HC Deb 26 June 1900 vol 84 cc1139-86


Order for Second Reading read.


Every one will admit that the question raised by this measure is of very great importance, having regard to the enormous amount of capital invested in limited liability companies, and having regard also to the great advantage which has unquestionably been derived by trade and commerce through the formation of these companies. No one will dispute that the operation of the Companies Acts has been largely beneficial to the trade and commerce of the country but, at the same time, it will be generally acknowledged that there are many evils arising out of the existing law. A Select Committee appointed to inquire into the subject reported that the frauds committed and the losses sustained in connection with limited liability companies rendered necessary further regulation with respect to the formation of these companies; and a Return which was moved for by the hon. Member for the Exchange Division of Liverpool showed that in one year, 1896, no fewer than 1,261 companies went into liquidation, involving the loss of no less than fifteen millions sterling, of which £8,284,000 were losses in capital. But, although these figures are considerable, they yet are, comparatively speaking, small compared to the enormous capital invested in public companies, which amounts at the present time to 1,500 millions sterling. Therefore, the losses in the year 1896 were only about 1 per cent. of the capital invested, and that fact should induce the House to approach the amending of the law relating to public companies with very great caution and circumspection. I think that in considering the question we should endeavour as far as possible to secure that there should be no unnecessary interference with the freedom of companies in carrying on their business and in the general management of their affairs, and that we should be extremely careful not to make the law so onerous and so oppressive as to prevent the very best class of our business men engaging in the operations of these companies. Great, undoubtedly, as are some of the evils existing under the present law, I can conceive no greater evil in connection with this matter than legislation which would prevent our best business men undertaking a share in the management of these companies, and which would have the effect of throwing the management into the hands of what I may call professional directors. Another matter we ought to bear in mind is that no legislation which we can undertake is at all likely to prevent mistakes in the management of companies which entails in many cases large losses. We cannot hope to prevent imprudence or incompetence of managers. Neither can we attempt to prevent errors of judgment. Another thing I think it will be impossible for us to do by any legislation we can pass is to protect investors from their own folly and carelessness. I think we are bound to endeavour so to amend the law as to insure the fullest information being given to all those who desire to take part in companies or invest their capital, but to attempt to prevent them being foolish in the investment of their capital is to attempt something it would be impossible to accomplish. On the other hand, there is no doubt that the law ought, as far as possible, to provide safeguards to protect the public against misleading or fraudulent devices or the fraudulent use of existing legal machinery. In order that this matter should be fully and carefully inquired into, the right hon. Member for South Aberdeen, when he was at the Board of Trade in 1894, appointed a strong Departmental Committee to consider this question. There was in the chair one of the ablest lawyers, who understood, perhaps, as much about commercial matters as any living lawyer, Lord Davey, two of Her Majesty's judges, and two or three representatives of the professional and mercantile classes. The Committee framed a Bill, and that Bill was introduced in 1896 in the House of Lords, and no one can dispute that the Bill received careful and, indeed, prolonged investigation elsewhere. But it was a matter which required careful investigation, and having regard to the other engagements of the distinguished legal authorities who were on that Committee it is not surprising the investigation of the Committee was spread over a considerable portion of time. The investigation in the House of Lords occupied the sessions of 1896, 1897, 1898, and 1899, and the result of the consideration of the Committee was an amending Bill which is practically the Bill which is now before the House. It is a Bill in many respects very different from the Bill originally proposed. It was considered that the Bill as originally proposed by the Committee which was appointed in 1894 was in many respects much too drastic in its character, and it was considerably modified. I do not mean to say I should not be glad to see a little less modification in the Bill, but it was very carefully considered by a body of very eminent gentlemen, and I am not disposed to quarrel with the decision they arrived at. The Bill as introduced is practically the Bill which was framed by the Select Committee of the House of Commons. In fact, it is identical with that Bill with one single exception, to which I will presently refer. I shall not trouble the House with all the details of the measure, but I shall endeavour briefly to point out some of the salient points of the Bill now before the House. The Bill provides, among other things, against the evil of directors-acting without qualification or taking gifts of paid-up shares. Many scandalous cases have arisen in connection with matters of this kind. It is quite clear that if directors undertake the responsibility of managing these businesses they ought to be properly qualified, and their qualification ought to be secured in the ordinary way, and certainly ought not to be bestowed upon thorn by the promoters of the company or by anyone interested in the flotation. Another evil against which the Bill provides is bogus or fictitious subscriptions. It is very often the case that a company proceeds to allotment when only a most insignificant portion of the capital has been bona fide subscribed with the inevitable consequence that in the course of time—sometimes a longer, sometimes a shorter period—the company goes into liquidation. We think the public in subscribing ought to be distinctly informed what is the minimum subscription on which the directors will go to allotment. We therefore provide that the minimum subscription shall be stated in the prospectus, and that three-fourths of the total amount duo on application and allotment shall be paid up before the company commences business, and paid up bona fide by those who have subscribed. We thus secure that the company starts with an adequate capital, or at least, that those who subscribe know the capital with which it starts business. We further propose to provide in the Bill that a Return of the allotment shall be made to the Registrar within seven days, so that all those who are interested may have an opportunity of seeing who their co-partners are. There is another scandal which has presented itself to the eyes of the public on many occasions in connection with companies —namely, secret payments to vendors and promoters. That, I think, is one of the greatest evils in connection with the existing law with which we have to deal. To prevent evils of that nature we provide that a statement shall be necessary in the prospectus of the amounts payable to the vendor or promoter, and the consideration there for. We do not consider it desirable in every case to prevent—in fact, we cannot prevent—payments being made, but we think that those who subscribe ought to have fully set out in the prospectus the amount which has been paid to both the vendors and the promoters, and what the money has been paid for. There is a practice prevalent of what is called underwriting shares. That is a practice which is not objectionable in itself so long as the public who are asked to take shares in the company know what is to be paid for underwriting, and the amount of the shares which have been underwritten. We consider this matter to be one of such importance that precautions have been taken in the Bill to prevent this provision being set aside by any waiver or agreement. Another evil which at present exists is that when it comes to the winding up of some companies it is found that the whole of the available assets of the company are mortgaged, and there is nothing at all to divide amongst the unhappy creditors. The only remedy which can be applied to this particular evil is to take care that publicity is given to any mortgages which exist. It is therefore provided that any mortgages shall be registered with the Registrar of Joint Stock Companies and be open to public inspection, and that any mortgages not so registered shall be invalid. There are several other provisions of considerable importance and great value with which I will not trouble the House, but with which no doubt the House is familiar. There are some provisions in this Bill which were not in the original Bill, some of which have given rise to considerable discussion and much opposition. There are the clauses dealing with the sale of drugs and the carrying on of a medical practice by a company. I am bound to say that I do not think those provisions are really very germane to the present Bill. I have no doubt that in themselves the provisions, or something analogous to them, with regard to these matters would be a bene- ficial alteration of the law, but I cannot say that I think they are in their proper place in a Bill for amending the Companies Acts. If those matters are to be dealt with it would be much better that they should be dealt with by a separate Bill, rather than in the measure now before the House. However, it will be for the Committee when they come to consider these provisions to decide whether they should be proceeded with, or whether they should be struck out and relegated to some other Bill at some other time. There is another provision which was not in the original Bill, and which, I think, is open to very serious objection. I mean the clause which gives a preference to a certain class of creditors incurred within three months prior to the winding-up of the company. That is an entirely now departure. I have no doubt the noble Lord who proposed this clause in the House of Lords had very good grounds, or thought he had, for inserting such a provision in the Bill; but having regard to the very serious alteration of the law which is made by that provision, I am quite unable to ask the House to retain the clause. It will be a very serious infringement of the rights of debenture holders, and I should imagine the House will not care to entertain it. There is one provision which we have omitted from the Bill as it originally stood to which I should like to refer, as it is the object of an Amendment to the Second Reading standing in the name of an hon. Member opposite. Even though the hon. Gentleman objects to the omission, he would hardly be justified in moving the rejection of the Bill. What is the history of the omission of that clause? The clause to which I refer is that repealing the twenty-fifth clause of the Companies Act, which sets out that all shares which are not paid for in cash, and for which other consideration is given, should be registered, the result of non registration being that the holder of the shares is liable to pay up in cash, although he has already paid for them in some other form. This was justifiably hold to be a rather serious provision. But an Act was passed two or three years ago by my right hon. friend, who was then Sir John Lubbock, which provided that in the case where registration had not taken place an innocent holder could appeal to the Court, which could relieve him of the difficulties in which he was placed by the non-registration, and order registration to take place. That, in the opinion of my right hon. friend, who was then chairman of the Associated Chambers of Commerce, amply mot the circumstances of the case. The hon. Gentleman opposite is not content with that, but desires to repeal Clause 25 altogether, and to do away with all registration of shares which are paid for otherwise than by cash. I do not think that would be a right thing to do. In the first place, I think it is perfectly right that persons should be able to make themselves acquainted with the fact whether the shares were paid for in cash or by some other consideration, and I hope the House will support me in resisting such an Amendment as that to be proposed by the hon. Gentleman opposite. As I have said, there are some things omitted from this Bill which I myself and many other persons would like to have seen included, but the Bill does not profess to deal with all abuses. I believe this measure to be an honest attempt to find a remedy, and a sufficient remedy, for some of the most flagrant imperfections in the present law, and as such I beg to commend it to the favourable consideration of the House.

Motion made, and Question proposed, "That the Bill be now read a second time."—(Mr. Ritchie.)

