HC Deb 31 July 1900 vol 87 cc203-23

Order for Third Reading read.

Motion made, and Question proposed, "That the Bill be now read the third time."


said he did not think they ought to pass the Third Reading of the Bill without a few remarks to show what the position of the law would be, unless it was altered in some respects in another place. The Bill came on so suddenly after it had passed through the Grand Committee that there had not been time to propose new clauses. Copies of the Bill, printed as amended, were not in their hands until Monday morning, and the Bill came on in the House on Tuesday. The Bill, no doubt, was exceedingly well intended, and he hoped it would do more good than he was afraid would be the case; but he hoped the Government in another place would take some stops to correct the difficulties, obscurities, and mistakes which were still to be found in it. The object of the Bill was to safeguard intending investors; but, while shareholders were looked after almost in a grandmotherly way, those who took debentures were supposed to be capable of taking care of themselves, and were left in rather an awkward position. There were certain requirements provided for in the Bill which were thought to be necessary for the protection of the public. If the public were not invited to subscribe before registration, a company might easily obtain a certificate of registration, after which subscriptions might be invited, and the intended safeguards could thus be avoided. Then there was a difficulty in connection with allotment. Supposing a company's shares had all been subscribed on the first allotment, which was not infrequently the case, and that within the year it was considered necessary by the directors to raise money by way of debentures, for which they issued a prospectus, at the same time desiring to elect a very large shareholder to the directorate, and a vacancy of the board occurred, or, at all events, it was thought advisable to elect that large shareholder, it was impossible under the provisions of this Bill to do so until the expiry of the year. No shareholder could be appointed a director of the company within the year unless he was named in the articles of association, or unless he lodged with the registrar a contract in writing undertaking to take from the company and pay for a certain number of shares, although the company might not be able to give the shares. That appeared to be a great absurdity. A shareholder who might hold three-fourths of the shares could not be appointed a director unless he complied with certain requirements which were really impracticable. He hoped that would be altered in the Upper House. The provisions with regard to the minimum subscription required amendment, because they could be easily evaded. The requirements in regard to the prospectus were designed to prevent fraud in the promotion of a new company, but they put unnecessary difficulties in the way of a company of long standing in the legitimate object of raising further capital by debentures. It would be obliged to state in the prospectus a number of old matters and transactions long forgotten, which investors would not care to know. They would prefer to see the last two or three balance sheets. When a director concurred in omitting to comply with some of the intricate requirements of this Bill in regard to the issue of the prospectus, was sued and had to pay damages, he could not make his co-directors contribute. It was only when an untrue statement had been made and a great wrong had resulted that he could make them contribute. What would happen to him if the prospectus both contained an untrue statement and did not meet with the requirements of the Act? It would take one with more ability than he had for solving puzzles, to determine. Another hardship was that if there was fraud in the formation of a company, or at any time of its existence, and the company came into liquidation—no matter whether the fraud had been committed by a director, manager, clerk, or even the office-boy—every person who during that time had been a director or officer of the company might be called upon, at his own expense, to be exposed to the ordeal and torture of an examination in public. These were a few of the points which he had picked out of the Bill which still required consideration, and he hoped that the House of Lords would assent to the Amendments in the direc- tion he had indicated. As Andrew Fair-service would have said, this Bill was "ower bad for blessing, but too guid for cursing."


