Lord BroughamI should hope that the noble Lord on the woolsack does not mean to press this most exceptionable bill, founded on a principle the most abominable, for carrying into effect the bad act of last Session, giving rise to every species of fraud and dishonesty. It has not answered in France. A man of straw is set up, and all the rest are answerable only to the amount of about 100l. I hope the present Trading Companies Act will not pass, and if it is brought forward now, I shall move that it be read a third time this day three months.
§ The Lord Chancellor. I cannot give up the Bill.
§ The Lord Chancellor. My Lords, in order to accommodate my noble Friend, as he appears rather anxious to quit the House, I will at once move the order of the day for the third reading of the Bill.
Lord Brougham. Then, my Lords, I move as an amendment, that the Bill be read a third time this day three months. The object of the Bill is to enable the Crown to constitute any three or twenty persons a corporation for the purpose of carrying on a trade; at the same time making those persons liable only to the amount they have embarked in that trade. Now that, my Lords, in my opinion, gives a licence to every species of fraud. The last Bill that has been introduced on this subject has been productive of the worst results, and the effect of the present measure will be to make that which was bad enough before, ten times worse.—Therefore it is that I hope your Lordships will not allow this measure to be read a third time.
§ The Lord Chancellor. My Lords, the bill of last year requires great alterations, and the object of the present measure is to 1208 supply its omissions and defects. The Act of the last Session authorised the Crown to sanction the incorporating associations of persons for effecting, by their joint capital, public works and objects, but it did not comprehend companies formed prior to the Act. The object of the present bill was to remedy that defect upon all companies complying with the regulations laid down by the act that was now in force. There is sometimes great difficulty in making corporations pay the demands against them, because very often their property is not to be found; by the present bill, every person must register their shares; parties, therefore, well know the extent to which they are liable, and the public will be aware of the persons with whom they have to deal.
Lord Brougham. My Lords, I have already stated to your Lordships the objections I entertain to this measure, and also to the bill of last year. That measure gives to the proprietors of Trading Companies only a limited responsibility, and relaxes that care and vigilance which every partner in a concern ought to keep over the whole of his partners. The result of which is, my Lords, that for want of that vigilance many a concern will be brought to a stand still, and many hundreds of individuals will be ruined. Oh! but, says my noble and learned Friend, the names of all the shareholders must be registered. Now, I think there is very little in that. We all know the effect of great names, such as Baring, Mellish, and others. A man when he gets a bill of theirs, does not go inquiring about their respectability, because he knows he can get the money for that bill at any time; so with respect to many of these companies, people don't go to the Register to see who are proprietors and who are not. They see great names attached to the direction, in many instances without the sanction of the parties, they give them credit, they advance them money, and probably the next day they find them all in the Gazette.—Now, a law on the same principle has been tried in France, and most signally failed. It is the practice often in companies, for some of the acting partners to fabricate accounts of fictitious property, and to make it appear that they are able to pay a dividend of twenty per cent, for the present year, and a similar dividend for the next, and so they go on till the whole capital is absorbed, while all the time there has been 1209 nothing but loss instead of profit. It is very easy, my Lords, to produce mystification and delusion by means of accounts, when persons are disposed to do so; and, therefore, it becomes necessary that means should be taken to prevent such proceedings. Under the good old system, in case of a defalcation, the directors were made to disgorge their profits if it should be proved that they had not acted fairly, but under the new French system they are allowed to pocket their own accounts, to the ruin of the other shareholders, and are not to be liable beyond the extent of 100l. I think, as I have clearly shewn, that the result of this system in France has been most mischievous, your Lordships will hesitate long before you make it effectual in England—and that being the object of the present bill, that you will reject it altogether.—The measure, my Lords, was originally resorted to in a poor country, where the means were required to draw capital into trade, but that is not the case in England, for here there is too much disposition to invest capital in trading speculations. My Lords, it is far from my wish to check the spirit of fair speculation, but I cannot but think that the present bill if it become law, would tend to encourage the investment of small sums in enterprises which would neither afford benefit to those engaged in them or the community at large.—For these reasons I trust that your Lordships will reject the bill.
§ The Lord Chancellor. My Lords, the observations of the noble Lord may apply very well to the ordinary matters of trade, but they can have no reference at all to great public works. My Lords, I would ask your Lordships whether there are no Railway Companies and no Canal Companies whose directors deal fairly with their proprietors? The real question for your Lordships is, whether the proposed system is not better for the individuals concerned and the community at large, than that of placing their capital in the hands of Corporations, against whom the individual creditors could not enforce their claims?
Lord Brougham. I beg to say it is not. Five hundred persons cannot form themselves into a company—they must have an Act of Parliament, and the Act of Parliament almost always gives them a general responsibility, and hardly one of them are liable. If Railway and other Companies go on well, much of this is to be attributed to the wisdom of Parliaments and the new 1210 rules of the House, by which the merits of every private bill are fully and accurately sifted. By the present bill the whole details are taken out of the hands of Parliament, and transferred to the discretion of two or three private individuals, who may perhaps be influenced by party or personal motives.
§ The House divided. Contents 10; Not Contents 12; Majority 2.
§ Bill thrown out.