PROTEST (Hansard, 7 August 1855)

§ LORD STANLEY OF ALDERLEY
then moved that the Bill be read a second time. He had always been of opinion that the present state of the law required amendment amongst other reasons, because it tended to drive British capital into other countries where similar obstacles to its employment did not exist. An illustration of this came under his own observation shortly after he went to the Board of Trade. An application was made to that Board by a large Steam Navigation Company which wished to obtain limited liability for the establishment of a communication between this country and Canada. This application was resisted with great obstinacy by the directors of Cunard's line and other existing Companies, and the result was that a charter was refused to the parties. This case convinced him of the very objectionable state of the law of partnership, which left the granting or withholding of charters entirely to a department of the Government that was liable to be influenced, or to be suspected of being influenced, by the representations of persons already in the trade, and who were naturally opposed to competition. Ultimately the Company to which he referred went to Canada, where these restrictions did not exist, and obtained a charter there. Another great objection to the present state of the law was, that it prevented small capitalists associating together and enjoying those advantages which were derived from the employment of a large capital. There was another object to be gained which he thought was of even more importance than this: at present the feeling existed among the operatives, and less wealthy classes of the community, that the law was made for the rich by the rich; he wished them to feel that the law was made by the rich for the poor as well as for the rich. He was not one of those who expected that any very great advantage would be gained by the association together of a number of operatives to carry on industrial establishments; for he thought that mercantile operations would be more successfully carried on by one or a few individuals, or by small partnerships, than they could possibly be by a large number of men who must delegate the management to a single individual or to a few persons; but it was only fair that the opportunity should be afforded to the 1920 smaller capitalists, and that they should not be deprived by the state of the law from whatever benefits were to be derived from combination and association in the employment of capital. Another reason why he thought it extremely desirable to introduce the principle of limited liability was, that the present state of the law prevented careful and prudent men from joining in these undertakings, and that, consequently, large trading Companies were now frequently formed by the rash and reckless. The next question was—how could they best effect an alteration of the present law without giving rise to greater evils? And it struck him that the law, as described by the noble and learned Lord, presented a mode of doing it. The noble and learned Lord said that the law as it at present existed prevented no person from having limited liability, because any person or Company might secure limited liability by making a special contract with each individual with whom they had any concern. That was perfectly true, and was carried into effect with regard to Insurance Companies, but was perfectly impracticable in the multifarious transactions of commerce. By the present Bill he proposed to give life to that principle, taking care that each individual who dealt with these Companies should have full knowledge of the condition and circumstances of the Company which seemed to be the true and sound principle upon which all commercial transactions should depend. For this purpose the greatest publicity would be given to the conditions on which the Company carried on its transactions. It was provided, not only that the Companies so carrying on business should have "limited liability" conspicuously painted on their premises, but that those words should be at the head of all their papers, their bills, and the instruments by which they carried on their business. No restrictions would be imposed on these Companies beyond those now imposed on Joint stock Companies. He thought there was no principle more true than that a person dealing with another person had no right to complain if the conditions were fulfilled on which he gave him credit. It was said that this alteration was not necessary; that this was a country where there was a super abundance of capital; that limited liability might be desirable in America and other countries where there was a small amount of capital, but was not necessary here. To 1921 a certain extent that was true; there was a large amount of capital in the hands of rich men in this country:—but what was wanted was that the poor man might be able to turn his small capital to account without running the risk of losing all he had. It was said that limited liability would encourage wild speculation; but unlimited liability in 1825 did not prevent schemes being propounded, involving capital to the amount of 160,000,000l., many of which schemes were of the most wild and extravagant nature. Another objection to the measure was that it would be injurious to persons at present carrying on business. If there was any reason in that objection, it was that these new Companies would carry on business on more favourable terms to the public, and thereby get a great portion of the trade. That he thought was rather an argument in favour of the Bill, as the public would obtain the benefit of the alteration in the law. Then, if it was desirable to make this alteration, no time could be more favourable than the present, for in a time of war people were not disposed to speculate readily in wild schemes, though at the same time they were desirous of employing their money profitably. He was satisfied that the apprehensions expressed in respect to the operation of the Bill were in a great degree merely conjectural and were entertained principally by that class of persons who had a superstitious dread of altering a state of things under which alone they fancied the country could be prosperous. The amount of capital provided by the Bill as originally introduced to be subscribed by the Company had been altered by the House of Commons, who by a large majority decided that there should be no certain amount of capital subscribed, but that the deed of settlement must be executed by shareholders, not less than twenty-five in number, holding shares to the amount, in the aggregate of at least three-fourths of the nominal capital of the Company; and there should have been paid up by each of such shareholders, on account of his shares, not loss than 20 per cent, and that the shares should not be of less value than 10l.; and that in complying with these conditions, and the others prescribed in the Bill, any Company should obtain registration. The other portions of the Bill were for the purpose of enabling Companies already in existence to come under the operation of the Bill. These 1922 were the principal provisions of the Bill. He would not go into the details, but after the second reading he trusted that they would give every consideration to its various provisions.

