HC Deb 14 February 1939 vol 343 cc1605-17

5.23 p.m.

Mr. Stanley

I beg to move, in page 8, line 13, after "classes," to insert: or (ii) otherwise for the benefit of the community. Now we come to a different part of the Bill, dealing with industrial and provident societies and building societies. Since this matter was discussed on the Committee stage, I have had evidence to show that the definitions of societies to be registered under the Industrial and Provident Societies Act are too narrow. I have had several cases brought to my notice, and one case—and hon. Members will realise, therefore, the weight that I attach to it—comes from my own constituency. It is, as a matter of fact, a society composed of a number of gentlemen who are my personal friends. It is so clearly the type of society which should be registered under the Industrial and Provident Societies Act, but which, under this definition, it would be possible for the Registrar to strike off, that I should like to give the House some details about it. It is a society called the Lake District Farm Estates, Limited, the purpose of which is to buy up farms in the Lake District to preserve the amenities and to prevent building and spoliation. It is an attempt to give to persons with limited means a chance to come into schemes which are being carried out on a big scale in the Lake District, namely, the buying of considerable tracts of land to hand over to the National Trust.

The idea of the Society was to allow people who could afford to spare a few pounds to do the same things as the bigger societies are doing in this respect. The Society has issued debentures which yield the princely rate of interest of 2 per cent. It also issues shares, though it is true with no limit to the dividend on the shares, but in the appeal for money the promoters of the Society say that with a great deal of luck the return on the money may reach a maximum of 3 per cent. In order, however, to prevent anybody being too greedy and trying to get too great an advantage, the amount of shares which anyone may hold is limited to £200. I think the House will agree that that is the kind of society, that that is the kind of restriction, and that that is the kind of object which we want to see registered under the Industrial and Provident Societies Act, though under the definition as at present drawn it would not be able to satisfy the Registrar, because the test must be that it promotes the social wellbeing of the working class, whereas anything done to preserve the amenities of the Lake District is for social wellbeing of all classes of the community, including the working class.

I have had other examples of that kind brought to my notice, and I have attempted in this Amendment to cover cases of that kind. It might be thought at first sight that the scope of the words "otherwise for the benefit of the community" might be too wide, but I would point out that they have to be read in conjunction with the subsequent words that there are special reasons why the society should be registered. Therefore, the society would not only have to show that it was for the benefit of the community, but that it was of such exceptional benefit to the community that there were special reasons why it should be registered. If we adopt this definition, it is certain that it would leave within the scope of the Act the type of society to which I have drawn attention and which I think all hon. Members will agree is the very type of society which should have the benefit of the Act.

5.29 p.m.

Mr. Johnston

Would the right hon. Gentleman kindly add to the explanation which he has just given? I am sure that nobody in the House would cavil in the slightest degree at enabling a society existing solely for the purpose of preserving public amenities to get the benefit of the Industrial and Provident Societies Act, but has he any power to see to it in the Bill that any such society, still being licensed under the Act, should not be a co-operative society? Has he power, or has the Registrar any power, to prevent any such society from using a misleading title? For example, there is a common misuse of the word "co-operative" by concerns which are not co-operative societies at all, and some of them have been of great disadvantage to the public when they have appealed for debentures or funds of any kind. When the right hon. Gentleman is widening his Clause to enable beneficent societies of the type he designated to come in as provident societies, has he any power to prevent any of these other societies, which are not bona fide co-operative societies, using misleading titles which may be to the disadvantage of the community?

5.31 p.m.

Mr. Stanley

I am not quite certain of my answer, but I understand there is some power to prevent the use of misleading titles. I also understand that that would apply to the use of the word "co-operative." If the right hon. Gentleman will allow me, I would like to look into that point further and will let him know what the answer is.

Mr. Johnston

Will the right hon. Gentleman add to that answer that if he finds that the apprehensions to which I have given vent do exist, and if he agrees with us that there is anything in the nature of the use of misleading titles which will be wrong, will he undertake to put the matter right in another place?

Mr. Stanley

I should not like to give any promise about something as to which there is uncertainty. I cannot give a copyright to the word "co-operative," but I will look into cases which are definitely misleading, and perhaps before the Bill is considered in another place I may have a talk with the right hon. Gentleman.

Amendment agreed to.