*MR. CROMBIE (Kincardineshire)

The right hon. Gentleman has alluded to the Amendment which stands in my name, and he has rightly divined my intention, for I do not propose to move that Amendment. The hon. Gentleman will no doubt remember that the Committee referred to this clause in very strong terms indeed, and recommended that nothing short of its repeal would be satisfactory, I think the right hon. Gentleman himself is under a slight misapprehension as to Lord Avebury's Act, because I observe that in introducing this Bill he referred to this Act as having been passed subsequent to this Bill coming from the House of Lords; but that is not so. Notwithstanding this Act, in the opinion of the House of Lords the repeal of this clause was considered necessary. The right hon. Gentleman said that we wished to get rid of the registration of shares which were not fully paid up, but that is not our intention at all. It is perfectly right and proper that such shares should be registered, and if the right hon. Gentleman wishes to increase the penalty against directors who do not register them, for my part I should be very pleased. But what we do find fault with is that, owing to the working of this clause, innocent parties are punished and not the guilty. I may buy shares in a company at the full price or at a premium, and if this company goes into liquidation I may find myself mulcted in a sum far greater than the value of those shares, and that seems to me to be a very hard case. The method of procedure provided by Lord Avebury's Act is complicated and expensive, and will probably involve the consulting of a lawyer. That is very hard indeed upon innocent people who may be in no way to blame for having got into trouble. I hope that some Amendment will be submitted which in no way interferes with the registration of shares.

MR. BRYCE (Aberdeen, S.)

The right hon. Gentleman, in introducing this Bill, has traced its history and commended it to the House in such moderate and conciliatory language that I have no wish to import political controversy into the discussion. There is an admission on both sides of the House that some reform of the law is needed. For that reason we may dispose of any apprehension that political controversy will arise over this measure, and we may address ourselves to the consideration of the question as to how far the Bill is likely to remove the evils, the existence of which we all admit. We need not go back further than the Committee of 1894. That Committee prepared a Bill, and it will be found in the appendix to the Report, which contains a survey of the whole subject. Since then the matter has remained in the House of Lords. This Bill was thrown on the House of Lords and tossed to and fro in that assembly, and in that process it has suffered a good deal. The right hon. Gentleman himself evidently regrets that the Bill does not contain more of the drastic force which it had when it emerged from the exceptionally strong Committee which originally prepared it. It was exposed in the Lords to two dangers. There were a large number of people who had the ear of the House of Lords who were very apprehensive that difficulties would be thrown in the way of direc- tors and promoters of companies; and there was also that highly critical spirit which is fully developed in lawyers, which is very much in its place and extremely valuable in the House of Lords when sitting as a judicial tribunal, but which diminishes its reforming force when it comes to deal with practical evils. Anyone who reads the very interesting Reports of the House of Lords Committee will perceive how that legal critical spirit was brought to bear in this matter, and bow anxious they were to remove everything which might lead to any difficulty or difference. It seems to me that that ought to have been qualified to a greater extent than it was by a sense of the changers and evils which the existing law causes, and a disposition to try experiments a little more boldly in order to remove those evils. The public all the time are suffering, and, as was said by the right hon. Gentleman, we cannot undertake to prevent companies making mistakes or give complete protection to investors; but still we must endeavour to remove, as far as we can, those devices by which investors are deceived, and we must remember that there will always be a large number of persons who are proper objects for the sympathy of this House and for legislation, because what they are endeavouring to do is in itself perfectly legitimate, and they are in many cases devoid of legal advice and the means of getting it if everybody who was going to invest consulted a trustworthy and skilful solicitor or stockbroker there would be very little difficulty in the matter, but a great many people have not got those aids, and they are liable to be deceived in a way which would not deceive those of us who have some experience. I do not say that you can prevent those people being deceived, but you ought to remove out of their path the easiest means by which they can be deceived. In one respect I am not quite sure that this evil is not greater at the present time than it was some years ago, because the fall in the rate of interest has imposed such a severe hardship upon many people deriving fixed incomes from small sums of money invested, that when those investments are paid off they are more than ever anxious to embark in rash ventures when a comparatively high rate of interest is promised, and the evil is rather greater than it was before. I think that is a reason for endeavouring to deal somewhat boldly with this matter, although I do not for a single moment deny that, as a general proposition, it is impossible for us to avoid a great many of the losses which will happen. Of course, I am only speaking of people with small incomes, who are the legitimate objects of our protection. A propos of that, I should like to say that the Hill as it is drawn seems to me to represent the minimum of what ought to be put forward for legislation. If hon. Members will look at the Report of the Committee they will see that it scrutinises very carefully all the objections that might be made to more drastic remedies, and they will see also that it was a Committee of a very conservative nature. That Committee consisted of throe experienced and able Judges, several solicitors experienced in all matters relating to common law, and several mercantile men who were eminently representative of the mercantile community. From what I have heard stated by some hon. Members of the House, nearly every plan that has ever been suggested in the public press or in the House for improving the law was brought before that Committee, and those proposals were subjected to the most rigorous examination. Many of them wore rejected, and nothing was allowed to pass which had not run the gauntlet of that Committee, and the Report was a unanimous one. Therefore, I attach a great deal of importance to the fact that a Committee, composed as this was, arrived at the decision that this Bill was necessary. It has been said with truth that a very large part of the capital of this country is embarked in these limited liability enterprises. I think it was said somewhere lately that the total British capital which is embarked in limited liability companies is more than double the capital in such companies in France or Germany, and is greater than the amount embarked in both those countries taken together. That shows how large a proportion of British capital is invested in these con-corns, and how very careful we ought to be in dealing with them. But these prosperous companies in which this capital is invested are not the companies which will be affected by this Bill. Those are substantial concerns, whose prosperity proves that this Bill will not affect them. It is also said that we must not be hard on honest men, and make it difficult for them to take up business as directors of companies. We must also remember that honest men have always had the most complete protection in the courts of law. I am aware of exceedingly few cases— and I doubt if anyone in this debate will be able to quote more than an extremely small number of cases—in which any director or promoter of a company who has honestly endeavoured to do his duty as an honest man has ever suffered at the hands of the courts. I believe such cases are extremely few. There are cases in which a man who is personally honest, who goes into a company knowing very little of law or business, and who practically sells his name—which is very likely a respectable and distinguished one—to the company because it will adorn the prospectus and give confidence to investors—these persons sometimes suffer for the acts of others who have more knowledge and fewer scruples. They embark in transactions which often come before the courts, and for which the directors are severely handled and are frequently obliged to pay for their improper proceedings. A man personally honest may suffer in that case, but he is not entitled to much sympathy from us. Nothing does more harm in connection with companies than when a man, honest, but ignorant and incompetent, gives the sanction of his name to acts which are afterwards condemned by the courts. Therefore I do not include such a person in the category of honest men whom we must protect. Men who really know their business and who desire to give diligence and attention to it have nothing to fear from any legislation likely to be passed by this House, because they will be perfectly certain to have the protection of the courts. I believe, therefore, that the main thing we have to do is to strengthen the hands of the courts, and to extend their powers by stopping up certain loopholes which some decisions of the courts have made, and which some provisons in previous Acts required the courts to give. The Courts of Equity have in the main framed our company laws, and taking them all in all they have done it with great skill and judgment. They have been supported as a rule by the opinion of the commercial community, and they have done a great-deal to keep that opinion at a good level; and were it not for the action of the Courts of Equity we should be in a much worse position than we are at present. But these Courts are embarrassed in two ways: in some cases by provisions of the Statute law which do not enable them to go as far as they would like in cheeking fraud, and in other cases by certain decisions which have been given and which it is impossible for the Courts to get over. I do not say that these decisions were necessarily wrong at the time they were given, because it could not then be seen what use would be made of them, but use has been made of them, and they have given fraudulent persons loopholes of escape. I believe the right course for legislation to take in these matters is not so much to frame a great number of small provisions, as to strengthen the law in its general principles and to encourage the Courts to deal with fraud in every form in which they find it. You cannot exhaust the particulars of fraud. Fraud is infinite, and the ingenuity of man will find new methods of evading any Act we may draw. It is therefore quite impossible to stop up all the loopholes. What we ought to do is to entrust the Courts with such wide powers and to define fraud so clearly and broadly, that wherever it may appear it may be dealt with. I should therefore be the last person to suggest that we should attempt to revise the law by going into details to meet all cases which have originated in the past. It is better to lay down principles and to trust to the Courts to carry them out. Of course we must also remember that any amendments we may make in the law must be tentative and experimental. We cannot reach finality in matters of this kind. The most we can do is to provide, as far as we can, against the provisions we make being evaded. New evasions will no doubt arise, and in the course of a few years it may be necessary to deal with this subject again, and still further extend the provisions of the law. I think, therefore, on the whole, that perhaps the best thing we can do now in the way of amending the Bill is to extend it a little further, and to restore some of those broad definitions and declarations of the duties and liabilities of promoters, directors, managers and auditors which were contained in the Bill as it came from the Committee in 1894, and which, to a considerable extent, have been left out. I will not trouble the House with a minute examination of the omissions, but I may tell hon. Mem- bers that several important sections contained in the Bill as it came from the Committee, with regard to the duties and liabilities of promoters, the duties and liabilities connected with the issue of a prospectus, the annual balance sheet, and the duties of auditors, have all been omitted from the present Bill, and in several cases the previous Bill contained provisions for imposing fines and declaring that such and such an act should be a misfeasance which are not in the Bill now proposed. It would be tedious to the House to go through the omissions in detail, but if any hon. Member will take the trouble to compare the present Bill with the Bill as it came from the Committee in 1894, he will see that there are several omissions which tend to weaken the present Bill as a whole. I think therefore it would be desirable in Committee to consider the desirability of restoring these provisions. With reference to criminal proceedings, the Committee of 1894 did not propose to deal with the criminal law; neither does the present Bill except in one clause. If I may venture to express an opinion, I think the Committee of 1894 was right, and that the Government are right now. To deal with these matters on a criminal basis ought really to be undertaken in a separate enactment. Even then I am not very sanguine about the effect of it, because where criminal proceedings have been tried Courts and juries have been extremely timorous in applying the criminal law, and frequently the attempt to apply the criminal law in connection with a company has failed just because juries were unwilling to convict. Therefore, I believe the Government are well-advised in not introducing such a provision into the present Bill. The provisions of the Bill which seem to me to deserve the support and confidence of the House are those with regard to the issue of prospectuses, the statutory meetings, the qualifications of directors, and the information to be given as to their position and their fees and commissions, if any, the provision that no business is to be entered upon on insufficient capital, and the provision as regards the registration of mortgages and charges. There is absolute unanimity with regard to the registration of mortgages and charges, and I think that part of the Bill will receive universal assent, and will do the greatest good. I need not return to the repeal of Section 25 of the Act of 1867, because it has been already dealt with, but I associate myself with what has been said on the matter by my hon. friend the Member for Kincardine. I hope when we get into Committee the repeal of that section, as recommended by the Committee of 1894, will be included in the Bill, because the object of the section is attained in another part of the Bill, and therefore the provisions have become superfluous, although, if retained, they will be annoying and dangerous to innocent persons. I think the Government was also well advised in omitting the clause giving preference to trade creditors in respect of debts incurred within three months of the winding up. That could not be supported. There are two other points to which I should like to call attention. The first has reference to Scotland. As the House knows, the winding up provisions of the Act of 1890 did not apply to Scotland, and as that is not regarded as satisfactory I wish to direct the attention of the House and the Lord Advocate to it. There is one other provision which seems to me to merit attention. The House will recollect that under the Act of 1890 power is given in certain cases to the Courts to order an examination, but this valuable power has been lost by a recent decision of the House of Lords which declared that an examination could only be ordered where the Official Receiver alleged fraud against a particular person. That is a very valuable power in some respects, and one of the best parts of our winding-up machinery, because it enables the whole history of a company to be examined into, and may afford valuable ground for subsequent proceedings. This decision of the House of Lords resulted in a very serious loss indeed, and we might take the present opportunity to extend the law by providing that where the Official Receiver reports that he has reason to believe that there has been fraud in the conduct of a company, but may not be able to take the responsibility of reporting fraud against a particular person, the Court should have power to order an examination. The House will notice that a part of the present Bill proposes to deal with the winding up, and therefore there is nothing unreasonable in introducing a provision of this kind. I hope the law officers or the right hon. Gentleman will consider this matter before the Committee stage, be- cause I believe that it is an amendment which would considerably improve the present machinery for winding up companies. Then there is the question of consolidation. It has been represented in several quarters that the whole of the law relating to companies should be consolidated. I have the greatest sympathy with the general idea of consolidating the law on the subject, but I doubt whether the time for consolidation has yet arrived. Something, however, may depend on the shape in which this Bill finally passes. If it passes in a satisfactory form there may be occasion for consolidation, but if it passes as it now is I believe it will create a demand on the part of the community for a further strengthening of the law. It is quite clear you cannot proceed to consolidate the law until you have got it into a tolerably satisfactory state; therefore I doubt whether the time for consolidation has yet arrived. Although no doubt consolidation would make it easier to administer the law and would remove a great many evils, still there would be no good in trying to accomplish it until the law is in a shape which would be regarded with satisfaction. Although I must again express my opinion that this Bill is not quite strong enough, and that it would be better if it were in the form in which it came from the Committee, and that some of the provisions in the original Bill should be restored, still I do not for a moment suggest that we ought not to take it as an instalment of reform. I believe especially as regards the registration of mortgages and charges, the position of directors, and the provisions with regard to commissions, the Bill will be a substantial improvement on the present law, and in the hope that it will be improved and considerably strengthened in Committee I should be sorry that the chance should be lost of improving the law. I therefore venture to hope that there will be no disposition in any part of the House to oppose the Bill, and I wish the right hon. Gentleman all success in passing it.

