HC Deb 10 January 1918 vol 101 cc413-8

  1. (1) A company carrying on any business to which Section one of the Act applies which has issued share warrants to bearer may give notice requiring the holders of the share warrants to surrender their warrants for cancellation and to have their names entered as members in the register of members.
  2. (2) The notice shall be given by advertisement in the London, Edinburgh, or Dublin "Gazette," as the case may be, and by any other method by which notices to, or for the information of, holders of share warrants to bearer are required to be given by the regulations of the company or the conditions of issue of the warrants.
  3. (3) Where such a notice has been given no person shall, as holder of a share warrant, be entitled to attend or vote at any meeting of the company, and any dividends or interest which may become payable in respect of any shares represented, by share warrants shall be retained by the company until the share warrants have been surrendered for cancellation.—[Sir. A. Stanley.]

Brought up, and read the first time.


I beg to move, "That the Clause be read a second time."

This Clause is for the purpose of dealing with share warrants to bearers. If I remember rightly, I promised at a later stage a scheme in regard to this matter. The Clause provides that a company may give notice to the holders of share warrants to bearer to bring them forward for cancellation, and to receive in exchange registered shares. It provides, when the notice has been given, that no dividends shall be paid to the holders of share warrants, and that holders of these share warrants shall not be allowed to vote at any meetings of the company. It is quite clear, I think, that if we are to determine where the control of any particular company lies, it will be necessary that we should know who are the holders of these bearer warrants. It is proposed that the company shall be empowered to give notice whereby these bearer warrants shall be cancelled and registered shares substituted, if necessary. I think it will be necessary at a, later stage that I should give notice of an Amendment in the Schedule to bring within the Schedule a company which has not given notice. Hon. Members will quite understand that in the case of a company that has given notice there is no reason why it should come within the Schedule, because those who hold the share warrants to bearer cannot exercise any rights. Therefore, a company which does not give any notice clearly must be brought within the Schedule, so that the Board of Trade may make proper investigation, and determine whether or not bearer warrants are under enemy control or otherwise.


The right hon. Gentleman says that later on he proposes to move an Amendment to the Schedule to make mandatory the notice to the company, but the wording of this Clause now before us rather suggests that it is desired that the company should give notice. May I point out that there is this great disadvantage in the proposal: Supposing a banker is making a loan against shares, he infinitely prefers to make the advance upon bearer warrants to making it on share certificates. There is this further fact, that if he only makes advances on share certificates, the shares would have to come into the name of the banker, and, in that case, would the banker have to apply for a licence? I do not wish to go over the whole ground which has been gone over so often, but I do wish to point out that the object which the right hon. Gentleman has in view, of trying to trace the holders of these share warrants, and who owns the shares, will not, I believe, be attained, and that the Bill will again fail to effect what he intends to do. I think that all these interferences with the free operation, in both shares and certificates, of bankers and others, are going to cripple, interfere with and contract this trade in metals in this country. I offer these observations only in the faint hope that they may make some impression on the right hon. Gentleman. I would like to ask whether he desires to do away with bearer warrants altogether?


So far as I known, bearer warrants in this country are almost unknown, and it is a most unusual circumstance to have share warrants to bearer. It is, on the other hand, in certain Continental countries the usual practice. The fact of issuing share warrants to bearer is one which, as far as my personal knowledge of business goes, has been almost entirely used as a means of peaceful penetration of foreign countries. The right hon. Gentleman in order to remedy an evil, if it be an evil, which is practically negligible, proposes to stop share warrants to bearer, and is thereby setting an example to foreign countries which may lead them to do the same thing. It seems to me highly probable that what is being done in this Amendment will simply lead to the destruction of British businesses in foreign countries. That is far the most probable result, and it is what inevitably happens when you adopt measures trying to prevent foreigners from carrying on business. There are infinitely more cases of British subjects carrying on business in foreign countries than of foreigners carrying on business in British countries. Therefore, we gain on the balance by any system which enables persons who wish to carry on business in a country which is not their own to disguise their nationality. That is entirely an advantage to British traders and a disadvantage to foreign traders. But the fact is that the Government do not know anything about trade. All that they want to do is, for the benefit of certain traders, to prevent another section of English traders engaging in trade. Therefore, they have introduced in this Amendment a policy which can on balance do nothing but harm to British traders.


The President of the Board of Trade said that it would be necessary to put something into the Schedule in addition to this Clause, and I notice that there is a proposed Amendment to the Schedule making one of the conditions that the company has issued share warrants to bearer and has not given notice requiring the holders to surrender those for cancellation. That would mean that a purely British company, if it were suspected that some of its share warrants. were held abroad, might be required by the Board of Trade to call them in and have them registered unless they wished. to run the risk of having no licence. Can anybody maintain that that is not interfering with British trade and industry which may be perfectly innocent? We are assured constantly from the Front Bench that this Bill in no way interferes with genuine trade. But here is genuine trade at all points, and if a company in this country finds it is for its convenience or profit to have share warrants to bearer, why on earth should they not be allowed to do so? I say that it is a gross interference with the liberty of the subject to require them to call in these warrants.


May I ask the Solicitor-General to answer the point as to whether this Amendment is to be a mandatory one?

The SOLICITOR-GENERAL (Sir Gordon Hewart)

I am not sure that I fully understand what my hon. Friend means when he asks whether the Amendment is to be mandatory. In order that effective control may be exercised it is necessary that the list of shareholders of a company should be accessible for identification. It there are warrants to bearer representing shares, it is impossible to ascertain who the shareholders are. Therefore, it is proposed by this Clause to provide an easy and simple method whereby warrants to bearer are to be exchanged for certificates, duly registered, of shares. It is proposed further, when we come to the Schedule, to add a condition which provides that where a company is a company of that kind and does not obtain the bearer warrants that fact of itself might, I do not say must, be a ground for refusing a licence.


While I welcome the statement that it might only prevent a licence, I endorse the statement of my hon. Friends that if this is persisted in it may, and in fact will unquestionably, cripple many companies which issue warrants so that they may obtain bank advances.


I am no particular friend of this Bill or of share warrants to bearer. I think there is an answer to the difficulty that has been raised. It is not lawful for a company hereafter to carry on this business without the licence of the Board of Trade. Then you provide that the Board of Trade shall not grant a licence to the company to which particular conditions apply. The burden of proof will be on the company to show that they do not fall within the conditions. That being so, this difficulty would not arise, because in every case the company, if it issued warrants to bearer, would have to show that it did not fall within those conditions. If some of the shareholders, sufficient in number, were some enemy interests, that would be sufficient reason for refusing a licence. The whole thing is of very little importance, because you cannot prevent the beneficial interest belonging to a particular person. You cannot go into the question of a trust while whoever is registered is the person who has control of the company. The thing will have very little operation, but I think that all the safeguards that can be taken have been taken under the Schedule, though I must point out that I think they are very inefficient.

Question put, and agreed to.

Clause read a second time, and added to the Bill.