Mr. Stanley

I beg to move, in page 8, line 32, to leave out from the first "to," to "been," in line 33, and to insert: acquire or offer to acquire shares in the share capital of, or to lend or deposit money to or with, the society or any other person. This is a drafting Amendment and describes better than the old words the type of security with which an industrial and provident society can deal.

Amendment agreed to.

5.33 p.m.

Mr. Duncan

I beg to move, in page 8, line 33, to leave out "to the public."

This Amendment deals with the proviso to Sub-section (2). As the Bill stands it covers only public issues. I want it to cover private issues such as mortgages and loans. This Amendment to leave out "to the public" fulfils my wish.

Mr. Spens

I beg to second the Amendment.

This is an important matter, because it really applies to all those bucket shops which at present carry on their operations under the guise of being registered under the Industrial and Provident Societies Act. There is a doubt whether they issue capital to the public, and by omitting these words we shall catch the type of financial transaction which it is intended should be caught.

Mr. Stanley

As the Bill left Committee, it covered only the case where there was a circularisation by the societies to others than its own members. It is clear now that the circularisation of its own members may bring the proviso into operation. I accept the Amendment.

Amendment agreed to.

5.36 p.m.

The Solicitor-General

I beg to move, in page 8, line 34, at the end, to insert: and (b) before deciding to cancel under this Sub-section the registry of any society, the registrar shall consider any representations with respect to the proposed cancellation made to him by the society within the period which, by virtue of Sub-section (3) of Section nine of the Industrial and Provident Societies Act, 1893, must elapse between the giving to the society of the notice required by that Sub-section and the cancelling of the registry, and, if the society so requests, afford it an opportunity of being heard by him within that period. We are giving to the Registrar additional powers to cancel registries of friendly societies. It ought to be presumed that the registrar would hear any representations from the societies that were about to be cancelled, but to make it certain we are putting a specific provision in the Bill requiring him to listen to the representations and to give them an opportunity of being heard before cancellation.

Mr. Bellenger

What is the period within which a society has power to ask for its case to be heard as specified in Sub-section (3) of Section 9 of the Industrial and Provident Societies Act?

The Solicitor-General

The period is two months.

Mr. Duncan

May I thank my right hon. Friend for putting this Amendment down? I originally raised this matter in Committee and was supported by the hon. Member for Bassetlaw (Mr. Bellenger), and urged that the Registrar should have some powers of dealing with certain aspects of the Industrial and Provident Societies Act.

Amendment agreed to.

5.38 p.m.

The Solicitor-General

I beg to move, in page 8, line 34, at the end, to insert: (3) Where the registrar gives notice under Sub-section (3) of Section nine of the Industrial and Provident Societies Act, 1893, of his intention to cancel the registry of a society in the exercise of his powers under this Section, then, if it appears to him at any time after the expiration of one month from the date of the giving of the notice that there have not been taken the steps which, by that time, could reasonably have been taken for the purpose—

  1. (a) of converting the society into a company under the Companies Act, 1929, or amalgamating the society with, or transferring its engagements to, such a company, in accordance with Section fifty-four of the said Act of 1893; or
  2. (b) of dissolving the society in one of the ways mentioned in Section fifty-eight of the said Act of 1893;
he may give such directions as he thinks fit for securing that the affairs of the society are wound up before the cancelling of the registry takes effect; and any person who contravenes or fails to comply with any such directions shall be liable, on summary conviction, to a fine not exceeding fifty pounds or to imprisonment for a term not exceeding three months or to both such fine and such imprisonment. We are extending the powers of the Registrar to cancel registration in the case of societies that do not fall within paragraphs (a) and (b) of Sub-section (1). He has, in case of his desire to cancel societies that do not come within those exceptions, to give two months notice. The Amendment would give an opportunity to a society, if it so wished, to convert itself into or to amalgamate with or to transfer its engagements to a company, or to dissolve or to wind up voluntarily. It seems only reasonable that it should have a chance of doing that in preference to being cancelled. It can do it within a period of one month, and if it does so the order for cancellation will not take place.

Amendment agreed to.

5.39 p.m.

