to the particulars which were not required to be stated in a prospectus issued after the formation of a company and inviting subscriptions for fresh shares.

Amendment, by leave, withdrawn.

MR. H. S. FOSTER

desired to move an Amendment not upon the Paper—in line 20 to strike out "a" in order to insert the words "any material." Those words were taken from Sub-section (k) of the preceding clause, which provided that "every material" contract must be set out in the prospectus. The need for the Amendment had been accentuated by the Reports of the Parliamentary Committee of the Incorporated Law Society with regard to the clause. The effect of the Amendment would be to restrict the powers of the clause in a very necessary way.

Amendment proposed— In page 9, line 20, to leave out the word, 'a,' and insert the words 'any material' instead thereof.'"—(Mr. H. S. Foster.)

Question proposed, "That the word 'a' stand part of the Bill."

SIR ROBERT FINLAY

hoped the House would not accept the Amendment, which was entirely unnecessary.

SIR ALBERT ROLLIT

said if there was one evil greater than another in company administration it had been the alteration of contracts by the directors without the sanction of the shareholders and without their knowledge. By the clause these things could be done provisionally, subject to the shareholders becoming acquainted with the proposed alteration, and he saw no reason for the Amendment.

Question put, and agreed to.

MR. H. S. FOSTER

said he did not think it was worth while to offer any argument in respect of the next Amendment. He would simply move.

Another Amendment proposed— In page 9, line 20, after the word 'prospectus,' to insert the words 'unless such variation shall be in favour of the company.'"—(Mr. H. S. Foster.)

Question proposed, "That those words be there inserted."

SIR ROBERT FINLAY

I hope my hon. friend will withdraw this Amendment, which is quite unnecessary.

Amendment, by leave, withdrawn.

Other Amendments made.

Another Amendment proposed— In page 9, line 31, to leave out the words 'not less than two directors,' and insert the-words 'the auditor or auditors,' instead thereof."—(Mr. H. S. Foster.)

Question, "That those words be there, inserted," put, and negatived.

Other Amendments made.

*MR. LAWSON WALTON

, in moving the next Amendment, said the House was well aware that a company was often brought into being in order that it might be constituted the purchaser, at an extravagant and inflated price, of property the vendor puts on the market. The company thus brought into existence was often the creature of the vendor. A company was a legal persona, and might buy the property at any price it thought proper. No doubt the vendor was answerable at law for any profit which he made in promotion, but it was impossible for the shareholders to obtain information as to what profit he had made in bringing the company into being. The legal duty which the vendor, when he was also the person who brought the company into being, ought to discharge was about to become a dead letter. Now, for the first time in the history of company law it had been made permissible for a company to pay the expenses incidental to its own promotion. The company might, therefore, provide for the underwriting of its own capital; it might set aside a fund for its own promotion or placing its own shares. But that was attended by the consideration that where a company paid commission it should publish to its shareholders the fact and state what the amount of its preliminary expenses was. But in ninety-nine cases out of a hundred the promotion of a company was effected not by the company itself, but by persons who were interested in bringing the company into being. There was no person so interested in bringing a company into being as the vendor who was to obtain from the company the price he was asking for his property. In those ninety-nine cases the preliminary expenses necessary for the notation of the company would be pro-Tided by the vendor and for the best of reasons—namely, that unless the company was launched there would be no purchaser for his property. If this Bill was to have any operative effect whatever the vendor, when he occupied not only the position of vendor, but also that of promoter, must be brought to book. The public must have some knowledge of the extent to which he was promoting the company, and what proportion of the so-called price which he was receiving for the property was being disbursed in preliminary and promoting expenses. Unless some such provision was inserted the Bill would be an elaborate series of clauses which would fail to stop frauds of the worst character. He might give a concrete case which had been illustrated by a recent investigation in the courts. A small business was purchased for a few pounds by a company promoter. A company was brought out to buy that business for as many thousands as the promoter gave hundreds. If it were the fact that the vendor and the purchasing company were both in existence at the time the arrangement was entered into, if both could watch their own interests, there would be no cause for such an alteration of the law. But the vendor stood to obtain so large a profit provided he could create the company to buy his property at his fixed figure, that it was worth his while to expend in anticipation of that profit very large sums of money in order to launch the company. The underwriting of the capital would be arranged; the directors whose names were to attract very largely the subscription of the share capital were paid; the advertising expenses borne, and that judicious expenditure made among the press of a certain class which was necessary to give the scheme the widest currency in financial circles. As the result of these operations the company was launched, and the stipulated price paid, the vendor obtaining a very large profit a considerable proportion of which had been expended in bringing the company into being. How was it possible for any; member of the public to come to the conclusion that it was desirable for the company to continue its operations unless he; knew, first of all, the legitimate price paid, and, secondly, the illegitimate price paid? The information provided for in this section was supposed to be information required by the shareholders attending the first statutory meeting; they were entitled to know what the scheme was in which they were embarking, and they had to come to the conclusion whether it would pay to put the company into working operation or whether it would not be better to abandon the concern as a stillborn enterprise. How could sane men decide for themselves that problem unless they knew to what extent the price paid for the property was purely fictitious—in other words, to what extent the sum received by the vendor had been disbursed in the manner just described? He could not conceive any objection to the Amendment, but he understood that the answer of the Government in Committee was that they had no control over the vendor. That, however, was no answer at all. The only vendor affected by this provision was the vendor who was also the promoter of the company, and it would be to the interest of such a vendor to furnish this statement provided the duty were imposed upon him; the promotion of the company would be impossible without that statement, and therefore no such vendor would attempt to promote a company unless he was in a position to publish to the shareholders the extent to which he was instrumental in forming the company. No further control of the vendor was required. It might be said that if a promoter furnished a false statement some responsibility would be cast upon the directorate. There was nothing in the Amendment making directors responsible for the accuracy of the statement furnished by the vendor. All they had to do was to tell the shareholders what the vendor said, and if there was any inaccuracy the vendor could be brought to book under Clause 32 of the Bill. The Bill would entirely fail if it was based on the assumption that the promotion expenses and all the incidental expenses attached to the flotation of a company were borne by the company itself. They were borne by the vendor, and an account was never rendered because there was no machinery by which it could be required. Ho appealed to the Government to provide by a simple Amendment of this kind, that the vendor, where he was also the promoter, should be compelled to furnish such an account as was here proposed, and that that account for what it was worth should be placed before the shareholders. It would be a very effective deterrent against fraudulent practices by the vendors of companies; by it shareholders would be able to judge to what extent the vendors had acted honestly in the promotion of a company, and with the information thus provided they would be able to decide whether a company was launched under favourable auspices or whether it was dishonest.

Another Amendment proposed— In page 10, line 8, after the word 'approval,' to insert the words—'(f) An account furnished by the vendors within the meaning of Section 12 (2) or not, setting out the sums in cash and shares expended by them in the formation of the company, with particulars of the items and objects of such expenditure.'"—(Mr. Lawson Walton.)

Question proposed, "That those words be there inserted."

SIR ROBERT FINLAY

said it was impossible not to sympathise with the object the mover of the Amendment had in view, but it was possible in the pursuit of such an object to put forward proposals which, for the purposes of this Bill, were not calculated to work any really beneficial effect. The section in which it was proposed to insert these words provided that the Return was to be a Return in reference to the affairs of the company as to matters within the knowledge of those concerned in the company—the number of shares allotted, the amount of cash received by the company, an abstract of the receipts and payments of the company on capital account, an estimate of the preliminary expenses of the company, the names, addresses, and descriptions of the directors, auditors, manager, and secretary, and the particulars of any contract the modification of which was to be submitted to the meeting for approval. Those wore all matters which the directors could properly be required to certify in the terms of the sub-section. His hon. and learned friend proposed, in addition to that, that a statement should be made by the vendors as to certain matters specified in the Amendment. How could the directors certify in regard to the matters referred to in the sections? If hon. Members looked at page 9, line 30, they would find that it was provided that the directors shall, at least seven days before the day on which the meeting is held, forward to every member of the company a statement of particulars as to the shares allotted, the cash received, and an abstract of receipts and expenditure.

*MR. LAWSON WALTON

The directors will simply certify that the account is the account sent to them by the vendors.

SIR ROBERT FINLAY

That would mean certifying nothing at all. All the matters dealt with in the sub-section were matters which the directors might fairly be expected to certify, but the directors could only certify that the statement was supplied to them by the vendors, and they could not certify whether it was true or untrue. That would only mean that they would be providing a safeguard which would be more or less illusory. Then he called the attention of the House to the extreme vagueness of the language of the Amendment. The Amendment stated that the vendors would have to furnish an account showing any sums in cash and shares expended by them in the formation of the company, with particulars of "the items and objects" of such expenditure. What did that mean? The items one could understand, but what were the objects? Was it meant that the promoters should state what they had in view when they spent these particular items? On the whole he submitted that this Amendment, though excellent in form, like all his hon. and learned friend's Amendments, was not one that should recommend itself to the House.

MR. LABOUCHERE

I hope the House will go to a division on this Amendment, as it seems to me to be a very legitimate and proper one. We know perfectly well that promoters do spend very large sums of money in getting out companies, and we know also that that money comes out of the pockets of the companies themselves. The aim and object of the Bill is publicity, and to enable persons who have taken shares to know what has been the bona fide expenditure, what has been the amount the vendor obtained, and what has been the amount spent in promoting the company. But if a company's accounts are only to be known to the shareholders and the promoter's accounts are not, that makes the Bill a perfect farce. Take the case of underwriting. The other day I was very sorry that the Attorney General could not see his way to insist that all the money given by the promoters for underwriting should be stated in the prospectus. A person would see 2 per cent, or 3 per cent. for underwriting in the prospectus, and would suppose that that was the only amount that was paid; but the Attorney General admitted that in addition to that 2 or 3 per cent, paid by the company the promoter might give any sum of money on condition, the Attorney General said, that it was his own money. But, of course, that money is eventually paid not by the promoter, but by the company. I do not know whether the Attorney General is aware of the nature of the amounts now paid by the promoter of a company. Take, for instance, the solicitor. The solicitor very often gets £1,000 for putting his name on a prospectus. Is that sum paid by the company? The company might pay £100 of it, but the promoter himself would pay £900. That applies also to brokers on the Stock Exchange. They very often receive £1,000 for putting their names on prospectuses, and that money is mainly paid by the promoters. I think the Bill without some such clause as this would be a mere farce and a snare, and would do more harm than good, I cannot understand the argument of the Attorney General. It seems to me that in his opinion there is something particularly sacred in the section. He says that the Amendment would make an inroad on it; but let us make an inroad on it, because there is nothing particularly sacred about it. Let us act as practical men. We know perfectly well where the difficulty is. It is that when a promoter is selling his property, he pays a very large amount of money himself to get hold of people. Take the case of reports. Does the right hon. Gentleman think that all the reports published about a company are bona fide? I like to know when I read these reports what the eminent mining engineer has got for them. If I saw that he got £1,000 or £2,000, I would begin to mistrust the company. Are promoters ashamed of making known what they pay, and are solicitors, brokers, and mining engineers also ashamed of what they make being known? If they think it is legitimate, why should not the shareholders know of it? Every shilling paid in this way comes out of the capital of the company, because it is added to the price paid to the vendor. I hope the Attorney General will not tell us that this clause, which is proposed by an hon. Gentleman who was a member of the Committee, and who is eminent in the law, cannot be accepted because it would make an inroad on the section.