The right hon. Gentleman has been congratulated at having reached the end of his labours; but I do not think that these congratulations, when they had reference to the character or the result of this measure, were entirely unmingled with a feeling of regret. I confess that I regard this Bill with some measure of disappointment. I feel that the right hon. Gentleman has missed a very great opportunity for amending defects in company law; and that after this measure has been passed there will still be a strong sense throughout the country that defects exist which might have been remedied. The right hon. Gentleman has been subjected to very great difficulties. In the first place, he had to deal with a stale measure. It was drafted some years ago, and was adapted to a state of things in regard to company promotion which the lapse of time had rendered obsolete. The methods of company promoting had considerably altered during the last few years, and since this scheme was framed. The light which was thrown upon the subject by the revelations in connection with the Hooley and other companies was absent, and therefore the result was a measure ill adapted for Amendments which were necessary to bring it into harmony with the modern conditions under which companies are launched. Again, the right hon. Gentleman seemed to suffer almost a paralysis owing to his anxiety not to overweight the Bill. Any Amendments proposed with the view of increasing its efficiency he appeared to regard with undue apprehension. Whether he feared the influence of some of his supporters or his colleagues, or whether he was afraid of criticism in another place, he lent a very much more ready ear to suggestions that would render the Bill less operative than to suggestions which would have made it a more effective instrument for the prevention of fraud. Then the right hon. Gentleman was subjected to undue pressure, having regard to the very limited time available for the discussion of a measure of the very first importance. When one considers the very trifling record of the session, the reason why this important measure is left to the very last day is difficult to imagine. It is almost impossible to give one's mind to criticising its complicated provisions in the time. The result of the procedure which has been adopted is that we have a Bill which none of us regard as an unmixed good. It does very little to remove the difficulties attendant on honest company enterprise, and very little to suppress fraud in company promotion. It is impossible to suppose that the company reformer will be satisfied with this measure, and after it has passed through Parliament we shall sooner or later have to take up the duty of forging a more perfect instrument to check the frauds of company promoting. There are defects which cripple this scheme which must be remedied before any effectual measure of company reform is passed. The Bill does not in any way deal with gambling companies which are formed without any prospectus. The whole framework of the measure is adapted to a state of things which assumes that every company is launched with a prospectus. The very elaborate requirements with which the directors are compelled to comply in issuing the prospectus are unattended by any penalties. They must furnish information on many topics, but if they do not do so there is no penalty in the Bill, and it therefore becomes necessary to fall back on the antiquated, cumbrous, and almost obsolete indictment for misdemeanour at common law. Now in no modern statute in my experience are the requirements of statutes left to be enforced by means of an indictment for misdemeanour at common law. In all modern statutes penalties are created, and in nearly every case you have the process of summary conviction which may be put at the disposal of persons enforcing the law. In this measure there is no such provision, and I cannot help thinking that this Bill has been drawn by somebody entirely unfamiliar with the practice of inserting such a provision in an Act of Parliament. There is no provision for giving the shareholders information with respect to the money expended by the vendor or the promoter in the promotion of a company. The vendor's account and the promotion account are not among the documents to be supplied to the shareholders. The Bill is framed upon the assumption that the cost of the promotion is to be borne by the company, but the cost of the promotion in nearly all cases is borne by those persons who bring it into existence, so that it is most essential that those accounts should be supplied in order that dishonesty in promoting companies should be stopped. Then as to the one man company. A more indefensible condition of things than that which is known as the one man company cannot be imagined; but after this Bill has become law, it will be possible for a man to bring out a company, to take all the shares and carry on his business under the name of a company, and although he owns all the property and takes all the profit of the business he leaves all the risk to the company and is under no liability. That is certainly a matter that should be remedied, but as this measure stands that state of things will continue to exist, because, as a man does not publish a prospectus to himself, and there is no record of shares allotted, or debentures placed, there is nothing to enable any person to inquire into the extraordinary scheme of which that company is the result. There is also no attempt to limit the practice of qualifying the liability of directors and other officers of the company by the insertion of provisions in the company's Articles. I do not wish to say anything with regard to this measure which may cause the right hon. Gentleman any disappointment. So far as it goes it is an honest and useful effort on the part of the Government in the path of company reform, but I greatly regret that it has not been made more complete. Important matters are left for future legislation, and if we fail to take advantage of the stream now when it is at the flood we may have to wait a long time for another opportunity. These evils will continue to exist in our industrial system; scandals will from time to time arise, and the present Bill may be pointed to as representing the sum of attainable effort in our generation.