MR. HOARE (Hampstead)

The principle of the Bill is one which we all must accept. There are, however, several provisions in the measure which we ought to accept with a certain amount of caution. There are exceptions to every rule, and there are a great many points in the Bill which require careful consideration before being passed into law. My object in rising is merely to ask the First Lord of the Treasury if he would be good enough to arrange that this Bill should be taken in Committee of the whole House. It is a very important Bill indeed, and it deals with gigantic interests. Hon. Members who are more especially interested in it are. for the most part men who are engaged all through the day, and would find a Grand Committee inconvenient and undesirable. If my right hon. friend can see his way to have a Committee of the whole House on the Bill, I believe that course would meet with the approval of the House. The criticisms would practically be of a friendly character, and merely intended to improve the Bill. I believe in the long run that course would save time and conduce to the passing of the Bill.


As a member of the Board of Trade Departmental Committee, to which the right hon. Gentleman opposite has referred, I should like to say a few words I can assure the right hon. Gentleman that he has not exaggerated the character of the discussions in the Committee and for my own part I shall never forget the destructive and constructive abilities of two of its members. The need for reforming the law is shown by what has taken place at the last annual meeting of the Association of Chambers of Commerce. No less than six chambers of commerce proposed resolutions on this subject, and they were carried unanimously. In fact one does not speak too widely when one states that this legislation is, the most important commercial measure proposed in this Parliament, and I hope it will be carried into law. The scandals in connection with companies are important in themselves, but they have even a very more important effect, namely, their destructive effect on trade and commerce. They have been the means of destroying the investment of capital, and creating distrust, which is most disadvantageous to commercial enterprises. Then we have also to regard the manner, which almost amounts to a public scandal, in which people, especially those who have scanty means of information and guidance, have been plundered by means of company arrangements of the very worst kind. The evidence before the Committee in this connection showed the most startling evils. We all admit that there is great difficulty in providing a remedy. I think the law ought to impose as many impediments as it possibly can against fraudulent acts, whether in connection with companies or otherwise, so as to prevent them to the utmost possible extent. I think this Bill is a move in the right direction. The necessity of caution has been referred to; and when we remember that some 1,500 millions are invested in these companies, the safeguarding of these enterprises is one reason for the exercise of great caution. If we take steps ruinous to these enterprises it may be impossible to retrieve them. It was shown conclusively in the Committee, by evidence from abroad, that the condition of the law in this country, and the facilities which it gave for investment, have been the means of attracting to this country many hundred millions of capital which otherwise would have been invested else- where. We ought not to destroy these facilities. Joint stock companies have many advantages. They are an outlet for capital, and they give strength to capital by association, but there is one point in which they have been an especial advantage to the whole body of the people, and that is they have given an opportunity for investment in trade to the non - commercial classes. There is, however, nothing more absurd than the misconception that because a man puts capital into a concern, but devotes no time and no thought to it, he should expect as large a return as a man who devotes not only capital but time and personal ability to his business. Joint stock companies have also another advantage, and that is the opportunity they afford to small investors to invest capital. They have also the further advantage of enabling an employer to give an interest in his business to his employees who have helped him to build it up. With regard to what has been said as to the care which should be exercised in dealing with company directors, I think it should be borne in mind that the principle which ought to be adopted in this kind of legislation is one of discrimination and not one of universal incrimination. I think we should remember that, whatever may be the evils in the administration of companies, the great Majority of them are both honest and prosperous. The same may be said of directors. Whatever want of care may lave been shown in some instances, or the recklessness or even the dishonesty of directors, the vast majority of them are both honest and laborious. I venture to go further, and say that even promoters in many instances may be perfectly honest and capable. The great point is not to deter the most capable men from taking part in company administration. I believe a thoroughly good business board to be the greatest security of the investor. Upon this point I should like to state what a great foreign jurist said on the question of imposing penalties for directors. He said that in the business world it was known that the imposition of penalties did not stop in any great degree persons who were determined to make their fortune by robbing their neighbours of their earnings, whereas it would keep out honourable men who were afraid of finding themselves committing an error without knowing it. That is the principle on which we should as far as possible act. I agree with the right hon. Gentleman opposite that there are some omissions in the Bill, as compared with the draft Bill as prepared by the Committee, which might perhaps be restored, especially the provisions relating to the financial obligations of a company, the obligation to keep certain specific accounts and to have a proper audit, and also some definition of what a proper audit ought to be. I think the Bill accomplishes much by requiring in the prospectus an exact record of the status of the company and its directors. Another point upon which the Bill is to be approved is that it strikes at the great evil of over-capitalisation. At present we have a long chain of vendors, and at the end of the chain the immediate vendor to the company, who fixes the price—that is after a large number of intermediate profits have been made. I am glad that those profits are to be disclosed, so that an investor may be able to use his own judgment. Another great improvement is the way in which the Bill strikes at improvident allotment. I have known many cases in which a vendor, by means of subsidised directors, has insisted on allotment when it was most improvident from a business point of view; and therefore the provision in this Bill dealing with that matter is a great improvement. With regard to registration, I think the House will agree that it would be impossible to have double registration in this matter. One reference was made of a practical character to what may be termed bogus allotments, that is to say, allotments to nominees and vendors in order to secure completion of the contract by the company going to allotment. A very interesting specimen of what may be done in company making is shown in the case of a company registered in 1891, the capital of which was 9,600,000 shares of one farthing each; the total subscribed capital was ld. Without saying that that is typical, there are a great many companies which have commenced on very similar terms. The great want of the present law is the want of the opportunity of combination between the shareholders in the earlier stages. They are scattered, and do not meet until the statutory meeting, and when they have been defrauded they are not able to take combined action. I think this Bill is an improvement in this respect, that in it future the statutory meeting must be called within one month, and the accounts must be on the table. I would farther suggest that they should be open for inspection for some days afterwards. I think there you have great security for the combined action of shareholders in any fraud which may take place. Some remarks have been made about debentures, but I do not think the House yet realises the importance of this point. A man owning a decaying business turns it into a company, and the company issues to him debentures, and he becomes his own secured creditor from that moment. Not only are his creditors out in the cold, but the shareholders also, because he practically holds all the assets. In future both mortgages and debentures will have to be registered at the office of the Registrar of Joint Stock Companies, and then anyone who thinks of becoming a shareholder or proposes to give credit will have the means of knowing exactly what the financial position of the company is with regard to the preliminary expenses. I think the company should undertake to pay them. Now, a general assertion has been made that underwriting is illegal and grossly immoral. I do not say it is not legal, because from time to time we have had expressions of opinion with regard to it, but there is nothing immoral in it. It is a necessary commercial element in the formation of a company, but a check would be placed against dissipation of capital by underwriting without information being given. There are some clauses which go some way to secure honest administration, and Clause 30 does not appear to me to be at all too drastic, providing as it does that a wilful misstatement should render a director liable to conviction of a misdemeanour. I must also refer to the absence of some official provision such as the Committee proposed, as to the question of audit, and some definition of the duties of auditors. I think the clauses which we inserted in Committee, after full consideration as to what the effect of their introduction might be, might have been retained, and I still hope that they will be inserted in the measure. Impress on every director his obligation to use reasonable care and prudence in the exercise of his powers, and give a right of action to the shareholders in the event of a director departing from that great commercial principle. I think it would be a wholesome check to directors if they knew that they would have to devote all their time to their duties, and that if they did not they were under some liability to the shareholders. In conclusion I have only to say I most respectfully differ from the right hon. Gentleman the President of the Board of Trade in what he said with reference to the consolidation of the Company Acts. Consolidation is almost a necessary preliminary to amendment, and in many instances the House has acted on that principle. The Bankruptcy Act is one instance, and the Merchant Shipping Act is another. In both those cases the Government complained of Amendments delaying consolidation. We have already party statutes dealing with company law, and I cannot help thinking that probably, among the difficulties which directors have to meet, not the least is that of not knowing what the law is, and not being able to find out exactly what is the position of the law in regard to this matter. In this country we urgently need consolidation. We are outstripped by other countries who have consolidated their laws, with great advantage to themselves. The need of this Bill has been demonstrated; it carries out a principle that the whole House will be ready to accept. It may not protect completely those who rush to be rich, but if they take more care in their own interests the Bill will give them full opportunity or knowing what they may expect, their rights and their obligations as shareholders and directors, and it will, I hope, lie the means of improving commercial morality and advancing the trade of the country.