Mr. Stanley

I beg to move, in page 8, line 41, at the end, to insert: (5) If, with respect to any industrial and provident society registered under the Industrial and Provident Societies Act, 1893, before the twenty-sixth day of July, nineteen hundred and thirty-eight, it appears to the registrar—

  1. (a) that neither of the conditions specified in paragraphs (a) and (b) of Sub-section (1) of this Section is fulfilled in the case of that society, and
  2. (b) that it would be in the interests of persons who hold shares in the share capital of or who have rights in respect of money lent to or deposited with, the society or any other person that the society should be wound up,
the registrar may present to the court a petition for the winding up of the society. As my hon. Friend the Member for North Kensington (Mr. Duncan) said, he and the hon. Gentleman the Member for Bassetlaw (Mr. Bellenger) raised during the Committee stage with a great deal of force the question of some of the industrial and provident societies. They pointed out that if, after a certain date, a society attempted to raise fresh money, the registrar would have power under the Clause to cancel registration. They gave cases which they knew of societies on the Register which, according to their accounts—and undoubtedly the Committee were much impressed by the accounts they gave—were frankly either dishonest or, if not dishonest, were so inefficient and extravagant that the members' money was being rapidly dissipated. If they did not choose to apply for more money the Registrar would have no power and would have to sit still while whatever money remained was being dissipated before it could be returned to the original members. I and all other members of the committee were much impressed by the case made out by the two hon. Gentlemen, and I promised that I would do my best to meet it by giving to the Registrar some additional power to deal with cases where he thought that the investors' interests were being imperilled and where action might result in something being saved from the wreck.

This Amendment provides that in cases where the new and more stringent conditions which are laid down for industrial and provident societies are not fulfilled, and where the Registrar thinks it would be in the interests of persons who hold the shares or who have other rights in the society that the society should be wound up, he is entitled to present a petition to the court for its winding up. I feel that it is right in a case of this kind, where we are dealing perhaps with a society which has been on the register for a long time, that the appeal should be to the court, but it certainly gives the Registrar a power which he does not now possess to deal with the case of a society which is dishonestly or extravagantly dissipating its funds, and to deal with it with sufficient rapidity to enable something to be saved from the wreck. I think the Amendment fully meets the case made by the two hon. Gentlemen.

5.43 p.m.

Mr. Johnston

I would like to ask the President whether he thinks that a case which I submitted to him in Committee is covered by the new power which the Registrar will have as a consequence of this Amendment. For example, paragraph (a) of Sub-section (1) says that it must be shown to the satisfaction of the Registrar that the society is a bona fide co-operative society. There are co-operative societies and co-operative societies. I have particulars of one here. I will not give it the benefit of a public advertisement. I have the literature of one calling itself a Co-operative Property Society, Limited, in which they are offering investors £6 11s. 2d., "safe, sure." There is nobody who can offer £6 11s. 2d., "safe, sure." I wonder whether, under the new powers, the Registrar could immediately present a petition to the court for the winding up of this concern, or whether he could strike it off as a non-bona-fide co-operative society and compel it to become a company, and, therefore, be subject to the provisions of the Companies Act. Who is to define what is a bona fide co-operative society? Has the Registrar to go to the court for a ruling as to whether a particular society is bona fide or not, or has he himself the sole decision as to what is a bona fide co-operative society?

5.44 p.m

Mr. Bellenger

The right hon. Gentleman has met the representations in Committee of the hon. Member for North Kensington (Mr. Duncan) and myself very reasonably. I rise only to ask him whether members of the public, other than the actual shareholders or depositors in a society which may be suspect, will have the right to put before the Registrar information which may lead him to take the action contemplated in this Amendment. The right hon. Gentleman will be aware from the illustrations already given to him that not only have Members of this House brought various things to his notice, but that the public Press has performed a very useful service in calling the attention of the public to the undoubted swindles now taking place under the shelter of the Industrial and Provident Societies Acts. Therefore, I should be glad to know whether the Registrar will be able to listen to any information about a society, from whatever quarter it may come, when making up his mind whether a prima facie case has been made out for him to take action.

5.46 p.m.