MR. LOUIS SINCLAIR (Essex, Romford)

said that he saw in this Bill no difficulties put in the way of unscrupulous men to prevent them getting over or evading the provisions made for the protection of the public. One result of the measure would be that the public would be put to greater expense than they had had hitherto to bear in the formation of companies. There was one point which he wished specially to point out. There was no tribunal to deal with complaints. The Board of Trade had taken no power under which they could investigate charges of fraud. The investigation would take place when the company was in liquidation, and when all the assets had been lost. Investors would like the investigation to come at some previous period, but there was no provision whatever for that in the Bill. The Bill provided with respect to the question of qualification that the prospectus should state the amount. There would be no difficulty in stating the amount at such a small figure that the good which the provision in the Bill was intended to secure would be done away with. Again, the provision in the Bill on the question of allotment lent itself to evasion, inasmuch as promoters could easily put in nominees, men of straw, to subscribe, and under the names of A, B, C, and D, with £1,000, £2,000, £3,000 and £4,000 respectively, they would be able to ensure the flotation of the company. He mentioned those points to illustrate what he felt—namely, that this Bill was not more far-reaching than the present law, and did not really deal with men who were capable of evading the law. Some day or other the Bill would have to be amended, inasmuch as it would be found that the expense honest promoters would have to undergo would be far more than they had to pay under the present law. He was afraid that the Bill would not have the very much desired effect. He was sure the country had viewed with consternation the acts which had lately been seen of unscrupulous men who floated companies without any tangible assets. Even if this Act had been in force it would not have been possible to prevent the fleecing of the public in the way those men had done. Those acts were within the knowledge of everyone in the House. He regretted that this Bill had not had more time devoted to it. The importance of it had not been fully gauged by those interested in it.

MR. LABOUCHERE (Northampton)

