§ Order for Second Reading read.
§ SIR WILLIAM HOLLAND (Yorkshire, W.R., Rotherham),
in moving the Second Reading of the Limited Partnerships Bill, said it was a measure for which the commercial opinion of the country had been agitating for the last thirty years, because it was felt that, for lack of some such proposal, commercial development had been considerably hampered and hindered. In the lastsession of Parliament this measure had the good fortune to pass through the House of Lords, an Assembly which at times could do very expeditious work, especially with a measure of a non-contentious character. But, unfortunately, when the Bill came down to the House of Commons there was so much pressure of business that it was unable to make any progress. Some work, however, was done last session while the Bill was on the Order Paper; in that the draftsmen of the Board of Trade paid the closest attention to its provisions, and suggested several alterations which had been embodied in the Bill. In addition to that there were the names of some conspicuous lawyers absent from the Bill last year, but which were present this year. Some of those lawyers were rather opposed to the measure at the outset, but certain alterations having been made init, they were now strongly in its favour, and, therefore, he was now able to quote the great authority of the hon. Member for Kingston on the one side and of the hon. Member for Reading on the other, than whom there were few, if any, greater authorities at the Bar on a question such as that with which this Bill dealt. He was glad also to know that the 1192 attitude of the Government was entirely friendly to the measure. He had conversed with the Attorney-General, and he felt sure that if he had been present the hon. and learned Gentleman would have pronounced his benediction on the Bill. The object of the measure was to make it safe for a man with capital to furnish financial assistance to a. firm, on the footing that he was to be remunerated for the employment of his capital by receiving a share of any profit which might be realised in thebusiness, without jeopardising his whole fortune in the event of the business going wrong. At present there was considerable risk of a capitalist being penalised in that way, and the consequence had been that many men preferred to keep their money lying idle rather than put it into a business, because if a capitalist lent his money in that way—he was so advised—and sought to tender any assistance in the conduct of the business, even in a casual degree, he ran very considerable risk of being adjudged a full partner if things went wrong. This Bill set up a sort of intermediate stage between a limited company and a private firm. It allowed one or more partners to be limited partners, and the rest must be full partners. This, obviously, would be a very great convenience in the case of families, perhaps, who wished to keep businesses in their own hands, or as an arrangement between friends, who, themselves in possession of money, were disposed to help others who might have brains, but were rather short of capital, and, in that way, business might be verysubstantially developed. They had seen an instance during the present session of the advantage that might accruefrom trying to learn from our foreign competitors. When the Patents Bill was introduced by the President of the Board of Trade, one of the arguments, and it was a 1193 Strong and irresistible argument, was that we were considerably behind other nations in the matter of patent legislation. Exactly the same remark might be made in regard to limited partnerships, because our principal foreign competitors had already this system in vogue. In France they had what was called a partnership en commandite. The result was that businesses had been developed to huge dimensions which perhaps would never have got their start had they not been assisted by this form of partnership. He could give specific instances of very substantial businesses in leed which had been developed in this way. A Departmental Committee sat a short time ago to deal with the question of Joint Stock Company Law. It was a very competent Committee which sat for eighteen months, and the result of its Report was that the Companies Bill had been introduced which was now under consideration in another place. There was one clause in the Report of the Joint Stock Company Committee which specifically referred to this Limited Partnerships Bill and referred to it with entire approval. Besides business men, the banking community were strongly in favour of it, and no wonder, because it opened the door to the profitable employment of some of their idle funds. The House of Lords' Bill last session was in charge of Lord Avebury. He had personally received a good many communications from various Chambers of Commerce in favour of the Bill, and also a petition from the Glasgow and West of Scotland Guardian Society for the Protection of Trade, in which occurred this sentence—That in the opinion of your petitioners the passing of this measure would be of the greatest benefit to the trading community of the country.Another society in Scotland had expressed a rather unfavourable opinion in regard to the measure, for the reason that the Bill did not go far enough. They urged that the powers of limited partners should be extended beyond the provisions laid down in this particular Bill. He agreed with that criticism, because he thought the limited partners ought not to have their powers restricted merely to inspecting books, and to advising thereon. When the Bill came before the Committee he would be very glad indeed to support an extension of 1194 the powers of limited partners. The Bill was not at all heroic in its nature nor exciting in its provisions. Some would say it was small and very unimportant. The House knew that it often happened that small Bills were at great disadvantage because they did not lend themselves to electoral purposes nor to dramatic displays on the platform. It would be impossible for an orator to move great masses of people to enthusiasm in regard to a measure of this kind, and for that reason much of the impetus derived from public opinion was lacking in the present case. And yet the potentialities of a Bill like this were often immense. Such a measure, in his opinion, might have a very striking effect, because it would tap reservoirs of accumulated capital and thus render incalculable service in encouraging enterprise, extending trade, and increasing the employment of labour. There was no better way of dealing with the problem of the unemployed than by establishing new industries which were likely to be permanent in their benefits, without being pauperising in their character. He begged to move the Second Reading of this Bill.
