Lords Sitting of 28 June 1927

Preamble
The House met at a quarter past four of the clock, The LORD CHANCELLOR on the Woolsack.
BUSINESS OF THE HOUSE.
THE LORD PRIVY SEAL (THE MARQUESS OF SALISBURY): My Lords, with reference to the conversation which took place in your Lordships' House at the beginning of business yesterday, I desire in the first place to apologise to your Lordships for the fact that I was not present. If I had had the least idea that the conduct of business was going to be called in question I need not say that I should certainly have been at your Lordships' disposal. I think that what was said yesterday cannot be entirely passed over in silence, but with your Lordships' leave I do not propose to say anything this afternoon because an intimation has been given to me that my noble friend Lord Newton, who took rather a prominent part in the discussion last night, cannot be present this afternoon. Accordingly, with your Lordships' leave, I will not say anything further on the subject until tomorrow.
COUNTY OF LONDON ELECTRIC SUPPLY COMPANY BILL.
Read 2a.
EAST ANGLIAN ELECTRICITY BILL.
Read 2a.
GREENOCK BURGH EXTENSION, ETC., BILL.
Read 2a.
NEWCASTLE-UPON-TYNE CORPORATION BILL.
Read 2a.
TORQUAY CORPORATION BILL.
Read 2a.
SCARBOROUGH GAS COMPANY (CONSOLIDATION) BILL. [H.L.]
Read 3a, and passed, and sent to the Commons.
MERSEY TUNNEL (BIRKENHEAD ENTRANCE, ETC.) BILL. [H.L.]
Read 3a, and passed, and sent to the Commons.
WEST BRIDGFORD URBAN DISTRICT COUNCIL BILL.
Read 3a, and passed.
WESTGATE AND BIRCHINGTON WATER BILL.
Read 3a, with the Amendments, and passed, and returned to the Commons.
OUSE AND CAM FISHERIES PROVISIONAL ORDER BILL.
Read 2a (according to Order).

COMPANIES BILL. [H.L.]
Amendments reported (according to Order).
Clause 1:
Restriction on registration of companies by certain names.
1.—(1) A company shall not, except with the consent of the Board of Trade, be registered by a name which contains the word "Royal" or "Imperial," or which in the opinion of the registrar suggests, or is calculated to suggest, the patronage of His Majesty or of any member of the Royal Family or connection with His Majesty's Government or any department thereof.
(3) No company shall hereafter be registered under a name of which the words "building society" form part.
THE LORD CHANCELLOR (VISCOUNT CAVE)THE LORD CHANCELLOR (VISCOUNT CAVE) moved, in subsection (1), after "imperial," to insert "or 'municipal.'" The noble and learned Viscount said: My Lords, this Amendment provides that a company shall not, except with the consent of the Board of Trade, be registered by a name which contains the word "municipal," thus suggesting a connection with local authorities. This has been done in certain instances, and some difficulty has been caused, and it
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is thought desirable to prevent the practice. The two Amendments that follow are respectively consequential and drafting.
Amendment moved—
Page 1, line 8, after ("Imperial") insert ("or 'municipal'").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Amendments moved—
Page 1, line 12, after ("thereof") insert ("or with any municipality or other local authority")
Page 2, line 11, leave out ("hereafter").—(The Lord Chancellor.)
On Question, Amendments agreed to.
Clause 4:
index of members of company.
4.—(1) Every company shall keep an index of the names of the members of the company and shall, within fourteen days after the date on which any alteration is made in the register of the members, make any necessary alteration in the index.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after "Every company," to insert "having more than fifty members." The noble and learned Viscount said: My Lords, it was pointed out in the discussion in Committee that to require a company of two members, for instance, to comply with this clause would give unnecessary trouble, and to meet that point I propose to confine the clause to a company having more than fifty members.
Amendment moved—
Page 3, line 9, after ("company") insert ("having more than fifty members").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 5 [Amendment of s. 26 of principal Act]:
THE LORD CHANCELLOR: My Lords, my Amendments to this clause are drafting.
Amendments moved—
Page 4 line 7, leave out ("registered address") and insert ("address of the registered office")
Page 4 lines 20 and 21, leave out ("to be forwarded to the registrar of companies")
Page 4 line 30, leave out ("filed together with") and insert ("annexed to").—(The Lord Chancellor.)
On Question, Amendments agreed to.
Clause 6:
Annual list of members and summary in case of company not having a share capital.
(4) Subsections (3), (4) and (5) of section twenty-six of the principal Act shall apply for the purposes of this section as if they were herein re-enacted with the substitution of a reference to the statement aforesaid for the reference to the summary.
THE LORD CHANCELLOR: My Lords, the first of the Amendments to this clause is purely drafting.
Amendment moved—
Page 5, line 31, leave out ("registered address") and insert ("address of the registered office").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (4), to leave out "substitution of a reference to the statement aforesaid for the reference to the summary," and insert "omission in the said subsection (4) of the words 'and summary'." The noble and learned Viscount said: My Lords, this is also a drafting Amendment.
Amendment moved—
Page 6, line 5, leave out from ("the") to the end of the clause and insert ("omission in the said subsection (4) of the words 'and summary'").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 7:
Amendment of s. 30 of principal Act.
7. Section thirty of the principal Act (which relates to the inspection of the register of members) shall be amended as follows:—
(a) at the end of subsection (2) there shall be inserted the following paragraph:—
"The company shall cause any copy so required by any person to be sent to that, person within such period (commencing on the day next after the date on which the requirement is made to the company) as is hereinafter provided, that is to say, in the case of a company not having more than five hundred members, a period of three days, and in the case of any other company, a period of three days increased by one day for each one thousand additional members of the company, so, however, that the period shall not in any case exceed twenty-one days";
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, in paragraph (a), to leave out "made to" and insert "received by." The noble
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Earl said: My Lords, this Amendment is really only to alter "made to" to "received by" in regard to a request sent to the company.
Amendment moved—
Page 6, line 17, leave out ("made to") and insert ("received by").—(The Earl of Halsbury.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in paragraph (a), to substitute "seven" days for "three" days. The noble and learned Viscount said: My Lords, I have also a similar Amendment two lines later in the paragraph. The effect of the two Amendments is to increase the period allowed to a company for supplying a copy of its register of members from three to seven days. It has been pointed out by the Chartered Institute of Secretaries that in cases where Good Friday, Sundays and Bank Holidays are included in the three days it would be difficult for a company to comply with the provisions of the clause as it stands.
Amendments moved—
Page 6, line 20, leave out ("three") and insert ("seven")
Page 6, line 22, leave out ("three") and insert ("seven").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 12:
Prohibition of provision of financial assistance by company for purchase of its own shares.
12. Subject as hereinafter provided, it shall not be lawful for a company to give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase made or to be made by any person of any shares in the company:
Provided that nothing in this section shall be taken to prohibit—
(b) the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase by trustees of shares in the company to be held for the benefit of employees of the company;
If a company acts in contravention of the provisions of this section it shall be liable to a fine not exceeding one hundred pounds, and every director, manager, secretary or other officer of the company who knowingly and wilfully authorises or permits the default shall be liable to the like penalty.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in proviso (b), after "held" to insert "by or," The noble and learned Viscount said: My Lords, the effect of the Amendment is that shares which have been purchased by money provided by the company for the benefit of employees of the company can be transferred into the names of the employees.
Amendment moved—
Page 9, line:32, after ("held") insert ("by or").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Amendment moved—
Page 10, line 1, leave out ("default") and insert ("contravention").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 13:
Rights of holders of special classes of shares.
13.—(1) If in the case of any company, the share capital of which is divided into different, classes of shares, provision is made by the memorandum or articles for authorising the variation of the rights attached to any class of shares in the company, subject to the consent of any specified proportion of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares, and in pursuance of the said provision the rights attached to any such class of shares are at any time varied, the holders of not less in the aggregate than fifteen per cent. of the issued shares of that class, being persons who did not consent to, or vote in favour of the resolution for, the variation, may apply to the Court to have the variation cancelled, and where any such application is made the variation shall not have effect unless and until it is confirmed by the Court.
(2) An application under this section must be made within seven days after the date on which the consent was given or the resolution was passed, as the case may be, and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.
(3) On any such application any shareholder of the class in question shall be entitled to be heard, and the Court shall, as it thinks fit, either disallow or confirm the variation.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to leave out all words in subsection (3) after "On any such application" and insert "the Court, after hearing the applicant, and any other persons who apply to the Court to be heard and appear to the Court to be interested in the application, may, if it is satisfied, having regard to all
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the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation and shall, if not so satisfied, confirm the variation."
The noble and learned Viscount said: My Lords, in the debate in Committee it was pointed out, by, I think, Lord Russell and also by Lord Danesfort, that the clause contained no indication to the Court of the principle on which it should act in considering applications under Clause 13, which deals with the modification of the rights of holders of special classes of shares in the company. In order to meet that view I propose to insert the words of my Amendment, which I think meet the point made by Lord Russell.
Amendment moved—
Page 10, line 27, leave out from ("application") to end of subsection (3) and insert the proposed new words—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 14:
Power to issue redeeconable preference shares.
14.—(1) Subject to the provisions of this section, a company limited by shares may, if so authorised by its articles, issue preference shares which are, or at the option of the company are to be liable, to be redeemed:
Provided that—
(b) no such shares shall be redeemed unless they are fully paid;
(c) where any such shares are redeemed otherwise than out of the proceeds of a fresh issue there shall out of profits which would otherwise have been available for dividend be transferred to a permanent reserve fund, to be called "the capital redemption reserve fund," a sum equal to the amount applied in redeeming the shares, and the provisions of the principal Act relating to the reduction of the share capital of a company shall apply as if the capital redemption reserve fund were paid up share capital of the company.
(4) Where in pursuance of this section a company has redeemed or is about, to redeem any preference shares, it shall have power to issue shares of the like class up to the nominal amount of the shares redeemed or to be redeemed as if those shares had never been issued, and accordingly the share capital of the company shall not for the purposes of any enactments relating to stamp duty be deemed to be increased by the issue of shares in pursuance of this subsection:
Provided that where new shares are issued before the redemption of the old shares, the new shares shall not, so far as relates to stamp duty, be deemed to have been issued in pursuance of this subsection unless the old shares are redeemed within one month after the issue of the new shares.
VISCOUNT BERTIE OF THAME VISCOUNT BERTIE OF THAME moved, in subsection (1), to leave out paragraph (b). The noble Viscount said: My Lords, I ask your Lordships to omit this paragraph because if a company is in such a prosperous condition that it can afford to repay its preference shares, although only partly paid up, it shows that the company cannot profitably employ the cash available in its business. All that a company in such a happy position would have to do would be to call up the unpaid liability and then redeem the shares. It would have no use for this extra money, and it might be inconvenient to the shareholders to have to find it, and, anyhow, vexatious.
Amendment moved—
Page 11, line 11 and 12, leave out paragraph (b).—(Viscount Bertie of Thame.)
LORD HUNSDON OF HUNSDON: My Lords, I agree with Lord Bertie of Thame, and I suggest that the paragraph which the noble Viscount wishes to omit is rather useless, because so far as my knowledge is concerned I do not think there are such things as partly-paid-up preference shares. At, least I cannot recall them, and for that reason I support the Amendment.
THE LORD CHANCELLOR: My Lords, I agree with what Lord Hunsdon has said, that it must be very rare to find partly-paid preference shares, but if the case should arise, I do not think the Amendment should be accepted. The Report on which the Bill is based recommended that one of the restrictions under which companies should be allowed to issue redeemable preference shares should be that only fully-paid-up shares should be redeemed. There was good reason for that. If the Amendment were accepted it would be possible for a company to obtain money for the redemption of partly-paid-up shares by issuing shares for a much smaller amount, to be fully paid up, with the result that persons who had entered into transactions with the company, relying on the uncalled capital, would lose that security. I hope that on reflection the noble Viscount will not press his Amendment.
VISCOUNT BERTIE OF THAME: I can only reiterate what I have said that directors would do, but I will not press my Amendment.
Amendment, by leave, withdrawn.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, in subsection (1) (c), to leave out "permanent." The noble Earl said: My Lords, this Amendment is apparently a very small one, but it really is connected with an Amendment which comes later and which I mentioned in the Committee stage. The clause enacts that on redemption of preference shares a certain amount must go to a permanent reserve fund. As I asked in the Committee stage, what is going to happen to a company when, for perfectly proper purposes of its own, it decides to reissue these preference shares? That permanent fund ought then to be released pro tanto as the amount released from the preference shares for the general affairs of the company.
Amendment moved—
Page 11, line 17, leave out ("permanent").—(The Earl of Halsbury.)
THE LORD CHANCELLOR: I think this Amendment of the noble Earl and the one that follows have been agreed to by all parties concerned.
On Question, Amendment agreed to.
Amendment moved—
Page 11, line 22, after ("shall") insert ("except as hereinafter provided").—(The Earl of Halsbrury.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (4), to leave out "of the like class." The noble and learned Viscount said: My Lords, this is little more than a drafting Amendment. It was suggested by the Faculty of Procurators.
Amendment moved—
Page 12, lines 1 and 2, leave out ("of the like class").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved to insert at the end of the clause:—
"(5) Where new shares have been issued in pursuance of the last foregoing subsection, the capital redemption reserve fund may, notwithstanding anything in this section, be applied by the company, up to an amount equal to the nominal amount of the shares so issued, in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares."

