HL Deb 14 May 1907 vol 174 cc749-62

Report of Amendments received.

Clause 11:—

THE EARL OF GRANARD

said the object of his Amendment to this clause was simply to impose a penalty, by reference to the Companies Act, 1862, on every director and officer of a company who refused to allow the inspection of a register of mortgages.

Amendment moved— In Clause 11, page 10, line 24, to leave out from the word 'company,' to the word 'provided' in line 26, and to insert the words, 'in like manner as the register of mortgages under section forty-three of the Companies Act, 1862, and the provisions of that section (including the penal provisions thereof) shall apply accordingly.'"—(The Earl of Granard.)

On Question, Amendment agreed to.

Clause 17:—

LORD AVEBURY

moved to amend this clause, which dealt with the power to re-issue redeemed debentures in certain cases, by adding, after the words— Where either before or after the passing of this Act a company has redeemed any debentures previously issued. the words— Or reissued under this Section. He said he had placed this Amendment on the Paper on behalf of the Central Association of Bankers, who were advised by their legal representatives that the words ought to be inserted in order to carry out the intentions of His Majesty's Government.

Amendment moved— In Clause 17, page 12, line 9, after the word 'issued,' to insert the words 'or re-issued under this section.'"—(Lord Avebury).

THE EARL OF GRANARD

said the legal advisers of the Board of Trade were of opinion that the section as it at present stood covered the point raised by the noble Lord. In these circumstances, he hoped the Amendment would not be Dressed.

Amendment, by leave, withdrawn.

LORD AVEBURY

explained that the Central Association of Bankers were advised that the words in his next Amendment were also necessary to carry out what was understood to be the intention of His Majesty's Government. He bagged to move.

Amendment moved— In Clause 17, page 12, line 13, after the word 'do' to insert the words 'contained in such debentures or in any trust deed securing the same.'"—(Lord Avebury.)

THE EARL OF GRANARD

said the point raised by the noble Lord would be dealt with in an Amendment which he (Lord Granard) would next move—viz.: to insert, instead of the words proposed by Lord Avebury, the following words— and not being an obligation enforceable only by the person to whom the redeemed debentures were issued. The object of the Government was to secure the protection of second debenture holders or other subsequent creditors.

LORD AVEBURY

said that if the noble Earl thought his words met the case batter he was prepared to leave the matter in his hands.

Amendment, by leave, withdrawn.

THE EARL OF GRANARD

then moved the Amendment to which he had referred.

Amendment moved— In Clause 17, page 12, line 13, after the word 'do' to insert the words 'and not being an obligation enforceable only by the person to whom the redeemed debentures were issued.'" —(The Earl of Granard.)

On Question, Amendment agreed to.

LORD AVEBURY

moved to omit the following proviso at the end of Subsection (1) of Clause 17— Provided that nothing in this section shall prejudice the operation of any judgment or order of a court of competent jurisdiction pronounced or made before the seventh day of March one thousand nine hundred and seven as between the parties to the proceedings in which the judgment was pronounced or the order made, and any appeal from any such judgment or order shall be decided as if this Act had not been passed. In his opinion the words would come in better later on. He understood that that was also the view of the Government.

Amendment moved— In Clause 17, page 12, line 22, to leave out from the word 'issued' to the end of Subsection (1)."—(Lord Avebury).

THE EARL OF GRANARD

accepted the Amendment.

On Question, Amendment agreed to.

LORD AVEBURY

said the insertion of the words which he proposed was in accordance with Amendments which had been introduced in other parts of the Bill. He believed the Amendment had the approval of the noble Earl in charge of the Bill.

Amendment moved— In Clause 17, page 12, line 31, after the word 'have' to insert the words 'whether before or after the passing of this Act.'"—(Lord Avebury.)

THE EARL OF GRANARD

accepted the Amendment, which he said was necessary in order to make it clear that the clause was intended to be retrospective. He had an Amendment on the Paper to the same effect.

On Question, Amendment agreed to.