SIR ALBERT ROLLIT

I understood the Attorney General to say that he regarded this Amendment as at variance with the scheme of the clause. It so happens that I proposed a clause on the original Departmental Committee with the object of giving the fullest information as to the history and genesis of a company to the shareholders at the statutory meeting, and to make the statutory meeting, hitherto formal, a reality. I venture to say that this additional information would be of the greatest value to the shareholders. The Attorney General said that the one objection was that the report would have to be certified by the directors, and that they could not certify it because it would be information furnished by the vendors. There is no objection on that ground. So far as I can see, the real objection to the clause is one that I ventured to raise on the Departmental Committee—how are you to compel vendors to furnish this information? That, however, could be easily made good by additional words to the effect that such information should be rendered by the vendors, and that a penalty should attach for non-compliance. I sincerely hope that the Amendment will be pressed.

MR. BRYCE

When the Attorney General objected to this Amendment, he really did not grapple with it on its merits. He admitted that the object was a good one, and that the difficulties in the way are really difficulties as regards machinery. But they could be easily met. Surely if this Amendment were to become part of the clause, it would then become the duty of the directors, knowing the responsibility which would be upon them of producing this account by the vendor at the statutory meeting, to enter into an arrangement with the vendor to supply that account before completing the contract for the purchase of the company. All that is necessary is to lay the duty on the directors, and to add a provision containing a penalty for misdemeanour as under Section 32. I see nothing at all in the argument of the Attorney General. It is perfectly clear that if it is part of the law the directors will require it, and the promoters will furnish it, and it will be produced at the statutory meeting. As regards the other objection of the Attorney General, he asks what is the meaning of "items" and "objects."

SIR ROBERT FINLAY

I said there was no difficulty about "items."

MR. BRYCE

Then the "object" would be, the purpose for which the money was applied. Supposing a sum of £500 is paid to a financial boomer, the "item" is £500, and the "object" is to boom the concern. I might also mention that this Bill, as prepared by the Departmental Committee and introduced by the Government in the House of Lords, contained a provision to the effect that a promoter might not retain for his own use any profit in shares or otherwise arising out of his connection with the promotion of the company, unless full and fair disclosure were made as to the amount of that profit. That would cover, at any rate, part of the object of my hon. and learned friend, and I think that the Government are bound to accept an Amendment which will have such a useful effect.

MR. BANBURY (Camberwell, Peckham)

said the Amendment proposed that the statement should be made at the statutory meeting, but he asked what protection would it then be? If it were made before the shareholders had invested their money ho could quite see it would be a protection, but if it were made after they had invested their money he could not see how it would protect them in any way.

MR. BOUSFIELD

said he could not help thinking that to object to the Amendment merely on verbal grounds was really not doing justice to its subject matter. What they wanted to get at was the large amount of money which disappeared during the formation of a company as between the people who were selling the concern and those who were taking it over. If the Bill remained as it was, and merely dealt with what the company did, and failed to deal with what the promoter did, he thought it would serve rather as a screen for the promoter than otherwise. They had the other night the question as to whether the commission to be paid for underwriting should be stated in the prospectus. That was but another way of dealing with the matter-suggested in the Amendment, and he understood from the President of the Board of Trade that he was prepared to give that matter consideration. Of course if they had it stated on the prospectus what had been done by the promoter, and if they made it the duty of the directors to ascertain the facts in relation to the promotion of the company, then a statement such as was proposed, coming before the statutory meeting, would be very desirable. It seemed to him, unless they made the directors responsible for obtaining a knowledge of what the promoter had done in connection with the flotation of the company, that the Bill would really serve as a screen for the promoter. Whatever might be the objection to the form of the Amendment, he hoped the Government would consider it in connection with the question of the disclosure in the prospectus of the underwriting commission paid by the promoter, with a view to seeing whether it could not be added to the Bill at any rate in another place.

MR. ALEXANDER CROSS (Glasgow, Camlachie)

said he desired to say a few words in support of the Amendment. At the time of the statutory meeting, whore the matter would be discussed, the promoter might not have got rid of all his shares, and if the statement remained screened or otherwise concealed from the public, then his remaining shares could be disposed of. Seeing that the Government had not expressed any serious objection to the principle of the Amendment, and that the Attorney General had stated that he entirely approved of the idea, he ventured to express the hope that some means might be found of carrying the Amendment into effect. After all, to his unprofessional mind the question resolved itself into a very simple one—was this information such information as the shareholders ought to have? It the Attorney General said that the information ought to be concealed, then he was entirely with him in opposing the Amendment, but if the Attorney General said that the information ought to be made public he was taking on himself a great responsibility in refusing to accept the Amendment.

MR. LOUIS SINCLAIR (Essex, Romford)

said he hoped the Government would not concede this point, because if the expenditure in cash and shares were to be divulged at the statutory meeting, then they might go so far as to ask what the vendor had paid for the property. If an enterprising man discovered a gold mine he would have to divulge the price he paid for it, although he might have expended considerably more money in obtaining reports and investigating the property; and when at the first statutory meeting it would be found that a large sum of money had been expended in that Way, although a gold mining company might not surfer so much, he claimed that such a disclosure would create a great amount of suspicion in connection with an industrial company.

MR. H. C. RICHARDS (Finsbury, E.)

said that the speech of the hon. Member for the Romford Division had entirely convinced him of the wisdom of voting for the Amendment. He could not understand why the law officers objected to an Amendment which had for its object the giving of information to the bona fide investor as to what had taken place. If the hon. Member for the Rom-ford Division were correct in his suggestion, then a promoter, whether of a gold mine or an industrial concern, would be allowed to palm it off on the public at any price he thought fit, and at any profit he could collar. That argument was utterly futile. What objection could there be to the promoter supplying information as to the amount of money which had been spent on obtaining reports? The hon. Member for Northampton charged certain members of the solicitors' profession with putting their names on prospectuses, and it was true that solicitors in the lower branches of the profession did that without ascertaining what the prospectus contained or disclosed, and they required a fee of one thousand guineas for doing it. He could, not understand why the two law officers of the Crown should object to the Amendment. It seemed to make clear that the statutory meeting should be something, more than a gathering of promoters, directors, and the seven signatories to the Articles of Association, and that it should be a gathering where the shareholders would be given some information as to what had taken place. If the Bill were meant to strike at dishonest promoters, then the Amendment should be accepted, because it might have the effect of compelling dishonest or hungry promoters to disgorge some of their spoil.

Question put.

The House divided:—Ayes, 72; Noes, 113. (Division List No. 249.)

AYES.
Abraham, William (Cork, N. E.	Fox, Dr. Joseph Francis	Price, Robert John
Asher, Alexander	Gladstone, Rt. Hon. Herb. J.	Provand, Andrew Dryburgh
Ashton, Thomas Gair	Greene, Henry D. (Shrewsbury)	Reid, Sir Robert Threshie
Birrell, Augustine	Griffith, Ellis J.	Richards, Henry Charles
Blake, Edward	Hazell, Walter	Roberts, John Bryn (Eifion)
Bolton, Thomas Dolling	Healy, Maurice (Cork)	Robertson, Edmund (Dundee)
Bousfield, William Robert	Hedderwick, Thomas Chas. H.	Robertson, Herbert (Hackney)
Bryce, Rt. Hon. James	Holland, William Henry	Robson, William Snowdon
Burt, Thomas	Horniman, Frederick John	Samuel, J. (Stockton-on-Tees)
Buxton, Sydney Charles	Jones, William (Carnarvonsh.)	Scott, Chas. Prestwich (Leigh)
Caldwell, James	Labouchere, Henry	Soames, Arthur Wellesley
Cameron, Robert (Durham)	Macaleese, Daniel	Strachey, Edward
Cawley, Frederick	MacDonnell, Dr. M.A. (Qu'ns C)	Sullivan, Donal (Westmeath)
Cohen, Benjamin Louis	MacNeill, John Gordon Swift	Tanner, Charles Kearns
Cotton-Jodrell, Col. Edw. T. D.	Mellor, Colonel (Lancashire)	Tollemache, Henry James
Crilly, Daniel	Mendl, Sigismund Ferdinand	Tully, Jasper
Cross, Alexander (Glasgow)	Molloy, Bernard Charles	Wallace, Robert
Dewar, Arthur	Morgan, W Pritchard (Merthyr	Walton, Joseph (Barnsley)
Donelan, Captain A.	Morton, Ed w. J. C. (Devonport)	Wilson, Henry J. (York, W. R.)
Doogan, P. C.	Moss, Samuel	Woodhouse, Sir J. T. (H'dd'rsf'd
Douglas, Charles M. (Lanark)	Moulton, John Fletcher	Woods, Samuel
Duckworth, James	O'Brien, Patrick (Kilkenny)	Yoxall, James Henry
Emmott, Alfred	Pease, Alfred E. (Cleveland)	TELLERS FOR THE AYES—Mr. Lawson Walton and Sir Albert Rollit.
Evans, Sir Francis H (South'ton	Pickersgill, Edward Hare
Fenwick, Charles	Power, Patrick Joseph