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The noble Earl said: My Lords, this follows from the previous Amendment.
Amendment moved—
Page 12, line 13, at end insert the said subsection.—(The Earl of Halsbury.)
On Question, Amendment agreed to.
Clause 18 [Amendment of s. 66 of principal Act]:
THE LORD CHANCELLOR: This and the following Amendments are purely drafting Amendments intended to bring this part of the clause into agreement with the earlier part of the clause.
Amendment moved—
Page 14, lines 28 and 29, leave out ("a majority of them in voting power") and insert the ("any of them representing more than halt of the total voting rights of all of them").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Amendment moved—
Page 14, lines 30 and 31, leave out ("convened by the requisitionists") and insert ("so convened").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, after Clause 25, to insert the following new clause:—
Giving of professional advice not to constitute person a director of a company.
".It is hereby declared that a person shall not be deemed to be within the meaning of any provision in this Act or in any other enactment amending the principal Act a person in accordance with whose directions or instructions the directors of the company are accustomed to act, by reason only that the directors of the company act on the advice given by him in a professional capacity."
The noble Earl said: My Lords, this is a clause which extends the meaning of the word "director." On the Committee stage I suggested that it ought not to apply to a receiver or a manager or a person who merely gives professional advice. At this stage have dropped the question of a receiver or a manager and my Amendment merely says that a person who gives professional advice shall not be deemed to be a director.
Amendment moved—
Page 21, line 36, at end insert the said new clause.—(The Earl of Halsbury.)
THE LORD CHANCELLOR: My Lords, I am much obliged to the noble Earl for reconsidering his Amendment. I did on the Committee stage express
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my sympathy with this part of the Amendment and I think now it might be accepted.
On Question, Amendment agreed to.
Clause 26 [Provisions with respect to offers of shares or debentures for sale:]
THE LORD CHANCELLOR: My Lords, this and the following are drafting Amendments, because these words are defined by a definition clause.
Amendment moved—
Page 21, line 38, leave out ("bonds or similar obligations").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Amendment moved—
Page 21, line 40, leave out ("bonds or similar obligations").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 27:
Prohibition of issue of abridged prospectuses with application forms annexed.
27.—(1) It shall not be lawful, whether before or after the formation of any company, to issue to the public or to any member of the public or to publish in relation to any of the shares in or debentures of the company an abridged prospectus which contains or has annexed to it a form of application for, or an invitation to subscribe for any of those shares or debentures or otherwise to invite subscriptions for any of those shares or debentures by reference to or in connection with an abridged prospectus.
(2) If an abridged prospectus is issued or published or subscriptions for shares or debentures are invited in contravention of the provisions of this section, every person who is knowingly responsible for the issue, publication or invitation (including, in any case where the prospectus relates to shares in or debentures of a company which has been already formed, the company) shall be liable to a fine not exceeding five hundred pounds.
(3) For the purposes of this section the expression "abridged prospectus" means a prospectus containing only an abridgment or summary of all or some of the matters required by section eighty-one of the principal Act to be stated in a prospectus.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to add to subsection (1):
"Provided that this section shall not apply to an invitation to any person to subscribe for shares conditionally on the shares not being taken up by any other persons, or to an invitation to any person to procure subscriptions for any shares."
The noble and learned Viscount said: My Lords, the effect of this Amendment

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is that the prohibition of the issue of abridged prospectuses with application forms annexed will not interfere with the underwriting of shares in a proposed company.
Amendment moved—
Page 23, line 12, at end insert the said proviso.—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, at the end of the clause, to insert "and the expression 'member of the public' in relation to any company does not include a member of, or a holder of debentures of, that company." The noble Earl said: My Lords, this Amendment gives a definition of "member of the public," so that it does not include a member of, or a holder of debentures of the company.
Amendment moved—
Page 23, line 26, after ("prospectus") insert the said words.—(The Earl of Halsbury.)
THE LORD CHANCELLOR: I do not think the Amendment should be necessary, but the Government do not oppose it.
On Question, Amendment agreed to.
Clause 28:
Amendment of s. 81 of principal Act.
28.—(1) Section eighty-one of the principal Act (which prescribes the particulars which are to be stated in a prospectus) shall be amended as follows:—
(iv) Subsection (6) shall be amended by the insertion after paragraph (b) of the following words: "or, if the noncompliance was in respect of matters which in the opinion of the court dealing with the case were immaterial."
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to add to paragraph (iv) of subsection (1) "or was otherwise such as ought, in the opinion of that Court, having regard to all the circumstances of the case, reasonably to be excused." The noble and learned Viscount said: My Lords, an Amendment was moved by Lord Hunsdon in the Committee stage of the Bill to insert at the end of subsection (1) (iv) "or if in the opinion of the same Court it was not reasonably practicable to comply with the requirements of this section." That Amendment I was not able to accept, but I promised to consider the matter, and
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I have put down this Amendment which I am glad to see he also supports. I do not think these words go too far.
Amendment moved—
Page 24, line 43, after ("immaterial") insert the said words.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 29:
Amendment as to minimum subscription.
29.—(1) The words "the minimum subscription on which the directors may proceed to allotment and" in paragraph (d) of subsection (1) of Section eighty-one of the principal Act (which prescribes the particulars which are required to be stated in a prospectus) shall cease to have effect, and the, following new paragraph shall be inserted in the said subsection (1) after paragraph (c):—
"(cc) where shares are offered to the public for subscription the minimum amount which, in the opinion of the directors, must be raised by the issue of those shares in order to provide for each of the following matters:—

(i) the purchase price of any property purchased or to be purchased which is to be defrayed out of the proceeds of the issue:

(ii) any preliminary expenses payable by the company, and any commission so payable to any person in consideration of his agreeing conditionally to subscribe for, or of his procuring or agreeing to procure subscriptions for, any shares in the company;

THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in paragraph (ii) of subsection (1) to leave out "conditionally." The noble and learned Viscount said: My Lords, this is really a drafting Amendment consequential on later Amendments standing on the Paper in my name to Clause 33 under which commissions can be paid for agreeing unconditionally to subscribe except in the case of shares which are to be issued at a discount. I beg to move.
Amendment moved—
Page 25, line 31, leave out ("conditionally").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 20:
Obligation to file statement in lieu of prospectus.
30.—(1) A company having a share capital which does not issue a prospectus on or with reference to its formation, or which has issued such a prospectus but has not proceeded to allot any of the shares offered to the public for subscription, shall not

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allot any of its shares or debentures unless at least seven day,, before the first allotment of either shares or debentures there has been filed with the registrar of companies a statement in lien of prospectus signed by every person who is named therein as a director or a proposed director of the company or by his agent authorised in writing in a form containing the particulars set out in Part I of the First Schedule to this Act.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, in subsection (1), to leave out "seven" and insert "three." The noble Earl said: My Lords, in the Committee stage I moved to leave out the number of days so that there should be no delay between the filing with the registrar and the allotment. The Lord Chancellor was not willing that that should be done and at this stage I am moving an amendment that the days in the Bill should be changed from "seven" to "three." I beg to move.
Amendment moved—
Page 26, line 32, leave out "seven") and insert ("three").—(The Earl of Holsbury.)
THE LORD CHANCELLOR: My Lords, We had a discussion in Committee stage and this Amendment has been put down in accordance with the understanding arrived at during the debate. I then suggested that Lord Halsbury should consider four days. The noble Earl now accepts three and I have no objection to the Amendment.
On Question, Amendment agreed to.
Clause 32:
Power to issue shares at a discount.
32.—(1) It shall be lawful for a company, if the following conditions are satisfied, but not otherwise, to issue any shares in the company at a discount:—
(b) If the company has already issued shares of the same class as the shares to be issued—
(i) the market price of the shares of the class which have already been issued must be less than their nominal value; and
(3) For the purposes of this section the market price of ant shares already issued shall be taken to be—
(c) if less than five transfers of such shares were registered within the specified period, then such price as the auditors of the company, having regard to the financial position of the com-
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pany as disclosed to them in the accounts of the company certify to be in their opinion the fair value of the shares.
For the purposes of the foregoing provision the expression "the specified period" means a period of one month terminating three weeks before the date of the issue of the prospectus inviting subscription for the new shares, or, if there is no such prospectus, the date of the contract to take the new shares.
LORD HUNSDON OF HUNSDON LORD HUNSDON OF HUNSDON moved to omit paragraph (i) of paragraph (b). The noble Lord said: My Lords, subsection (1) (b) of Clause 32, which I propose should be omitted, prohibits the issue of shares at a discount unless the market price of the shares is at a discount. The clause permits the issue of shares at a discount where the market price is below pat, provided the issue price is not more than 50 per cent. below the nominal value. The Bill, therefore, abandons whatever principle there may be against issuing shares at a discount and it picks out the companies who are doing fairly well, whose shares stand at par or a little over, and puts them into the salute category as companies which are doing so badly that they cannot issue shares at even 50 per cent. of their nominal value. What I would like to ask is: What is there so reprehensible in having one's shares quoted at par that companies in that position are to be subjected to this disability?
The only explanation of this proviso I can think of is that the Bill has been drafted by different people—I understand that nine people have been engaged on it—and that the person who inserted this proviso thought that, if shares stood in the market at par or over, they could be issued at par or over. But the price of a share indicates the point at which sales and purchases are equal and if by means of a new issue you increase the number of shares to be sold you must also increase the number of buyers. You cannot increase the number of buyers except by giving the fresh buyers some inducement to come forward and that inducement is a discount on the market price. It is for that reason no doubt, that some other person of the nine who did know about business has inserted a clause permitting the issue of shares at 10 per cent. below the market price.
Thus, through these conflicting activities, the Bill brings us to this position. If your shares are at 99 you may issue them at 89, but if they are at par or at a slight premium you cannot issue them at all, so that the companies who are in the unfortunate position of having managed their affairs reasonably well, alone out of all the companies in the country except those which are in very low water, are forbidden to increase their capital by the issue of shares. The Lord Chancellor said at the Committee stage that the present law, forbidding the issue of shares at a discount at all, bore hardly on companies whose shares were already at a discount and therefore they were given relief. My answer is that it produced exactly the same hardships on companies whose shares were at par or a little over: and if there is any evil in issuing shares at a discount there must be a greater evil in issuing them at 89 than in issuing them at 90 or 92. If I may say so, with all deference and respect to those who may disagree with me, I think that the dictum that shares may not be issued at a discount unless they stand at a discount will, in the City at least, supersede the classical non sequitur "who drives fat oxen should himself be fat."
So much for the merits of the question. I called attention to this matter during the Committee stage and I also proposed a more important Amendment to the next clause. My reason for mentioning the next clause is that the Lord Chancellor resisted both these Amendments on the ground that the clauses which I wish to amend were recommended by the Greene Committee on whose Report this Bill is based and, therefore, so far at least as the Lord Chancellor is concerned, both my Amendments will stand or fall by my power to persuade him that the Greene Committee did not recommend them, though it is true that the Wrenbury Committee did so. In supporting his statement that the Greene Committee recommended these clauses the Lord Chancellor told Your Lordships that their Report stated that the Committee were not prepared to dissent from the findings of the Wrenbury Committee. This statement, as I said at the time, could not be considered as an enthusiastic endorsement of the Wrenbury findings, and, indeed, it does not follow
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that you assent to a proposal because you are not prepared to dissent from it, for it may be that you cannot make up your mind one way or the other.
But in fact the Report said that the Committee, as a whole, were not prepared to dissent from the Wrenbury findings, and the words "as a whole" had evidently seemed so unimportant to the Lord Chancellor that he forgot them. I submit, however, that they are very important and I think that the phrase means that the Committee were not unanimous in dissenting from those findings. That certainly is not a recommendation of the findings. I have only spoken to three members of the Committee and they all agree that the Committee did not recommend them. Mr. Harold Brown, for instance, who was a member of the Committee, writes as follows:—
"I should say that inasmuch as the Committee as a whole did not dissent from the findings of the Wrenbury Commission, the position as far as the Greene Committee was concerned was that they left the Wrenbury recommendations to stand on their own feet, and that they neither assented to nor dissented from them; in other words they could not agree about the matter one way or the other."
But if the Greene Committee did recommend them is that sufficient for your Lordships' House? The Greene Committee are not responsible for this Bill, and still less the Wrenbury Committee. Your Lordships are responsible and in your Lordships' House there are many noble Lords who have life-long practical experience of these matters.
Surely, we are to decide whether any clause in this Bill is satisfactory, not on the opinion of some outside body but on our own opinion, after hearing the arguments for or against it. I am not suggesting that this Amendment of mine is of the first importance in itself, except so far as it is important that your Lordships should not approve any clause which you are not convinced is reasonable and fair, and your Lordships may feel that. I have trespassed unduly on your time and shown undue pertinacity. My excuse is—and I think it is one which your Lordships will accept—that as I have had fifty years' experience of business I felt that this Bill might give me an opportunity of being of some assistance to your Lordships' House, and that I might help to prevent