LORD AVEBURY

moved an Amendment to Subsection (3). This subsection ran— (3) Where a company has deposited any of its debentures to secure a current account, the debentures shall not be deemed to have been redeemed by reason only of the current account having, whilst the debentures were so deposited, been in credit. His Amendment was to omit the words "a current account," and to insert the words "an advance. The clause as it stood would only apply to advances by bankers. In many cases companies obtained advances from insurance companies, and it would be very hard if they were precluded, as they would be unless his Amendment were accepted, from going to insurance companies for advances. Moreover, insurance companies would be deprived of a profitable business. But, more important still, a company would be deprived of the guarantee of the validity of debentures. If a company had deposited debentures with a bank and had redeemed them, those debentures would be perfectly good; but, unless his Amendment were accepted, they would not be good if they had been deposited with an insurance company and subsequently redeemed. It would be impossible for an ordinary purchaser in the open market to determine whether or not a debenture was good, because it would be impossible to ascertain whether it had been deposited with an insurance company for an advance, in which case it would be bad.

Amendment moved— In Clause 17, page 12, line 35, to leave out the words, 'a current account,' and to insert the words 'an advance.'"—(Lord Avebury.)

THE LORD CHANCELLOR (Lord LOREBURN)

said that this Amendment and two other Amendments which were consequential had only just been handed to him. They were not on the Paper, and therefore he had not had an opportunity of examining them, critically; but, as far as he could see, the Amendments seemed to be in the right direction. The purpose of the noble Lord was to secure that a debenture should not be vitiated by reason of any advance being repaid. That appeared to be sound, and he would accept the Amendment, reserving to himself the right to reconsider the point on further inquiry.

On Question, Amendment agreed to.

Consequential Amendments agreed to.

LORD AVEBURY

said his next Amendment was a purely technical one. It did not alter the Bill in any way, but he was advised that the words were desirable in order to carry out the intentions of the Government. He would not, however, press the Amendment if the words were considered unnecessary.

Amendment moved— In Clause 17, page 12, line37, after the word 'credit,' to insert the words, 'or cease to be in debit, nor shall other holders of debentures of the same series or class or any subsequent encumbrancers be entitled to treat payments into such account as in reduction of the amount for which the debentures in security may rank as against such other holders or subsequent encumbrancers.'"—(Lord Avebury.)

THE EARL OF GRANARD

said that, so far as the Government were concerned, they accepted the principle of the first part of the Amendment, but not the second part, which would create an exception in the general law of mortgage in favour of a particular class. For this reason it would be inadvisable for the Government to agree to the Amendment.

LORD ALVERSTONE

submitted that something of the kind was required, but agreed that the words in the Amendment as they stood would not do. With regard to the latter part of the Amendment, there was, he thought, some necessity for a proviso to meet that case.

THE LORD CHANCELLOR

said he had some misgivings on the point. It seemed to him that the effect of the Amendment would be to violate what he regarded as a very fair rule. Therefore, while he was prepared to consider it, he at present inclined to the view that it could not be accepted.

LORD AVEBURY

said that if the noble and learned Lord would consider the point he would not press the Amendment.

Amendment, by leave, withdrawn.

LORD AVEBURY

moved the insertion of a new subsection to meet a case, which, he said, was more common in the country than in London, in which debentures were issued in blank. It had been pressed upon him very strongly from the country that words of this kind were desirable.

Amendment moved— In Clause 17, page 12, after Subsection (3) to insert the following new subsection: —(4) The foregoing provisions shall mutatis mutandis apply and be deemed to have applied not only to debentures or debenture stock issued as completed securities, but also to debentures or certificates for debenture stock deposited or issued in blank with or without power to fill up the blanks, and to provisional certificates for debentures or debenture stock.' "—(Lord Avebury.)

THE LORD CHANCELLOR

said the object of the Amendment seemed to be that in cases where there had not been what in ordinary parlance was called an issue, but where there had been debentures or certificates for stock deposited in blank, the fact that the debt had been paid off should not vitiate the debentures. He thought the Amendment was unnecessary, on the ground that it had been decided, and rightly decided, that a transaction with debentures of that kind was, in fact, an issue, and, accordingly, would fall within the provisions stated earlier in the Bill, which prevented the issue of debentures being vitiated by the process in question.

LORD ALVERSTONE

entirely agreed with the Lord Chancellor, but asked the noble and learned Lord to consider, in connection with this matter, the last words of the Amendment. He doubted very much whether the cases referred to applied to provisional certificates for debentures.

THE LORD CHANCELLOR

said he would give the point his attention. It might be that it would require consideration.