NOES.
Allnusen, Augustus Henry E.	FitzGerald, Sir Robert Penrose-	Nicol, Donal Ninian
Ashmead-Bartlett, Sir Ellis	Flannery, Sir Fortescue	Phillpotts, Captain Arthur
Atkinson, Rt. Hon. John	Flower, Ernest	Purvis, Robert
Balfour, Rt. Hn. A. J. (Manch'r	Foster, Harry S. (Suffolk)	Remnant, James Farquharson
Balfour, Rt. Hn. G. W. (Leeds)	Garfit, William	Ridley, Rt. Hon. Sir Matthew W
Banbury, Frederick George	Gedge, Sydney	Ritchie, Rt. Hon. C. Thomson
Beach, Rt. Hn. Sir M H (Bristol)	Gibbs, Hn. A. G. H. (Cy of Lond.	Round, James
Bigwood, James	Giles, Charles Tyrrell	Royd, Clement Molyneux
Blundell, Colonel Henry	Godson, Sir Augustus Frederick	Russell, T. W. (Tyrone)
Bond, Edward	Gorst, Rt. Hon. Sir J. Eldon	Sidebotham, J. W. (Cheshire)
Brassey, Albert	Goschen, Rt Hn G J (St. George's	Sidebottom, William (Derbysh.
Brodrick, Rt. Hon. St. John	Goulding, Edward Alfred	Sinclair, Louis (Romford)
Bullard, Sir Harry	Green, W. D. (Wednesbury)	Skewes-Cox, Thomas
Butcher, John George	Hamilton, Rt. Hn. Lord George	Smith, James Parker (Lanark)
Carlile, William Walter	Hanbury, Rt. Hon. Rbt. Wm.	Smith, Hon. W. F. D (Strand)
Carson, Rt. Hon. Sir Edw. H.	Haslett, Sir James Horner	Spencer, Ernest
Cavendish, V. C. W. (Derbysh.)	Hoare, E. Brodie (Hampstead)	Stanley, Hon Arthur (Ormskirk
Cayzer, Sir Charles William	Hudson, George Bickersteth	Stone, Sir Benjamin
Cecil, Evelyn (Hertford, East)	Hutton, John (Yorks., N. R.)	Strauss, Arthur
Cecil, Lord Hugh (Greenwich)	Jameson, Major J. Eustace	Strutt, Hon. Charles Hedley
Chamberlain, Rt. Hon. J. (Birm	Kimber, Henry	Sturt, Hon. Humphry Napier
Chamberlain, J Austen (Worc'r	King, Sir Henry Seymour	Thornton, Percy M.
Chaplin, Rt. Hon. Henry	Lafone, Alfred	Tomlinson, Wm. Edw. Murray
Charrington, Spencer	Lawson, John Grant (Yorks.)	Tritton, Charles Ernest
Clare, Octavius Leigh	Leigh-Bennett, Henry Carrie	Vincent, Sir Edgar (Exeter)
Collings, Rt. Hon. Jesse	Lonsdale, John Brownlee	Warr, Augustus Frederick
Cook, Fred. Lucas (Lambeth)	Lopes, Henry Yarde Buller	Welby, Lt-Col. A. C. E. (Tauntn
Cornwallis, Fiennes Stanley W.	Lowe, Francis William	Wharton, Rt. Hon. John Lloyd
Davies Sir Horatio D (Chatham	Lowles, John	Whiteley, H. (Ashton-under-L.
Digby, John K. D. Wingfield-	Macdona, John Cumming	Whitmore, Charles Algernon
Dixon-Hartland, Sir F. Dixon	M'Arthur, Charles (Liverpool)	Williams, Jos. Powell (Birm.
Douglas, Rt. Hon. A. Akers-	Malcolm, Ian	Wolff, Gustav Wilhelm
Doxford, Sir Wm. Theodore	Martin, Richard Biddulph	Wrightson, Sir Thomas
Dyke, Rt. Hn. Sir William Hart	Middlemore, J. Throgmorton	Wylie, Alexander
Fellowes. Hon. Ailwyn E.	Monckton, Edward Philip	Wyvill, Marmaduke D'Arcy
Fergusson, Rt Hn. Sir J. (Manc'r	Morrell, George Herbert
Finch, George H.	Morton, A. H. A. (Deptford)	TELLERS FOR THE NOES—Sir William Walrond and Mr. Anstruther.
Finlay, Sir Robert Bannatyne	Murray, Rt Hn A Graham (Bute
Fisher, William Hayes	Murray, Chas. J. (Coventry)

Other Amendments made.

MR. BANBURY

said he wished to move the following Amendment standing in the name of the hon. Member for West Wolverhampton. Unless this Amendment were carried, he held that very considerable hardship would be en- tailed on innocent people. In the event of the charge on the stock of a company not being registered, the people who had subscribed for that stock would be deprived of their security and would rank only as ordinary creditors. It was said that those people must go to a judge and say that their contract had been entered into on false representation; but he would point out that they generally were widows or clergymen who had saved a few hundred pounds, and they did not know where to go or what to do. If it was a large investor he would register the charge; but it was absurd that small people scattered all over the country should come to London and register their security. Again, it was said that the certificate which they received would bear upon its back the fact that the security was registered; but what if the endorsement was forged? Seven days was too short a time in which to register a debenture or a mortgage.

Amendment proposed— In page 11, line 38, to leave out from the word 'company' to the word 'secured,' in page 12, line 3, inclusive, and insert the words 'be registered in manner required by this Act within twenty-one days after the date of its creation.'"—(Mr. Banbury.)

Question proposed, "That the words proposed to be left out to the word 'registered,' in line 41, stand part of the Bill."

MR. RITCHIE

said that this Amendment was vital to the clause and to the scheme of the Bill as far as the registration of mortgages was concerned. If it were accepted by the House it would destroy the object which the Government had in view in framing the clause. Some of the worst cases that had been brought to the notice of the public in connection with company formation were in connection with the kind of company of which he would give an illustration. A man turned a private business, perhaps of an unsatisfactory character, into a company, and shares were taken in it by himself or some of his nominees. He then issued debentures, which were secured on all the property, so called, of the company, including not only the buildings, machinery, and plant, but the whole movable and immovable property of the company. The business went on for an indefinite period, and then came the inevitable smash. Then, what was the fate of the-creditor? He might have sent in goods to the extent of thousands of pounds, within a comparatively recent period of the formation of the company, and he found that the original promoter had got a claim over the whole property of the concern, including those goods, although the creditor had had no notice whatever of the existence of the charge, which was in the hands of the promoters of this nefarious company. That was why the Government considered it imperative that there should be no mistake about the registration. He had tried every means, he could think of for giving effective protection, but could find none, except by insisting on registration, which would secure that creditors would have full knowledge of what was going on. Nothing else would be of any avail. As to the objection that failure to register might entail hard-ship upon an innocent holder, ho pointed to the numerous safeguards which surrounded this undoubtedly onerous clause. First of all, by Section 7 the company had to be registered. Then by Section 16 it was the duty of the company to register every mortgage and charge created by the company. But that was not all. Under Section 20, directors who did not see that the charge was registered became liable to a fine of £100. Then there was the liability under the general law of every director to a person who might be aggrieved by non-registration. Further, Sections 6 and 16 provided for the endorsement of every debenture; and another section provided that a summary of the charges on the company should be sent to the registrar, who, if on examination he found the charges not registered, could either himself take proceedings under this Act, or the Board of Trade could do so. He could not see where the difficulties mentioned by his hon. friend could arise. Then there was the safeguard of an appeal to the court, which could, if anyone was damnified, order registration to take place. Lastly, the debenture-holder himself could compel registration. In any case, ho was satisfied that, without this clause, one of the worst frauds in connection with company organisation would be left untouched, and creditors would find themselves in the same hole as they often found themselves in now.

MR. MOULTON (Cornwall, Launceston)

hoped that the Government would adhere to their position as to this clause. He had no sympathy with the main provisions of the Bill. He believed that all this specific legislation as to what directors were to do and what the officers of a company were to do was on entirely false lines. It dulled the consciences of courts and juries, and led them not to apply good sensible doctrines of fraud and misrepresentation, and to look to the performance of specific duties as satisfying the claims which a company had on its directors and officers. But when he came to this clause he gave the Government his heartiest support. He could not see why they should allow charges upon the property of a company to be other than public charges. The first subsection was limited as to registration of charges for the purpose of securing the issue of debentures; but he would willingly have seen that a mortgage or charge of any kind should be registered in the case of a company. He would accept gratefully any attempt to bring into greater publicity all charges against a company. It was utterly impossible to prevent these frauds unless this registration wore required, and he hoped that the Government would insist that without this registration all these charges should be void both against the liquidators and against the creditors. He trusted that, for the protection of the general public, they would take upon themselves this responsibility, and that when the registrar had given his certificate of registration that should be conclusive. If this were done, the public would have reasonable protection, and the perpetration of these frauds on the public would become impossible.

MR. LOUIS SINCLAIR

ventured to think that the clause as it now stood would in some cases inflict hardship and protect the swindlers against the small investor. He was convinced that in some cases debenture holders only found out that their security was invalid when they received their debentures and had paid their money, and then the time for registration of the stock would have expired, and great injustice would be committed. He thought also that if the trustees were made liable to pay up hundreds and thousands of pounds because the company had not registered their stock, good men would be deterred from acting as trustees. Another thing he was afraid of was that the fine of £100 would fall severely on small holders.

SIR FRANCIS EVANS (Southampton)

said that this Bill, as a whole, reminded him of the Merchandise Marks Act which the hon. Member for Sheffield was supposed to have carried into law. Its effect would be to hinder the investment of English capital in foreign undertakings. To come to the point before the House, he wished to point out that in the carrying on of foreign undertakings they were obliged to borrow money months, sometimes more than a year, before the mortgage could be properly registered. Take a country like Chili: supposing that for some reason or another it was determined to carry on a great undertaking in that country; they would have to create debentures, and the public would have to take those debentures upon the character of the undertaking. Now, if they were to impose on the directors a condition that they could not issue debentures or give valid security unless they registered them under a certain number of days, all he could say was that they could never raise debenture stock. In Chili for certain reasons they were obliged to wait until the courts authorised the registration, and to his own knowledge it had taken over a year to register a mortgage and make it a real mortgage on property. That applied not only to Chili, but to many other countries abroad where Britons invested a large amount of capital. He noticed that there were several classes of Amendments making the registration compulsory in seven days, twenty-one days, three months, etc; but they could not give what it was sought to give—namely, security to the investor—if they tied him down to a date when it was perfectly impossible to get hold of the security in order to get a charge upon it. He believed that seven days, twenty-one days, or three months were equally inapplicable to cases where large amounts of British capital were invested.

*SIR ALBERT ROLLIT

thought that his hon. friend had overlooked the next sub-section in the clause, which enabled the time of registration to be extended. His hon. friend had pointed out the hardship of debenture-holders not being able, owing to the failure of registration, to secure their investments. But he also overlooked the words of Sub-section 7, by which any person interested in the charge might register; it appeared that even a debenture-holder alone, if he supposed the duty of the company had not been performed, would be at liberty to effect registration and so prevent hardship. The reason which induced the Departmental Committee to make this stringent regulation had been pointed out by the President of the Board of Trade. The principle which influenced the Departmental Committee in casting the obligation upon the company and upon the holders of the security was, that registration could best be enforced by making it the duty of those whose interest it was that registration should be effected, and that seemed to be a right principle. The provisions in the Act of 1862 for registration in a limited form had become a dead letter, and that dead letter had carried more misfortune to shareholders and creditors than probably any other portion of the company law.