Mr. Stanley

The Registrar is entitled to accept from any quarter information which will enable him to make out a case. With regard to the question put by the right hon. Member for West Stirling (Mr. Johnston), I do not know the exact particulars of that society, but the fact that it chose the title "co-operative society" would not make it a bona fide co-operative society within the meaning of this Clause. In Sub-section (6) of the Clause there is a definition of what such a society must be. I am assuming that the society to which he referred and which offers such very substantial dividends is not a co-operative society within that interpretation, but a society working with the object of making profits for the payment of interest and dividends. That being so the position of the Registrar would be as follows: If a society of that kind tried to register in future he could refuse it registration. If it were already registered and tried to get more money, then he could strike it off. He could cancel the registration on the ground that it was not a bona fide co-operative society. If it does not try to get more money then, as it is not a bona fide co-operative society, he could petition for it to be wound up if he thought the interest of the members required it; in other words, if he thinks it is bankrupt or fraudulent then, as it is not a bona fide co-operative society, he can use this new procedure.

5.48 p.m.

Mr. Silverman

The right hon. Gentleman said that Sub-section (6) laid down the condition which would have to be satisfied in order to enable a society calling itself "co-operative" to be deemed a co-operative society for this purpose, but that is not strictly so. The Sub-section excludes one particular case but does not purport to be a definition Sub-section.

Mr. Stanley

I am sorry if the hon. Member was misled, but I made it quite clear that Sub-section (6) excluded the particular case to which the right hon. Gentleman referred.

Amendment agreed to.

5.49 p.m.

Mr. Stanley

I beg to move, in page 9, line 3, after "any," to insert "person who is or has been an."

I should like to explain at the same time the following Amendment, which is consequential upon this one. The object of these two Amendments is to enable these powers to be applied to an ex-officer of a society as well as to an existing officer. The Registrar has had considerable experience of what has happened in previous cases. Where an inquiry is imminent the existing officers may leave and the new officers may be found to be unable to answer any questions. It may often be necessary to examine the ex-officers. Precedent for this is to be found in the Friendly Societies Act, 1896, and in the Industrial Insurance Act, 1923, and I submit that these powers will help the Registrar to have the investigation properly conducted.

Amendment agreed to.

Further Amendments made:

In page 9, line 4, leave out "officer," and insert "person."

In line 8, after the first "of," insert "any of."

In line 8, leave out "Sub-section (2)," and insert "Sub-sections (2), (3), and (5)."

In line 13, leave out "Any person who," and insert "If any society or other person."

In line 14, after "Sub-section," insert "the society or person."—[Mr. Stanley.]

5.53 p.m

Mr. Stanley

I beg to move, in page 9, line 17, at the end, to insert: ( ) The registrar may, if he considers it just, direct that all or any of the expenses incurred by him in exercising his powers under the last preceding Sub-section in relation to any society shall, either wholly or to such extent as he may determine, be defrayed out of the funds of the society or by the officers or former officers thereof or any of them, and any sum which any society or other person is required by such a direction to pay shall be a debt due to the registrar from that society or person. This Amendment confers upon the Registrar, in connection with these inquiries, similar powers to those granted to him in investigations under the Friendly Societies Act, 1896, the Industrial and Provident Societies Act, 1893, and the Building Societies Act, 1894. Inquiries of this kind may involve very considerable expense, and that expense may be largely increased if the society adopts obstructive tactics and tries to spin out the investigation, or if during the investigation irregularities are discovered which have to be followed up and exposed, and it seems to me that in those cases the Registrar should have a power to make the society bear some part of the cost, or the whole of the cost, of the investigation, rather than that it should fall upon the Treasury. If it is nothing more than a routine investigation to enable the Registrar to see whether the objects of the society bring it within paragraphs (a) and (b), naturally this power would not be used, but where it is an investigation which is designed to say whether the transactions of the society are bona fide and honest and in which obstructive tactics are met with or grave irregularities are disclosed, I think it is right that the Registrar should have this power and that having the power he should exercise it.

5.55 p.m.