§ EARL GREY
said, that as far as he was informed on the Bill, his leanings were in favour of its principle, and the objection he had urged referred simply to their Lordships discussing at this time, and in the present state of the House, a great change in our commercial law, to which there was no opportunity at present of giving anything like due care and deliberation. He deeply regretted that their Lordships had come to a different determination on that point: for although he admitted the importance of the measure he could not admit that its urgency was such that it would not admit of being postponed for six months with the view of giving it full consideration. By the course they had taken their Lordships ran all the risks of hasty and dangerous legislation. He was not opposed to the principle of the Bill, and therefore should not vote against the second reading. When the House went into Committee he should endeavour to render the Bill as safe as possible; and he trusted Her Majesty's Government, having induced this House to waive their recorded resolution upon the express promise that this Bill should, even at this late period of the Session, be duly and fairly considered, would not endeavour in the further stages of the measure to prevent its receiving the fair consideration which it deserved.

§ LORD REDESDALE
said that he, like the noble Earl, was rather favourable than otherwise to the principle of the Bill; but there were many points with respect to which he felt much difficulty. Among other things he thought there ought to be some margin, beyond the amount of the shares, up to which a Company should be liable to pay in case of bankruptcy. He would be very ready to give any assistance in his power in order to improve the Bill, for the full and fair consideration of which time ought to be allowed. Some remarks had been made respecting the Standing Order which had been suspended, and which was said to be unconstitutional. He, however, thought it was a useful rule, as it was well known that after a certain time a determined opposition could prevent the passage of a measure through the other House, while in their Lordships' House it 1923 was quite the contrary, the minority being completely at the mercy of the majority. However, if the interpretation which had been placed upon the Standing Order was to be maintained—that the importance of a measure proved its urgency, he doubted whether he should propose the renewal of the Standing Order in a future Session. He must repeat that he considered the present a most unfit period at which to dispose of so important a subject, for, if any Amendments were made when the Bill went back to the other House, it would be impossible for these Amendments to be properly considered. That such a measure should be forced on the House, without an opportunity of full consideration, was, he conceived, a matter very much to be lamented.

LORD WYNFORD
thought the Bill was imperfect, in not providing for the case of a Company which exceeded its capital. The management of Companies was intrusted to a few persons, and if those persons abused their trust, there did exist at present means of punishing them; but under the proposed law no such means would exist.

LORD DENMAN
said, persons who were inclined to commit frauds of the kind alluded to might be certain that some criminal law would be passed to meet their cases if necessary. He thought it desirable that all objections to the measure should be fully stated, as he believed they could all be answered, or at least obviated by Amendments.

REDESDALE.	ST. LEONARDS.
HAWARDEN.	MONTEAGLE OF BRANDON.
LYTTELTON.	BATH.
GREY.	WYNFORD.
ST. VINCENT.