MR. BRYN ROBERTS (Carnarvonshire, Eifion)

thought the object of registration had been somewhat misapprehended. The object was not to validate a mortgage, but to give notice to creditors of its existence. He had no sympathy with the complaint with regard to the parlous position in which trustees for debenture holders would be placed by this provision. The hon. Gentleman opposite seemed to think that a trustee should receive a certain payment in consideration of his name being used, but that he should have no duties whatever to discharge. The object of a trustee was to give the debenture holders an assurance that their debentures were well secured. There would be nothing in this provision to deter a good man from taking the position of trustee, but there would be something to deter a bad man doing so, and refusing to perform the duties incident to the position.

MR. H. S. FOSTER

believed that every Member of the House agreed as to the desirability and necessity of requiring companies to keep proper registers of their mortgages and charges, but the point upon which some differed from the Government was as to the penalty to be attached to the non-observance of that wise and proper registration. The President of the Board of Trade had said that this was an onerous clause, and the hon. Member for. South Islington had described it as a stringent clause, and there was no doubt they were right. The clause cast a statutory duty upon certain officials of a company, and upon no one else, to see that there was a registration of mortgages and charges, but the clause punished not only the official upon whom the statutory obligation was cast, but also those who could not by any possibility be held responsible for non-registration. That was a very serious situation. A statement had been issued by the Parliamentary Committee of the Incorporated Law Society, a body which included some of the best known and most eminent lawyers in London. Among the members of that committee were the hon. and learned Member for North Islington and the right hon. Gentleman the Member for East Wolverhampton. The statement of this committee, which had been adopted by the Council of the Incorporated Law Society, contained the following in regard to this clause— The committee quite appreciate the desirability in the public interest that provision should be made for the public registration of mortgages, etc., of companies. But, whilst provision is made for such registration, care must be taken that nothing is done to prevent the free raising by companies of money on debenture or debenture stock, or to impair the security which debenture holders or stock holders rightly expect they will receive for their money. To avoid the security of a debenture stock holder because his security is not registered would strike a blow at such security which would effectually prevent companies from raising money by such means and prevent the development of limited company enterprise. The cases of a debenture stock holder for, say, £1,000, part of an issue of, say, £1,000,000, and an ordinary lender of £1,000 to a private individual, are quite different. In the case of a loan of £1,000 to a private individual, the lender makes his own bargain, and he has only himself to blame if he neglects to register his security. Applicants for debenture stock in many cases live in the country. To make such persons within seven days after the allotment of the stock (which it is submitted is in law the creation of the stock) go to Somerset House and see whether the necessary registration of the security has been made, would be intolerable and would lie perfectly impracticable. By all means impose penalties upon the officers of a company who can control the registration if they fail in their duty to register, but on no account interefere with the security of the man who applies bona fide on the strength of a prospectus, and has no control over the registration or non-registration of the security promised to be given to him and on the faith of which he has parted with his money. That statement was made by a body of solid men whose opinions were entitled to great weight in the House, and it appeared to commend itself as common sense. By all means let penalties be imposed, and if they were not sufficiently heavy let them be made heavier: let it be made a serious offence for those officials whose duty it was to register to fail in their duty. But, after all, the creditor was not in quite the same position as the debenture holder. The creditor before he gave credit generally made some inquiries, and the fact that there had been one or two cases in which fraud had been committed on creditors by collusive charges being given for the purpose of defrauding those creditors was surely not sufficient justification for striking a blow at the validity of the security of the charge when once that charge had been validly created.

MR. BOUSFIELD

pointed out that this was really a question of hardship between two sets of innocent people. One set must suffer, and, on the whole, he thought it would be more in accord with various analogies if the one to suffer in this ease was the debenture holder.

MR. BOND

said the view to be taken of the propriety of this clause and the Amendment depended a good deal upon the opinion held as to the efficacy of the safeguards to be provided. The sugges-

tion was that certain classes of mortgages and charges ought to be registered, in order that people who were asked to deal with the company might know all the circumstances of the company and what charges were likely to come in before them if anything happened to the concern. The efficacy of that suggestion depended on whether intending creditors would search the register. The register was to be kept in London, and it was very doubtful whether a trader in Glasgow, Edinburgh, or Plymouth would, except in very exceptional cases, inform himself as to the state of the mortgage register. If that was so, the endeavour to protect that class of person would not be very successful. On the other hand, in the case of an omission to register, a very serious wrong would be inflicted upon perfectly innocent persons. On the whole, there seemed to be some doubt as to whether any distinct and definite advantage would be given to the intending creditor by insisting on this registration, and he should support the Amendment

MR. SYDNEY GEDGE

, who spoke amid cries of "Divide," was understood to say that, although he voted for the Amendment in Committee, he was satisfied by the debate which had just taken place that he was wrong in so doing, and he should, therefore, now vote against the Amendment.

Question put.

The House divided:—Ayes, 150; Noes, 29. (Division List No. 250.)

AYES.
Allhusen, Augustus Henry E.	Cavendish, V. C. W. (Derbysh.)	Dyke, Rt. Hn. Sir William Hart
Asher, Alexander	Cawley, Frederick	Emmott, Alfred
Ashmead-Bartlett, Sir Ellis	Cecil, Evelyn (Hertford, E.)	Fellowes, Hon. Ailwyn Edw.
Atkinson, Rt. Hon. John	Cecil, Lord' Hugh (Greenwich)	Fergusson Rt. Hn Sir J (Manc'r
Balfour, Rt. Hn. A. J. (Manch'r)	Chamberlain, Rt. Hn. J. (Birm.)	Finch, George H.
Balfour, Rt Hn Gerald W (Leeds	Chamberlain, J. Austen (Worc'r	Finlay, Sir Robert Bannatyne
Beach, Rt Hn Sir. M. H. (Bristol)	Channing, Francis Allston	Fisher, William Hayes
Beaumont, Wentworth C. B.	Chaplin, Rt. Hon. Henry	FitzGerald, Sir Robert Penrose-
Bethell, Commander	Charrington, Spencer	Flannery, Sir Fortescue
Bigwood, James	Cohen, Benjamin Louis	Flower, Ernest
Birrell, Augustine	Collings, Rt. Hon. Jesse	Fowler, Rt. Hon. Sir Henry
Blundell, Colonel Henry	Cook, Fred. Lucas (Lambeth)	Garfit, William
Bousfield, William Robert	Cornwallis, Fiennes Stanley W.	Gedge, Sydney
Brassey, Albert	Cotton-Jodrell, Col. E. T. D.	Giles, Charles Tyrrell
Brodrick, Rt. Hon St. John	Cross, Alexander (Glasgow)	Godson, Sir Augustus Frederick
Bryce, Rt. Hon. James	Davies, Sir Horatio D (Chatham	Gorst, Rt. Hon. Sir J. Eldon
Bullard, Sir Harry	Dewar, Arthur	Goschen, Rt Hn. G. J. (St. Geor's
Butcher, John George	Digby, John K. D. Wingfield-	Goulding, Edward Alfred
Buxton, Sydney Charles	Douglas, Rt. Hon. A. Akers-	Green, W. D. (Wednesbury)
Caldwell, James	Douglas, Charles M. (Lanark)	Grey, Sir Edward (Berwick)
Carlile, William Walter	Doxford, Sir William Theodore	Griffith, Ellis J.
Carson, Rt. Hon. Sir Edw. H.	Duckworth, James	Hamilton, Rt. Hon. Lord G.
Hanbury, Rt. Hn. Robert W.	Murray, Rt Hn A. Graham (Bute	Spencer, Ernest
Haslett, Sir James Horner	Murray, Charles J. (Coventry)	Stanley, Hn. Arthur (Ormskirk
Hayne, Rt. Hn. Charles Seale-	Nicol, Donald Ninian	Strachey, Edward
Hazell, Walter	O'Brien, Patrick (Kilkenny)	Strauss, Arthur
Healy, Maurice (Cork)	Pease, Alfred E. (Cleveland)	Strutt, Hn. Charles Hedley
Hoare, Edw Brodie (Hampstead	Pease, Herb. Pike (Darlington)	Sturt, Hon. Humphry Napier
Holland, William Henry	Peel, Hn. Wm Robert Wellesley	Talbot, Rt Hn. J. G. (Oxf'd Univ.
Hudson, George Bickersteth	Phillpotts, Captain Arthur	Thornton, Percy M.
Hutton, John (Yorks., N. R.)	Pollock, Harry Frederick	Tollemache, Henry James
Jones, William (Carnarvonsh.	Purvis, Robert	Tomlinson, Wm. Edw. Murray
King, Sir Henry Seymour	Remnant, James Farquharson	Tritton, Charles Ernest
Knowles, Lees	Richards, Henry Charles	Walton, John Lawson (Leeds, S.
Lafone, Alfred	Ridley, Rt Hon Sir Matthew W.	Welby, Lt.-Col A C E (Taunton)
Leigh-Bennett, Henry Currie	Ritchie, Rt. Hn. Chas. T.	Wharton, Rt. Hon. John Lloyd
Long, Col. Chas. W. (Evesham)	Roberts, John Bryn (Eifion)	Whiteley, H. (Ashton-under-L.
Lonsdale, John Brownlee	Robertson, Herbert (Hackney)	Whitmore, Charles Algernon
Lopes, Henry Yarde Buller	Rollit, Sir Albert Kaye	Williams, Joseph Powell- (Bir
Lyttelton, Hon. Alfred	Round, James	Willoughby de Eresby, Lord
Macaleese, Daniel	Royds, Clement Molyneux	Wilson, Henry J. (York, W. R.)
Macdona, John Gumming	Russell, T. W. (Tyrone)	Woodhouse, Sir J T (Huddersf'd
M'Arthur, Charles (Liverpool)	Samuel, J. (Stockton-on-Tees)	Woods, Samuel
Malcolm, Ian	Seely, Charles Hilton	Wrightson, Sir Thomas
Martin, Richard Biddulph	Sidebotham, J. W. (Cheshire)	Wylie, Alexander
Mellor, Colonel (Lancashire)	Sidebottom, Wm. (Derbysh.)	Wyndham, George
Monckton, Edward Philip	Skewes-Cox, Thomas	Wyvill, Marmaduke D'Arcy
Morrell, George Herbert	Smith, James Parker (Lanarks.	Yoxall, James Henry
Morton, Arthur H. A (Deptford)	Smith, Samuel (Flint)	TELLERS FOR THE AYES—Sir William Walrond and Mr. Anstruther.
Moss, Samuel	Smith, Hon. W. F. D. (Strand)
Moulton, John Fletcher	Soames, Arthur Wellesley
NOES.
Abraham, William (Cork, N. E.	Greene, Henry D. (Shrewsbury)	Provand, Andrew Dryburgh
Ashton, Thomas Gair	Horniman, Frederick John	Robson, William Snowdon
Blake, Edward	Lawson, John Grant (Yorks.)	Sinclair, Louis (Romford)
Bolton, Thomas Dolling	Lowles, John	Sullivan, Donald (Westmeath)
Bond, Edward	MacDonnell, Dr M A (Queen's C	Tanner, Charles Reams
Crilly, Daniel	MacNeill, John Gordon Swift	Tully, Jasper
Dalziel, James Henry	Mendl, Sigismund Ferdinand	Warr, Augustus Frederick
Donelan, Captain A.	Morgan, W Pritchard (Merthyr
Doogan, P. C.	Morton, Edw. J. C. (Devonport)	TELLERS FOR THE NOES—Mr. Banbury and Sir Francis Evans.
Foster, Harry S. (Suffolk)	Power, Patrick Joseph
Gibbs, Hn. A.G. H. (City of Lond	Price, Robert John

Question put and agreed to.