§ Motion made, and Question proposed, "That the Bill be now read a second time."
§ SIR F. BANBURY
said the hon. Gentleman had given a very clear statement of the object of the Bill, and the effect it would have if passed into law. This was an exception to the general rule of Bills brought in by private Members. He objected to the habit of private Members bringing in Bills, because the House generally saw only one side, and had very little experience of the effect they would have. But the hon. Gentleman who had moved the Second Reading of this Bill was thoroughly conversant with the subject, and although, as he said, it was one which would not create enthusiasm, yet it was an extremely useful measure and one which he was quite competent to bring in. For the last fifty years a system somewhat similar to that which was proposed had existed in France with very good results. He had had some experience of businesses controlled and advanced by such a system, and not having heard of any bad effects resulting from it, he would certainly support this Bill. 1195 For a number of years there had been a great prejudice against any Bills of this sort, but he thought it had arisen from the conservative nature of Englishmen about their businesses. One objection which had always been raised was that people would not know who the limited partner was, or that a person was a partner only to a limited extent. Clause 5 provided that every limited partnership must be registered. He did not quite know who was going to keep the register. The Bill also provided that the statements should be filed in the Registrar's office where they could be inspected by any person desirous of inspecting them. Very often people were rather careless in business, and in the hurry of carrying through a transaction they might forget that the firm consisted only of limited partners whose means were not very great. He gathered that the amount of capital put into the firm by a partner would be stated when he filed his statement.
§ SIR F. BANBURY
said the only objection would be that people might be too careless or too lazy to go to the Registrar's office to find out the actual state of affairs. That objection had been advanced before, but he did not think there was very much init, and if this Bill became effective such an objection would probably disappear altogether. He thought the Bill provided a scheme which would be successful, if there was any money left in the country. At the present moment money was going out of the country very fast, and it should not be forgotten that there would be so little left that this Bill might not be taken any advantage of at all. Some modifications might be required in Committee, and he had an idea that it was not the same Bill as the one which was introduced last year. The general principle of the measure, however, had his approval and he would support the Second Reading.
§ SIR A. TORRANCE (Glasgow, Central)
said he had had forty-three years experience in the City of London, and when the hon. Member spoke on reservoirs of accumulated capital 1196 he touched a question which he was very sore upon. Succesful businesses had only been created by enterprise, and these reservoirs would lead to money being lent to suit the purposes of the lender. He would, however, want to know more about the matter before he could consent to such a state of things. Considerable speculation had been going on and business men might do well one year and badly another, and this limited liability system was a most dangerous one. He knew of a firm in London which had failed, and the debenture holders practically got all the money. This seemed to him to be a dangerous principle, and it would have to be very much better explained before he could accept the principle of limited partnership set forth in this measure.
§ SIR F. CAWLEY (Lancashire, Prestwich)
said that if a man desired to help a friend to start or extend a business he was not able to do so without risk to himself unless it was registered as a limited liability company. If a man desired to help a friend in that way and get some recompense in the shape of a share of the profits he became a partner, and was liable to the extent of every halfpenny he possessed in the world. Therefore he thought it was desirable that a man should be able to put money into a business and reap some recompense out of the profit without having the whole of his estate made liable for any default or failure of his partners to do their work properly. He regretted that the Bill had not come on at a time when more Members of the House were present, in order that more hon. Members could have expressed their views. The Bill was really a very important departure. It seemed to him that one of the clauses in particular might lead to some loss to people who were doing business with a firm because they knew that a certain capitalist had money in it. He did not believe that a partner ought to be able to draw his money out without its being advertised that he had ceased to be a partner in the firm. There were cases in which men of good reputation became members of firms, and afterwards became bankrupt, and he thought some provision should be made for cases of that sort. There were other clauses in the Bill which he thought required very careful scrutiny, and although he was prepared to support 1197 The Bill he regretted that the Second Reading had not received the scrutiny and criticism of a larger House.