I trust the House will not yield to the suggestion that some method of consolidation should precede the passing of this amendment of the law. The right hon. Gentleman who introduced the Bill has pointed out that it is impossible to deal with so large a subject except by instalments; and that this measure is nothing more than an instalment in the settlement of a number of difficulties that must arise in the administration of so large a branch of the law. I do not propose to waste the time of the House in praising the merits of the Bill, but I wish for a brief space to point out some omissions which have been made from it. It may be that these omissions are inevitable—no law is-ideal and perfect. It is possible that some of the scandals which of late years have shocked the commercial world are beyond the reach of the law. This, measure, as I read it, would leave many of these scandals entirely uncorrected Promotion, where it is undertaken on behalf of a company, will no doubt be exposed by the operation of one clause of the Bill. But modern company promotion is undertaken by the vendor, and the moneys expended by the vendor in promotion are expended out of the moneys received by him as the price of the property or business he sells. I doubt whether this Bill will ensure publicity-being given either to the amount expended in that fashion or the mode in which the expenditure takes place. Let me give to the House a concrete case. A small business is bought for a few thousand pounds, which it is proposed by the promoter to sell to a company for—45,000. There is a margin of—30,000 of profit. The promoter of the company has purchased the business and paid for it, and therefore he is not struck at by the clause which attacks the vendor in this Bill. Having purchased the business and paid for it, it would be impossible for him to obtain from an individual purchaser anything like a corresponding profit to that which would be given by a company. How is that profit divided Half of it is distributed in; payments to directors who join the board and give to the company the advantage and use of their names. A portion is expended among the press, and a portion is used in paying for the placing of shares. That, promotion account shows, that—30,000 is divided as to one-half—or a large portion of one-half—in illegitimate expenditure, and the rest is net profit in the hands of the promoters. That is a scandal which was exposed in a very recent case. Now, I have scrutinised this Bill to ascertain, whether any of its provisions would operate to prevent any repetition of such a disgraceful state of things. Of course, where the promotion is undertaken by some other person than the vendor, the Bill gives protection by publicity to the account, but where the promotion is done by the vendor, there is no means by this measure of ensuring that the shareholders and the world will know exactly what the profit is, and how it has been expended. I will try and suggest to the right hon. Gentleman in Committee some mode in which this matter can be reached, but I think he will agree with me that in its present state transactions of the nature to which I have referred will not be interfered with by the Bill. Another omission from the Bill is that it assumes that every company is formed by means of a prospectus or of some preliminary statement; and that adequate notice is given to the shareholders by providing that certain information shall appear either in that prospectus or preliminary or initial statement. That assumption is falsified in many cases in which we get a company formed without prospectus or preliminary circular. It is inadequate to deal with cases where the capital is subscribed, not on the faith of the prospectus or preliminary statement, but on the faith of the names in the prospectus, in which case the prospectus is not read. This Bill is inadequate to deal with such a case, and also to deal with other cases of that kind. For instance, it is also inadequate to deal with a case whore, although there are statements in the prospectus, there are other statements in the prospectus or in the articles of association which compel every shareholder to waive the rights which he may by law be entitled to enforce against the person who is responsible for the misrepresentation on which he relied. It is perfectly well known to Members of of the House that many companies are originated in the neighbourhood of the Stock Exchange without either prospectus or preliminary statement, particularly in gold speculation, and that a market is created by the operation of certain interested persons, and the mere fact that shares are being dealt in daily induces the public to come in and deal with these shares. In all companies of that class the provision of the Bill ensuring that certain information should be given in the prospectus ceases to have any operation. In regard to waiving, I recently saw a case in which it was stipulated in the articles of association that the directors of a company might make secret profits to any extent, and that the shareholders should not be entitled to enforce the law against these directors in respect of any profits that they had made. I wonder how many of the shareholders of that company ever read the articles of association which imposed that most serious restriction upon their legal rights. I suggest to the right hon. Gentleman that he may reconsider some of the provisions of the Bill. First of all, so as to deal with the case of certain companies which come into existence without a prospectus, or if with a prospectus with statements qualifying the provisions in regard to the waiver of shareholders' rights, and also dealing with those cases in which reliance is placed less on the language of the prospectus than on the names of the directors, who often allow the use of their names to the company promoters. There are other topics on which I might dilate. The first is in reference to the one-man company to which the hon. Member for South Islington has referred. A very useful decision of the Court of Appeal was recently reversed by the House of Lords, with reference to the legal obligation attaching to the proprietor of a company of that kind; and I should suggest to the right hon. Gentleman the introduction of a clause reviving the right of the creditors to have recourse against the person who has, in point of fact, the whole of the company's property secured by debentures and receives the whole of the profits made by the business. Then there is one other casus omissus, and that is the failure to deal with the very serious condition of things which has arisen in connection with founders' shares. The ordinary shareholders and the public ought to know, in plain terms, on the face of the prospectus, what are the rights of the holders of this very novel and anomalous interest in connection with a company. One case recently made public showed that the holders of founders' shares controlled the directors and the whole company's business, with the result that all the profits made by the company over 6 per cent. went into the pockets of the holders of the founders' shares, though that profit was obtained at the risk of the ordinary shareholders of the company. In other words, the holders of the founders' shares were in a position to utilise the whole of the company's machinery for the purpose of filling their pockets with the profits, and to cast the whole liability for losses on the ordinary shareholders. Now, that position was only to be ascertained after a most careful inspection and scrutiny of the articles of association, which being ascertained would have barred any general subscription. And yet that company was floated under the authority of a well-known man. I would suggest to the right hon. Gentleman to insert a provision in this Bill that, where there are founders' shares the full rights of the holders of these founders' shares in reference to the company's assets shall appear in the prospectus, so that a very important element of that kind might not be lost sight of by the public who are invited to subscribe their money. I congratulate the right hon. Gentleman the President of the Board of Trade on having introduced this Bill, which, I cannot help thinking, is one of the most important commercial measures introduced in this Parliament. I trust it will be discussed in Committee of the whole House, and that in the end we shall have a very valuable and important addition to our commercial law.

MR. MARTIN (Worcestershire, Droitwich)

said he hoped that the Committee stage of the Bill would be taken in the whole House. No doubt many of the provisions of the Bill were fairly satisfactory, but they could not all be accepted without reservation, and it was necessary that every clause should have the fullest consideration. For instance, the provision in regard to the qualification of directors might exclude men, such as foremen in works owned by a small company, who would make most valuable directors if a qualification were given to them. Then he would point out that a return in reference to members of a new company was to be made within seven days; but he was informed by a secretary to a company that that would be almost, if not quite, impossible, and that it would take six weeks or more before such a return could be made. The provisions as to dealing with vendors as promoters would require to be very carefully considered. It was perfectly true that the vendor was now generally the promoter, but it was perfectly impossible to des-criminate between the two in the Bill as it was drawn. In regard to the question as to the publicity of mortgages, that was a step in the right direction; but even there the clause might work great hardship. It was the custom for a company which had large sums of money coming in at certain seasons of the year to borrow money from their bankers on the security of their uncalled capital for a period of six weeks or two months, until that money came in. The clause in the Bill might prevent them doing this, because the publicity given to the transaction might injure the position of the company. If that danger could be avoided the clause otherwise would be satisfactory. The House ought to remember that one of the objects of the Limited Liability Acts was to enable people to lose their money, if he might say so. What was wanted was to give facilities not for speculation, but for enterprises which were attended with a certain amount of risk, and if the House were fully conscious of that, the necessity would be seen of giving encouragement to businesses with a certain amount of risk but which could not be called wild speculation. He offered the right hon. Gentleman the assurance that this Bill was regarded with a great deal of satisfaction by a great many men engaged in business.