Amendment proposed— In page 11, line 41, to leave out the word 'registered,' and insert the words 'filer with the registrar for registration.'"—(Mr. Sydney Gedge.)

Amendment agreed to.

MR. H. S. FOSTER

said he desired to raise a very important question. Clause 16 required registration within seven days after the date of creation, but the Amendment he had put down proposed that this period should be throe months. He might point out that he was not wedded to any particular period.

MR. RITCHIE

I am willing to accept twenty-one days.

MR. H. S. FOSTER

said he should prefer to hear the opinion of the House as to whether twenty-one days or three months was most acceptable.

Amendment proposed— In page 12, line 1, to leave out the words 'seven days,' and insert the words 'three months.'"—(Mr. H. S. Foster.)

Question proposed, "That the words 'seven days' stand part of the Bill.'"

MR. RITCHIE

I do not think this period ought to be so long as three months. I agree with my hon. friend that seven days is too short, and I would suggest that he might accept the terms of the Amendment standing next on the Paper in the name of the hon. Member for West Wolverhampton, which provides that the period should be twenty-one days.

MR. MOULTON

said that if twenty-one days were allowed surely that ought to be enough. He agreed that no time ought to be lost in registering. He did not think anyone would agree to sub- scribe for debentures which had not been properly registered.

SIR FRANCIS EVANS

said he did not exactly understand the object of the effort which was being made by this proposal. Were they not by this proviso opening the door to fraud on the part of the man who subscribed for debentures? He did not believe that the proposal would afford any protection either to the lender or the creditor, whether the period fixed was seven or twenty-one days. They were practically asking the lender to lend his money upon an imaginary security, and they were opening the door to very great fraud. He was opposed both to seven and twenty-one days, and the directors should be obliged to register at once what they intended to do, in order that the lender or creditor might see for himself exactly what was proposed. By this proposal they would open the door to fraud as against the creditor and the lender, and the Bill would do much harm and no possible good.

SIR HENRY FOWLER

I should like to point out that what this clause aims at is to give notice. It gives notice to all the world that the company has created this security upon its property. That is precisely what is done with reference to a bill of sale. This clause seems to mo to meet the case completely. It provides that— Where the mortgage or charge comprises property outside the United Kingdom, it shall be sufficient compliance with the requirements of this section, if a deed purporting to specificially charge such property be registered notwithstanding that further proceedings may be necessary to make such mortgage or charge valid or effectual according to the law of the country in which such property is situate. That appears to me to entirely cover the case mentioned by my hon. friend. I think seven days is too short a period, but I hope the Government will not go beyond twenty-one days, because I think all these difficulties are perfectly imaginary, and I cannot see where they will arise. It is a very simple and straightforward transaction, and will put an end to what has been the very worst type of fraud that has been committed in connection with companies.

MR. H. S. FOSTER

I am willing to accept twenty-one days, and I will withdraw my Amendment.

Amendment, by leave, withdrawn.

Amendment proposed— In page 12, line 1, to leave out the words 'seven days' and insert the words 'twenty-one days.'"—(Mr. Ritchie.)

Amendment agreed to.

Amendment proposed— In page 12, line 5, after the word 'shall' to insert the words ' so far as that property is concerned.'"—(Mr. Sydney Gedge.)

Amendment agreed to.

Amendment proposed— In page 12, line 36, after the word 'secured' to insert the words 'shall be conclusive evidence of the requirements of this section as to registration having been complied with.'"—(Sir Robert Finlay.)

Question proposed, "That those words be there inserted."

SIR FRANCIS EVANS

said by this proposal they were going to make the public think that there was a real charge upon the property, and this would open the door to great fraud. What the public would think by chose words was that they had secured a mortgage upon the property, and by the insertion of these words they would emphasise the belief that there was a mortgage and security when there really was none whatever. He thought these words would make things worse than they were before, for they would merely add to the delusion of the public, and would be productive of much harm.

SIR ROBERT FINLAY

replied that he could not help thinking that the observations of the hon. Member were simply a repetition of the observations which he directed against the clause generally.

SIR FRANCIS EVANS

Exactly.

SIR ROBERT FINLAY

said they had decided that matter, and what they were now dealing with was whether the certificate was to be conclusive evidence that the requirements had been complied with. He really could not see that any member of the public would be deceived by this provision.

Amendment proposed— In page 13, line 5, to leave out Sub-section 8."—(Sir Robert Finlay.)

MR. H. S. FOSTER

Can we have some explanation why this sub-section is to be left out?

SIR ROBERT FINLAY

It is simply a consequential Amendment.

SIR FRANCIS EVANS

contended that this was another way of deceiving the public. They provided in this sub section that they should substantially disclose the nature of the security, and now they proposed to take out that proviso. The nature of the security was the only guarantee that it was a security at all. Those investing money wanted to know exactly the nature of the security, and if the directors were obliged to state that this security was no security at all until the Government of a foreign country really acknowledged it, it was essential for the protection of the lender of money in this country that they should substantially disclose the nature of that security. Without the sub-section the person who took up debentures would be deceived into believing that registration in this country was a guarantee, whereas it would be of no value in respect of property situate abroad. He quite disagreed with the Government in their decision to withdraw this sub-section, because it was necessary for the protection of the public in the industrial undertakings which they possessed in foreign countries. He should certainly vote against this proposal.

MR. LABOUCHERE

said the views expressed by his hon. friend the Member for Southampton were not a mere phantom, but were a practical reality. What his hon. friend meant was that if a company with a largo amount of property abroad issued a certificate of debentures stating that those debentures had been registered, the persons buying those bonds would be under the impression that the registration held good, whereas it did not hold good in regard to that property until the obligations with regard to registration were fulfilled abroad. Subsection 8 provided that— The registration of a mortgage or charge in pursuance of this section shall not be invalid merely by reason of any inaccuracy in the particulars registered provided that they substantially disclose the nature of the security. A great many companies had property abroad, and they issued debentures which were absolutely worthless, and when a person saw those debentures registered hero he would think that that was a guarantee of security to him in regard to the property of the company, whereas it was no such thing. If his hon. friend went to a division he should certainly vote with him, because he really thought they were making a great mistake. He agreed that it might not be necessary to disclose all mortgages, but there were a great many innocent people who took these bonds, and he did not think their interests should be sacrificed for the benefit of others.

*MR. LAWSON WALTON

pointed out that if a charge was given which was worthless, the person who held that charge had a property of no value, because it was a mortgage upon property which had no value. The provision of this clause was simply that that charge should be registered for what it was worth. How such a provision could be construed into an injustice he was at a loss to understand. Surely it could not be worth either more or less because it was to be registered in this country. The suggestion that there might be some person who had lent his money upon the assumption that the security was valuable because it was registered, assumed a state of ignorance which was not supported by ordinary experience.

MR. BRYCE

It appears to me that if my hon. friend the Member for Northampton and the hon. Member for Southampton think what is attributed to them by the hon. Member for South Leeds, his argument is against them. But I understand them to mean something different. I take it they were thinking not of a creditor, but of the person who takes the debentures. Therefore, the argument of my hon. friend does not appear to me to be relevant. Sub-section 2 makes them believe that they have a valuable charge when they have got nothing of the kind. I do not think that the leaving out of this sub-section will meet my hon. friends' view. All we can do now is to appeal to the Government to consider the point with a view of seeing whether they can introduce words in Sub-section 2 which will meet the point raised. It seems to me that it is a point which deserves consideration when the Bill goes to another place.

MR. BRYN ROBERTS

said it was conceded that the holder of the security knew that his security was valueless unless it was registered in a foreign country. If that was so, surety he was defrauded whether there was registration or not. That fraud existed at the present time, and, therefore, he assumed that there could be no fraud except upon terms of which the debenture-holder was aware. He would not be deprived of that knowledge when he learned that the registration had been in this country only, because he would know that registration only gave him notice that he would not be displaced by subsequent creditors lending money. The imperfection by reason of the non-registration remained exactly where it was before, and it was neither increased nor diminished by this proposal.

Amendment agreed to.

Amendment proposed— In page 13, line 18, after the word 'company to insert the words, 'provided that where a series of debentures containing any charge to the benefit of which the debenture holders of that series are entitled pari passu is created by a company, it shall be sufficient for the comp my to keep an entry of the following particulars—(a) the total amount secured by the whole series; (b) the dates of the resolutions creating the series and of the covering deed, if any, by which the security is created I or defined; (c) a general description of the property charged; and (d) the names of the trustees for the debenture holders."—(Mr. Tomlinson.)

SIR ROBERT FINLAY

said his right hon. friend was willing to accept an Amendment in other words, which would meet the object of his hon. friend.

MR. TOMLINSON (Preston)

Then I withdraw my Amendment.

Amendment, by leave, withdrawn.

Amendment proposed— In page 13 line 18, after the word 'company,' to insert the words, 'provided that in the case of a series of uniform debentures a copy of one such debenture shall be sufficient.'"—(Mr. Ritchie.)

Amendment agreed to.

Another Amendment proposed— In page 13, line 19, to leave out from the word 'court' to the word 'may,' in line 25."—(Mr. Bond.)

Question proposed, "That the words proposed to be left out stand part of the Bill."