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the passage of any clause which, in my judgment at least, would weaken the great and general respect for your Lordships' opinion. I beg to move.
Amendment moved—
Page 27, line 19, leave out lines 19 to 21.—(Lord Hunsdon of Hunsdon.)
LORD BALFOUR OF BURLEIGH: My Lords, I should like to say a word in support of the Amendment of my noble friend for which I shall vote unless I hear from the Lord Chancellor some very convincing reasons against it. I do not think, as my noble friend has said, that the quotation of the Committee's finding is convincing. We want to know the reason. It does seem to me that, the Bill departing from the principle of prohibiting shares being issued at a discount, it is difficult to justify this preservation of parity as a kind of fetish. I do not think there is any particular fetish about parity and if companies with shares at a discount are to be allowed to issue new shares I cannot see any reason why the companies described by Lord Hunsdon should not also have the same privilege. I shall wait, naturally, to hear what the Lord Chancellor has to say in defence of the clause, because your Lordships have not yet had a defence, but unless there is some convincing reason if the noble Lord goes to a Division I shall vote with him.
LORD ASKWITH: My Lords, I should also like to support my noble friend. I have been reading carefully the clause in the Wrenbury Report, and I cannot see why suddenly there should be brought in without argument these words that it should be allowed only in the case of companies whose issued share capital is at a discount. It does not seem to follow at all on the previous part of the argument, except that they have said that it ought not to be allowed at the beginning or earlier stages of a company's career. The Greene Committee almost invariably end up with a recommendation, but in this matter they do not end up with any formal recommendation at all, and it appears from the paragraph that the Committee were very divided about it. I have myself asked several important persons in the City and they cannot see a reason for it. They tell me that in many cases it might be of great advantage if a company with shares a little above par were able to induce share-
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holders, who know all the facts of the case, to subscribe more capital without waiting until the shares of the company have fallen back.
LORD GREENWAY: My Lords, I rise with much diffidence as I have only recently been admitted to your counsels, but as a business man I should like strongly to support the Amendment proposed by my noble friend Lord Hunsdon of Hunsdon. The intentions of the Bill are, of course, admirable, and they have, I am sure, the support of the whole House, but I would ask your Lordships to consider carefully whether the provisions of the particular clause to be amended are not likely to be worse than the evils which they are intended to cure. What is the proportion of the rogues who would be checked in their malpractices by these provisions in the Bill as compared with the honest investors and business men who would thereby be hampered in their operations? Certainly not one in ten thousand, probably not one in a hundred thousand. It has hitherto, I believe, been an accepted principle of justice that it is better for a number of murderers to escape punishment than that one innocent man should be hanged, but here we have a totally different principle. The framers of the Bill appear to think that ten thousand people or one hundred thousand people should be punished rather than that one rogue should escape justice. We have heard a good deal lately about the tyranny of Prohibition and local option, but what about the tyranny of the clause sought to be amended whereby the whole of the business and investing community—that is practically the whole nation—are to be prevented from carrying out a perfectly legitimate business operation in order to check a comparatively infinitesimal number of rogues from doing wrong?
THE LORD CHANCELLOR: My Lords, I hope the House does not think for a moment that I am otherwise than very grateful to those who, like Lord Hunsdon of Hunsdon and the noble Lord who has just spoken, have had experience of business and put their knowledge and experience at the disposal of this House. I have always listened throughout our discussions to what has been said and endeavoured to meet objection. I have no doubt I can satisfy noble Lords on

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this Amendment, but I did not think it would be wise to attempt to shorten discussion because I knew Lord Hunsdon of Hunsdon would like to give us his views about the Report of the Committee, not only with a view to this Amendment but others. I am afraid that on his construction of the Committee's Report I am totally unable to agree with him. The Wrenbury Committee made certain recommendations about the issue of shares at a discount on certain, conditions. It is common ground that those words which are in the clause in question were included in the Report of the Wrenbury Committee. Then came the second Committee, the Greene Committee, who set out the recommendations of the earlier Committee and said that this Committee as a whole did not dissent from the recommendations of the Wrenbury Committee.
I believe that nobody—certainly not the business men I have had to deal with—would question that this meant that the Greene Committee did not dissent from but in fact accepted the recommendations of the Wrenbury Committee. I certainly so understood it and I do not believe that anybody could, without assistance, understand it otherwise. However, let it be taken that the Greene Committee were divided and were not prepared to take a strong line either way. We still have the recommendations of the earlier Committee. It seems to me that this Amendment might fairly be accepted by the House. I believe that if the words were in they could easily be evaded, as the noble Lord has pointed out, and if they may cause injury to honest concerns I am quite prepared to accept the Amendment.
LORD HUNSDON OF HUNSDON: I am very much obliged to the noble and learned Viscount.
On Question, Amendment agreed to.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, in subsection (3) (c), after the last "company," to insert "and to any other information and explanations given to them." The noble Earl said: My Lords, this Amendment is a very small one. It is merely to add the words "any other information and explanations given to them."
Amendment moved—
Page 28, line 25, after ("company") insert ("and to any other information and
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explanations given of them").—(The Earl Halsbury.)
On Question, Amendment agreed to.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, after paragraph (c) of subsection (3), to insert:—
"Provided that if the auditors of the company are unwilling or unable for any reason to certify the fair value of the shares the directors of the company may request another public accountant or firm of public accountants to give a certificate for the purposes of this section."
The noble Earl said: My Lords, this Amendment is a rather more important one because it deals with a case not provided for in this clause. Suppose the auditors do not care to take the responsibility, what is to happen then? It might very well be that a perfectly reputable firm of auditors do not care to take a responsibility of this kind when another equally reliable firm of auditors might care to take it. It seems rather hard that because a firm of auditors happen to be taking one particular line of policy the clause should be barred because of them.
At the Committee stage I suggested that the directors of the company might do it. That, I agree, was perhaps open to objection. Now it is suggested that there should be another set of auditors appointed for the purpose of giving this certificate. It is quite clear that the company's auditors would appear as the company's auditors and if another firm than the company's auditors give the certificate it is quite clear that that firm must be of at least as good a reputation as the company's own auditors. Therefore no difficulty could arise by attempting to put up a firm of auditors distinctly not reputable in order to get through a certificate of this kind. As nothing is provided in this Bill, I beg to move this Amendment.
Amendment moved—
Page 28, line 26, at end insert the said proviso.—(The Earl of Halsbury.)
THE LORD CHANCELLOR: My Lords, perhaps I may at once say a word about this Amendment. The purpose of the clause is to fix the market price of shares. The clause provides that for this purpose yon should take the average making-up price of the shares on the Stock Exchange, if there is any. If there is none on the last three accounts, then you must take the price

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paid on the average for any such shares in respect of which transfers were registered within the specified period. If however, less than five transfers were registered in that period, you must take the price certified by the auditors of the company as being a fair price for the shares. Those are useful options. The noble Earl proposes that, if you cannot get the price through any of those methods, you may go past the company's auditors and call in somebody from outside to give you the price. It seems to me that if you cannot get the price fixed in the way proposed by the Bill, and if you cannot get the company's own auditors to say what the value of the shares is, then the company ought not to be allowed to issue those shares at a discount. This issuing at a discount is a new practice. It has been illegal hitherto and it is now proposed to legalise it. It would be going too far to allow this further option to be given. I would like to hear the views of members of the House who are daily dealing with such matters, but at present, unless they take another view, I would oppose it.
VISCOUNT BERTIE OF THAME: My Lords, the noble and learned Viscount's suggestions cover the case and I do not think this proviso is necessary.
THE EARL OF HALSBURY: My Lords, I ant thinking of the case where there are big assets such as good will and where certain firms of auditors might not care to take the risk of putting a value upon the shares. It is rather difficult to know in such cases what the value of the share might be. The Greene Committee said:—
"If the issue of shares at a discount were frankly authorised and the public notified that shares could be issued at a discount it might induce the public to realise that the nominal value of a share is no guide whatever as to its intrinsic worth, and that a share is nothing more than a token representing a certain proportion of the profits and assets of the company."
It might very well be that a firm of auditors might not care to take the risk of saying what was the market value of a certain asset. It might be that another firm might quite and properly be prepared to certify its value. They might be perfectly right in certifying it and in giving it a proper market value. At present, if the company's auditors will not do it, the matter must fall.
On Question, Amendment negatived.
Clause 33:
Amendment of s. 89 of principal Act.
33. Section eighty-nine of the principal Act shall be amended as follows:—
(a) Subsection (1) thereof shall cease to have effect so far as it authorises the payment of commission to a person in consideration of his subscribing or agreeing (otherwise than conditionally on the shares not being taken up by any other persons) to subscribe for any shares in a company, and the amount payable to a person in consideration of his agreeing to subscribe conditionally or of his procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in a company, shall not in any case exceed an amount equal to ten per cent. of the nominal value of the shares in respect of which there is a conditional agreement to subscribe or in respect of which subscriptions are procured or agreed to be procured;
LORD HUNSDON OF HUNSDON LORD HUNSDON OF HUNSDON moved to leave out paragraph (a) and insert:—
"There shall be inserted at the end of subsection (1) of section 89 of the principal Act the words—
"(c) Not in any case in excess of ten per cent. of the nominal value of the shares; and provided that the number of shares which persons who have agreed for a commission to subscribe absolutely is disclosed in the manner provided in this subsection."
The noble Lord said: My Lords, the Amendment I now propose I moved in substance in Committee, but the noble and learned Viscount opposed it on the ground that the Greene Committee had recommended the clause which I propose to amend. We are now agreed that the Greene Committee were divided upon all these points and I therefore put forward the reasons for this Amendment on its own merits.
I propose to amend Section 89 of the principal Act by adding these words. Section 89 of the principal Act enacts that
"It shall be lawful for a company to pay a commission to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares in the company.…"
I propose that the commission shall not in any case exceed ten per cent, of the nominal value of the shares, following therein the Bill as it now stands, but I am omitting the prohibition in the Bill against paying a commission to those who take shares absolutely or "firm" as we say in the City. On the last occasion my

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noble friend Lord Banbury objected that it was not fair to offer to the public 50,000 shares where in reality 20,000 shares had already been taken firm. I have therefore added the words
"and provided that the number of shares which persons who have agreed for a commission to subscribe absolutely is disclosed in the manner provided in this subsection."
That is to say, in the prospectus or in any documents in lieu of the prospectus. Except for the fact that it is a good thing to disclose everything in a prospectus on general principles there is not much point in this proviso because the fact that shares have been taken firm before issue is what we call in the City a "bull point" and is therefore usually mentioned in the prospectus. The important part of my Amendment is the omission of the prohibition against taking shares firm.
If the proposal in the Bill is allowed to stand it will come as a great shock to the City of London where the custom of taking shares firm is regarded as an ordinary and useful financial transaction which does no injury to anyone. Moreover, as I explained on the Committee stage, the proposal could be easily evaded by a verbal understanding—a good many of these arrangements are done verbally and not by contract at all—to allot the subscription of any particular applicant in full. In answer to that, the noble and learned Viscount said, "Let them try." That was rather startling advice from a Lord Chancellor because, as those who tried would certainly succeed, it would put law-abiding citizens at a disadvantage with those who broke the law at the suggestion of the noble and learned Viscount. Another important effect of this prohibition would be that it would place an impediment in the way of insurance companies, trust companies and other financial undertakings who are now in the habit of taking shares or debentures firm as a permanent investment. It is the permanent investor whom it is advisable to encourage in the interests of the investing public. Those who underwrite issues conditionally are the people whom this Bill prefers (as against the views of the City of London), but they are of less value than those who take shares permanently because they may sell any shares that may be allotted to them at any price, provided that their under-
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writing commission will cover their loss, with the result that the shares go down in price and the investing public whom we are trying to protect loses.
Amendment moved—
Page 28, line 34, leave out from ("follows") to the end of line 9 on page 29 and insert the said new words.—(Lord Hunsdon of Hunsdon.)
LORD BALFOUR OF BURLEIGH: My Lords, in view of the previous acceptance of the Amendment to Clause 32 I hope the Lord Chancellor will accept this Amendment dealing with those who take shares firm. As the objection to issuing shares at a discount has been removed, this should also be removed. As to evasion, it is quite obvious that this is a thing which is bound to be evaded if it is put in the Bill. What does the Lord Chancellor think of these circumstances? I suppose they would be evasion, but they certainly would not be illegal. I wonder whether he would consider what would happen where shares are taken firm without any special commission, but subsequently an agreement is entered into that, if the shares are still in the same name at the end of, say, three or six months, the commission will be paid. In that way the object is achieved and the shares are in fact taken firm and there is no commission for the firm under-writing. That is one possibility and, no doubt, there are many others. It is obvious that there will be a great many means of getting round the Bill. I hope to hear from the Lord Chancellor that this Amendment will be accepted.
THE LORD CHANCELLOR: My Lords, may I first rather protest against the suggestion of my noble friend Lord Hunsdon that when I said "let them try" I was encouraging an attempt to break the law. If I may complete my sentence, it would run: "let them try and they will find the law too strong for them." The Wrenbury Committee, when they recommended that it should be lawful to issue shares at a discount, also recommended that it should no longer be possible to pay a commission to a man who took the shares firm, because that was looked upon as a kind of discount that would come within the conditions of the Bill, and not as ordinary commission. In logic there is a great deal to be said for that view, but I recognise