I think the full discussion upon this measure will be much more properly taken in Committee than at this stage. At the same time, there are one or two 'topics in the Bill which I will venture to discuss, though in no hostile spirit. The right hon. Gentleman may be well gratified with the reception which the Bill has received from all parts of the House. This Bill, I think, is a well-intentioned effort to meet a very unpleasant state of things, though I believe the acuteness of the position has been somewhat exaggerated. The right hon. Gentleman has enumerated the main points to which the remedial clauses of the Bill are directed. First, he mentioned the case of disclosing to the public the amount which a director pays for his shares as a qualification, and the necessity that these shares should be paid for by him in cash. Now, I venture to suggest-to the right hon. Gentleman that the remedy which he proposes is purely chimerical. What he aims at is the destruction of the guinea-pig director. Now, the guinea-pig director is a. person who receives fees amounting to, say, £200 per annum, and he will be required, under the clause, to find some qualification of probably not more than £200. To insist that he shall find that £200 out of his own pocket, and to think that by so insisting you are going to get rid of the guinea-pig director, is a pure delusion. It is perfectly evident that if he has not got the money himself he will obtain it by some elusive method from some one of the promoters, or will provide himself with £200 from outside, in order to secure an annual remuneration of £200. You will not by this provision in the slightest degree militate against the guinea-pig director. I do not know any means by which you will be able to prevent that class of persons serving on a Board of Directors except by compelling all directors to hold a substantial and. proportionate amount of the capital of the company. Of course, few do that, and you will find great difficulty in obtaining director's of companies. You would also lose the services of very useful men. I would urge another objection. There are numerous instances in which a person is connected with a family business or a firm, where the qualification of director is not £200, but much heavier. It may be desirable that he should serve on the Board, but he probably cannot, or may not find it convenient to find the large qualification necessary, but the firm or family business with which he is associated find the money for that purpose, and the man might be made a most useful director. I know from my own experience that by the clause as it stands, he would be prevented being appointed, because of the necessity imposed on him of having the qualification in his own right. There is one other point to which I desire to call attention. There was an excellent provision in the Bill, in spite of what was being said against it, to give a priority to trade creditors. I cannot help thinking that in abandoning that provision, the right lion. Gentleman has struck at the root of the Bill. For example, here is a company formed with a capital of £50,000, £25,000 as debentures, and £25,000 as shares. The real value of the property is only £25,000, the £25,000 of share capital being a pure figment. The company commences its operations and runs into £20,000 of debt. The creditors observe that the company has a capital of £50,000, and they trust it. The company comes to grief, and the mortgagees are very likely able to appropriate every scrap of the property, to the exclusion of those creditors who have trusted it on the faith of the capital of £50,000. I know that objection to the right hon. Gentleman's original provision was taken by influential business men, but I think that in the interests of the commercial community at large, it would be wise for him to reconsider the position he has now taken up. I do not like to differ from my hon. and learned friend, but I cannot help thinking that the provisions of Clause 12 meet the point that he raised that the profits made by the immediate vendor to the company are not disclosed. I cannot help thinking that sub-section (f), associated as it is with sub-section (j), does compel the vendor to the company, or the company on its own part, to disclose to the public not only the amount paid to the immediate vendor but the amount paid by him to the vendor from whom he purchased. I do not at this time wish to engage the attention of the House further, but I think it would be desirable if the right hon. Gentleman would consider these two points.

*MR. CHARLES McARTHUR (Liverpool, Exchange)

I do not wish to detain the House long, particularly after the very long, not to say exhaustive, debate which has taken place on the subject. My principal object in rising is to give expression to the views of the Liverpool Chamber of Commerce and the Liverpool Law Society with respect to the Bill. I can in the first place join in the almost unanimous expressions of welcome on the part of the House with respect to the Bill. I think we all feel that this Bill is greatly wanted. Public opinion is quite ripe for a reform of company law, and I think the provisions of the scheme which the Government have been so long preparing will in a large measure meet the requirements of the case. It cannot be denied that the operation of the system of limited liability has been of enormous, advantage to the country, as has been pointed out in the course of the debate. It is a system well suited for those great undertakings by which the commerce of this country is to a large extent conducted. It has afforded opportunities for the investment of capital which would otherwise have remained idle and unprofitable, but at the same time the system of limited liability has been greatly abused. Opportunities have been taken by unprincipled men to bring before the public bogus companies, and there is a strong feeling that something ought to be done to stop these abuses. Reference was made by my right hon. friend the President of the Board of Trade to the losses arising to this country from the insolvency of limited companies. I think he said that the losses were, comparatively speaking, small compared to the enormous amount of capital invested in public companies. That may be true, still I think we must all admit that it has been very great and very serious. In illustration of this I would refer to the motion which I myself moved, and which the House granted, on the subject of loss by companies in 1896. A return of companies wound up in 1896 was issued by the House of Commons in August, 1899. It shows that the number of companies wound up in that year was 1,261. In connection with 334 of these there was no probable loss, while with respect to 252 no returns had been obtained. With regard to the remaining 675 companies the loss to the shareholders amounted to £13,227,225, and to creditors £1,978,136, making a total of £15,205,411. If, as regards the 252 companies wound up, and of which no returns had been obtained, we estimate the loss in proportion to the loss in connection with the 675, we get a sum of £5,846,000, and thus we arrive at a sum total loss to creditors and shareholders of £21,051,411. Of course, the task of discriminating between the use and abuse of limited liability is one of great delicacy. We must be careful in rooting up the tares lest we root up the wheat also. So far as my limited knowledge goes I endorse the opinion that the Bill is an honest attempt to meet the difficulties of the case. One of the principal causes of the failure of companies is the remissness of directors. I agree with the Bill in so far as it seeks to bring home to directors their real responsibility, but I agree with the President of the Board of Trade that we must not go too far in this direction. While taking such steps as may be necessary to prevent directors so far as possible from evading their responsibilities, we must not place on them obligations which would prevent men of character and repute from acting as directors. The President of the Board of Trade said that we must: be careful not to make the obligations on a board of directors too onerous, but I cannot help thinking some of the clauses of this Bill are of that character. Let me take one by way of illustration—Clause 9, which requires that in every case of an allotment of shares a return should be made by the company to the Registrar within seven days. If there should be default, and if the directors know of it, they are to be severally liable to a fine of £50 for each day that the default lasts. That is a very serious penalty indeed. I think it is going too far. Although that penalty may never be imposed, yet the fact that it is on the Statute-book may prevent men thoroughly qualified from taking these positions. A further clause relates to inadequate descriptions in prospectuses, and I agree with the Hon. Member for South Leeds in doubting whether its provisions are sufficiently stringent to disclose the real interest of the original vendor. I think I may say that feeling is shared by many others. It may be generally stated that, throughout the Bill, sufficient exemption is not made in the case of private companies. I think that with reference to companies which do not appeal to the public, several clauses will have to be modified. With regard to statutory meetings it may be that what is proposed in the Bill is a very desirable arrangement; but the provision that at the first statutory meeting any subject 'may be discussed is open to objection, because it is felt that this latitude may be abused by people who get into companies by taking shares for the purpose of injuring the companies. The clauses in respect to the registration of mortgages have been generally approved, and I heartily participate in that approval; but to enable persons interested in provincial companies to obtain the benefit of this arrangement, it has been suggested that it would be very desirable if copies of the entries in the register could be sent to the County Court of the district where a company is interested, so that the people on the spot may be able to get the information required. In regard to the matter of auditors, I think that the description of their duties in the Bill is insufficient. It is necessary, not only in the interest of the shareholders but in the interest of the auditors themselves, that they should know what their duties are It is very desirable that there should be some clear definition of what is required of auditors, and in particular that they should report whether, in their opinion, full and fair balance-sheets have been drawn up.

Attention called to the fact that forty Members were not present (Mr. HEDDER-WIGK, Wick Burghs). House counted, and forty Members being found present.

*MR. CHARLES McARTHUR (continuing)

said: There are one or two defects in the Bill I wish to call attention to. One is the preference given to debts contracted within three months of winding up. I am very glad to learn from the right hon. Gentleman that the clause is to be withdrawn, and also the medical clause. I hope this Bill will pass through. If we wait for a perfect Bill we will never have any Bill at all. We have in this Bill the foundation of a good and useful measure. I trust that the structure raised on that foundation will be one free from the difficulties of the present situation, and one which will hand down in increased measure the benefits of the limited liability system.

*MR. HOLLAND (Yorkshire, W.R., Rotherham)

I should like, as a business man, to thank the President of the Board of Trade for what has now been, done with the view of redeeming some of the pledges which have existed many years that there should be some legislation in regard to company law. I can testify that at various meetings of chambers of commerce throughout the country there have been resolutions passed in this direction for many years past, but, unfortunately, little or no progress has been made. Of course the Bill which is now before us is in no sense an ambitious measure. It does not profess for a moment to deal with all the evils which have attended company promotion, but I think the fact of this not being an ambitious measure will be all the more likely to ensure its passing during the present session. I thoroughly endorse the position which the President of the Board of Trade has taken up in regard to the extreme undesirability of legislating so as to have the effect of deterring responsible men from undertaking directorships. I think the first object should be to get the best men to serve on the boards of limited companies, and then, having secured them, to see that they shall exercise reasonable care and diligence in the discharge of their duties. It is quite clear from the enormous increase in the number of joint stock companies during the last few years that they fulfil a public need, and not the least of these needs is that they enable an investor, without having himself a practical experience of business, to spread his capital over a great variety of businesses, and in that way to minimise the risk of losing his capital. I think it is a laudable object that the Board of Trade should make it hard for a joint stock company to begin business unless there should be an adequate supply of capital. Inadequacy of capital has been one of the most fruitful causes of disaster in joint stock companies. While all the material information should be given in the prospectus, it is of the utmost importance not to take away from the investor the sense of responsibility for examining for himself as to the details of the concern and forming his own opinion as to its prospects of success. I am glad there is a clause in the Bill providing for the publication of the commission paid to underwriters. I am aware that some chambers of commerce have suggested that such commission should be limited to 20 per cent. I must say that I do not myself concur in any such limitation. I think the amount of the commission may well be left entirely unlimited, provided only that the amount of that commission shall be set forth in the prospectus. I think Clause 13 will be somewhat impracticable of application in the case of very large concerns, for I see it prohibits a company from varying the terms of any contract it may have entered into without complying with very considerable formalities. This may operate harshly when it is desired to alter the remuneration of managers and others with whom agreements may have been made. I am glad that the President of the Board of Trade does not favour the giving of priority to new creditors over debenture holders. I think it might have been to some extent justifiable to give that priority had there been no registration whatever of those debentures or mortgages; but in view of the stipulation that those securities shall be registered their position ought to be inviolable, and no new creditor should be allowed to take precedence over them. I think the seven days mentioned in the Bill is a period entirely inadequate, and I think the President of the Board of Trade has him-himself recognised this. It is stipulated that the mortgages shall be open to the inspection of the members and the creditors of a company. It might be well not to limit the inspection to the members and creditors, because there are many individuals who, though not creditors now, might contemplate becoming creditors, and if they were not to be allowed access to the documents until actually becoming creditors I think a real hardship would be inflicted upon them. I entirely concur with some observations made by previous speakers that there should be no discouragement of the gift of the necessary qualification in shares in certain instances to men to become directors. Having had considerable experience of manufacturing districts in the North, I can testify that very often the most desirable class of men to get on the boards are men who have had practical experience of their respective businesses—men who have the brains but not very much capital—and if the gift of qualifying shares to them is to be discouraged, I think a very undesirable step will be taken. I cordially agree with the hon. and learned Member for South Leeds that there is a very great abuse in the existence of founders' shares in certain companies. I am sorry that that evil is not touched on at all under this Bill, but I recognise that it is impossible to deal with all the abuses which exist without making the Bill exceedingly cumbrous, and to that extent diminishing its chances of passing into law, and therefore I cordially welcome the introduction of the measure, and shall do what I can to help it to pass into law.