said that company promoters generally looked pretty well after themselves. So far as the complaint of the hon. Member for the Romford Division was concerned, he did not share it. The right hon. Gentleman the President of the Board of Trade had, he had no doubt, the most honest and excellent intentions in bringing forward this Bill, but he did not carry out his excellent intentions in the Bill. It seemed to him, with all respect to the right hon. Gentleman, that he really did not know the tricks of promoters sufficiently to be able to provide against them in the Bill. The Bill admittedly was one of the worst ever passed by a legislative assembly. He had been concerned in passing many Bills, good, bad, and indifferent, but he did not know any Bill so bad— not in its principles, but in the mode of giving effect to those principles—as the Bill they were going to read the third time that evening. The Bill was badly drawn up. It went to a Committee on which they bad a number of wholly excellent and intelligent lawyers, and a good many perfectly respectable directors. They knew nothing of the subject with which they had to deal. The honest directors put up their hands to heaven and asked, "Can such things be?" Then the Bill came down to the House. They could not discuss a Bill of this importance and magnitude in the last week of the session. In order to make the Bill ship-shape and to make it hold water it ought to have been discussed much longer. What happened on the previous night? The President of the Board of Trade and the Attorney General were in possession of what he might call a mechanical majority. They had about thirty gentlemen sitting behind them who voted against every Amendment which the Government did not accept Those gentlemen knew absolutely nothing of the matter. The Government Whips ought not to interfere in connection with such a Bill as this. It was not a party question, but in this case they knew perfectly well that the whip pointed to the lobby, and Amendments proposed by his hon. and learned friend the Member for South Leeds and others were voted down. At the same time the, thirty Members on the other side of the House were kept sweet by the right hon. Gentleman making concessions to them. Some Gentleman got up and moved a little Amendment on the other side of the House, and the right hon. Gentleman said, "Agreed, agreed," before they knew where they were, and thereupon the Amendment was carried, whereas when Amendments were moved from the Opposition side of the House there was no cry of "Agreed." It seemed to him that the right hon. Gentleman considered it a point of honour to oppose them. It was to be a real Conservative Bill, and, naturally from the standpoint of Gentlemen on the Opposition side of the House, it was a very bad Bill. [The hon. Member for the Peckham Division of Camberwell interjected a remark which was inaudible in the Gallery.] The hon. Gentleman was an angel among those who were not angels. His Amendments were excellent ones, but they were too much in the line of those proposed on the Opposition side to find favour with the right hon. Gentleman. That morning at half-past one, when the House adjourned, he was prepared to sit until three o'clock if they could amend the Bill in any way. The case was perfectly hopeless. The House was getting more and more sleepy, and there were cries of "Divide, divide," from the faithful thirty. Under those circumstances he went off to bed and left the right hon. Gentleman to do what he pleased. The right hon. Gentleman was very courteous, but he always distrusted a Minister who was very courteous. He knew perfectly well what it meant. He knew that the courtesy was a sort of quid pro quo for getting something else. His hon. friend had pointed out many of the shortcomings of the Bill, and it seemed to him that when a clause was passed shutting up some loophole for swindling it was opened again, and that further opportunities for swindling were given that did not at present exist. A clause in the Bill stated that a company might underwrite, and on the prospectus a statement of what it paid for the underwriting was to be set forth. But right hon. Gentlemen refused to allow any money which might be paid by the promoters in excess of 1 per cent. or 2 per cent. paid by the company to appear on the prospectus. What was the consequence? The investor, looking at a prospectus, would say, "This is a very good company, for it has been underwritten at 2 per cent."; but for all they knew the underwriting might have been 10 per cent., because the right hon. Gentleman would not agree that whatever was given for underwriting, whether by the promoters or the company, should appear on the prospectus. Then as to abridged prospectuses, surely it was desirable that in an abridged prospectus the main substantial facts should be stated. An Amendment was moved to that effect, but the right hon. gentleman refused to accept it, and he said that if abridged prospectuses were not allowed newspapers alone would profit. As a matter of fact, newspapers would gain by abridged prospectuses, because if the full prospectus had to be published not many would be advertised, and then only for brief periods, and when a particular company would rather avoid full publicity the abridged prospectus would be spread abroad. He always distrusted a company which advertised very much. If the company were a rotten company depending entirely on the names on what Mr. Hooley called "the front page," it would be found that it would be before the public for a week or more, and the longer it was before the public and the longer the prospectus, the presumption was the worse was the company. So far as newspapers were concerned, if they looked only to their own interests and not to the interests of the public, they would be very glad to have the system of abridged prospectuses. Then it had been pointed out that there were no penalties in the Bill, and that all its clauses were a series of pious opinions. There might be a prosecution by some roundabout way at common law, but why not have adopted the usual system and included specific penalties in the Bill? The right hon. Gentleman was so enamoured of the measure that he absolutely refused to make any change in it. As to one man companies, they were generally swindles. Of course, a perfectly honest man might for family reasons wish to convert his business into a private company, but as a general rule the man who wished to convert his business into a company did so either because he found the business was going down or because for the preceding two or three years there had been very large profits which he wished to capitalise. Then he started his company without a prospectus. The shares were sold to the public, he himself keeping the debentures, and in a little while when the company went into liquidation the shareholders got nothing. The one man company was a danger which ought to have been dealt with in the Bill, but they had absolutely shirked it. Then as to brokers: would the right hon. Gentleman inform the House what was a "lawful brokerage"? Every hon. Member connected with the Stock Exchange would bear him out when he stated that, while there were many honest brokers who took a fair and legitimate brokerage, there were a great many other people, some of them members of the Stock Exchange and others solicitors, who took an enormous brokerage. They were told that they could have a call on £1 shares for 15s.; that if they sold them they would get 5s. a share, and that if they did not they would not lose anything. Such a broker sent out circulars to his clients and informed them what excellent shares he could offer them, his clients, of course, having no idea that the broker was doing anything except looking after their interests. In that way, not only in the case of new companies but also in the case of old companies, the public were robbed throughout the country. He was not a sentimentalist. A great deal had been said about widows and orphans, but generally the widow was "a stag," and the orphan did not take shares. It was stated that an investor would send for the full prospectus before he applied for shares. That was simply nonsense. An investor in the country saw a prospectus which stated that the list would close for the country to-morrow morning; how could he send for a prospectus? The Bill was to go before the House of Lords. He was was not a warm admirer of the House of Lords, but every institution in the world which had lasted for a long time had something to be said for it. In the House of Lords there were a large number of legal gentlemen who were particularly qualified to deal with the matters connected with the Bill, and he sincerely hoped that the House of Lords, would show it was a useful body, by dealing with the Bill in a very different manner to that in which it had been dealt with in the House of Commons. There was a good deal in the Bill which ought not to be in it, and there was a good deal not in it which ought to be in it. As the Bill stood at present he believed it would have been better in the public interest if it had not been passed that session, but that next session, with the knowledge they had before them, a good practical Bill should be brought in and discussed at a time when its provisions could be properly examined.