§ MR. BEALE (Ayrshire, S.)
Said there was only one thing he had heard in the debate which called for an answer. His hon. friend apprehended that this Bill might possibly do a certain amount of mischief which arose already from the Limited Liability Bill and other Acts. The fact was that this Bill would only play a very small part, and he doubted whether it would make a substantial difference in the amount of money that was put into trading concerns on those terms. He wished to say a word as to the principle on which the danger of liability rested when a man put his money into a concern and wished to be a sleeping partner. He was not liable merely because he had put money in and agreed to take in return a share of the profits. As a matter of fact he was only liable as a partner if, in addition to his share of profits, there was an agency between him and the other members of the firm. During his experience he had never found the slightest difficulty in framing an agreement to avoid all dangers of that kind. Often when men put their money into business they insisted upon mixing themselves up in the management and sometimes held themselves out as men with influence who could control the other partners or as being in the position of agents for the other members of the firm, or else implying that the other members of the firm were agents for them. This now legislation ought to be directed towards finding an easy way of expressing what the obligations of the sleeping partner wore, and the most valuable thing in the Bill was the clause which said that hemight examine books. Let them suppose that a man acted in such a way as to hold himself out to be a partner. People might then rely upon his credit, and he was not sure whether under Clause 7 there was a provision which did not come in conflict with the end of sub-section 2 of Section 4 which said he was not to be liable beyond the amount contributed by him. The Bill ought to be considered with a view to prevent creditors relying on a man's position and credit when he was not really liable, and, on the other hand, to remove the pitfalls which acted unfairly 1198 in the case of a man who put his money into a concern as a sleeping partner.
§ SIRA. ACLAND-HOOD (Somersetshire, Wellington)
said there seemed to be a great difference of opinion in regard to this measure, especially amongst business men. It was obviously a Bill of great importance, and therefore he did not think the House of Commons ought to pass it in a hurry after a few minutes discussion on a Friday afternoon, especially when the great bulk of hon. Members had gone elsewhere on pleasure bent. There were seventeen clauses in the Bill, and many of them raised important points. Under one of the clauses a new offence was created for which the unfortunate victim would be liable to two years hard labour. He had always held that the House should be very careful in creating new offences. At the present moment the Board of Trade and the Treasury were not represented, nor was there anyone present representing the English Law Officers. In those circumstances he thought that it was in the interest of the business men of the country that he should move the adjournment of the debate.
§ Motion made and Question proposed, "That the debate be now adjourned."—(Sir A. Acland Hood).
§ THE UNDER-SECRETARY OF STATE FOR THE HOME DEPARTMENT (Mr. HERBERT SAMUEL,Yorkshire, Cleveland)
said that this Bill was not in any way connected with his Department, but at the same time all Ministers were in some degree responsible for one another, they were in a partnership, however limited, and, therefore, he ventured on this occasion, feeling sure that his colleagues of the Board of Trade would approve of his action, to express the desire that this Bill should pass the Second Reading. The President of the Board of Trade had been detained at a meeting of the Cabinet, and that prevented his being in the House. If the Bill were really contentious, he would have agreed with the 1199 right hon. Gentleman as to the undesirability of its passing the Second Reading under the circumstances of the moment, but it had been generally regarded as an agreed Bill. He had reason to believe from personal knowledge that it was very greatly desired among bankers in the City of London, generally. It passed last year through the House of Lords. The present Lord Chancellor had expressed warm approval of the Bill. It was a measure which received in this House the support of the hon. Baronet the Member for the City of London and, therefore, they might be sure that it could not have anything very objectionable or contentious in it. The Board of Trade approved of the Bill and desired its passage. They had been in close consultation with the lion. Member who had moved the Second Reading. He trusted the House would read the Bill a second time.
§ Question put, and negatived.