LORD AVEBURY

stated that as this was a highly technical point he would leave it in the hands of the Lord Chancellor.

Amendment, by leave, withdrawn.

LORD AVEBURY

moved the re-insertion of the proviso which had been deleted from an earlier part of the clause.

Amendment moved— In Clause 17, at the end, to insert the words, 'Provided that nothing in this section shall prejudice the operation of any judgment or order of a court of competent jurisdiction pronounced or made before the seventh day of March one thousand nine hundred and seven as between the parties to the proceedings in which the judgment was pronounced or the order made, and any appeal from any such judgment or order shall be decided as if this Act had not been passed.' "—(Lord Avebury.)

On Question, Amendment agreed to.

Lord AVEBURY

moved an addition to the proviso just added to the clause.

Amendment moved— In Clause 17, at the end, to insert the words, Provided also that nothing herein contained shall derogate from or prejudice any power to issue debentures in the place of any debentures paid off or otherwise satisfied or extinguished reserved to a company by its debentures or the securities of the same.' "—(Lord Avebury.)

On Question, Amendment agreed to.

Clause 21:

LORD AVEBURY

reminded their Lordships that there was some discussion on this clause when the Bill was in Committee, and said that one or two noble Lords imagined that he was proposing to leave out an obligation on the part of the company to give notice to the shareholders when there was proposed to be any change of auditor. But the real effect of the clause, as it stood, was that unless the directors chose to give such notice there could be no change of auditor. If his Amendment were agreed to the subsection would read— A person, other than a retiring auditor, shall not be capable of being appointed auditor at an annual general meeting unless notice of an intention to nominate that person to the office of auditor has been given by the nominator to the company not less than fourteen days before the annual general meeting, and the company shall, at the expense of the nominator, send such notice to every shareholder and to the retiring auditors not less than seven days before the annual general meeting. He understood that the noble Earl in charge of the Bill was prepared to accept the Amendment with the exception of the words requiring that the notice should be given "at the expense of the nominator." Unless the notice were given at the expense of the nominator anyone might nominate an enterprising young man as auditor to a particular company and therefore impose on the company the unnecessary expense of sending a notice to every shareholder advertising the person nominated. It was agreed that, if the proposed auditor should be elected, then the expense of the notice should be borne by the company; but he did not think companies should be put to the expense of sending round notices of the nomination of an auditor who had really no chance of being elected.

Amendment proposed— In Clause 21, page 14, line 23, after the word 'days' to insert the words 'before the annual general meeting,' and leave out the word 'by, and after the word 'company' to insert the words 'shall, at the expense of the nominator, send such notice,' and after the word 'shareholder' to insert the words 'and to the retiring auditors.' "—(Lord Avebury.)

THE EARL OF GRANARD

said the Government were not prepared, without further consideration, to accept the words "at the expense of the nominator." They thought it rather hard that, in the case of a shareholder wishing to nominate an auditor, all the expense should be borne by him. The Government proposed to submit several of the points that had been raised to the Committee on whose recommendations the Bill had been drafted, and this point would be one of those referred for consideration.

LORD ALVERSTONE

suggested that the question of notice being given to retiring auditors should also be considered. It was a small matter, but he thought the provision might lead to canvassing and other undesirable results.

* LORD FABER

did not like the idea that the shareholders who proposed an auditor should have to pay for the issuing of the notices. In the case of a very large company the expense would be almost prohibitive, and, therefore, it would come to this, that the auditor would only be proposed by the company. As the auditor was appointed for the protection of the shareholders this would be a very awkward result. He agreed that it would be hard on a company if a shareholder, in a frivolous spirit, proposed an unfit person as auditor, but of the two difficulties he thought they had better face the second.

THE LORD CHANCELLOR

said he was prepared to agree with Lord Faber, but, as the Board of Trade wished to consult the Committee on this and kindred points, he thought it would be best to allow them to do so.

LORD AVEBURY

said he was quite ready to leave the point in question to be considered by the Committee, and he moved his Amendment without the words "at the expense of the nominator."

Amendment, as amended, agreed to.

LORD AVEBURY

moved the insertion of a new sub-section dealing with the question of auditors. He said it had been held in some cases that the auditors named in the prospectus had not really been appointed at all, and therefore some such provision as that contained in his Amendment was obviously necessary.