MR. MARKS (Tower Hamlets, St. George's)

said he did not think the hon. Gentleman the Member for Northampton had quite made out a case for the sweeping condemnation with which he had opened his speech. The hon. Gentleman said this was one of the worst of the many bad Bills which he had discussed. He had less experience of very bad Bills than the hon. Member; but he was bound to say if what the hon. Member had said of this Bill was the worst that could be said of it, the Government had to be congratulated on a very fair achievement. It was by no means, in his judgment, a perfect Bill. It was true many things had been left out of the Bill which might have been put into it, and a few things were put in which might have been left out; but at the same time, when one considered the circumstances under which the measure had been brought before the House, it was perfectly obvious that two or three of the chief evils of company promotion had been dealt with in an effective manner. In the matter of disclosure in the prospectus the Bill went as far as any reasonable Bill could go. There was the obligation to disclose important facts in connection with the formation of the company, the obligation to disclose the terms upon which underwriting was obtained——


There is the obligation to disclose what the company pays for underwriting; but, at the same time, a promoter may add to that by paying what he likes.


said that was perfectly true; but, at all events, the company had to disclose the amount paid by it for underwriting. It was absolutely impossible for it to disclose what another person might pay for underwriting. He had pointed this out in Committee. Another important feature was the obligation on a company to register its mortgages of a certain class, and to endorse on mortgage debentures, when they are issued, the fact of their registration. There were, however, two important omissions from the Bill which militated very much against it. In the first place, it did not deal with what was known as the non-prospectus or the private company. The authors of the Bill had proceeded under the impression that subscriptions to all limited companies were obtained by means of prospectuses duly published. Those who were familiar with the facts were aware that in the majority of these companies, many of which had caused disaster to investors, the subscriptions were not obtained by the issue of a public prospectus. In order to deal with the evils at which the Bill was aimed it was essential that the non-prospectus companies should be dealt with; but they had not been dealt with. He regretted that the most useful proposal of the hon. and learned Member for South Leeds— that there should be an obligation to file, at the time of the company's registration, a Memorandum that would serve as a prospectus at all stages of the company's history—was refused by the Government. When the Act was in operation it would be found that the rejection of that Amendment was a fatal flaw in the measure, and had deprived it of what would have been its most valuable feature. One other point might be emphasised, which it might not be too late to remedy in the House of Lords—namely, the manner in which the registration of a certain class of charges had been dealt with. The great object which joint-stock company reformers had lately had in view had been to protect trade creditors. This class was not effectively protected by the provisions of the Bill. There was no safeguard in reference to the charges upon uncalled capital. In the case where inspection of the register of mortgages was provided for, the inspection was limited to the actual shareholders and creditors of the company; but these were not the people most concerned to know the financial condition of the company The person most concerned was the intending creditor. The person so situated looked at the list of shareholders and found a large number of respectable names, and that there was £50,000 or £60,000 of uncalled capital. On the strength of that he gave credit to the company. He was not aware that behind his back the company had mortgaged its unpaid capital to a bank or a money-lending intsitution. Such a person had no means of finding out the financial condition of the company before he gave it credit, and if he inquired at the offices of the company he would stand a very poor chance of getting any orders. He felt that in the two important respects he had mentioned the Bill fell short of what might be expected.

MR. BRYCE (Aberdeen, S.)