SIR ROBERT FINLAY

agreed to some extent with the principle enunciated by the mover of the Amendment, but it was hardly right to throw the matter at the House without giving any grounds. The same objection did not seem to apply to the next Amendment, in the name of the hon. Member for Walsall, and he should, be willing to accept that.

Amendment, by leave, withdrawn.

MR. SYDNEY GEDGE

formally moved— In page 13, line 25, after 'company,' to-insert 'or that on other grounds it is just and equitable to grant relief.'

SIR FRANCIS EVANS

asked whether this provision would enable the judge to look into the matter as to whether a. foreign Government had had time to enable such mortgage to be registered.

SIR ROBERT FINLAY

reminded the: hon. Member that the section merely imposed an additional requirement in order to validate a mortgage given by a company. It was not in any way to render valid in a foreign country that which would not be valid if the Bill were not passed.

Amendment agreed to.

Amendment proposed— In page 13, line 40, to leave out from the-word 'company,' to the word 'pounds,' in page 14, line 4, inclusive, and insert the words. 'the company, and every director, manager, and other officer of the company who knowingly and wilfully authorised or permitted such default shall, without prejudice to any other liability, be liable on summary conviction to a line not exceeding one hundred pounds; and if any person knowingly and wilfully authorises or permits the delivery of any debenture or certificate of debenture stock, required by this Act to be registered, without a copy of the certificate of the registrar being indorsed upon it, he shall, without prejudice to any other liability, be liable on summary conviction to a fine not exceeding one hundred, pounds,' instead thereof."—(Mr. Ritchie.)

Question, "That the words proposed to be left out to the word 'responsible,' in page 14, line 2, stand part of the Bill," put, and negatived.

Remaining words omitted.

Question proposed, "That those words be there inserted."

MR. LAWSON WALTON

said the language of the original clause was that if any company made default in complying with the requirements of the Act certain penalties should attach, and the two defaults were entirely distinct in character. The first was as to the registration of the debentures, and the second was as to the duty of seeing that each certificate of debenture stock had endorsed upon it a certification that the debenture had been registered. "Default" was a word which comprehended not only intentional but negligent disregard of duty, and in the original clause the liability certainly attached to officers of the company who negligently omitted to register a debenture or to take the necessary steps to give each holder of debenture stock the necessary certification. The clause proposed to be substituted used language which, probably not intentionally, but certainly effectually, excluded all cases of default attributable to negligence. He therefore desired to move the insertion of the words "or negligently" after the words "knowingly and wilfully" in each case. This Amendment was of enormous importance to the perfectly innocent class of person who might hold the debentures of a company. Those debentures by the present law were valid, whether registered or not, but by the operation of this clause their validity would be contingent on their having been registered. It was essential that it should be somebody's duty, not merely if he thought of it, to take the necessary care to see that the debenture-holder had upon the certificate of his debenture an intimation that the debenture had been registered. He did not say that many officers would wilfully do it, but scores would negligently omit to take the necessary steps, and it was necessary to do something to ensure that persons who negligently omitted to do their duty should be made responsible by means of such a provision as he now proposed.

Amendment proposed to the proposed Amendment— In line 3, after the word 'wilfully,' to insert the words 'or negligently.'"—(Mr. Lawson Walton.)

Question proposed, "That those words be there inserted in the proposed Amendment."

SIR ROBERT FINLAY

pointed out that the clause in its original form, as regards one branch, applied only to persons who "knowingly" authorised or permitted the delivery of any debenture stock without the certificate being endorsed thereon. He reminded the House that the penalty with which they were dealing was a very severe one, it being £100 for each default. Surely in such a case it was not too much to say that the persons to whom the liability attached should be persons who could be shown to have knowingly evaded the law. It would be a very serious step to apply that penalty to persons who had been guilty only of negligence, and therefore he hoped the Amendment would be negatived.

MR. MOULTON

trusted the House would not listen to the Amendment. This was a fine example of how men even of the eminence of the mover of the Amendment, as soon as the words "limited company" were mentioned, seemed to lose all sense of proportion. What was the House asked to do? Here was a question of endorsing a notice of registration on a security which came to a man who had bought it and whose business it was to look over it and see that it was in order. Was it suggested that a clerk who had forgotten to do what was provided, although he never had any intention of violating the law, because he was sleepy or careless, ought to be liable on summary conviction to a penalty not exceeding £100? Surely they would not get things in a better state if they lent themselves to such exaggerated notions of punishing everybody connected with a company for mere inattention. To suggest that mere inattention should be punished in this way seemed to him to be out of all proportion to the offence.

MR. LABOUCHERE

said that if a clerk was sleepy this proposal would wake him up. But it would not affect clerks so much as directors, and there must be some sort of guarantee. It was proposed to put in words to the effect that punishment was to be inflicted if the clerk wilfully or negligently did a certain thing. But how could they tell whether he did a thing wilfully or negligently? The fact was that this thing had been done in the past, and this was a proposal to prevent it being done in the future. He was perfectly certain that they would get more fairness from these men, and they would not be so negligent as they would be if there was not some punishment fixed. He should have liked to see this Amendment moved from the other side of the House, where there seemed to be a sort of family arrangement, for not a single Amendment had been accepted from this side of the House. It was a very remarkable thing that all the Amendments from the other side should be accepted.

SIR FRANCIS EVANS

said this was trying to impose penalties by law in a way in which it was perfectly impracticable and unworkable. It was not possible for a director of a large company to make perfectly certain that in all these matters he was protected by what was set forth in this paragraph. To impose £100 for each offence was really an absurdity.

Question put, and negatived.

Words inserted.

MR. H. S. FOSTER

said it was the practice of some companies to supply the information he desired to provide for voluntarily to the debenture holders, and he hoped his right hon. friend would accept his Amendment. He begged to move.

Amendment proposed— In page 15, line 22, after the word 'meeting,' to insert the words 'a copy of such report and balance-sheet shall be sent to every registered holder of debentures or debenture stock within seven days after such general meeting.'"—(Mr. H. S. Foster.)

SIR ROBERT FINLAY

said he hoped his hon. friend would not press this Amendment, because a great deal of expense would be incurred to put it in operation.

Question, "That those words be there inserted," put, and negatived.

MR. BRYCE

I beg to propose that Clause 26 be left out. This clause proposes to extend the operation of Section 2 of the Joint Stock Companies Arrangement Act, 1870, to a case in which a company shall be deemed to be in course of winding up when a petition for the winding up of the company has been presented. This Act provides that where a company is in course of liquidation by the Court it is possible for an arrangement or compromise to be made between the company and its creditors, and that that arrangement shall be binding if a majority representing three-fourths in value of the creditors agree to the compromise. The effect of Clause 26 would be very detrimental. Section 2 of the Act of 1870 was intended for companies unable to meet their obligations, and it was provided that as everybody could not be paid in full an arrangement might be made by which they could make some concession and accept something less than their rights. In the case of a bona fide liquidation this may be the only way of doing the best for all the people connected with the company. If you extend that provision so as to allow a company, without any order and without a company going into liquidation at all, to force a compromise by a three-fourths majority upon a minority, and compel the minority to accept less, it is obvious that you are giving a very wide and what may become a very dangerous extension of the principle of compelling people to accept less than they ought to get. Is it right to put into operation the power of a majority of three-fourths when the minority may be unwilling to submit to the compromise, and when the object may be merely to get money on more favourable terms? I moved a similar Amendment upstairs, and on that occasion the Attorney General appeared to think that it was not a dangerous proposal, and he undertook to consider it. If the Attorney General thinks my Amendment to leave out Clause 26 goes too far, I am quite willing to move to leave out simply the first part.

Amendment proposed— In page 15, line 24, to leave out Clause 26."—(Mr. Bryce.)

Question proposed, "That the words proposed to be left out stand part of the Bill."

SIR ROBERT FINLAY

said that the second section of the Companies Act of 1870 provided for certain facilities for arrangements in the case of companies which were in the course of being wound up, either voluntarily or under the supervision of the court. He thought there was a great deal of force in the proposal made in the first part of the clause, which provided that the company should be deemed for this purpose to be in the course of winding up merely if the petition for the winding up had been presented. A company was not in course of winding up until it was being wound up; the mere presentation of a petition had no effect until an order followed on the petition. It was in reference to that part of the section, and that part only, that he expressed the opinion to which reference had been made. He gathered that the right hon. Gentleman would be satisfied if the Government struck out the earlier part of the section, and he was prepared to agree to that on their behalf.

MR. BRYCE

entirely accepted the promise of the Attorney General; it completely met his doubts with regard to the clause, and he would therefore withdraw the Amendment, and move to strike out only the first part of the clause.

Amendment, by leave, withdrawn.

MR. BRYCE

formally moved to omit the first part of the clause, down to the end of line 27.

Amendment agreed to.

MR. BRYCE

formally moved to insert before line 28 the words, "The provisions of Section 2 of the Joint Stock Companies Arrangement Act, 1870."

Amendment agreed to.

MR. SYDNEY GEDGE

, in rising to move the omission of Clause 28, said he would not at that hour of the night move an Amendment of such a character if it were not of very great importance. The clause was not in the Bill as originally introduced, but was brought in by the influence of the right hon. Gentleman the Member for South Aberdeen. Under the existing law, if a company was in course of liquidation, the official receiver could summon the directors to a private examination. If, under the Act of 1890, the official receiver reported that in his opinion fraud had been committed in the promotion or formation of the company, the court might publicly examine certain persons. It was for some time thought that if fraud had been alleged by the official receiver against any person, not only that person but also any other person connected with the company might be publicly examined. The House of Lords, however, had decided that that construction of the Act was wrong, and that only the person whom the liquidator prima facie suspected of fraud might be subjected to the terrible ordeal of a public examination. On that occasion Lord Herschell used very strong language on the subject, to the following effect— If their construction is right yon have this preposterous result. You have A, we will say, inculpated in the report on a charge of fraud. It is suggested that B and C were co-directors with him or co-officials of some kind or other, and you have an order made and, as they say, properly made, for the examination of not only A, but B and C also, and on the examination it turns out none of these persons were to blame. Then A applies for his costs. 'Yes' say the Court, 'you were exculpated, and we will give you your costs'; but when B and C come the answer is, 'No; you have not been exculpated because you were never charged, and therefore you must bear the expenses yourself.' Such legislation would be nothing short of preposterous. The only construction of the legislation that can make it reasonable is that no persons can be ordered to attend and be examined at their own expense but those who are prima facie inculpated. In this clause, however, the Government were proposing to do the very thing which the House of Lords had declared to be preposterous, and ought not to be done. He hoped the Government would go back to its first love, and consent to omit this clause from the Bill.