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that it has been the practice in the City for a long time to pay commission to underwriters, not only those who agree to take shares if nobody else takes them, but also those who at the same time agree to take shares themselves. I know that this has been done and that business men are satisfied with the practice, and I have no desire to interfere with it.
May I, however, ask noble Lords to consider one point? I think that the prohibition might perhaps be allowed to continue in the case of an issue of shares at a discount. The Bill authorises the issue of shares at a discount subject to a maximum discount with a maximum commission. If you are going to allow a company to give not only the maximum discount provided in the Bill but also a further discount in the guise of a commission of 10 per cent., you will be going a good deal beyond the recommendations of the Wrenbury Committee. Accordingly I have put on the Paper an Amendment that might take the place of this Amendment. I propose to keep the initial words which the noble Lord, Lord Hunsdon, proposes to leave out, but to confine them to shares which are to be issued at a discount and to make a consequential Amendment at the end of the clause which would authorise paying a commission on shares being taken firm in the ordinary way. In other words, I would prevent this additional discount beyond the statutory discount, but I would no longer seek to interfere with the practice of paying commission on shares taken firm. Before the House takes a decision on that alternative suggestion, I should like to hear the views of noble Lords.
LORD GREENWAY: My Lords, I should like to say that if it is necessary or advisable to pay an underwriting commission, whether the underwriting be on firm or on conditional terms, on shares issued at par, surely it is more necessary or advisable that the underwriting commission should be paid on shares that stand at a discount and have to be issued at a discount.
LORD BALFOUR OF BURLEIGH: My Lords, it is difficult to speak with certainty on this point, but it seems to me that if the under-writing commission and the discount together could be limited to 10 per cent., this appears to meet the
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point. I do not see why this should not include both the under-writing commission and the discount, but I am not absolutely certain that I have grasped the point.
THE LORD CHANCELLOR: The effect of my Amendment would be to limit the discount, not to 10 per cent., but to 60 per cent.—the 50 per cent. maximum laid down by the Bill, and the further 10 per cent. allowed in the way of commission.
LORD BALFOUR OF BURLEIGH: That is what I meant—10 per cent. in addition to the 50 per cent.
LORD ASKWITH: My Lords, as I understand the point, it is that if the shares of a company are taken firm at the outset of its career this would be permitted, but if a company wants to obtain capital when its shares are at a discount they are not to be allowed to be taken firm, with a commission for taking them firm. I understood my noble friend Lord Greenway to suggest that in that case the company might be rather in difficulties and it would be even more important for the shares to be issued firm, if anyone would take them firm in those circumstances. It seems to me that Lord Greenway's argument is sound, and that Lord Hunsdon's Amendment will be the better one to adopt.
LORD HUNSDON OF HUNSDON: My Lords, the way that I look at it is that there should be no difference between the commission paid to any one who takes shares firm and to anyone who underwrites the shares. It does not seem to me to make any difference whether the shares are at a discount or not, and the figures of 10 per cent. and 50 per cent. apply equally.
THE LORD CHANCELLOR: I will put the noble Lord's Amendment.
On Question, Amendment agreed to.
Clause 31:
Accounts.
(6) Section one hundred and thirteen of the principal Act (which relates to the powers and duties of auditors) shall be amended as follows:—
(c) At the end of subsection (3) there shall be added the words "and if the company makes default in furnishing

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such a copy to any member who demands it and tenders to the company the amount of the proper charge therefor, the company and every director, manager, secretary or other officer of the company who knowingly and wilfully authorises or permits the default shall be liable to a fine of five pounds for every day during which the default continues."
THE EARL OF HALSBURY: My Lords, my two Amendments to this clause are drafting. I beg to move.
Amendments moved—
Page 30, line 21, after ("the") insert ("reserve fund")
Page 30, line 22, leave out ("as"), and after ("sheet") insert ("or to a reserve fund, general reserve or reserve account to be shown specifically on a subsequent balance sheet.").—(The Earl of Halsbury.)
On Question, Amendments agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, at the beginning of subsection (6) (c), to leave out "At the end of" and to insert "In subsection (3), after the word 'furnished,' there shall be inserted the words 'within seven days after he has made a request in that behalf to the company' and at the end of the said." The noble and learned Viscount said: My Lords, the subsection here dealt with amends the provision in Section 113 of the Act of 1908 relating to the supply of copies of balance sheets to members of companies by imposing a penalty for noncompliance. In the subsection as it stands, there is no time limit within which the requirement must be performed, and the Amendment is suggested to remedy this defect.
Amendment moved—
Page 31, line 9, leave out ("At the end of") and insert the said new words.—(The Lord chancellor.)
On Question, Amendment agreed to.
Clause 35:
Form of balance sheet.
(2) There shall be stated under separate headings in the balance sheet—
(b) if it is shown as a separate item in or is otherwise ascertainable from the books or papers of the company, the present amount of the goodwill as so shown or ascertained.
(4) Where the assets of a company include shares in a subsidiary company or
1052
any indebtedness of a subsidiary company by loans or otherwise the aggregate amount of these assets (distinguishing shares ant indebtedness) shall be set out in the balance sheet of such company separately from all its other assets. Where the liabilities of a company include any indebtedness to a subsidiary company (through loans or otherwise) such indebtedness shall be set out in the balance sheet of such company separately from all its other liabilities.
(5) Where a company (in this subsection referred to as "the holding company") holds shares in a subsidiary company or in two or more subsidiary companies, there shall be annexed to and filed with the balance sheet of the holding company a statement, signed by the persons by whom in pursuance of Section one hundred and thirteen of the principal Act the balance sheet is signed, stating how the profits and losses of the subsidiary company, or, where there are two or more subsidiary companies, the aggregate profits and losses of those companies, have been dealt with in, or for the purposes of, the accounts of the holding company and in particular how, and to what extent,—

(i) provision has been made for the losses of any subsidiary company either in the accounts of that company or of the holding company, or of both; and

(ii) losses of any subsidiary company have been taken into account by the directors of the holding company in arriving at the profits and losses of that company as disclosed in its accounts.

For the purposes of this subsection the profits of a subsidiary company mean the profits made during the period to which the accounts of the holding company relate or shown in any accounts of the subsidiary company made out in that period, and the losses of a subsidiary company means losses incurred during that period or shown in any such accounts.
If for any reason the directors of the holding company are unable to obtain such information as is necessary for the preparation of the statement aforesaid, they shall so certify in writing and their certificate shall be annexed to and filed with the balance sheet in lieu of the statement.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, in subsection (2) (b), after "if," to insert, in the case of a company registered on or after the first day of April, nineteen hundred and nine." The noble Earl said: My Lords, this Amendment deals with the form of balance sheet. In subsection (2) it is stated that there shall be shown:—

"(a) the preliminary expenses of the company so far as not written off; and

(b) if it is shown as a separate item or is otherwise ascertainable from the books or papers of the company the present amount of the good will."

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The auditors have a great difficulty in this matter, and I think in Committee the noble Viscount suggested that "papers" was a rather wide expression. My two Amendments, this and the one which follows, are really in the alternative. If in fact you do not have to go into every paper without limit at all, the auditors in preparing the balance sheet would not object to it, and the first Amendment which I am moving is that it should only be the goodwill of a company registered on or after the 1st day of April, 1909. That would give a time limit on which they could work, and they would not have to go back beyond the year 1909. If on the other hand, that is not acceptable, my alternative Amendment is to leave out the word "papers" and insert "in any contract of sale or agreement." I feel difficulty in moving my first Amendment until I have some indication of the view of the noble Viscount.
Amendment moved—
Page 32, line 5, after ("if") insert ("in the case of a company registered on or after the first day of April nineteen hundred and nine").—(The Earl of Halsbury.)
THE LORD CHANCELLOR: I would first say on the form of the Amendment that I would ask the noble Earl to move to leave out "if it."
LORD KYLSANT: My Lords, I suggest that it is a very great advantage to the public that the good will should be stated in the balance sheet, and to simply say that it shall not be stated in a balance sheet if the company was registered before 1909 is liable to result in its not being shown in the case of companies that have very excessive good will. I believe that it would be a decided advantage to the general public to have the good will shown, and if an alteration is to be made in the law it should not be limited to companies registered after 1908, but apply to all companies. I suggest that whatever clause is agreed upon it should apply to every company.
LORD DANESFORT: My Lords, I do not gather from the speech of the noble Earl quite what the object of his Amendment is. If it is desirable in the case of a limited company registered after April, 1909, that the good will should
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be shown, surely, as Lord Kylsant has said, it is desirable to show it, also in the balance sheet of older companies.
THE LORD CHANCELLOR: My Lords, I was told that the trouble was that if you force an old company to go back into all its past papers, in order to see whether somewhere there is a valuation for good will, you would be putting too heavy a burden upon such a company, and therefore it is proposed to limit the paragraph (b) to companies which have been in operation since 1908. I have taken notice, however, of what Lord Kylsant has said, and perhaps the noble Earl would not mind withdrawing this Amendment and not moving his alternative Amendment, and then we can try to find a suitable form of words before the Third Reading.
Amendment, by leave, withdrawn.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to leave out all words is subsection (4) after "Where," except the concluding words "indebtedness shall be set out in the balance sheet of such company separate from all its other liabilities," and insert "any of the asset of a company consist of shares in, or amounts due (whether on account of any loan or otherwise) from subsidiary companies, the aggregate amount of those assets, distinguishing shares and indebted ness, shall be set out in the balance sheet of the first-mentioned company separately from all its other assets, and where a company is indebted (whether on account of any loan or otherwise) to subsidiary companies, the aggregate amount of that". The noble and learned Viscount said: My Lords, this is a purely drafting Amendment.
Amendment moved—
Page 32, line 15, leave out from ("where") to ("indebtedness") in line 23 and insert the said new words.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Amendment moved—
Page 32, line 28, leave out ("and filed with").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (5), after "have", ["have been dealt with"], to insert "so far as they concern the holding company." The noble and learned Viscount said: My Lords, it was felt that the words as they

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stand in the Bill imposed rather too heavy a burden on the company, and it is therefore proposed that they shall only apply to the proportionate part of those profits and losses with which the holding company is concerned.
Amendment moved—.
Page 32, line 35, after ("have") insert ("(so far as they concern the holding company)").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, after paragraph (ii) in subsection (5), to insert:—
"Provided that it shall not be necessary to specify in any such statement the actual amount of the profits or losses of any subsidiary company, or the actual amount of any part of any such profits or losses which has been dealt with in any particular manner."
The noble Earl said: My Lords, the object of this and subsequent Amendments is to deal with a point raised on the Committee stage, and it is really a question of how the subsidiary companies accounts must be divided up.
Amendment moved—
Page 33, line 5, at end, insert the said proviso.—(The Earl of Halsbury.)
THE LORD CHANCELLOR: My Lords, subject to what noble Lords may wish to say, I am prepared to accept this and the two following Amendments standing in the name of the noble Earl.
On Question, Amendment agreed to.
Amendments moved—
Page 33, line 6, leave out from ("profits") to end of line 12, and insert ("or losses of a subsidiary company mean the profits or losses shown in any accounts of the subsidiary company made up to a date within the period to which the accounts of the holding company relate, or, if there are no such accounts of the subsidiary company available at the time when the accounts of the holding company are made up, the profits or losses shown in the last previous accounts of the subsidiary company which became available within that period")
Page 33, line 16, leave out ("they") and insert ("the directors who sign the balance sheet"), and leave out ("certify") and insert ("report"), and leave out ("certificate") and insert ("report").—(The Earl of Halsbury.)
On Question, Amendments agreed to.
THE LORD CHANCELLOR: My Lords, the next is a drafting Amendment.
Amendment moved—
Page 33, line 17, leave out ("and filed with").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to add to the clause:—
"Where a company the ordinary business of which includes the lending of money holds shares in another company as security only, no account shall for the purpose of determining under this subsection whether that other company is a subsidiary company be taken of the shares so held."
The noble and learned Viscount said: My Lords, this Amendment would exempt from some of the obligations of the clause a company the ordinary business of which includes the lending of money. This limited provision is sufficient to protect banks and insurance companies: the Amendment is inserted in order to meet a point raised by the British Bankers' Association.
Amendment moved—
Page 33, line 38, at end insert the said words.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 36 [Rights of members and debenture holders to receive copies of balance sheets and reports of directors and auditors]:
THE LORD CHANCELLOR: My Lords, the effect of the Amendment I move to this clause is that where a company receives a demand for a copy of its balance sheet it shall comply with the demand within seven days instead of fourteen.
Amendment moved—
Page 34, line 9, leave out ("fourteen") and insert ("seven").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 38 [Amendments as to registration of mortgages and charges]:
THE LORD CHANCELLOR: My Lords, the next three are drafting Amendments.
Amendments moved—
Page 36, line 7, after ("company") insert ("registered in England")
Page 37, line 10, after ("before") insert ("the date of")
Page 37, line 11, after ("Act,") insert ("and remaining unsatisfied at that date").—(The Lord Chancellor.)
On Question, Amendments agreed to.
Clause 40 [Provisions as to receivers and managers]:
THE LORD CHANCELLOR: My Lords, there are two more drafting Amendments.
Amendments moved—
Page 38, lines 31 and 32, leave out ("the balance, if any, of the receipts")
Page 38, line 32, after ("liquidator") insert ("the amount properly payable to him").—(The Lord Chancellor.)
On Question, Amendments agreed to.
Clause 42 [Amendment of s. 104 of principal Act]:
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to insert as a new subsection:
"(3) Where any debentures which have been redeemed before the elate of the commencement of this Act are re-issued subsequently to that date, the re-issue of the debentures shall not prejudice any right or priority which any person would, if this section had not passed, have had under or by virtue of any mortgage or charge created between the dote of the redemption of the debentures and the date of the commencement of this Act."
The noble and learned Viscount said: My Lords, the effect of this Amendment is to prevent the provision of Clause 42 from having a retrospective effect to the prejudice of mortgages created before the new Act comes into force. The Amendment meets a point raised by the Bankers' Association.
Amendment moved—
Page 40, line 6, at end insert the said new subsection.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 44 [Amendment as to service of process]:
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to insert as a new subsection:—
"Where process is served on a company under this section, the person issuing out the process shall send a copy thereof by post to the registered office of the company."
The noble and learned Viscount said: My Lords, this Amendment is to meet the views of the Scottish lawyers, who have their own views about this matter.
Amendment moved—
Page 42, line 17, at end insert the said new subsection.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 45 [Power to acquire shares of shareholders dissenting from scheme or contract approved by majority]:
THE EARL OF HALSBURY: My Lords, this Amendment is merely an extension of fourteen days to one month, as fourteen days is thought to be rather short.
Amendment moved—
Page 42, line 33, leave out ("fourteen days") and insert ("one month").—(The Earl of Halsbury.)
On Question, Amendment agreed to.
Clause 49 [Provisions for facilitating reconstruction and amalgamation of companies]:
THE LORD CHANCELLOR: My Lords,, this is a drafting Amendment.
Amendment moved—
Page 45, line 20, after ("reconstruction") insert ("of any company or companies").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 61:
Amendment as to voluntary winding-up in certain, cases.
61—(1) The following provisions of this section shall have effect in relation to every voluntary winding-up, unless at a meeting of the directors of the company held before the date on which the notices of the meeting at which the resolution for the winding-up of the company is to be proposed are sent out, the directors, or, in the case of a company having more than two directors, at least two of the directors of the company, have made a statutory declaration to the effect that they have made a full inquiry into the affairs of the company, and that having so done they have formed the opinion that the company will be able to pay its debts in full within a period not exceeding six months from the commencement of the liquidation, and unless before the said date the declaration so made has been filed with the registrar of companies.
(6) The creditors at the meeting to be held as aforesaid or at any subsequent meeting, may, if they think fit, appoint a committee of inspection, and if such a committee is appointed the company may, either at the meeting at which the resolution for Winding-up the company is passed or at any time subsequently in general meeting, appoint such number of persons as they think fit to act as members of the committee not exceeding five in number:
VISCOUNT BERTIE OF THAME VISCOUNT BERTIE OF THAME moved, in subsection (1), to substitute "twelve months" for "six months." The noble Viscount said: My Lords, I have been asked by my noble friend Lord Danes-fort, who has had to go to an important political meeting, to move this Amendment in his name. The Society of In-