said that though they had devoted a good deal of time and labour to the Bill, yet they had not spent enough time and pains on it. The Bill had been before the House of Lords for four years, and he did not see why the Government should not have sent it to the Commons Grand Committee in March instead of in July, when they were obliged to act under a constant sense of hurry and pressure. Moreover, the Government appeared to him to have been too much in fear of an unseen and malignant influence, which appeared to him to be the influence of the House of Lords. The Bill which was originally introduced in the other House was a far more drastic measure than the present Bill, and he was of opinion that many desirable Amendments had been refused by the Government, not because they were not right in themselves, but merely because they thought it would be more difficult to pass the measure through the other House. He could not, therefore, agree with the hon. Member for Northampton, who had expressed an admiration for that body, which would evoke all the more gratitude because it was so unexpected. Looking at the part which the other House had played in preventing the Bill going further, and in cutting it down while it was before them, he thought it would be seen that the critical faculty of the House of Lords greatly exceeded its constructive faculty. The House of Lords possessed eminent legal knowledge and great power, but they rejected a proposal lest in one case in a hundred it might work badly. They could not possibly effect amendments in the law without taking some risk, and it appeared to him that the House of Lords should take some risk in matters of this kind. In their anxiety to protect the honest man, they left the meshes wide enough for others to slip through, and he was, therefore obliged to agree that the measure was not a very satisfactory one, although he did not largely blame the Government for the reasons he had mentioned. Now they had come to the end of the Bill many of them must feel, as a man sometimes did when he had finished writing a book, that then he knew how to write it, and would like to begin and write ft all again. They had certainly realised the extraordinary difficulties of the subject, and that was why he congratulated the right hon. Gentlemen on having passed even this Bill. The difficulties were attributable not only to the fact that new practices came into being in business, and that diverse interests of directors, shareholders, and creditors had to be regarded, but to the fact that the main object of the Bill was to deal with fraud. The maxim that fraud was infinite was two thousand years old; but it was as true now as it ever was. It was not much use trying to anticipate and prevent the particular forms which fraud had heretofore taken, because one might feel sure when one hole had been stopped the rabbit would get into the garden through another. Therefore he was not very sanguine as to the method they had adopted of inventing a great number of detailed provisions to counterwork and prevent the devices by which fraud might seek to attain its ends. He was not sure that they would not have done better to try and pass a, simpler and shorter Bill, of which the main purpose should be the laying down more broadly of the doctrine of the kind of good faith and honesty required from promoters and directors and every person occupying a fiduciary position. We ought to put the promoter not in a position regarding which precautions should be taken, but in the position of a man bound to exercise the utmost good faith. The best way of dealing with this Protean subject of fraud was to arm our courts with greater powers, and that, he thought, ought to have been done. Of course, that meant giving a considerable discretion to the courts, but he thought that might safely be done. The great difficulty in the way was that when they trusted to the courts they were obliged to trust to people to bring actions, and there was a great indisposition to resort to criminal procedure, and juries had a tendency to let people off for doing what was only the common practice. From civil actions he had more hope, but the constant reproach of our law was the fearful expense and difficulty of putting it into motion, and the question of the reform of the company law was therefore really a branch of the wider question of making the law of England more effective and cheaper. That being so, he could not join in the severe con- demnation passed on the Bill. He thought there were some good points in it, and though he regretted that nothing had been done with the non-prospectus companies and the one-man companies, still they had got some distinct gain from the Bill; and, remembering how long they had had to wait for it, he did not think the Government would have done well to wait until next session. But they had not reached anything like finality, and they would have to watch with the greatest care the results of the experiment they were now trying. Considering how difficult the subject was, and the extraordinary want of knowledge which most Members of the House possessed about this very special subject, he was not prepared to say that the Bill was at all to be disparaged or that they might not have to look on it as a distinct step forward. He would join, therefore, in the congratulations which had been addressed to the right hon. Gentleman on the perseverance and open-mindedness he bad shown, and although he could not regard the measure as final, still a good deal would be learned from its working. He hoped, however, that the President of the Board of Trade would keep before his mind the probability that in a few years they would be in a position to pass a measure which would remedy some of the defects that would then have been disclosed.


said that whatever he might say with regard to some of the observations made on this Bill, he certainly had no fault to find with the right hon. Gentleman who had just sat down. In fact, he agreed with much that the right hon. Gentleman had said. He would have been very glad if it had been possible to make this a more complete Bill than it was. To a certain extent the Bill was in the nature of an experiment, and with regard to its merits they could only be determined by seeing how they would work out in operation. No claim could be made for the Bill anything in the shape of finality. Indeed, he would be inclined to say that it seemed to be a fault in our legislation that we attempted to deal with many matters much more comprehensively than was prudent, and he thought a great deal was to be said for moving tentatively, especially in connec- tion with a measure of this kind. There was one remark of the right hon. Gentleman with which he confessed he was not quite in accord. The right hon. Gentleman said that when we finished the Bill last night we felt very much as a man feels who has finished an interesting book and desires to read it all over again.