Amendment proposed— In page 15, line 34, to leave out Clause 28.—(Mr. Sydney Gedge.)

Question proposed, "That the words proposed to be left out stand part of the Bill."

SIR ROBERT FINLAY

admitted the accuracy of the statement of the hon. Member with regard to the decision of the House of Lords upon the language of Section 8 of the Companies Winding-up Act, 1890, and he did not for one moment suggest that the decision of the highest legal tribunal in the land was incorrect, having regard to the wording of the clause. But the Chancellor of the Exchequer had stated that the effect of the words was entirely at variance with the intentions of those who were responsible for bringing in the Bill, and, as he believed, of the House when it passed it. That, of course, was a matter into which no court could go when construing a section, and the decision of the House of Lords had reference to the wording of the clause and that alone. What, after all, was the result of this section? There had to be a report charging some particular person with fraud before an order could be made for the examination of any person, and the person so to be examined must be the person charged with fraud in the report of the official receiver. The effect of the change proposed would be merely that if the official receiver reported that there had been fraud in connection with a company, the order for the examination must be made.

MR. SYDNEY GEDGE

Of everybody?

SIR ROBERT FINLAY

Of any person connected with the company. The Chancellor of the Exchequer had declared that that was certainly the intention when the Bill was introduced. There really did not seem to be anything so very terrible about the fact that if a fraud had been reported an order must be made for the public examination of anyone connected with the company. That was the extent of the proposal, and he hoped the House would adhere to it.

MR. BRYCE

said it was extremely undesirable to throw upon a Department like the Board of Trade the responsibility of bringing a charge against a particular person. It was quite right that the official receiver should report that he was satisfied there were grounds for believing there had been fraud in the inception or management of a company, but that was quite different from throwing upon an official of such a Department the duty of imputing fraud against any particular person.

MR. MOULTON

drew attention to the fact that the only person who could recover costs in such cases was the person who exculpated himself. He thoroughly agreed with the Attorney General as to the advisability of the examination of all persons in such a case as was suggested; but would it not be necessary, in order that injustice should not be done to innocent people, to make some further provision with regard to costs. Those who had not been charged would not come within the words "exculpate themselves," and they would therefore not be able to recover costs. Surely this clause ought not to be passed without some consideration of that point.

SIR EDWARD CARSON

explained that the effect of the proposal was merely that where there was fraud any person might be called and examined. There did not appear to be anything very hard in the fact that if the person was not exculpated from the charge of fraud he should get no costs.

MR. SYDNEY GEDGE

reminded the right hon. and learned Member that the House of Lords had distinctly decided that people who were not charged with fraud could not get their costs.

MR. BOND

said that persons might be put to considerable expense, even though no charges were made against them, and not being persons exculpated they would not be entitled to recover costs.

MR. RITCHIE

I think the question which the hon. and learned Gentleman has raised is one which ought to be considered, and I will agree to consider the question.

MR. LAWSON WALTON

contended that there could be no exculpation without a charge, and the only person who could get his costs was the person against whom the charge was made. That was the decision of the House of Lords. If they got a report which made no charge there could be no exculpation, and there was no jurisdiction to provide for the costs. They might get the case of a number of directors who were publicly examined, and yet there was no arrangement for their costs. If the right hon. Gentleman proposed to look into the question he should do so with the intention of doing full justice to the decision of the House of Lords.

SIR SEYMOUR KING (Hull, Central) moved the omission of Clause 29. He said he regretted that it would he necessary for him to go at some length in the way of explaining why lie made this proposal. The clause had been introduced upon the motion of his hon. friend the Member for Peckham, but he had been unable to ascertain that the clause had been called for by any public opinion in the country. It was a perfectly unworkable proposal, and the only people who would get am good from it would be the lawyers. The result of the clause would undoubtedly be to prevent some of the most regular transactions in respect to companies; it would greatly interfere with the reconstruction and amalgamation of companies, and it would almost prohibit a. profitable sale. He would like to know what justification there was for the clause being proposed at all. This was simply a question of existing contracts between two parties, a lender and a borrower, and the clause proposed to alter the contract in the interest of one part y, and that the lender. It was urged in favour of the clause that money-lenders did not know the terms on which they were lending, but such ignorance must be extremely limited. The question was whether this House was going to vary the existing conditions between shareholders and debenture-holders which would affect considerably millions of capital. There was another person to the contract besides the lender, and that was the borrower. He entered upon terms perfectly well known, and in case of winding up he should be able to repay the money at par. There were eases of great amalgamations going on every day where numerous little companies came together and formed one company, and none of these could be affected under this clause without the shareholders paid a very heavy fine to the debenture holders. He knew the case of a company where they went to the Stock Exchange and they were informed of the resolution which had been passed by the Stock Exchange in November, 1896, not to grant any more quotations unless the price named for redemption was embodied in the trust deed, and the Stock Exchange required them to insert that clause. Of course they said they would do nothing of the sort. The debentures had to run for 100 years, and they could not foresee what 100 years might bring forth. That company absolutely declined to accede to the request of the Stock Exchange Committee, but in the end they got their quotation. It was that very right that they insisted upon preserving, and it was that right which was attempted to be taken away by this clause. The result would be that the greater the necessity of the shareholders the greater would be the fine to be exacted from them. He agreed that in the case of an insolvent company the debenture holders would only be too glad to do this, but the debenture holders were amply secured, and it might not suit the shareholders to continue the business. He should have liked to say a great deal upon this point, for he wished to plead for the rights of the shareholders, which were being taken away under this clause. The shareholders would be the mere slaves of the debenture holders without profit to themselves, or else they would have to pay blackmail to the debenture holders. Everyone knew what the effect of this clause would be. Was there ever such a remarkable piece of drafting as was contained in this clause? What was the meaning of "redeemable debenture or preference stocks or shares"? Whoever hoard of such a thing? Then the clause went on to say that such stocks and shares shall not be paid off "before the due date." What was the due date? There was another side to this beautiful clause. If no debenture was to be paid off before the due date they would lose their right to demand their money in case of going into liquidation. There was no provision in the clause for ascertaining the opinion of the debenture holders. The whole clause was a most indifferent piece of drafting; it was impossible to know really what was meant. The only effect of the clause would be to inflict great hardship on shareholders throughout the length and breadth of the country, and he had never heard of contracts being varied to the detriment of one party with-out any reason being shown, without compensation being given. He therefore moved the omission of Clause 29.

Amendment proposed— In page 16, line 1, to leave out Clause 29."—(Sir Seymour King.)

Question proposed, "That the words proposed to lie left out to the second word 'of,' in line 1, stand part of the Bill."

*MR. BANBURY

said that the hon. Member who had just sat down had stated that a company being desirous of going into liquidation because it could no longer carry on business profitably would have to pay blackmail to the debenture holders. This was not correct, because the clause provided that any company could go into voluntary liquidation, without obtaining the consent of the debenture holders, by applying to the court and obtaining its consent. The clause was designed to meet what was little less than a swindle. A company issues debentures payable, say at 110, on a certain date. It finds in two or three years that its business and credit have improved, and that it can borrow money cheaper than it could when it issued its debentures. It goes into voluntary liquidation, pays its debentures off at 100, though the prospectus had stated that they would only be paid off at 110, and then issues new debentures at a lower rate of interest. This had been done during the last four years. It was first done by a company in the Midlands. There was a lawsuit, and the debenture holders lost. A brewery company immediately followed suit, and it has been done by other companies. As to there being no provision for obtaining the consent of the debenture holders, everyone knew that they were registered, and that all the company had to do was to send round a form which the debenture holders would fill up "yes" or "no." There was something to be said for the case of a company which found it could not carry on business profitably and desired honestly to go into liquidation and pay off its debentures. If the Amendment he proposed to move later on was accepted, the clause would not apply to such a company, and no injustice would be done.

MR. MOULTON

hoped the Government would not defend the clause. He hardly knew whether it was more funny or more unjust, and the drafting was such that no court could really construe it. The framers of the clause seemed to imagine that by going into voluntary liquidation a company could alter its liability. Nothing of the kind. But what was really proposed? A great many companies issued debentures only on the terms that if for any reason they gave up business they should be entitled to repay either at par or above par, or on whatever terms were stated in the debenture. Mortgage companies, which were a very solid kind of company if well managed, borrowed large sums, and as long as business went on they were willing to pay interest considerably higher than that on many other securities. But they were only willing to carry on business while they could afford to pay that high rate of interest, and one term of the debenture was that if they chose to go out of business they should be entitled to repay. If they borrowed on those terms what possible right had the House without any public need to come in and say, "Although these were the terms on which you borrowed you shall not have the advantage of them"? It would be monstrous for the House to interfere with fair contracts fully understood by both borrower and lender, just for the purpose of assisting the Stock Exchange in some of its difficulties. He trusted the House would not at the present period of the session attempt legislation on such a point, which, if gone into at all, must be gone into fully.

MR. RITCHIE

said that, looking at the clause superficially, it had been thought that it afforded an opportunity of remedying what had been represented as a very considerable grievance, which had long been crying out for a remedy, and the clause was thereupon added to the Bill. But after the discussion which had taken place he thought all would recognise that if they began by interfering with this clause they would start on a very thorny and difficult subject, probably involving another evening, or perhaps longer, being devoted to the matter. That, at the period of the session at which they had arrived, would probably have the effect of wrecking the Bill, and throwing away all the labour which had been bestowed on the measure, and such a result would be a very great disaster. He was inclined to think there was a grievance in the existing state of the law which required a remedy, but it would be impossible to deal with it in the present Bill, and he would therefore appeal to his hon. friend, the Member for Peckham, to agree to the omission of the clause. The matter could then be proceeded with next session, after farther consideration, in a measure by itself, if the hon. Member thought fit to take that course, and it could then receive the full consideration which the importance of the subject deserved. Speaking for the Government, he was bound to say that, having regard to the difficulties in connection with the clause, they would support the Amendment for its omission.