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corporated Accountants and Auditors, who are an important body, requested him to bring it forward. The reasons of the Amendment are these. The declaration required to be made by the directors under this clause is an onerous responsibility. In practice directors as a matter of business will find great difficulty in making a statutory declaration that "the company will be able to pay the debts in full" within six months. Having regard to the heavy penalties in the Bill to which directors will be subject it is unreasonable to expect them to take undue risks in making this declaration. The position, however, might be eased if the expression of opinion required could be based upon a period of twelve months, instead of six, because the longer period would give more time for an advantageous realisation of assets.
Amendment moved—
Page 51, line 26, leave out ("six") and insert ("twelve").—(Viscount Bertie of Thame.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (6), after the first "inspection," to insert "consisting of not more than five persons." The noble and learned Viscount said: My Lords, under the clause as it stands the creditors can appoint any number of persons to serve on the committee of inspection, and the company can only appoint five. This Amendment limits the number of members of the committee of inspection appointed by the creditors to five.
Amendment moved—
Page 52, line 33, after ("inspection") insert ("consisting of not more than five persons").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 68:
Liability where proper accounts not kept.
(2) For the purposes of this section, proper books of account shall be deemed not to have been kept in the case of any company if there have not been kept such books or accounts as are necessary to exhibit and explain the transactions and financial position of the trade or business of the company, including books containing entries from day to day in sufficient detail of all cash received and cash paid, and, where the trade or business has involved dealings in goods, statements of the annual stocktakings and (except in the case of goods sold by way of retail trade to the actual consumer) of
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all goods sold and purchased, showing the goods and the buyers and sellers thereof in sufficient detail to enable those goods and those buyers and sellers to be identified.
LORD HUNSDON OF HUNSDON LORD HUNSDON OF HUNSDON moved, in subsection (2), before "retail trade," to insert "ordinary," and to leave out "to the actual consumer." The noble Lord said: My Lords, this clause lays it down that books have not been properly kept unless they are in sufficient detail to identify all the buyers of goods, except in the case of goods sold by way of retail trade to the actual consumer. I would therefore point out that the retail trader often sells for cash across the counter, and does not necessarily know to whom he is selling, or whether the purchaser is an actual consumer. Therefore I propose that the subsection should read "except in the case of goods sold by way of ordinary retail trade."
Amendment moved—
Page 63, line 26, after the first. ("of") insert ("ordinary"), and leave out ("to the actual consumer").—Lord Hunsdon of Hunsdon.)
On Question, Amendment agreed to.
Clause 71:
Prosecution of delinquent directors.
(5) The Board of Trade, with the consent of the Treasury, may direct that the whole or any part of any costs and expenses properly incurred by the liquidator in proceedings duly brought by him under this section shall be defrayed as expenses incurred by the Board under the principal Act in relation to the winding-up of companies ill England, and subsection (3) of Section thirteen of the Economy (Miscellaneous Provisions) Act, 1926, shall apply accordingly.
Subject to any direction under this subsection and to any mortgages or charges on the assets of the company all such costs and expenses as aforesaid shall be payable out of those assets in priority to all other liabilities payable thereout.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in the last paragraph, after "company," to insert "and any debts to which priority is given by Section two hundred and nine of the principal Act." The noble and learned Viscount said: My Lords, this clause proposes to charge the costs of proceedings by the liquidator on the assets, subject to certain prior charges, but that should also be made subject to these preferential debts. It is the practice of liquidators and receivers to pay these preferential debts for wages,

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salaries, and so on, as soon as possible after they are appointed. As the Bill stands, they might hesitate to make those payments because they would not know whether a prosecution would be instituted, and the costs of any prosecution would have priority over such payments. It is thought better to say expressly that these preferential payments retain their priority.
Amendment moved—
Page 68, line 19, after ("company") insert the said words.—(The Lord Chanceller.)
On Question, Amendment agreed to.
LORD HUNSDON OF HUNSDON LORD HUNSDON OF HUNSDON moved, to insert the following new subsection:
"(6) Nothing in this Act shall oblige any solicitor to supply any information the giving of which would involve a breach of professional privilege."
The noble Lord said: My Lords, I brought this Amendment forward on the Committee stage and the noble and learned Viscount was sympathetic, but he wished to have time to consider it and asked me to bring it forward again. According to the clause every agent is to give assistance to the prosecution which he is reasonably able to give, and "agents" are defined as bankers and others and solicitors. Members of the Law Society are alarmed at this because they thought it was altering the existing custom. The only thing I have to say is that in the Amendment the word "professional" is only put there in order to explain the nature of the privilege, because the privilege is not really to the profession but to the clients of the profession. It is the clients of the profession that the Law Society seeks to protect. I beg to move.
Amendment moved—
Page 6S, line 21, at end insert the said new subsection.—(Lord Hunsdon of Hunsdon.)
VISCOUNT BERTIE OF THAME: My Lords, if this Amendment is inserted it will induce any fraudulently disposed director or other officer to employ the same solicitor as the one employed by the company. This Amendment, I think, is quite unnecessary as it is open to any director or other officer to employ a solicitor other than the company's solicitor, and I ask your Lordships not to accept the Amendment.
THE EARL OF HALSBURY: My Lords, if this solicitor had certain information because he is the solicitor of the company, that is one thing, but if he has the information because he is solicitor to a director that is a totally different thing. It does not seem to me that a director would get himself into a better position by employing the company's solicitor.
THE LORD CHANCELLOR: My Lords, this question of privilege is a very difficult matter. There has been a good deal of difficulty as to how far it extends in such proceedings as we are contemplating here. It is, as the noble Lord has said, a privilege not of the solicitor but of the client. It is the client only who would be affected. It is quite true, as Lord Bertie has said, that if this Amendment is carried in these words difficulty would arise where the person charged had employed the solicitor who was also the solicitor of the company. The solicitor is not bound to tell the Court anything about the company's affairs which he may have learned while acting for the company. It would, of course, be undesirable that he should do that.
I am disposed to think, if your Lordships are willing to accept the principle, that the Amendment might run in a different form. Let me point out that this question arises not only on the clause which we are discussing but also on a similar provision in Clause 43, and if the proviso is put in it ought to apply to both clauses. It is suggested to me that it might run in this form:—
"Where proceedings are instituted under this Act against any person by the Director of Public Prosecutions, nothing in this Act shall be taken to require any person who has acted as solicitor for the defendant to disclose any privileged communication made to him in that capacity."
That would, to some extent, meet the point made by the noble Viscount, and if he sees no objection I would suggest that this Amendment be withdrawn and that a new clause in the form that I have indicated be put down for Third Reading.
VISCOUNT BERTIE OF THAME: My Lords, I am rather against directors or companies' officers employing the same solicitor as the company. If you get tricky directors and tricky solicitors together you cannot tell what they might not do.
LORD HUNSDON OF HUNSDON: I accept the solution offered by the noble and learned Viscount.
Amendment, by leave, withdrawn.
Clause 72:
Provisions as to liability of directors, &c.
72.—(1) Subject as hereinafter provided, ally provision, whether contained in the articles of a company or in any contract with a company or otherwise, for exempting any director, manager or other officer of the company from, or indemnifying him against, any liability which by virtue of any rule or law would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the company shall be void:
Provided that—
(c) notwithstanding anything in this subsection, a company may, in pursuance of any such provision as aforesaid, indemnify any director, manager or other officer of the company against any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which he is acquitted or in connection with any application under Section two hundred and seventy-nine of the principal Act in which relief is granted to him by the Court.
(2) Section two hundred and seventy-nine of the principal Act shall apply to the managers and officers of a company as it applies to the directors of a company, and the Court in determining in pursuance of that section whether any person ought fairly to be excused for any negligence or breach of trust shall take into consideration all the circumstances connected with his appointment, including the purpose thereof and shall have effect as though for the words "negligence or breach of trust" there were substituted the words "negligence, default, breach of duty or breach of trust."
LORD ASKWITH LORD ASKWITH moved, before "guilty" in subsection (1) in the line immediately preceding the provisos, to insert "knowingly." The noble Lord said: My Lords, I have been asked by Lord Gainford, in his unavoidable absence, to move this Amendment and the other Amendments that he has put down to Clauses 72 and 74. These clauses are of very great importance to directors generally because they make a very complete alteration in the existing law and practice. At the present moment it is the general custom of a company to give an indemnity to a director if he has been guilty of negligence or default, and there have been very few cases indeed before the Law Courts. The clauses seem to be directed to meet what occurred in a very well known case which created such
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a sensation and perhaps caused the bringing in of this Bill. The subsection provides that the indemnity cannot be given and my noble friend suggests that whether the man is guilty or not he must be brought up and tried. Unless considerable mitigation is given to the provisions of the Bill by means of the Amendments of Lord Gainford and Lord Hunsdon of Hunsdon the director would be subjected to these proceedings, however innocent he might be. It would be a protection to him if the word "knowingly" were inserted.
If he has "knowingly" been guilty of negligence or default or breach of duty or trust, then it would be right that he should be subjected to a trial, but there should be this proviso that he should have done it "knowingly." The words "wilfully" and "knowing" are inserted in all cases of this kind of default or negligence mentioned in this Bill. For confirmation of this I would refer your Lordships to Clauses 8, 10, 13, 14, 16, 17 and others. It is in this clause for the first time that we find the omission of those words. I am aware that in paragraph 46 of the Report there is a very strong reference to directors. It says:—
"A director may with impunity be guilty of the grossest negligence provided that he does not consciously do anything which he recognises to be improper."
Apparently, under the provisions of this particular clause, he is given six months in which to study the law. The majority of men who become directors are business men or experts, and even if they try to do so they would find the greatest difficulty in learning fully the law relating to companies. There may be a few persons who become directors who would not take any trouble about it and it may be the case that perhaps some of them ought to be hit. In the majority of cases, however, it would be a very serious matter. In bad cases it would be found, I think, when the question came to be investigated, that offenders were guilty in other respects and they would be hit. But the provision that they cannot be indemnified at all raises a quite different legal question to that which has existed in the past and I would submit that insufficient latitude is given in the case of a technical inadvertent breach of the Company Law of which a director may be guilty.
Amendment moved—
Page 68, line 30, after the first ("be") insert ("knowingly").—(Lord Askwith.)
LORD HUNSDON OF HUNSDON: My Lords, I hope the Government will accept this Amendment. As my noble friend says, this is the only place where "knowingly" and "wilfully" do not appear. Though I have not the least idea or what these words mean they do seem the only bright spot in a Bill full of masses of punishments, liabilities and offences. If we are all supposed to know the law then if we break the law we must do it knowingly and wilfully. Still, I should like to see the words inserted because they are some protection.
THE LORD CHANCELLOR: My Lords, I am afraid that if your Lordships accept this Amendment you will be totally destroying the value of this clause. It is an important clause, I agree, and it wants careful consideration, but the recommendation which the House, I think, accepted in Committee was that a provision in the articles that a director should be exempt from any liability for any negligence or default or breach of duty should be void—that the liability should be the ordinary liability of an agent who commits a default or a breach of his duty—but that if for special reasons the Court thought that a director ought to be excused then the Court might excuse him. I fully accept the latter part of the recommendation, and I am prepared when the time comes to accept some of the proposals which are on the Paper in order to extend the power of the Court in a proper case to excuse a director who has been negligent. It seems to me, however, to be going much too far to say that this clause shall not apply to negligence or breach of duty unless it is wilful and is done knowingly. I do not know what wilful negligence is. Negligence is omission to do something which a man ought to have done. Generally it occurs from want of thought or want of care, and I cannot imagine a man saying to himself: "I know all about my duties, but I will be negligent about them." It seems to me that to put in these words would destroy the whole effect and meaning of this clause and I would rather not have the clause at all than have these words inserted. They would create the greatest difficulties and I think any real danger would be met by later Amendments. I hope therefore the noble Lord will not press the Amendment.
LORD ASKWITH: In view of the noble and learned Viscount's promise that he will consider very carefully what would happen in the event of a man being obliged to be convicted for what may amount to a very small offence——
THE LORD CHANCELLOR: May I interrupt? Not convicted, but civilly liable.
LORD ASKWITH: —I will not press the Amendment.
Amendment, by leave, withdrawn.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in sub-section (1) proviso (c), after "Act" to insert "or under this section". The noble and learned Viscount said: If your Lordships are not prepared to accept, later Amendments which would give authority to a director who thinks he has been negligent to apply himself to the Court for relief, you will delete these words.
Amendment moved—
Page 69, line 9, after ("Act") insert ("or under this section").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (2), to leave out "connected with his appointment including the purpose thereof" and to insert "of the case, including those connected with his appointment." The noble Viscount said: My Lords, this Amendment also relates to the question of the liability of directors. The proposal in the Bill is to make Section 279 of the principal Act apply to the managers and officers of a company as it applies to the directors, and the Court, in determining in pursuance of that section whether any person ought fairly to be excused for any negligence or breach of trust, may take into consideration all the circumstances connected with his appointment, including the purpose thereof. It has been represented to us that this does not go quite far enough. It directs the attention of the Court to the circumstances connected with the appointment and so may lead the Court not to pay sufficient attention to other circumstances.
The Report of the Greene Committee, I find, contains these words:—
"On the other hand it has been forcibly brought to our notice that under the modern conditions of company administration it is in many cases quite impossible for every director to have an intimate knowledge of or to exercise more than a quite general