What I said was that we felt like a man who had written an interesting book, and who, when he came to the end of it, thought that now that he knew how to write it he would like to begin and write it all over again.


said that was not his feeling last night when the Bill got through. Many difficult and complex questions had to be discussed, and he was very glad when they were finished. Several of the speeches which had been made had been delivered with a view to showing once again to the House how strong were the arguments with which hon. Gentlemen supported the Amendments they moved, but he did not think he should usefully occupy the time of the House if he entered into a discussion of details or attempted to reply to arguments which had been addressed to the House more than once. The right hon. Gentleman said he would prefer a shorter and a simpler Bill. His view would be to give greater power to the courts; but he answered himself by showing that that would involve going to the courts and entailing an enormous expense, and was, therefore, a course which was open to considerable objection. He (Mr. Ritchie) thought he ought to remind the House, in answer to the complaints which had been made by some hon. Gentlemen that the Bill was not as fully discussed as the importance of the subject warranted, of the history of the measure. The right hon. Gentleman the Member for South Aberdeen knew very well that the Departmental Committee was appointed by himself. The subject of company law reform was originally investigated by the Departmental Committee, comprised of some of Her Majesty's judges, able lawyers, and eminent merchants who were in touch with the commercial world. The Bill which emanated from that Committee was not exactly the Bill they had before them now, but it was very much on the same lines; although the Bill introduced by his representative in the House of Lords four years ago was exactly in the shape recommended by the Departmental Committee, it was afterwards amended by a Select Committee of the House of Lords. When the hon. Gentleman the Member for Northampton expressed his confidence in the House of Lords and in the popularity of its Members, he was glad to hear him.


The Law Lords.


The Law Lords! He was still more glad to hear it; because this Bill had been under the consideration of a Committee of the most eminent Law Lords for no less than four years, and that Committee had had before it men the most eminently capable of giving information in regard to company law. It was true that it seemed sometimes to hang fire in the other House, and the reason for that was that these eminent lawyers were very much occupied, and could not devote that amount of time to it which they in the House of Commons could do. The hon. Member must therefore feel a glow of satisfaction when he knew that that critical examination into this question which he advocated had already taken place by the House of Lords and by its most eminent Members. It was only natural that when a Bill came down to that House with such a recommendation as that there should be very little doubt about any very material point in it. The right hon. Gentleman opposite had spoken of the extreme difficulty of the subject. No doubt it was extremely difficult, and a sort of subject which he undertook to say, whatever shape the Bill had assumed in that or the other House, would not have satisfied everybody. It must be remembered that this was a matter which must be dealt with with extremely great caution. The enormous bulk of the companies of this country had been very successful, and had done great things for our commerce and industry, and in endeavouring to hit at the undoubted defects in the law, and strike at undoubted fraudulent concerns, they must take extreme care not to make the law so drastic that honest men would be prevented from becoming directors of honest concerns, while the worst class of director would not be deterred from joining in the formation of fraudulent companies. That had always been present to his mind throughout the whole course of the discussion on the Bill. He had felt on many occasions that there had been a good deal to be said for some of the Amendments proposed by hon. Members on both sides of the House, and for many of the Amendments he had a sneaking regard. But he had always in his mind the great fear, already stated, that by accepting some of them it would make it difficult for good men to join good companies as directors, while the worst class of company directors would not be prevented in any way from undertaking the risks of joining in the formation of companies which were not so good. It had been said that they had been rather hurrying on this measure. He would have been glad if it had been introduced at an earlier stage of the session. It had been on the tapis for four or five years, and a great number of its provisions had been asked for by the great mass of the commercial community, and although the House might differ on some points in the Bill, he was satisfied that it was in the interest of the commercial community generally that this reform of company law ought not to be kept hanging over year after year, and should not be further delayed. Although he should have liked to see it introduced earlier in the session, he did not think there were any grounds for saying that the House of Commons had not had an opportunity of adequately considering it. As the right hon. the Member for Aberdeen said, seven days had been spent on it in Grand Committee, and every one of the points—far more than had been raised in the House itself—that could have occurred to the ingenuity of any one in regard to company law, had been brought before and discussed by the Committee in a businesslike and capable manner. He must therefore say that he did not think there was any just reason for complaint that the House of Commons had passed this measure in a hurry, and without time for the consideration of Amendments desired to be put forward by hon. Gentlemen. In fact, on the Report stage, many of the most important questions touched on in Committee were discussed again. He was much obliged to the right hon. Member for South Aberdeen, and the right hon. and learned Member for Dumfries Burghs, for the manner in which they had spoken of the part which his colleagues, the Attorney General and the Solicitor General, had taken in this matter. They had tried to consider in a fair and reasonable manner all the proposals put before them, and if they had not accepted all the Amendments, it was because they believed they would not advance the cause they had at heart, and would not have the effect that they desired in preventing men from engaging in these undertakings. He believed himself that the full disclosure of the position of the companies sought to be formed—which was the real principle of the Bill—would have a very considerable effect in enlightening the public mind, and in its operation it would have a very beneficial effect on the country, if not all that some of them had hoped. It was possible and extremely probable that, after seeing the working of the Bill for some longer or shorter time, they should be able from the experience so derived to do something more in undertaking further reforms.