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

I think the course of the debate has exhibited a singular and welcome unanimity in reference to the character of the measure, and an equal unanimity with reference to the necessity for some legislation to remove existing evils in connection with the administration of the Joint Stock Companies Act. It has been frankly said by the right hon. gentleman in charge of this Bill that this measure does not aim at removing all the evils which now exist. It will, therefore, possibly be sufficient for the House at this stage to address itself to the question of whether the remedies proposed so far as they go are of the character best calculated to accomplish the end the measure has in view. I cannot help thinking that rather undue importance is attached to the question of the qualification of company directors. I do not think that anyone acquainted with joint stock company enterprises will believe for a moment that any considerable part of the evils which arise from them is due to a lack of qualification—that is, pecuniary qualification—on the part of the directors therein concerned. It does not follow that because a director is a large shareholder he is therefore better qualified to direct the affairs of the company. Indeed, the much abused "guinea-pig" is sometimes a very competent director of company interests. He is not infrequently a retired Government official, possibly with colonial or military experience, who is content to supplement the meagre pension which the liberality of the nation bestows upon him by the few hundreds a year which he can derive from the administration of the affairs of a company. I am bound to say that in my experience he is not at ail infrequently a very competent person for that work. He may be called upon to attend board meetings two or three times a week, and the £300 or £400 a year which he derives from the two or three companies with which he is connected, while they do constitute a very substantial and welcome addition to his income, are, at the same time, fairly earned by him in his attendance at board meetings and in his general supervision of the business of the companies. To imagine that any real advantage would result to shareholders if the qualifications of these professional directors were set forth in the memorandum of association, or in the prospectus of a company, seems to me to be an idle dream. It may b;3 that a director will buy his own 100 shares; it may be he will get a friend, to buy them for him. The man who can earn £250 a year by being a director of a company can always find some one willing; to put up the £100 necessary to buy the shares which constitute his qualification. Then comes the question of the prospectus. I would like to suggest to my right hon. friend that the provisions in respect of the prospectus are calculated to cut both ways. To a certain extent, it is true, a great advantage would accrue to the public from setting forth in the prospectus of every company the full particulars which by this Bill the prospectus should contain. But the provisions with reference to the prospectus are to apply only to a company which is about to make a public issue of shares. It is notorious that some of the very worst company scandals which have occurred in the City, at any rate in the past fifty years, have been in connection with companies which never issued prospectuses at all. That is true not only in reference to colonial companies, and South African companies, and foreign companies, but to British companies, while with regard to American companies no prospectus is ever issued in England. If these are important safeguards which are provided in this Bill, it seems to me that they will fall far short of accomplishing what is desired if they cannot be in some way extended to all companies whether they do or do not make a public appeal for subscriptions. It might be urged that this is impracticable. I suggest that it is not impracticable, and I would invite the right hon. Gentleman to consider for a moment whether the filing of a prospectus might not well be made a condition precedent to the registration of any limited liability company. What is the present situation with respect to a company which is brought out without a prospectus? In the first place, no one is responsible, no misrepresentations can be made, the whole of the shares are issued in. the first place to the vendor or his nominee, and those shares are got off through the Stock Exchange or some other agency. There is another evil in connection with this matter of the non-prospectus company. It seems to me that one of the chief requirements in connection with the Amendment of the Joint Stock Companies Act is this, that as soon as possible it should be rendered impossible, or at any rate as difficult as possible, for a bankrupt trader to avail himself of the Joint Stock Companies Act for the purpose of defrauding his creditors. That is, in my judgment, one of the commonest and one of the most crying of the present evils. What is the position under the Bill we have before us? A bankrupt trader forms himself into a joint stock company with the aid of certain clerks of the solicitor whom he employs. The shares are issued to him, and they are peddled out among the creditors to a certain extent, and to a certain extent they are peddled out, if it is a large enterprise, through reputable stockbrokers; if it is a small enterprise, then through the disreputable circularising stockbroker. In any case, he gets rid of the shares in some. way or other. Under this Bill he is under no obligation whatever to disclose any fact with respect to his business, and nothing is commoner than for a small tradesman who knows he is on the eve of bankruptcy to turn himself into a joint stock company and to get out of his liability. It is as common as having a fire, and is more effective. I would earnestly urge upon the right hon. Gentleman, if, as it is clear, the authors of this Bill believe the prospectus is the vital part of the joint stock company scheme, that a prospectus should be insisted upon whether a company makes a public issue of its shares or whether it does not. Then there is the statutory meeting. In respect of this I think some careful consideration should be given, even in the early stages of the Bill. Up to recent times the statutory meeting has been—I will not say a convivial gathering, but at any rate quite an informal gathering, at which the chairman usually explained to the shareholders that they were called together, not that he has anything to say or that there is anything for them to do, but because the eccentricities of Parliament require it, to comply with certain formalities. It is proposed under this Bill to make the statutory meeting a very important meeting. It is proposed, indeed, as it seems to me, to make of it an occasion for a thorough investigation of the company in its very earliest stages. I think that is a very desirable thing, but we must sec to it that the provision of the Bill does not defeat its own purpose. I can discover nothing in the Bill to prevent a company from holding its statutory meeting before the issue of its shares. If I am right in my reading of the measure, that would defeat the obvious purpose you have in view. First you form your company; then you get your directors; then you hold your statutory meeting; then, having complied with the statutory requirements, but not until then, you issue your shares. You have then got a long run before you, during which you are under no obligation to call the shareholders together or give any account of the progress of their enterprise. Then there is the question of commissions for underwriting. At the present time I think I am right in saying there is no limit to the amount of underwriting commission that may be paid for the placing of shares under any circumstances. But Clause 10 of the Bill before us only provides that it shall be lawful for a company to pay a commission upon any offer of shares, for public subscription, and that, if I read the Bill correctly, would exclude the payment of commission under any conditions other than those of public subscriptions. In the event of a private placing of shares or debentures no broker would be entitled to receive any commission, and no company would be entitled to pay any commission. So that it seems to me that, while apparently and ostensibly legalising the present practice, the Bill would really be limiting an existing right. In regard to the payment of preliminary expenses I cannot help thinking that the Bill weakens rather than strengthens, the present law. It is provided that no company may proceed to allotment excepting under certain conditions, and may not proceed with any business until certain formalities have been complied with. I am referring now to Clause 8. But under Sub-section 3 it is provided that nothing in this section should prevent any company paying or contracting to pay any preliminary expenses. In other words, there is no limit to the amount of preliminary expenses the promoters may defray. They may fail to get the amount of money which they have set forth in their memorandum of association as the minimum upon which they will proceed to allotment, and having failed to obtain that minimum they may not proceed to allotment, and, being unable to proceed to allotment, they may not go on with any business, and they must keep the money they have received intact except in so far as they may pay that money away for the pur- poses of what are called "preliminary expenses." That is a very vague term; and assuming, as we must assume, that this most welcome Bill is aimed at the dishonest company promoter, it does seem to me to open the door to him to do things without incurring any penalty, which at present he is unable to do. If some limit were put upon this matter there would be some protection afforded to the public; but, as it stands, assuming a dishonest promoter with a dishonest scheme, assuming the public refuse to rise to his bait, the dishonest promoter is still at liberty to use all the money he happens to receive for the purpose of what he may call his "preliminary expenses." There are one or two other points to which at a later stage of the Bill I shall venture to direct the attention of the right hon. Gentleman. At present I would confine myself to this observation. In so far as the Bill fails to touch the case of the non-prospectus company it fails in its purpose. In so far as it deals with the question of commission it cuts down an existing right and substitutes no equal right in its place. In respect of the registration of mortgages even, if I am correctly informed, it affords no additional facilities to those which already exist. In conclusion let me refer to one other point—namely, the right of a shareholder who has applied for shares to claim the cancellation of his allotment in the event of any irregularity. He is limited under this Bill to one month, and it is stated specifically that he may not apply for a rectification of the register later than one month. I would call the attention of the right hon. Gentleman to the fact that that limits an existing right. If these points should be dealt with at some future stage of the Bill I cannot doubt that the measure will accomplish a great deal of good; but the chief object to be achieved, namely, the protection of the public—not only the share-investing and the share-speculating public, but the legitimate trading public—from the present evils which arise from the flotation as companies of the businesses of bankrupt tradesmen cannot be effectively dealt with unless at some stage of this Bill we can provide a means to prevent an insolvent trader from turning his business into a company for the purpose of foisting the shares upon the public, either for cash or its equivalent, without as a condition precedent to obtaining registration he shall have filed at Somerset House something which, for purposes of any possible litigation, will serve the object of a prospectus at all stages.