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supervision over the company's business. Moreover, it often happens that a director is appointed owing to some special knowledge of a particular branch or aspect of the company's affairs or because he is in a position to obtain business for the company. It is not to be expected that such a director should be bound to have so close an acquaintance with the general business of the company as other members of the board. We are of opinion that the general law of negligence is sufficient to deal with such a case but in order to remove any possible hardship we recommend that the Court in exercising its power to grant relief should give attention to considerations of the nature indicated."
I am very unwilling to cause any suspicion in the minds of business men that their case will not be fully and fairly considered with a view to ascertaining whether or not they should be excused. Therefore I propose, if your Lordships agree, to amend that clause by instructing the Court to have regard to all the circumstances of the case, which will, I think, improve the security of the directors.
Amendment moved—
Page 69, lines 17 and 18, leave out ("connected with his appointment including the purpose thereof") and insert ("of the case, including those connected with his appointment").—(The Lord Chancellor.)
On Question, Amendment agreed to.
LORD ASKWITH LORD ASKWITH moved to insert the following new subsection:—
"(3) Whenever in any proceedings pending before a Judge and jury against any person claiming relief in respect of any negligence, default, breach of duty or breach of trust, of which such person has been or is alleged to have been guilty as director, manager or officer of any company the Judge, after hearing the evidence tendered by or on behalf of such person, shall be of opinion that such person ought fairly to be excused from the negligence, default, breach of duty or breach of trust or alleged negligence, default, breach of duty or breach of trust the Court may on the application of such person withdraw the case from the jury and direct judgment to be entered for such person on such terms as to payment of costs or otherwise as the Judge may think proper."
The noble Lord said: My Lords, I beg to move this Amendment on behalf of my noble friend Lord Gainford. I prefer it to that of my noble friend Lord Hunsdon which is also on the Paper. This Amendment extends the power of the Judge and enables him, before an actual finding by the jury, to withdraw the case from the jury instead of having to wait until a finding has been given
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and then perhaps relieve the applicant. In view of all the new kinds of negligence brought in by this Bill, it seems to me important that this dispensing power should be given. The reason that Lord Hunsdon's Amendment does not go as far as mine is that it does not appear from the Companies Consolidation Act that the Court can dismiss a case and relieve the director except after a finding of the jury or of the Court. This Amendment will enable that to be done at any time without having to wait for the finding in perhaps a very small case against a comparatively innocent director.
Amendment moved—
Page 69, line 21 at end insert the said new subsection.—(Lord Askwith.)
LORD HUNSDON OF HUNSDON: My Lords, I rather disagree with my noble friend Lord Askwith in his criticism of the Amendment that stands in the name of my noble friend Lord Halsbury and myself. It does not conflict at all with his Amendment. It deals with a different condition. What Lord Askwith's Amendment seems to do is to deal in a more moderate way with that part of the Amendment to Clause 32 which my noble friend Lord Halsbury and I moved on the Committee stage. It does, though not to such an extent as we suggested, tend to make the honest director a little more comfortable in his mind. While we desire to stop malpractices, we must take care not to check honest people from joining the boards of companies lest in the end the gain may be less than the loss.
THE LORD CHANCELLOR: I agree that the two Amendments are independent of one another.
LORD ASKWITH: I would be very pleased if both were accepted.
THE LORD CHANCELLOR: I accept the principle of this Amendment. The drafting of it, however, is not approved and if the noble Lord would accept this Amendment in place of it I should be obliged:—
"Where any case to which the said Section two hundred and seventy-nine applies is being tried by a Judge with a jury, the Judge, after hearing the evidence, may, if he is satisfied that the defendant ought in pursuance of the said section to be relieved either in whole or in part from the liability sought to be enforced against him,

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withdraw the case in whole or in part from the jury and forthwith direct judgment to be entered for the defendant on such terms as to costs or otherwise as the Judge may think proper."
It certainly covers the whole ground.
LORD ASKWITH: It is, if I may say so, a great improvement on the drafting of the clause given to me and it meets the point that the Judge may be able to withdraw the case before the finding of the Court.
Amendment, by leave, withdrawn.
Amendment moved—
Page 69, line 21, at end insert the said new subsection.—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, at the end of the clause, to insert the following new subsection:—
"(3) Where any person being a director, manager or officer of a company has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust, he may apply to the Court for relief, and the Court on any such application shall have the same power to relieve him as under Section two hundred and seventy-nine of the principal Act it would have had if it had been a Court before which proceedings against that person for negligence, default, breach of duty or breach of trust had been brought."
The noble Earl said: My Lords, this is an Amendment in a much milder form than the one which Lord Hunsdon and myself moved on Committee Stage. We have undoubtedly proposed a much milder subsection for the relief of directors on this occasion.
Amendment moved—
Page 69, line 21, at end insert the said new subsection.—(The Earl of Halsbury.)
THE LORD CHANCELLOR: My Lords, the effect of this Amendment is that if a director or an officer of a company thinks a case might be made against him for negligence, default, breach of duty or breach of trust, he need not wait until he is sued but may himself, having a guilty conscience, apply to the Court for relief and the Court may give him relief. I doubt whether that power would be very much used, but I see no objection to it.
On Question, Amendment agreed to.
Accounts to contain particulars as to loans to directors, &c.
73.—(1) The accounts which in pursuance of this Act are annually to be laid before
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every company in general meeting shall contain particulars showing—

(a) the aggregate amount of any loans which during the period to which the accounts relate have been made either by the company or by any other person under a guarantee from or on a security provided by the company to the directors of the company, and to any other officers of the company respectively, including any such loans which were repaid during the said period; and

(b) the aggregate amount of any loans made to directors and to such other officers respectively at any time before the period aforesaid and outstanding at the expiration thereof:

THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (1) (a), to leave out "aggregate." The noble and learned Viscount said: My Lords, I have a series of Amendments to Clause 73. The effect of these Amendments taken together is that, whereas Clause 73 as it stands requires a company's accounts to contain particulars as to the aggregate amount of loans to directors and to other officers of the company respectively, the clause when amended will require such particulars to be given in detail showing the amount lent to each director or officer individually. I have sympathy with the objection taken on the Committee stage that the statement that an aggregate sum of £10,000 had been lent to the directors or officers would not tell the shareholders very much and that it would be right to give the details. The effect of these Amendments is to require those details to be given.
Amendment moved—
Page 69, line 25, leave out ("aggregate").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Amendments moved—
Page 69, lines 29 and 30, leave out ("the directors") and insert. ("any director or officer")
Page 69, line 30, leave out from ("company") to ("including") in line 31.
Page 69, line 34, leave out ("aggregate").
Page 69, lines 34 and 35, leave out from ("made") to end of line 35, and insert ("in manner aforesaid to any director or officer").—(The Lord Chancellor.)
On Question, Amendments agreed to.
Clause 74:
Statement as to remuneration of directors to be furnished to shareholders.
74.—(1) The directors of a company shall, on a demand in that behalf made to them

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in writing by members of the company representing at the date of the demand not less than one quarter of the total voting rights of all the members of the company, furnish to all the members of the company within a period of one month from the date of the demand a statement, certified as correct, or with such qualifications as may be necessary, by the auditors of the company, showing as respects each of the last three preceding years in respect of which the accounts of the company have been made up the aggregate amount received in that year by way of remuneration or other emoluments by persons being directors of the company, whether as such directors or otherwise in connection with the management of the affairs of the company, and there shall in respect of a person being by virtue of the nomination, whether direct or indirect, of the company a director of any other company be included in the said aggregate amount any remuneration or other emoluments received by him for his own use as a director of that other company.
(2) In computing for the purpose of this section the amount of any remuneration or emoluments received by any director the amount actually received by him shall, if the company has paid on his behalf any sum chargeable by way of income tax (including super-tax) in respect of the remuneration or emoluments, be increased by the amount of the sum so paid.
(3) If any director fails to comply with the requirements of this section he shall be liable to a fine of fifty pounds.
LORD ASKWITH LORD ASKWITH moved, in subsection (1), to omit the words "on a demand in that behalf made to them in writing by members of the company representing at the date of the demand not less than one quarter of the total voting rights of all the members of the company." and insert "if required by a special resolution of the company so to do." The noble Lord said: My Lords, I beg to move this Amendment which stands in the name of my noble friend Lord Gainford. The Committee's Report declares that the question of the disclosure of the remuneration of directors is a difficult one, and they make certain recommendations. The Bill that is before us says:
"The directors of a company shall, on a demand in that behalf made to them in writing by members of the company representing at the date of the demand not less than one quarter of the total voting rights of all the members of the company, furnish to all the members of the company within a period of one month from the date of the demand a statement, certified as correct, or with such qualifications as may be necessary, by the auditors of the company, showing as respects each of the last three pre-
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ceding years in respect of which the accounts of the company have been made up the aggregate amount received in that year by way of remuneration or other emoluments by persons being directors of the company, whether as such directors or otherwise in connection with the management of the affairs of the company,"
and so on.
I submit that a special resolution of a company is far the best way of dealing with this difficult question. If members of a company really want it, they can easily obtain an opportunity for discussion of this subject, and then the company in a general meeting can discuss whether the remuneration is fair or not. But if you were to allow for an unspecified period—and it might go on for years—such a small number of persons to issue a fiat that the directors must provide this statement, however much they may disagree with the proposal, you create a very unfair position for many people. You may be doing a thing which the board of directors have had no opportunity whatever of putting before the general meeting, you may be compelling them to disclose particulars which a general meeting would refuse to give and you are actually,, by a minority, binding a company by Statute to a disclosure that may be quite contrary to the view of the majority.
I am urged to press this Amendment very strongly. The clause, as it stands, might easily lead to the overthrow of a majority decision. Men who were managers of the company and who were invited to add to that managership a directorship—which is very often a very valuable arrangement for a company—would, as a result of this provision, be very loth to become directors of the company lest they should be obliged to have a disclosure, of a kind which is frequently refused, of all the amounts they have received by resolution of the board. This expert type of managing director is frequently a man who is called in when the company is not doing very well and his brains are required. He may be paid a fixed salary, or be paid by results, according to what he achieves. The company may then prosper, and a request may be made by persons jealous of these managing directors with a view to finding out how much they are receiving, and it will be said that they are receiving, or have received, an unfair