Amendment proposed— In Clause 21, page 14, line 32, after the word 'pounds' to insert as a new subsection: —" (6) Where in any prospectus issued by a company any person is named as the auditor, the said person shall, unless he resign the appointment, continue to be the auditor of the said company until the first annual general meeting succeeding the issue thereof.' "—(Lord Avebury.)

THE EARL OF GRANARD

said he would be obliged if the noble Lord would not press the Amendment. The whole subject would go before the Committee, and the Government would act on their recommendation.

Amendment, by leave, withdrawn.

Drafting Amendments agreed to.

Clause 41:

LORD AVEBURY

moved to omit the words "independently of the presence or votes of any shareholders or any other class" from the following proviso— But provided always that no preference or special privilege attached to or belonging to any class of shares shall be interfered with except by a resolution passed and confirmed by shareholders of that class, independently of the presence or votes of any shareholders of any other other class, and every resolution so passed shall be a valid special resolution binding all shareholders of such class. As the clause stood, the holder of preference shares could not vote upon a matter affecting ordinary shares, and vice versa; but, unless the words which he proposed to delete were omitted, a person who held both classes of shares would not be able to vote at all.

Amendment proposed— In Clause 41, page20, lines 40 and 41, to leave out the words 'independently of the presence or votes of any shareholders of any other class.' "—(Lord Avebury.)

THE EARL OF GRANARD

said the Government thought the Amendment of the noble Lord greatly improved the clause, and they had much pleasure in accepting it.

On Question, Amendment agreed to.

THE EARL OF GRANARD

moved to insert a new clause after Clause 46. He explained that the object was to secure that all extraordinary resolutions should be filed with the Registrar in like manner as special resolutions.

Amendment proposed— After Clause 46, to insert as a new clause: 'An extraordinary resolution for the purposes of the Companies Act, 1862, and this Act, moans a resolution which is passed in such manner as would, if it had been confirmed by a subsequent meeting, have constituted a special resolution, and section fifty-three of the Companies Act, 1862, shall apply in the case of an extraordinary resolution in like manner as that section applies in the case of a special resolution, with the substitution of a reference to the date of the passing of the extraordinary resolution for the reference to the date of the confirmation of the special resolution.' "—(The Earl of Granard.)

On Question, Amendment agreed to.

Clause 50:

* LORD BALFOUR OF BURLEIGH

asked the Lord Chancellor, before the Bill finally left their Lordships' House, to reconsider the subsection which he (Lord Balfour) had suggested should be added to Clause 50, but which the noble and learned Lord desired should not be pressed at a former stage. The proposed new subsection to which he referred read— The provisions of this Act with respect to the registration of mortgages and charges shall not apply to companies registered in Scotland. The noble and learned Lord refused to accept that subsection when the Bill was in Committee. The point he wished the Lord Chancellor most carefully to consider was whether or not the clauses headed "Mortgages and Charges" (11 to 20 inclusive) would apply to Scotland. If they did so apply, Scottish companies would be put to serious and unnecessary expense. There was no doubt that at present mortgages and charges created by limited companies had not to be registered with the Registrar of Joint Stock Companies in Scotland, but such mortgages and charges were already registered under the law of Scotland in the Register of Sasines, and it would be unfair to make a second registration necessary. Section 34 (2) of the Act of 1900 provided that the provisions of that Act with respect to the registration of mortgages and charges should not apply to companies registered in Scotland. This subsection was inserted on the Report Stage of that Bill, and the insertion was due to the sudden discovery that under the Scottish law there were not, and never could be, any floating charges the iniquities of which were so eloquently denounced by Lord Lindley and which it was intended to put a stop to. Section 14 of the Act of 1900 containing the principal provisions as to the registration of mortgages and charges was repealed by this Bill, and there was some doubt whether the saving clause for Scotland would or would not apply to the new provisions in this Bill. Great importance was attached to Scotland being excluded from the provisions of this Bill as to registration of mortgages and charges, and he hoped that point would have the careful consideration of the noble and learned Lord on the Woolsack.