I welcome this Bill as a very businesslike and practical method of dealing with a subject of vast importance not merely to the commercial classes, but to that enormous mass of people who may be described as the investing public. I welcome it all the more because it is not of too ambitious a character. We must remember that by far the great majority of companies and of company directors are honest, and we must beware lest in endeavouring to suppress dishonesty we render it impossible for any gentleman of position and honour to engage in the directorate of a joint stock company. The main principle upon which this Bill is founded is that of giving full information to the persons chiefly interested—the shareholders and the creditors or the intending shareholders and the intending creditors. If that information is given it is for them to say whether they will deal with or invest in the company, and, provided they get ample information, it is their own fault if they either invest in or deal with a company which turns out unsatisfactorily. That, to my mind, is a great merit of the Bill. Another merit of the measure is that it strangles dishonest companies in their inception. The great majority of dishonest companies get money from the public and go into speedy liquidation. This Bill, if it is effective, will prevent those companies coming into existence. At an early stage the company will be stopped, and the promoters and other persons who are intending to profit by it will be deprived of their booty. There are only two points in the Bill to which I desire to call attention, but they are points which I venture to think are of very great importance. One is the question of the prospectus. The Bill provides, and properly provides, that a considerable number of matters affecting the company, and which naturally affect the mind of intending shareholders, should be specified in the prospectus. But what I do not find in the Bill, which I think it would be advantageous to have there, is some more specific remedy in case of non-compliance with the provisions of Clause 12. I do not see what is to happen if this clause, which states what, is to be included in the prospectus, is not complied with. It may be said, and possibly truly, that Clause 30 would in some cases make it a misdemeanour on the part of promoters issuing a prospectus which does not comply with the requirements, and would subject them to punishment accordingly. That may be, but what I want to know is what civil remedy has the shareholder who invests money on the faith of such a prospectus? It may be said he would have an action for damages, but what I think he should be entitled to is some means of getting rid of his shares. The Bill says the prospectus ought to contain certain things. It seems to me that a man who has applied for shares on the faith of a prospectus ought to be entitled to got his money back if it turns out that the prospectus is not in accordance with law. That is a matter in which the Bill could be amended in Committee if necessary. There is another clause which to my mind is of enormous importance—namely, the clause relating to the registration of mortgages. My hon. friend says that that does not strengthen the existing law. I rather think he is in error there, because although the existing law provides for the registration of mortgages properly so called, it does not provide for the registration of debentures. This is a very important fact. Let me give the House one specific case which I am afraid is of very frequent occurrence, where the non-registration of debentures causes great loss to shareholders and creditors. A man owns a failing business, and sells it to a company which is formed for the purpose of buying it. The purchase money is taken chiefly in debentures. The company, after a short and inglorious existence, goes into liquidation. In the meanwhile the public have subscribed money for taking up shares in this company, and trade creditors have supplied goods to the company without receiving payment. When the company goes into liquidation in comes the vendor, and these debentures swallow, up every fraction of the assets of the company, and the trade creditors and the shareholders lose their money. The Bill provides for the registration of all debentures, and if, when a creditor sees a very large number of debentures registered, he chooses to trade with the company, all I can say is that it is his own fault if he suffers. On the general aspect of the Bill I should like to refer to a point mentioned by the hon. Member for St. George's and the hon. Member for Rotherham. They appeared to think there was no harm in the practice of giving qualifying shares. I hold the strongest opinion that that is a most dangerous method by which to qualify directors. Where does this qualification come from? In nine cases out of ten it comes from the promoter, and the gentleman who gets the shares, consciously or unconsciously, in nine cases out of ten, becomes the tool and carries out the objects of the promoter. I am extremely glad that the Bill proposes that any person who undertakes the responsible duties of a director of a joint stock company, in which he is bound not only by law but by honour and duty to do the best he can for the interests of the shareholders, shall not be qualified by the promoter, or by some other persons whose interests may be directly antagonistic to those of the shareholders. On the whole I am glad to support this Bill, because I think as it stands it will provide, as far as possible, a remedy against many of the abuses which now exist and it will not act as a deterrent to responsible persons acting as directors of companies.

MR. BAYLEY (Derbyshire, Chesterfield)

I think there must be a feeling on both sides of the House, and especially on, the part of gentlemen who have had long experience of the ordinary commercial routine of business life, that the right hon. Gentleman, by pressure behind him, has withdrawn one of the most important clauses of the Bill. There must be a feeling of great regret amongst those who represent the commercial classes of the country that the right hon. Gentleman has withdrawn the clause dealing with debentures. I did hope that we should have a clause dealing with fraudulent cases only, where the issue of debentures has been a fraud upon the ordinary trade creditors. All who have had any commercial experience know how very easy it is to turn a concern into a limited, company worth £10,000 when it is going steadily down hill. It is all done as a sort of family affair. You give debentures for the £10,000, which is the real value of it, and you go into the market for the rest. Practically you go into the open market and you buy goods to the extent of £10,000. The ordinary shareholders never get anything, the debenture holders foreclose, and then there is nothing for the ordinary creditors. In small businesses this is done to a very considerable extent, and the Judges have pointed this out repeatedly. Surely the ingenuity of the Government or the Members of this House could devise a provision to meet the particular case of fraudulent debenture holders. I hope that in Committee a clause will be produced dealing with this particular class of fraud in getting money from the ordinary trade creditors. I do hope the Government will reconsider this question. There are other serious questions in regard to which this Bill ought to go a little further. There is too much fraud in other companies which the Government will have to face eventually, but whilst this Bill deals in only a limited way with a great subject, I believe the House will support the Government in passing to a successful issue a Bill which is honestly attempting to deal with a great question.

MR. BANBUEY (Camberwell, Peckham)

I do not agree with the hon. Gentleman who has just sat down in regretting that the Government have withdrawn the clause dealing with debentures. On the contrary, I think that clause was a great blot on the Bill, and I am extremely glad that they have undertaken to withdraw it. As far as I understand, it is not possible to pass a law in this or any other Parliament which will prevent every species of fraud. Frauds will occur and people will invest their money foolishly, whatever we do to safeguard their interests. The hon. Gentleman argues that a company is made by the debenture holders to enter into bargains to make profits for themselves, and that the shareholders get nothing. I would point out that as far as my experience goes it is the shareholder who enters into contracts with the traders, and if people are foolish enough to give them credit without first ascertaining that they are in a position to." justify that credit, then they must take the risk. I was sorry to hear the hon. Member say that he viewed with regret the clause; as to the qualification of directors. I should say that clause was about the best in the Bill. The idea that a director should receive his qualification from somebody else has been the cause of the many failures of companies that have occurred during the last few years. It is quite true that you may possibly have some official of the company who thoroughly understands the business and yet has no capital, but that man should not be made a director, but an officer of the company. A director should certainly have a direct interest in the company, and the class of people anxious to add £150 or £200 to their income as a sort of supplementary income are the worst class of directors you can possibly have. You want business men with business qualifications to take the position of director, and they should have a large interest of their own in the particular company of which they are directors. A man who has had no business experience at all is the very worst class of director you can get. I am very glad indeed that the Government have introduced this clause into the Bill.


I beg to move that this Bill be referred to the Standing Committee on Trade. I regret that I find myself out of accord in regard to this motion with several hon. Members of the House whose opinions are entitled to the greatest respect. But the question is, does the House honestly desire that this measure should be passed into law during the present session? If it does, then I think the most effectual way of doing that is to refer the Bill in the ordinary way to the Standing Committee. If a Bill of this kind is not one of those which can properly be referred to the Standing Committee, then I might complain that that institution does not fully carry out and fulfil the objects for which it was set up. Anyone who has been present, and who has gone through a complicated Bill on the Standing Committee, must know that the discussions on those Committees are of a much more business character than they are in nine cases out of ten when discussed by a Committee of the whole House. I know it is said that the meetings of the Committee are held at a time when many hon. Members cannot conveniently attend; but I wish to point out that there is a full opportunity when the Bill comes back before the House on the Report stage to discuss any particular matter which any hon. Member desires to discuss. I hope the House will support the Government in their anxious desire to pass this measure into law, and will agree to the reference to the Standing Committee on Trade.

Motion made and Question proposed, "That the Bill be committed to the Standing Committee on Trade, etc."— (Mr. Ritchie.)


It is obvious that the reference which the right hon. Gentleman has proposed will limit very largely the area of suggestion in regard to this measure. One or two hon. Members who have spoken asked that the whole House in Committee should be allowed to consider this scheme. They pointed out the personal inconvenience in regard to attendance during the time which the Standing Committee conducts its business. It is obvious that this course will limit very largely the number of Members who will take part in the further consideration of this measure. It is also obvious that it will shut out a number of hon. Members who are personally familiar with the administration of the existing law, and who could give great assistance to the right hon. Gentleman if he wishes to carry a measure that will be of permanent utility to the future administration of this important legislation. I cannot conceive that this House has not time between this and the month of August to dispose of this measure. We certainly should not occupy a very long period in discussing the details of the Bill in this House, and the experience of a larger number of Members would not be unfruitful of suggestions which the right hon. Gentleman would be likely to consider. I fail to see any reason whatever for sending this measure upstairs to a Committee of which many of us are not members, and where many of us will not be able to attend, especially in regard to a measure in which so many Members of this House are so deeply interested.

MR. ALEXANDER CROSS (Glasgow, Camlachie)

I wish to point out to the right hon. Gentleman that the constitution of the Standing Committee upon Trade is somewhat peculiar. If he casts his eye over the names he will come across many hon. Members who will admit that they are in no way well quali- fied to deal with this subject. Moreover, it is a question in which the outside public take a great interest. When the matter is disposed of upon the floor of this House we have the assistance of the comments in public journals, which is not always available in regard to proceedings upstairs. The session is not yet near its conclusion, and I think it would be possible to deal with this question before a Committee of the whole House.


I trust the right hon. Gentleman will allow this Bill to go before a Committee of the whole House. This Bill affects Ireland, and no part of the country has been more victimised by bogus companies than Ireland. There are very few Members from Ireland on the Committee on Trade, and very little opportunity is afforded to point out the defects which there are in this measure if you send it to a Select Committee. Besides this, the experience of those hon. Members who have had to deal with the company law in a professional way is most material and of great advantage, and the Committee suggested includes hardly any lawyers. I notice that the Chancellor of the Exchequer smiles at that remark, but we know that it is his idiosyncrasy to think that the world would get on better if there was no law and no lawyers. We in Ireland, however, have always been particularly respectful to the law, but this is really a serious matter', and a change is being made which vitally concerns that part of the United Kingdom, and we have not had an ample opportunity of discussing this Bill on the Second Reading. [An HON. MEMBER: Why?] Because we were anxious to facilitate the progress of the measure. The question is why should we not discuss so serious a Bill as this in a Committee of the whole House, where every section of the kingdom will be represented. The course suggested seems to be utterly unreasonable. We all know that a great deal of the mischief which this Bill is intended to obviate arose from the defects in the earlier Bills of 1862 and 1867, and if those Bills had been closely watched and adequately discussed, probably the opportunity would never have arisen that has taken place of fleecing the public, especially of Ireland, through the medium of bogus companies.