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amount, though they may have brought the company to a period of prosperity after its lean years.
The Greene Committee itself alludes to the fact that it is often inadvisable to disclose these matters, because people can act on behalf of rival companies and competitors. Most people will know of certain instances in which this has been done in order to obtain the services of these men by endeavouring to offer them a bigger sum than they are receiving. This procedure might be used to buy up a manager, and, although the aggregate remuneration is that which has to be shown according to this Bill, yet it would be perfectly easy to find out what remuneration an expert manager is getting. The fees for ordinary directors are generally laid out in the articles of association or have been passed by special resolution of the company, and if these are withdrawn from the total it can be ascertained with the greatest case what is being received by the experts. A special resolution has to be demanded by a majority of three-quarters of those present in person or by proxy, and not by a majority of those persons who are members of the company and entitled to vote. If the company agrees that the matter should be disclosed, let it be disclosed, and a general meeting can be held to discuss the matter upon the resolution of only one-tenth of the persons present in person or by proxy.
There is another point in regard to this disclosure of remuneration that is not without some importance. Very often it has come out—I have known instances of this myself—that some man who has really been keeping the company going by his brains has received a very considerable amount, and that amount is used for comparison with the wages of clerks and other employees, even of workmen, for the purpose of making trouble. Surely the board, who are the responsible persons and a committee of whom have appointed the expert, are the people to decide how much a man is to receive, and, if the company really does desire that this should be disclosed, it should be disclosed, while if the board are able to convince the company that it ought not to be disclosed and that there is no necessity that it should be disclosed, and if the company back them up, then few, or comparatively few, persons would be
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able to get this information, which it is often not to the advantage of the company that they should have. Accordingly I venture to hope that the suggestion that Lord Gainford has put forward, backed by very strong interests indeed, will be accepted in view of the very difficult situation that would arise if the procedure laid down in Clause 74 were followed as it stands.
Amendment moved—
Page 70, line 19, leave out from ("shall") to ("furnish") in line 23, and insert ("if required by special resolution of the company so to do").—(Lord Askwith.)
LORD KYLSANT: My Lords, I cannot help feeling that this Amendment goes further than is quite reasonable. Some Amendment may be desirable, but if the majority of a company really desires this information, my own view is that it should be supplied. I can quite understand from the speech of the noble Lord, Lord Askwith, that it might not be unreasonable to ask for a three-quarters majority, but if the majority of any company desires to have this information I certainly feel that they should have it.
LORD BANBURY OF SOUTHAM: My Lords, I agree with Lord Kylsant, and I do not understand why this information should be withheld. Lord Askwith gave, as I understood him, one reason and one reason only. That was that some particular expert, who was receiving a very large salary, and who was a manager, had been asked to join the board, and that therefore as he had joined the board the large sum which he was receiving in addition to his director's remuneration, as manager, would be disclosed. The answer is that the manager need not join the board and in that case nothing need happen. But I must say that I think there can be no harm whatever in letting the shareholders—after all, the directors are the servants of the shareholders—know what they are paying for their services. It may be said that there are certain people who are receiving at the present moment enormous sums for certain services which they are supposed to render, but having been for many years connected with certain companies, my opinion is that the sums so paid are totally beyond the value of the services rendered. It seems to me a ridiculous idea to think that all you have to do is

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to give a man £15,000 a year and immediately he becomes a sort of demi-god. My own belief is that you could find many others capable of doing the same thing better for one-third of the salary. Therefore I think it is right that the shareholders should know to whom, and what, they are paying, for after all it is their own money.
LORD HUNSDON OF HUNSDON: My Lords, I should like to support the Amendment of my noble friend, but with one slight alteration. It may be really a very bad precedent if 25 per cent. of the shareholders are allowed to dictate to the board, which after all is the company, on any subject at all, and it is for the same reason that I am inclined to agree with Lord Kylsant when he states that 75 per cent. is necessary for a special resolution. I suggest that we should leave out from the Amendment the word "special," and then the will of the majority of the shareholders would prevail.
LORD BALFOUR OF BURLEIGH: My Lords, I am very doubtful as to the wisdom of the Amendment. If the suggestion which has been made were accepted you might as well leave out the clause, because if a majority wants a thing, and passes a resolution in the ordinary way, it can get it. The object of the clause is to prevent abuses, and I think the effect of getting greater publicity is a very valuable one. For that reason I am very doubtful as to the wisdom of limiting the clause at all, and subject to anything that the Lord Chancellor may have to say I should be very sorry to see the Amendment accepted.
LORD OLIVIER: My Lords, I entirely agree with Lord Balfour of Burleigh. Lord Hunsdon spoke of the will of the majority of the shareholders prevailing. I presume he means the will of the majority of the proxies. There are companies in which a large block of ordinary shares are held by certain directors who are unquestionably in receipt of very large remuneration, and preference shareholders and minority shareholders have no means of ascertaining what is the remuneration which those directors are receiving. I think this clause is a very excellent one in the interests of publicity, and I hope the Government will not give way upon it.
THE LORD CHANCELLOR: My Lords, I have discussed this Amendment with the President of the Board of Trade, and I am disposed to think that 25 per cent., for which the clause as drawn provides, is rather too low a proportion, because if you say that a quarter of the shareholders may require this information it is still possible that some large holder of shares—some person who acquires for his own purpose a large block of shares—may call for this information for purposes not closely connected with the company in question. Therefore I think that 25 per cent. is rather too low. On the other hand. I could not possibly assent to a special resolution, because, as Lord Askwith has reminded you, it means the vote of three-quarters of the shareholders present in person, or by proxy, at the meeting of the company. I think a fair solution is to say that an ordinary resolution of the company shall be sufficient. After all, the affairs of the company are managed by the board subject to directions given by the company in ordinary meetings, by ordinary resolution passed by a bare majority of those present or by proxy. Therefore if the noble Lord will withdraw his Amendment, and move it with the word "special" omitted, I shall be prepared to accept it.
LORD ASKWITH: I should be prepared to take that course. That will allow the directors to meet the whole of the shareholders of the company and not be forced by a bare minority, who may have gone behind the scenes and who at any time may put forward this request. I am not against this disclosure of information, but it ought to be given when the company wants it, and in a legitimate manner, on the decision of the people who have a right to be consulted.
Amendment, by leave, withdrawn.
Amendment moved—
Page 70, line 19, leave out from ("shall") to ("furnish") in line 23, and insert ("if required by resolution of the company so to do").—(Lord Askwith.)
On Question, Amendment agreed to.
Amendment moved—
Page 70, line 25, leave out ("date") and insert ("receipt by the company").—(The Earl of Halsbury.)
On Question, Amendment agreed to.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, to add to subsection (2):—
"Provided always that it shall be sufficient to state the total aggregate of all sums paid to or other emoluments received by all the directors in each year without specifying the amount received by any individual."
The noble Earl said: My Lords, this Amendment really, I think, only deals with a point assented to in the Committee stage—namely, that the sums of remuneration shall he given in the aggregate and not in detail. It may be possible to work out the individual remuneration, but I think that possibly when the arithmetical sum comes to be done it will not be found to be quite so easy as is suggested. At all events I think the principle of my Amendment was more or less accepted in Committee.
Amendment moved—
Page 71, line 4, at end, insert the said proviso.—(The Earl of Halsbury.)
LORD BANBURY OF SOUTHAM: My Lords, I am afraid I must disagree with the noble and learned Earl on this point. I do not see what there is to be ashamed of. Why should not the shareholders know that Mr. A. is receiving £2,000 a year, while other directors are only receiving £500 each? Why should they not be told? I do not believe in all this secrecy. It only creates suspicion in the minds of the shareholders, and I see no earthly reason why the information should not be given.
THE LORD CHANCELLOR: My Lords, this is in accordance with the recommendations of the Committee on which we have very much to rely, and I should be disposed to assent to this Amendment if the House finds it acceptable.
LORD BANBURY OF SOUTHAM: My Lords, we have not the authority of the Committee in every case, and the Committee, though composed of very competent persons, may occasionally be wrong. It is not important, but I really do not see why a director should object to any shareholder knowing what he is receiving. It seems to me the proper course to pursue. I cannot see what there is behind this.
LORD OLIVIER: My Lords, I really must strongly support the point made by the noble Lord opposite, with all his great experience. In some companies
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there are unquestionably cases where directors do receive quite a peculiar amount of remuneration, and why the whole amount should be lumped in the aggregate, without specifying any individual, I cannot conceive, except on the ground that is is to obscure the policy pursued by the directors.
THE EARL OF HALSBURY: My Lords, I think the argument in favour of having an aggregate instead of disclosing each separate director's emoluments has been brought before your Lordships on two or three occasions within the last few months. It is not a question of not wanting to disclose these emoluments to the shareholders of the company, but of not wanting to disclose them to the management of your rivals, because, if you do, your rivals will come along and offer higher emolument in order to entice away the best business man in your company. It is on that, I think, that the Greene Committee acted.
On Question, Amendment agreed to.
Clause 77:
Companies, etc., disqualified for acting as liquidator, auditor or receiver of a company.
77.—(1) No body corporate (but not including a firm in Scotland) shall be qualified to act as liquidator (whether in a winding-up by the Court or in a voluntary liquidation), auditor or receiver of the property of a company, and any appointment made in contravention of this provision shall be void.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, near the beginning of subsection (1), after "No body corporate (but not including a firm in Scotland) shall," to insert. "unless appointed so to act before the passing of this Act." The noble and learned Viscount said: It seems to me that this clause ought not to apply to auditors and other officers already appointed; it is rather hard on them.
Amendment moved—
Page 71, line 40, after ("shall") insert the said words.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 78:
Provisions as to auditors.
(2) The following shall be substituted for subsection (5) of Section one hundred and twelve of the principal Act:—
"(5) Subject as hereinafter provided, the first auditors of the company may

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be appointed by the directors at any time before the first annual general meeting, and auditors so appointed shall hold office until that meeting:
Provided that—
(a) the company in general meeting may remove any such auditors and appoint others in their place; and
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, in subsection (2) (a), to leave out "in general meeting may," and to insert "may at a general meeting of which notice has been served on the auditors in the same manner as on members of the company." The noble Earl said: My Lords, in this clause as originally drafted the auditor of the company might be removed by a snap vote at the first meeting of the company, and, in order to obviate that, this Amendment provides that "the company may at a general meeting of which notice has been served on the auditors in the same manner as on members of the company remove any such auditors ….," and by a later Amendment it is provided that notice has to be given of the nomination of any fresh auditors.
Amendment moved—
Page 72, line 20, leave out ("in general meeting may"), and insert the said new words.—(The Earl of Halsbury.)
THE LORD CHANCELLOR: My Lords, I am prepared to accept this and the following Amendments.
On Question, Amendment agreed to.
Amendments moved—
Page 72, line 21, leave out ("others")
Page 72, line 22, after ("place") insert ("any other persons being persons who have been nominated for appointment by any member of the company and of whose nomination notice has been given to the members of the company not less than seven days before the date of the meeting").—(The Earl of Halsbury.)
On Question, Amendments agreed to.
Clause 85:
Restrictions on offering of shares for sale or for subscription.
85.—(1) It shall not be lawful for any person to go from house to house offering shares for subscription or purchase to the public or any member of the public.
(2) Subject as hereinafter provided, it shall not be lawful to make an offer in writing to any member of the public of any shares for purchase unless the offer is accompanied by a statement in writing
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(which must be signed by the person making the offer and dated) containing such particulars as are required by this section to be included therein and otherwise complying with the requirements of this section:
Provided that the provisions of this subsection shall not apply—

(a) where the shares to which the offer relates are shares which are quoted on, or in respect of which permission to deal has been granted by, any recognised stock exchange in Great Britain and the offer contains a statement that the shares are so quoted or that such permission has been granted; or

(b) where the shares to which the offer relates are shares which a company has allotted or agreed to allot with a view to their being offered for sale to the public.

(4) The said statement shall contain particulars with respect to the following matters—
(e) the total amount of any bonds, debentures, debenture stock or other similar obligations issued by the company and outstanding at the date of the statement, together with the rate of interest payable thereon;
(5) If any person acts, or incites, causes or procures any person to act, in contravention of this section he shall he liable to a fine not exceeding two hundred pounds, and in the case of a second or subsequent offence to imprisonment for a term not exceeding twelve months or to a fine not exceeding five hundred pounds, or to both such imprisonment and fine.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved to add to subsection (1): "'House' in this section means private residence'". The noble Earl said: My Lords, this is an Amendment which I am raising at the request of the noble Lord, Lord Harris, who has to be away to-day on public duty. Clause 85 is intended to prevent what is commonly known, especially in some of the more popular papers, as the house-to-house offering of shares. I do not know because I have not had time to investigate, but I should not be at all surprised if this were the first Bill before either House of Parliament in which the words "house to house" came in. On the Committee stage Lord Harris pointed out that it was rather a difficult expression to construe, unless it is construed in its ordinary sense, which involves the meaning of every house. The noble and learned Viscount on the Woolsack thought