SIR ROBERT REID (Dumfries Burghs)

said he would not detain the House more than a few moments. He would not say anything after the speech of the right hon. Gentleman, especially as the right hon. Member for South Aberdeen was not present, except on two definite points. He did not wish to criticise the Bill at all, but only to urge two points. The first was that this Bill was directed substantially against fraud. He believed that the Bill might be useful, though he was afraid it would not do as much as the right hon. Gentleman expected. But there were constantly occurring, every year, the most scandalous and gross frauds in company administration; and he did not think that there had been a sufficient use of the existing criminal law for the purpose of punishing, according to the law as it existed, those gross frauds by which many millions sterling every year were taken out of the pockets of honest and confiding people and put into the pockets of thieves and scoundrels, for they were nothing better. He ventured to suggest to the Attorney General that he should keep a very close eye on what was going on, and what was perfectly well known. In cases which were really fraudulent the Attorney General should put the sharp edge of the criminal law into force for the purpose of preventing these scandalous things which they knew were constantly going on. The criminal law had, in fact, become a by-word in connection with company administration. There was a second suggestion he had to make. An Amendment had been introduced into the Bill for the purpose of enabling a public examination to take place in those cases where the official receiver had made a report. He ventured to make the further suggestion—if it was not too late, with a view to a passage of the Bill through the other House—that cases of compulsory liquidation were very small in number; but there was no means of public examination in cases of voluntary liquidation, no matter how scandalous these had been, or in cases of liquidation under the supervision of the court. The publicity of examinations under the Bankruptcy Act of 1883 had been most effective. The Colonial Secretary, who was then President of the Board of Trade, pointed in 1883 to the necessity of publicity in any bankruptcy proceedings, and maintained with great force that not only the creditors, but the public, had an interest in the disclosures of frauds, irregularities and improprieties. The gentleman at present at the head of the Bankruptcy Department of the Board of Trade had repeatedly drawn attention to the very same thing, and said that one of the best means of preventing frauds was publicity. They could not have public examinations as the law now stood, except in the small number—and it was a decreasing number—of cases of compulsory liquidation. He ventured to suggest that more effective than even the clauses of this Bill, would be publicity, and the provision that men who were guilty of disgraceful conduct in getting up and in the management of companies should not be able, by means of voluntary liquidation, to shield themselves from public contempt, and it might be from criminal prosecution.


) said he rose to say only a word in regard to the first suggestion of his hon. and learned friend. He seemed to think that there had been some remissness in bringing the criminal law into operation in connection with company frauds. He could not help thinking that if his hon. and learned friend had closely followed the prosecutions during the last few years——


said he did not mean to imply censure.


said ho was quite sure his hon. friend did not imply any censure. There had been a considerable number of prosecutions for fraud in connection with companies, and he thought that in most of these cases convictions had resulted. He must remind his hon. friend of the fact that before entering on prosecutions of this kind it was necessary to be tolerably sure that they had sufficient evidence to ensure that justice would be done. It would be a great evil if a prosecution of this kind ended in a fiasco. There might be little doubt that a gross fraud had taken place, but it might be extremely difficult to get the necessary evidence. He could not help thinking that when his hon. friend spoke of the criminal law being rather a by-word, he was exaggerating. When the present Master of the Rolls was Attorney General the same vigilance was brought to bear in cases of this kind as when his hon. and learned friend occupied the same office. He could assure the House that the attention of the Public Prosecutor and of himself would not be relaxed, and whenever they could see their way, where it was desirable in the public interests that prosecutions should be undertaken, there would be no remissness.

Bill road the third time, and passed.