I will not argue the wider and almost irrelevant question of the maintenance of law and order in Ireland, but I will come to the narrower issue which is immediately before the House. I submit that one or two of the arguments which have been adduced in favour of sending this Bill to a Committee of the whole House ought not to have very much weight. One of them is that introduced by the right hon. and learned Gentleman opposite to the effect that there is not a sufficient number of lawyers upon the Standing Committee on Trade. So far as that is concerned, it is a misfortune which can be remedied quite sufficiently to meet the general view of hon. Members on both sides of the House. Another argument to which I do not attach great weight is that used by my hon. friend, who says that the Grand Committee on Trade would not from day to day have the advantage of the commentary of the daily press. I do not know that that is an argument which ought to have very much weight in influencing the decision which we have to come to to-night. The real argument against sending this measure to the Grand Committee on Trade is that certain hon. Gentlemen in this House who, by their professional knowledge, are most qualified to deal with the technical details raised by this Bill, are prevented by their daily vocations from attending the sitting of the Grand Committee without putting themselves to considerable inconvenience. I think that is an argument of considerable weight. But if I may judge by the reception which this Bill has received upon the present occasion, there is no probability that the discussions in the Grand Committee will be of a protracted character. I should imagine that one or two days at the outside would be quite sufficient to deal with this Bill. [Cries of "No."] That, at any rate, is the opinion of those who are best qualified to advise me in the matter.


It would take two nights in the House.


Then that is a sufficient reason for taking the course we have suggested, but I will leave that point and return to the main current of my observations. Let it be remembered that the Grand Committees were created for the very purpose of dealing with Bills of this kind. It is a Bill which has no party flavour about it, which raises no popular passions, no great political isues, but which does deal with important details in commerce or in trade; and it is exactly that type of Bill for which the Grand Committee system was instituted. I think it would be a very serious commentary upon that institution, and a very serious blot upon its utility, if the House were now to refuse to send this Bill to the Grand Committee because some hon. Gentlemen think it would be difficult for them to serve. My hon. friend who has just sat down pointed out that by the constitution of the Standing Committee on Trade many hon. Members would be excluded who are specially qualified to add weight and lustre to that Committee. I would point out, however, that the constitution of that Committee is elastic, and there is a possibility of adding fifteen members to the Committee, and I am sure that number would include all the specially qualified Members of this House who do not at present serve on that Committee. Therefore, I think that argument falls to the ground. Those who are better qualified than I am to judge inform me that in every Bill of this kind there is a special advantage in being able to be in touch with the Minister in charge of the Bill, and to have the draughtsman close at hand to be able to draw up. Amendments which the discussion on the Bill seem to render necessary. That is not the case in our discussions in the House, so that there are real advantages in the machinery of the Grand Committee which this House fails to provide. These are the reasons which induce the Government, with considerable reluctance, and on grounds which I think will commend themselves to the House at large, to maintain the view which we have expressed— that this Bill, by its character, by its reception, and by the nature of the discussion which is likely to arise, is exactly the kind of Bill which ought to be sent to the Grand Committee. I hope that my hon. friends will, in the first place, be able to help us upon that Grand Committee, and will in addition, when the Bill comes down to the House on the Report stage, urge before a larger audience any views which may not have re- ceived full development on the Committee upstairs. I hope the House will adhere to the motion made by my fight hon. friend.

Question put.

House divided:—Ayes, 138; Noes, 52. (Division List No. 163.)

Anson, Sir William Reynell Fellowes, Hon. Ailwyn Edw. Murray, Rt. Hn. A. G. (Bute)
Asher, Alexander Ffrench, Peter Nicholson, William Graham
Atkinson, Rt. Hon. John Finch, George H. O'Dowd, John
Austin, M. (Limerick, W.) Finlay, Sir Robert Bannatyne Parkes, Ebenezer
Balfour, Rt. Hn. A. J.(Manch'r) Fisher, William Hayes Paulton, James Mellor
Balfour, Rt. Hn. Gerald W. (Leeds) Flannery, Sir Fortescue Pease, Herbert P. (Darlington)
Banbury, Frederick George Foster, Sir Walter (Derby Co.) Peel, Hon. W. R. Wellesley
Bayley, Thomas (Derbyshire) Gibbons, J. Lloyd Pickersgill, Edward Hare
Beach, Rt. Hn. Sir M. H. (Bristol) Giles, Charles Tyrrell Platt-Higgins, Frederick
Beckett, Ernest William Godson, Sir Augustus E. Plunkett, Rt. Hn. Horace Curzon
Bemrose, Sir Henry Howe Goldsworthy, Major-General Pryce-Jones, Lt.-Col. Edward
Bethell, Commander Gordon, Hon. John Edward Purvis, Robert
Bill, Charles Gorst, Rt. Hon. Sir John E. Pym, C. Guy
Blundell, Colonel Henry Goulding, Edward Alfred Rasch, Major Frederic Carne
Bolton, Thomas Dolling Greene, Henry D. (Shrewsbury) Rentoul, James Alexander
Brassey, Albert Greville, Hon. Ronald Richardson, Sir T. (Hartlep'l)
Brodrick, Rt. Hon. St. John Hammond, Sir C. (Newcastle) Rickett, J. Compton
Bullard, Sir Harry Hanbury, Rt. Hon. Robert W. Ritchie, Rt. Hon. Charles T.
Burns, John. Healy, Maurice (Cork) Robinson, Brooke
Butcher, John George Healy, Timothy M. (N. Louth) Rollit, Sir Albert Kaye
Carson, Rt. Hon. Sir Edw. H. Helder, Augustus Royds, Clement Molyneux
Cavendish, R. F. (N. Lancs.) Hermon-Hodge, Robert T. Russell, T. W. (Tyrone)
Cavendish, V. C. W. (Derbysh.) Holland, William Henry Samuel, Harry S. (Limehouse)
Chamberlain, Rt. Hn. J.(Birm.) Houldsworth, Sir Wm. Henry Scoble, Sir Andrew Richard
Chamberlain, J. Austen (Worc'r) Hozier, Hon. James Henry Cecil Sidebotham, J. W. (Cheshire)
Charrington, Spencer Jessel, Captain Herbert M. Simeon, Sir Barrington
Glare, Octavius Leigh Johnston, William (Belfast) Smith, J. Parker (Lanarks.)
Coghill, Douglas Harry Johnstone, Heywood (Sussex) Smith, Hn. W. F. D. (Strand)
Collings, Rt. Hon. Jesse Kenyon, James Steadman, William Charles
Colston, Chas. Edw. H. Athole Langley, Batty Stock, James Henry
Colville, John Lawson, John Grant (Yorks.) Strutt, Hon. Charles Hedley
Cook, Fred. Lucas (Lambeth) Lockwood, Lt.-Col. A. R. Vincent, Sir Edgar (Exeter)
Corbett, A. Cameron (Glasg'w) Lopes, Henry Yarde Buller Warr, Augustus Frederick
Courtney, Rt. Hn. Leonard H. Lucas-Shad well, William Welby, Sir C. G. E. (Notts.)
Cox, Irwin Edward Bainbridge Macaleese, Daniel Wentworth, Bruce C. Vernon-
Curzon, Viscount Macartney, W. G. Ellison Whiteley, H. (Ashton-under-L.)
Dalkeith, Earl of MacIver, David (Liverpool) William's, Jos. Powell-(Birm.)
Dalziel, James Henry Maclure, Sir John William Wilson, J. W. (Worcestersh. N.)
Davies, Sir Horatio D. (Chatham) M'Arthur, Charles (Liverpool) Wodehouse, Rt. Hn. E. R. (Bath.)
Denny, Colonel M'Killop, James Wrightson, Thomas
Digby, John K. D. Wingfield- Melville, Beresford Valentine Wylie, Alexander
Donelan, Captain A. Monckton, Edward Philip Wyndham, George
Doogan, P. C. Montagu, Hon. J. S. (Hants.) Yerburgh, Robert Armstrong
Doughty, George More, Robt. Jasper (Shropshire) Young, Commander (Berks, E.)
Douglas, Rt. Hon. A. Akers- Morrell, George Herbert TELLERS FOR THE AYES
Faber, George Denison Morton, Arthur H. A. (Deptf'd) Sir William Walrond and Mr. Anstruther.
Fardell, Sir T. (George) Murnaghan, George
Atherley-Jones, L. Griffith, Ellis J. Robson, William Snowdon
Barlow, John Emmott Harrington, Timothy Runciman, Walter
Billson, Alfred Hazell, Walter Samuel, J. (Stockton-on-Tees)
Birrell, Augustine Hedderwick, Thomas C. H. Shaw, Thomas (Hawick, B.)
Brigg, John Hemphill, Rt. Hon. Chas. H. Smith, Samuel (Flint)
Broadhurst, Henry Horniman, Frederick John Sullivan, Donal (Westmeath)
Caldwell, James Jones, William (Carnarvonsh.) Sullivan, T. D. (Donegal, W.)
Cawley, Frederick Lawson, Sir W. (Cumberland) Thomas, David A. (Merthyr)
Cross, Alexander (Glasgow) M'Crae, George Trevelyan, Charles Philips
Dewar, Arthur M'Ghee, Richard Wilson, Frederick W. (Norfolk)
Douglas, Charles M. (Lanark) Maddison, Fred. Wilson, Henry J. (York, W. R.)
Duckworth, James Marks, Henry Hananel Wilson, John (Govan)
Fenwick, Charles Martin, Richard Biddulph Wilson, Jos. H. (Middlesbr'gh)
Field, William (Dublin) Molloy, Bernard Charles Woodhouse, Sir J. T. (Hudders)
Fitzmaurice, Lord Edmond Moss, Samuel Yoxall, James Henry
Flower, Ernest Pearson, Sir Weetman D.
Foster, Harry S. (Suffolk) Pilkington, Sir G. A. (Lancs S. W.) TELLERS FOR THE NOES
Gibney, James Price, Robert John Mr. Lawson Walton and Mr. H. C. Richards.
Goddard, Daniel Ford Provand, Andrew Dryburgh