SIR FRANCIS EVANS

said the right hon. Gentleman had admitted that the clause did not cover a great deal of what it ought to cover. The mover of the resolution to reject this clause had been opposed by the hon. Member for Peckham, who was a member of the Stock Exchange, and who had an Amendment down which did not cover the most dangerous part of this clause. The most dangerous part of this clause was that, if for any reason a sound and good company wished to amalgamate with another company, it would not be allowed to do so. Neither this clause nor the Amendment of the hon. Member for Peckham covered that point. The clause affected an enormous amount of capital. Companies had amalgamated and they had borrowed money which was not payable at once except at a large premium. Under liquidation they claimed to discharge their indebtedness at par, whereas possibly their obligation was to discharge their indebtedness at 5, 10, or even 15 per cent, premium. Supposing that, having bargained to pay 4 per cent. for ten years, those bonds being at a premium, they amalgamated with a company with large premiums, and they then proceeded to pay off at par. They had no power to give the bondholders the premium at which their bonds stood in the market. This clause ought not to be allowed to pass, and he should oppose it as much as he could, because it was a very bad clause. How was this country to stand against the competition of foreign companies if combinations of this kind were prevented? The bondholders had nothing to do with it, and they ought to have a right to pay them off, and there ought to be some protection for those who did not go to Somerset House to look at the registers, but who, upon the strength of the statements in the prospectus and the price quoted on the Stock Exchange, invested their money believing it would be redeemed by a certain date. There was a column which stated when such bonds could be paid off. When a company went into liquidation, the date might be 1920, but the true date of that bond was 1900. He thought this clause would do great injury to the people of this country if adopted.

MR. BANBURY

said it would be useless to persevere with this clause after what the President of the Board of Trade had said. He understood that the right hon. Gentleman would give what facilities he could for a private Bill being introduced to remedy this state of things.

Remaining words omitted.

Amendment proposed— In page 17, line 8, to leave out the word 'passing,' and insert the word 'commencement.'"—(Mr. H. S. Foster.)

Amendment agreed to.

*MR. LAWSON WALTON

said he proposed to add one more to the category of documents in regard to which there was a penalty for false statements. He proposed to add the word "prospectus." He wished to impress upon the House that the prospectus was of more importance than all the other documents which appeared in this clause. There was no penalty for the insertion of a false statement in a prospectus. He was aware that the answer would be that a wilful misstatement with regard to information contained in a prospectus would be a misdemeanour at common law. It might be said also that if a false statement appeared in a prospectus with intent to defraud, the provisions of the Larceny Act were applicable. He proposed, in the interests of the directors, that this section should be amended, and he thought there was a very strong reason for moving this Amendment.

Amendment proposed— In page 17, line 10, after the second word 'any,' to insert the word 'prospectus.'"—(Mr. Lawson Walton.)

Question proposed, "That the word 'prospectus' be there inserted."

SIR ROBERT FINLAY

I must give my hon. and learned friend the same answer in the House as I gave him in Committee. It is not necessary to go back to the common law, because the Larceny Act deals with the ease of any director circulating any statement which is fraudulent. I ask the House not to accept this Amendment which my hon. and learned friend wishes to in graft upon the clause.

Question put, and negatived.

*MR. LAWSON WALTON

said the second Amendment which he had upon the Paper had nothing to do with fraud, but it had to do with the intentional disregard of the provisions of the statute, and therefore it became important to understand the exact scope of the section. He submitted that if this section was to have any beneficial operation it must deal not only with deliberate false statements but with deliberate suppression of information. If they had an intentional false statement it was a disregard of the provisions of the section, and if they had an intentional suppression of some material information which a person was required to give, that would be an equal disregard of the law. It was obvious that, unless the Amendment he was moving was inserted, a person would wilfully ignore the statutory obligation if he could not with advantage falsely state the particulars required. As the clause stood there was no such remedy in such a case, and he therefore hoped the Amendment would be accepted.

Amendment proposed— In page 17, line 13, after the word 'false,' to insert the words 'or wilfully suppresses any material particular therein, or any statement which he is here by required to make.'"—(Mr. Lawson Walton.)

Question proposed, "That those words be there inserted."

SIR EDWARD CARSON

, whose remarks were inaudible in the Reporters' Gallery, was understood to oppose the Amendment.

MR. BRYCE

was of opinion that the clause would be ineffective unless it applied also to suppression. Many of the worst deceits were perpetrated by suppression. The Bill ought to be drawn upon the principle of enacting that the fullest and amplest good faith should be required from a promoter or director in stating facts relating to a company; but as that, unfortunately, was not the case here, they had to do the best they could with the criminal law. This was not a case for the application of caveat emptor; it was a case where a person should be made to tell the truth as well as not to tell lies. If the Amendment was pressed to a division he certainly should support it.

Question put.

The House divided:—Ayes, 23; Noes, 65. (Division List No. 251.)

AYES.
Asher, Alexander	Griffith, Ellis J.	Sinclair, Capt John (Forfarshire
Beaumont, Wentworth C. B.	Hayne, Rt. Hon. C. Seale-	Sullivan, Donal (Westmeath)
Bryce, Rt. Hon. James	Hazell, Walter	Tanner, Charles Kearns
Caldwell, James	Healy, Maurice (Cork)	Tully, Jasper
Channing, Francis Allston	Horniman, Frederick John	Ure, Alexander
Dewar, Arthur	Macaleese, Daniel
Doogan, P. C.	Moss, Samuel	TELLERS FOR THE AYES—Mr. Lawson Walton and Mr. Labouchere.
Evans, Sir Francis H (South'ton	O'Brien, Patrick (Kilkenny)
Greene, H. D. (Shrewsbury)	Pease, Herb. Pike (Darlington
NOES.
Allhusen, Augustus Henry E.	Chamberlain, J Austen (Worc'r	Hamilton, Rt Hon Lord George
Ashmead-Bartlett, Sir Ellis	Chaplin, Rt. Hon. Henry	Hanbury, Rt. Hn. Robert Wm.
Atkinson, Rt. Hon. John	Charrington, Spencer	Knowles, Lees
Balfour, Rt. Hn. A. J. (Manch 'r)	Collings, Rt. Hon. Jesse	Lafone, Alfred
Balfour, Rt. Hon. G. W. (Leeds)	Curzon, Viscount	Lawson, John Grant (Yorks)
Beach, Rt. Hn. Sir M. H. (Bristol	Davies, Sir Horatio D (Chatham	Leigh-Bennett, Henry Currie
Blundell, Colonel Henry	Douglas, Rt. Hon. A. Akers-	Lonsdale, John Brownlee
Bond, Edward	Fellowes, Hon. Ailwyn Edward	Lyttelton, Hon. Alfred
Brassey, Albert	Finch, George H.	Macdona, John Cumming
Brodrick, Rt. Hon. St. John	Finlay, Sir Robert Bannatyne	Malcolm, Ian
Bullard, Sir Harry	Fisher, William Hayes	Monckton, Edward Philip
Carson, Rt. Hon. Sir Edw. H.	Foster, Harry S. (Suffolk)	More, Robt. Jasper (Shropshire)
Cavendish, V. C. W. (Derbysh.)	Gedge Sydney	Murray, Rt. Hon. A. G. (Bute)
Cecil, Lord Hugh (Greenwich)	Godson, Sir Augustus Frederick	Murray, Charles J. (Coventry)
Chamberlain, Rt. Hn. J. (Birm.)	Green, Walford D. (Wedn'sb'ry	Nicol, Donald Ninian
Phillpotts, Captain Arthur	Smith, James Parker (Lanarks)	Whiteley, H. (Ashton-under-L
Purvis, Robert	Smith, Hon. W. F. D. (Strand)	Wylie, Alexander
Richardson, Sir T. (Hartlep'l	Stanley, Hon Arthur (Ormskirk	Wyndham, George
Ritchie, Rt. Hn. Chas. Thomson	Sturt, Hon. Humphry Napier	Wyvill, Marmaduke D'Arcy
Royds, Clement Molyneux	Talbot, Rt. Hon. J G (Oxf'd Univ.
Russell, T. W. (Tyrone)	Thornton, Percy M.	TELLERS FOR THE NOES—Sir William Walrond and Mr. Anstruther.
Seely, Charles Hilton	Tomlinson, W. E Murray
Sidebotham, J. W. (Cheshire)	Welby, Lt.-Col. A C E (Taunt'n)

Motion made, and Question, "That this House do now adjourn"—(Mr. Ritchie)—put, and agreed to.

Other Amendments made.

MR. H. S. FOSTER

said a definition of a prospectus became the more necessary after the Amendments introduced by the President of the Board of Trade that evening. The prospectus contemplated by the Bill was evidently the document to be filed with the Registrar containing the statutory particulars enumerated in Clause 11. It was, however, very necessary to identify the document called the prospectus which was to contain all these various provisions. The Amendment introduced by the President of the Board of Trade clearly provided that an advertisement might appear which would not be the prospectus but an abridged prospectus. The abridged prospectus need not contain all the documents, and yet it would be an advertisement within the meaning of the definition clause. He did not know whether the Attorney General was pro-pared to accept the Amendment or any extension of it. He did not want to take up the time of the House in labouring the point, but he could take up a good deal of time in pointing out the difficulties which would arise if this definition of "prospectus" were to be applied to the word wherever it occurred in the Bill.

Amendment proposed— In page 17, line 38, to leave out from the word 'means' to the word 'company,' inclusive, in page 18, line 2, and insert the words 'a copy of the document tiled or to be filed with the registrar in pursuance of Section 11,' instead thereof."—(Mr. H. S. Foster.)

Question proposed, "That the words 'any prospectus, notice, circular' stand part of the Bill."

SIR ROBERT FINLAY

said he hoped the House would not accept this Amendment, for his hon. friend had done scant justice to the definition of the word given in the clause. The Amendment was totally inadmissible, and he thought his hon. friend must be under some misconception.

MR. SYDNEY GEDGE

thought it would be better if this definition of prospectus could be left out altogether. In Section 11 they had a full account of what was to be done with the papers, and if they read in such a definition it would be very misleading. He did not think he was wrong in saying that the terms of Section 11 would apply to every thing. Would it not be possible to omit the word altogether, for it was very confusing, and the word "prospectus" did not require any special definition any more than the word "company."

MR. TOMLINSON

said it was quite possible that a company might desire to put in a short advertisement, and why should they not be allowed to issue such an advertisement? A company might wish to issue an advertisement stating that they were prepared to issue so many shares, and saying that prospectuses could be had on application. He begged to move.

Amendment proposed— In page 17, line 39, after the word 'circular,' to insert the words 'or any.'"—(Mr. Tomlinson.)

SIR ROBERT FINLAY

I hope my hon. friend will not press this Amendment, for if it is accepted any one could get out of the whole provisions of the Act by the simple device of sending a mere form of application in another enclosure.

Amendment, by leave, withdrawn.

Other Amendments made.

MR. RITCHIE

I do not know whether, considering the late period of the session, the House will consent to read the Bill a third time now. Under the circumstances perhaps the House will be willing to accept the motion for the Third Reading. I therefore move "That the Bill be now read a third time."

This proposition was opposed from both sides of the House, and was not pressed.

Bill to be read the third time Tomorrow.