THE LORD CHANCELLOR

said he would consider the point. The mischief against which the registration of mortgages by companies was directed was that people dealing with companies which had a limited liability sometimes found, when they tried to enforce their claims, that there were mortgages which had been undisclosed to the public, and the disclosure of which would have prevented any person giving the company credit. As soon as the unfortunate creditor attempted to enforce his claim for a just debt down came the mortgagor, who was often the promoter of the company, and swept off all the assets under a mortgage which no one had ever heard of. That was a flagrant and a great wrong, and clauses had been inserted in this Bill to secure that there should always be publicity in regard to any such transactions, so that no one should be cheated in consequence of the apparent prosperity of a company which was, in fact, mortgaged up to the hilt. The registration of mortgages and charges on heritable property was required under the Scottish law, but the mortgages to which he had referred had no connection with heritable property. They referred to book debts, uncalled capital, and so forth; and the result was that the registration of heritable property only would not provide the necessary security. He wished to know whether it was desired that companies in Scotland should not be obliged to register mortgages on movable property. If that was the real wish of the people of Scotland, well and good; but he thought they ought to be satisfied, in the face of the great mischief to which he had alluded, that this was the wish of the people of Scotland before inserting any such provision. For himself he would not, in this matter, accept the view of the legal profession, for this was a part of high public policy. If Lord Balfour would elucidate that matter he would be very grateful to him, and would promise the best consideration to any view put forward.

* LORD BALFOUR OF BURLEIGH

said that so far as mortgages and charges on heritable property were concerned there was nothing between them. But his information went to show that in Scotland no effective mortgage or charge could be given upon assets remaining in the hands of a company such as could be created in England by a mortgage or charge on uncalled capital, a bill of sale, or a floating charge; and registration of charges other than those affecting heritage, already provided for, was therefore unnecessary. If that was right it was clear that this part of the Bill should not apply to Scotland. His information came from those who had carefuly considered the matter, and not from company promoters or persons against whom the Bill was directed. He hoped the noble and learned Lord on the Woolsack would ascertain for himself whether the law was as he (Lord Balfour) had stated it.

THE CHAIRMAN OF COMMITTEES (The Earl of ONSLOW)

said he had carefully abstained from rising until the noble Lord had resumed his seat. But a, Committee of their Lordships' House had been appointed to consider the question of order in debate, and he would be greatly surprised if that Committee did not find that it was out of order for a noble Lord to address the House more than once on Report.

* LORD BALFOUR OF BURLEIGH

agreed that he had been out of order in speaking again on the same matter, but said it would be in the recollection of the House that the noble and learned Lord on the Woolsack had appealed to him for information. But for that fact he would not have risen again.

THE LORD PRIVY SEAL (The Marquess of RIPON)

said the noble Earl the Lord Chairman was quite right. Their Lordships had got so demoralised in consequence of the latitude during the discussions on the Education Bill last year that they appeared to have forgotten the rule of the House. He only rose to press upon their Lordships the fact that the rule was that no Peer could Speak more than once on the Report Stage.

THE LORD CHANCELLOR

My Lords, I hope I shall not be out of order if I say one word about this Bill now that it is through Report. I have been asked whether it is possible that the Third Reading could be taken the day after to-morrow. That request is made on the ground that it would be possible to find a really early day in the House of Commons before this House meets again after the Whitsuntide recess. It would be a great convenience if your Lordships would agree to this course, and it would enable us to get on with the Bill. If the House will consent to that I will promise my noble friend Lord Balfour that the point he raised shall be fully considered with a view to its being dealt with in the House of Commons.

* LORD BALFOUR OF BURLEIGH

I most readily respond to the appeal of the noble and learned Lord. I am sure it is a matter which he could deal with in consultation with others much better than on the Third Reading in this House.

THE MARQUESS OF LANSDOWNE

In the ordinary circumstances, considering that the Bill this evening has been dealt with somewhat freely and without the House having always a full opportunity of knowing what was proposed, I think we should have asked for a longer period in which to reconsider the Bill in its amended form. But I understand that the Bill receives the consent of your Lordships on both sides and that some of my noble friends behind me, who have taken a closer interest in it than we have been able to take, are in favour of the course proposed by the noble and learned Lord on the Woolsack. If that is so, we on this Bench shall raise no objection to that course being taken.

LORD AVEBURY

I quite agree to the course proposed, and I should like to thank the noble and learned Lord on the Woolsack and Lord Granard for the courtesy with which they have met the Amendments that have been suggested.

Bill to be read 3a on Thursday next, and to be printed as amended. (No. 55.)