FINANCIAL POWERS (U.S.A. SECURITIES) BILL. (Hansard, 25 July 1941)

§ Sir John Mellor (Tamworth)
I wish to raise a point with regard to Sub-section (4) of Clause 2, which begins as follows: (4) On the placing of the disposal of the Treasury of any security any right conferred by this Section to release or payment in respect of the security, or to payment in respect of any income or other payment arising there from, shall vest in the person who, immediately before the placing thereof at the disposal of the Treasury, was entitled (whether as bailee or otherwise) to possession of the documents of title to the security. … I wish to ask what will be the position of a registered shareholder of shares which will be affected by this Bill who has deposited his certificates with someone as security for a loan. Under this provision, as I read it, when the shares are pledged the Government, in making any payment whether of capital or on account of income, will recognise only the person with whom the certificate had originally been deposited In fact, the shareholder will be ignored altogether. In the case of a bearer security, I do not see that it would make any difference, but in the case of a registered share probably what had been happening was that the shareholder received his dividend direct from the company and he had merely deposited his certificate, probably without any transfer attached to it, with a person as security for a capital sum. I do not think this will work very satisfactorily from the 1208 point of view of a shareholder in that position, and I should be very grateful if whoever replies would give some assurance on that point, namely, that the shareholder, in a case where he has deposited his certificate as security, will not altogether be ignored.

§ The Attorney-General (Sir Donald Somervell)
My right hon. Friend will certainly look into that case. If you take the ordinary case where a share certificate has been deposited with a bank, the owner would have to get it out of the bank in order to be able to deliver it to the Treasury. Normally he might have to pay off the loan in order to get it out of the bank, and that, of course, might be inequitable. I do not think, however, that this problem is likely to arise in practice, but my right hon. Friend will certainly look into it, with a view to seeing how the position might be met within the words of the Bill. It really comes to this: when the shares are called for, it is the duty of the owner to deliver them, and, of course, if he holds them free of any lien or charge, no difficulty arises, but if there is a charge upon them, and if he has not got them to deliver and cannot obtain them without paying off a loan, that would be a case to be specially considered. Naturally, there is no desire to put such burdens on people, and the position will therefore be specially considered.

§ Sir J. Mellor
But may I draw the attention of my right hon. and learned Friend to paragraph 6 (1) of the Draft Regulations? It begins in this way: 6.—(1) In these regulations the expression owner,' in relation to any security, includes any person who has power to sell or transfer the security, or who has the custody thereof. … I suggest, therefore, that what would happen in practice would be that the Government would require the banker—or whomsoever the security was deposited with—to deliver the security—that is, the certificate—to them and that, except that they might require the shareholder to execute a transfer so that the security became saleable, they would not have to require the shareholder to do anything or to pay off his loan. That would remain secured by such rights as the banker would have to receive payment from the Government. My point was that the banker or whoever else the certificate may have been deposited with would not only 1209 receive payments on capital account, but would also receive payments in respect of income, and I suggest that that would very definitely alter the position of the shareholder.

§ The Attorney-General
I understand that it would not have the effect my hon. Friend says, though I am not disputing that the words might not cover the action he is suggesting. I understand that it would be the pledge—the owner—who would be directed to deliver the securities, and if he said it was difficult or impossible for him to do so owing to the fact that he had pledged them, that would be considered as a special pledge. Perhaps my hon. Friend will leave it at that for the moment, and may right hon. Friend will communicate with him as to how it is intended to deal with the class of case which he has in mind and which I quite agree is one that we wish to see properly dealt with.