Mr. Silverman

I cannot help feeling a little uneasy about the width of the language used in this Sub-section. I recognise that it is very largely, and I am not sure that it is not entirely, the same language as is used in the other Sub-section, but it is nevertheless a new power in this instance. I do not think anybody would object to the Registrar having power, in any circumstances such as the right hon. Gentleman has described, to charge his costs against the funds of the society or, indeed, in a suitable case against the private property of some person, who need not even be a member of the society, because the words are: any society or other person, and that might be anybody at all. Where obstruction has been employed and what otherwise might have been a speedy and cheap investigation has become a long and costly one, it is right that there should be such a power, but the Sub-section is not in any way limited. It says: The Registrar may, if he considers it just, direct that some one shall pay the costs which he has incurred. I do not know whether any right of appeal exists or whether the Registrar's discretion is absolute and cannot be appealed against. If it were absolute it would be a very wide power. I accept the statement that he has this power already in some cases, but is that any argument why we should extend it? He would be the investigating officer, the witness, the prosecutor and the judge in his own case, and having decided the case in his own favour he would then proceed to award himself costs against any individual who he might think had acted unjustly. Unless he is to be a superman it is possible that somewhere and at some time injustice might creep in through the exercise of powers so wide, and I should like the right hon. Gentleman to say whether the Registrar's discretion is in any way controlled or checked by anybody at any point, and whether there is any appeal, and, if not, whether there ought not to be.

Mr. Stanley

These powers have been exercised by the Registrar for 46 years, and during that time there has never been any complaint, so far as I am aware, that they have been arbitrarily or unjustly used. Even if this Amendment were rejected he would still exercise, in connection with every other form of inquiry which he holds, the powers which he has exercised for 46 years, and I cannot see anything which differentiates this type of inquiry from the types of inquiry under the three previous Acts, which all contain provisions of this kind. Even if the limitation suggested by the hon. Member could be included it would still be at the discretion of the Registrar, still be for him to decide, and I cannot help feeling that it is a salutary power from the point of view of securing a speedy investigation.

Amendment agreed to.

6.0 p.m.

Mr. Bellenger

I beg to move, in page 9, line 28, to leave out paragraphs (a) and (b), and to insert: or amalgamates with, or transfers its engagements to, any such company in accordance with the said section—

  1. (a) the amount which is to form the nominal share capital of the company or, as the case may be, the amount of any increase made in the amount of the nominal 1616 share capital of the company by reason of the amalgamation or transfer shall, for the purpose of the charge to stamp duty under Section one hundred and twelve of the Stamp Act, 1891, be treated as being reduced by an amount equal to the amount which, immediately before the said twenty-sixth day of July, formed the paid-up share capital of the society;
  2. (b) no stamp duty shall be payable on any conveyance, assignment, or other instrument of transfer, of any of the property of the society, being an instrument executed in pursuance of the conversion, amalgamation or transfer, as the case may be; and
  3. (c) the fees which, by virtue of Section three hundred and thirteen of the Companies Act, 1929, become payable on the registration of the company or, as the case may be, payable by the company in connection with the amalgamation or transfer, shall be deemed to have been paid."
Hon. Members will remember that under paragraphs (a) and (b) of Sub-section (1) of this Clause, the Registrar has power to cancel the registry of a society registered under the Industrial and Provident Societies Act, and thereupon that society has the option within one year of the cancellation of converting itself into a company under the Companies Act, 1929. In paragraphs (a) and (b) of Clause 5, no Stamp Duty or fees are charged on the conversion of this provident, society into a limited company. It may be that the society whose registry is cancelled might not convert itself into a limited company, but might amalgamate with another company or transfer its obligations and assets to the other company registered under the Companies Act. Therefore, it is suggested that where an amlagamation of this sort takes place, or a transference of the assets and liabilities of a society whose registry has been cancelled, to another company, the aggregate share capital of the newly-formed company shall not incur Stamp Duty or fees. This is only an extension of the present provision already in paragraphs (a) and (b) of Clause 5. I think that the right hon. Gentleman can accept this Amendment because it seems to follow from an Amendment which has already been passed, moved by him, providing for such a transaction, namely, the amalgamation or the transference of the assets or liabilities of such a society.

Mr. Ede

I beg to second the Amendment.

6.2 p.m.

Mr. Stanley

The hon. Gentleman, and I think also the right hon. Gentleman the Member for West Stirling (Mr. Johnston), called attention to this point on Committee and claimed that it was a necessary extension of the privilege that we had already given under this Clause to a society which, within the period of time, wished to convert itself into a company. During the discussion on the Committee stage I admitted the correctness of the hon. Gentleman's contention in principle, but doubted the actual drafting of the Amendment which he had put down and which did not appear to cover all the cases. In the Amendment which we are now considering the drafting omissions have been corrected, and it covers all the possible cases. It is certainly an alteration which should be made, and I am prepared to accept it.

Amendment agreed to.