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everybody knew what "house to house" meant. I am not certain that everybody does. The words have to be construed strictly, and if they are left as we find them in the Bill what will be the effect on an issuing house who are going to underwrite shares? What happens in practice? They put down on a list what they think certain firms will take, and then send one of their clerks round the City to see these various people whose names they have put down, and ask them if they will take what it is suggested they should take. Why is that not offering shares from house to house? I cannot see why it is not; but I am perfectly certain that the promoters of the Bill never intended to put an end to what is a well-known custom in the City of London. The Amendment would exclude the offices in the City, and would allow a business office to act in the ordinary way.
Amendment moved—
Page 76, line 19, at end insert ("'House' in this section means 'private residence'").—(The Earl of Halsbury.)
THE LORD CHANCELLOR: My Lords, I think there is something to be said for this Amendment. We do not want to prevent these people going from office to office offering shares to brokers, who know very, much more about them than the hawker knows himself. The only objection I see is that the share hawker might go, in some country places, from shop to shop and try to sell his shares to inexperienced people, and this Amendment would not prevent it. I think if the noble Earl would move it in this form, by inserting the word "subsection" for "section," it might be agreed to.
THE EARL OF HALSBURY: Certainly I accept that.
Amendment, by leave, withdrawn.
Amendment moved—
Page 76, line 19, at end insert ("'House' in this subsection means 'private residence"'). (The Earl of Halsbury.)
On Question, Amendment agreed to.
THE EARL OF HALSBURY THE EARL OF HALSBURY moved, in subsection (2) in the paragraph preceding the proviso, after "public," to insert "other than a share dealer or a share broker." The noble Earl said: My Lords, I think this follows from the last Amendment.
Amendment moved—
Page 76, line 22, after ("public") insert ("other than a share dealer or share broker").—(The Earl of Halsbury.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (4) (e), to leave out "bonds." The noble and learned Viscount said: My Lords, this Amendment and the following one in my name are drafting Amendments.
Amendment moved—
Page 77, line 29, leave out ("bonds").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Amendment moved—
Page 77, line 30, leave out ("debenture stock or other similar obligations").—(The Lord Chancellor.)
On Question, Amendment agreed to.
VISCOUNT BERTIE OF THAME VISCOUNT BERTIE OF THAME moved, in subsection (5), before "a fine" where those words first occur, to insert "imprisonment for a term not exceeding six months or to." The noble Viscount said: My Lords, I took advantage of the noble and learned Viscount's suggestion in Committee and interviewed a representative of the Home Office in regard to this matter. The result of that interview is this and the following Amendment which stand in my name. The gentleman I saw said the Home Office would welcome the opinion of the Court and thought that this was the most convenient way of bringing to the attention of the Court the fact that a person convicted was liable to deportation. I beg to move.
Amendment moved—
Page 78, line 18, after ("to") insert ("imprisonment for a term not exceeding six months or to").—(Viscount Bertie of Thame.)
LORD HUNSDON OF HUNSDON: My Lords, I hope your Lordships will not accept the Amendment, which, I understand, alters the Bill in the matter of punishment. If your Lordships alter this Bill in any matter of punishment it will be assumed by the House of Commons, when it goes down to that place, that you have considered the question of the punishments in this Bill. That, I believe, is not the case. Certainly the Law Society have not considered the punishments in the Bill, nor do I think the chartered accountants have. I do not, in fact, know anybody who has. I have

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taken out of the Bill all the punishments and all the crimes and I have compared them. I have no knowledge of what I may call the crime tariff of this country and it was impossible for me to propose any Amendments with regard to them. I wish to say this—because this is the only opportunity of doing so—that in my judgment some one who does understand and know what I call the crime tariff of this country should go through this Bill clause by clause and see if the punishments are proportionate.
I am only going to give two examples of what I think are the very disproportionate punishments in this Bill. Clause 34 says that if a copy of the balance sheet is not sent to every shareholder seven days before the general meeting the company directors and officers are liable to a £20 fine. That is a technical offence and £20 is the fine. The default must be knowingly and wilfully permitted. Clause 38, which also deals with a technical offence, says that if a company has bought a property with a mortgage on it before the passing of this Act they have to send the Registrar of Companies a copy of the mortgage and all particulars within six months after the passing of the Act. The company may have bought the property with the mortgage on it many years before and may have mentioned the mortgage in the balance sheet every year and the chairman may have referred to it every year in his speech, but because they have committed the technical offence of omitting to send a copy of the mortgage to the Registrar of Companies the directors, officers and secretary are liable to a fine of £50 a day (during which the default continues; that is to say, at the rate of £18,250 a year, which not only takes a very sanguine view of the financial position of most secretaries that I know but seems excessive and out of proportion to the offence, which is a technical one.
LORD PARMOOR: I understand this is a reduction from twelve months to six months.
VISCOUNT BERTIE OF THAME: No, it is six months on the first conviction.
LORD PARMOOR: Then I agree with what the noble Lord, Lord Hunsdon, has said.
THE LORD CHANCELLOR: My Lords, the clause, as drawn, provides that for the first offence of this class the penalty shall be a fine not exceeding £200, but for a second offence imprisonment for a term not exceeding twelve months or to a fine not exceeding £500, or to both such imprisonment and fine. The Aliens law provides that if an alien is convicted of an offence which carries imprisonment he can be deported under the Aliens Act. The effect of this Amendment is that he may be deported where he is only fined for a first offence. The object of the Amendment is to bring this offence within the category of offences for which deportation may be ordered by the Court. If the noble Viscount has discussed this with the Home Office where they know all about these penalties, and if, as I understand, he has obtained their approval, then, unless your Lordships see some objection in principle, I think we might accept the Amendment. I do not think, except in a very serious case, imprisonment would actually be imposed.
On Question, Amendment agreed to.
Amendment moved—
Page 78, line 19, after ("pounds") insert, ("or to both such imprisonment and fine").—(Viscount Bertie, of Thame.)
On Question, Amendment agreed to.
Clause 90:
Amendment of s 208 of principal Act.
90. For Section two hundred and eight of the principal Act (which relates to the ranking of claims in Scotland), the following section shall be substituted:—
(2) In the winding up of a company registered in Scotland, where there have been mutual credits, mutual debts or other mutual dealings between the company and any creditor or person claiming to be a creditor of the company, an account shall be taken of what is due from the one party to the other in respect of such mutual dealings, and the sum due from the one party shall be set off against any sum due from the other party, and the balance of the account and no more shall be exigible; but nothing in this Provision shall entitle any person to claim the benefit of any set off against the property of a company in any case where he had at the time of giving credit to the company notice of any fact which would have enabled a creditor to present a petition for the winding up of the company on the ground that it was unable to pay its debts.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to leave out subsection (2). The noble and learned Viscount said: My Lords, it is proposed to omit this subsection and leave the matter with which it deals to be, regulated by the Common Law as it is in Scottish bankruptcy proceedings. The Amendment, which was suggested by the Scottish bank managers, has the approval of the Lord Advocate.
Amendment moved—
Page 81, lines 12 to 29, leave out subsection (2).—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 99:
Unclaimed dividends, &c. to be lodged in bank.
99. When a company registered in Scotland has been wound up, and is about to be dissolved, the liquidator shall lodge in a joint stock bank of issue in Scotland (not being a bank in or of which the liquidator is acting partner, manager, auditor, agent or cashier in the name of the Accountant of Court the whole unclaimed dividends and unapplied or undistributable balances, and the deposit receipts therefor shall be transmitted to the Accountant of Court; and the provisions of Section one hundred and fifty-three of the Bankruptcy (Scotland) Act, 1913 so far a, consistent with this Act, shall with any necessary modifications, apply to sums lodged in bank in pursuance of this section in like manner as they apply to sums deposited in pursuance of that enactment.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to leave out "auditor." The noble and learned Viscount said: My Lords, thy effect of this Amendment is to make the opening lines of Clause 99 read as follows:—
"When a company registered in Scotland has wound up, and is about to be dissolved, the liquidator shall lodge in a joint stock bank of issue in Scotland (not being a bank in or of which the liquidator is acting partner, manager, agent or cashier) in the name of the Accountant of Court the whole unclaimed dividends and unapplied or undistributable balances."
There seems no reason why the liquidator should be precluded from selecting for the deposit of unclaimed dividends a bank of which he happens to be the auditor. A trustee in bankruptcy is not so restricted by the similar provisions regarding Scottish bankruptcies. This amendment was suggested by the Scottish bank managers and has the approval of the Lord Advocate.
Amendment moved—
Page 84, line 30, leave out ("auditor").—(The Lord Chancellor.)
On Question, Amendment agreed to.
VISCOUNT BERTIE OF THAME VISCOUNT BERTIE OF THAME moved, after Clause 101, to insert the following new clause:—
". At the end of Regulation 8 of Table A of the principal Act there shall be inserted the following new regulation:—
(8A) No part of the funds of a subsidiary company shall be employed in the purchase of, or in loans upon the security of, the shares of the parent company. Subsidiary company shall bear the same interpretation as that contained in subsection (6) of Section thirty-live of this Act"
The noble Viscount said: MY Lords, as you already know, it is illegal for a company to deal in its own shares, but there is nothing to prevent it forming a subsidiary company and supplying it with money, not with the avowed object but still with a view to dealing in that company's shares. That is an evasion of the law. There is another objection and that is, if the parent company has to go out of business and a subsidiary company holds a large block of its shares that company also probably would have to follow suit. I have here the balance sheets of two companies which I will call A. and B. Company A. has an ordinary capital of £200,000 of which Company B. holds £113,000. Company A. holds shares in Company B. and some other companies in the same class of business which stand in their books at the sum of £310,000, so that the holding must be considerable. I submit that such a state of affairs is quite wrong, and I would ask your Lordships to remember the City Equitable and its subsidiaries.
Amendment moved—
Page 85, line 10, at end insert the said new clause.—(Viscount Bertie of Thame.)
THE LORD CHANCELLOR: My Lords, I really do not think this proposed new clause is suitable for insertion in this Bill. The proposal is to add a new regulation to Table A of the Companies Act. That table, as your Lordships know, is a model form of articles which a company may adopt if it pleases, which it may not adopt at all. Or which it may adopt with variations. As a matter of fact I believe Table A is adopted in its entirety by very few companies. It is much more common to find a company adopt an entirely new set of articles of its own. Therefore it would not be very much use to put in

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these words. They would have very little effect. Further, Table A may be amended by the Board of Trade, and the proper course would be to put the matter before the Board of Trade and ask them to exercise that power. I am not discussing the matter on its merits, but it would complicate this Act to insert these words.
VISCOUNT BERTIE OF THAME: I will not press the Amendment, but I do not quite understand what I ought to do.
THE LORD CHANCELLOR: If the noble Lord after this Bill has passed will approach the Board of Trade and put his points to them and ask them to amend Table A under their powers, they will, I am sure, consider the matter.
VISCOUNT BERTIE OF THAME: I am much obliged to the noble Viscount. I will not press the Amendment.
LORD BANBURY OF SOUTHAM: My Lords, may I say that I am afraid that this Amendment might produce a rather extraordinary state of affairs. Though no doubt certain parent companies do things which they ought not to do there are some companies—I know of one myself—which hold shares in other companies quite legitimately. Take the case of an English company which holds shares in an American company with a result which is very good to the shareholders of both companies. Under this Amendment if it were passed or, as I understand it, if my noble friend goes to the Board of Trade and gets an alteration in Table A, that would be prevented. I really do think we must be careful what we are doing. We cannot by legislation prevent a man being stupid—I wish we could—but we must not pass legislation which will interfere with legitimate business.
Amendment, by leave, withdrawn.
Second Schedule:
SECOND SCHEDULE.
MINOR AMENDMENTS.

Section of Act.

Amendment.

S. 209

After subsection (1), the following new subsection shall be inserted:—

"(1A) When any person has advanced money to a company for the purpose of paying any wages or salary to which paragraph (b) or paragraph (c) of

THE LORD CHANCELLOR: My first two Amendments to this Schedule are drafting.
Amendments moved—
Page 93, line 17, leave out ("(1)") and insert ("(2)").
Page 96, line 17, leave out ("(f") and insert ("(ff)").—(The Lord Chancellor.)
On Question, Amendments agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in the reference to Section 209, to leave out the new subsection (1A) and insert:—
"(1A) Where payments on account of wages or salaries have been made to any clerks, servants, workmen or labourers in the employment of a company out of moneys advanced by some person for that purpose, that person shall in a winding-up have a right of priority in respect of the moneys advanced up to the amount in respect of which those clerks, servants, workmen or labourers would in the aggregate have been entitled in the winding-up to priority in respect of those wages or salaries."
The noble Viscount said: This is a drafting Amendment which simply puts the matter in a better form.
Amendment moved—
Page 97, leave out lines 16 to 24 and insert the said new subsection.—(The Lord Chancellor.)
On Question, Amendment agreed to.
LORD ARNOLD LORD ARNOLD moved to leave out the reference to Section 243. The noble Lord said: My Lords, this Amendment deals with a point of some importance though I need not detain your Lordships more than a moment or two in putting the case for it. The words which are in the Second Schedule give power, as your Lordships will see, to destroy any documents relating to companies after the expiration of twenty years from the date of dissolution

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of the company to which the documents relate. The effect of this would be to destroy a very large number of documents which are in existence at the present time and which are most valuable for the purposes of research. Documents from the year 1845 onwards would be destroyed. Those documents are available at present for an analysis of the flow of capital and so forth in particular decades, and they throw much light upon the question of industrial development during those years. They furnish unique and irreplaceable evidence of the exact ebb and flow and direction of capital from 1845 onwards. That, I think, is of great importance. What is at stake? Really only a little space can be required in which to continue the keeping of these documents. If the Government cannot find room for them—though I think they could—they are of such value that certain outside bodies, I think, would come to the rescue. I have no authority to speak in the matter, but I would suggest that perhaps the London School of Economies, which does a great deal of research, would house some of these valuable documents and there are other organisations which might be disposed to come to the rescue. Obviously the space required to keep these documents cannot be very great in proportion to the great mass of papers which the Government has to keep. It has to keep, for instance, a copy of every newspaper published. Most of them do far more harm than good. Yet, at the present time they have to be kept. Really the additional space required to keep these documents could only be quite small.
One final point I should like to put is that before many years there is bound to be another Companies Bill. If it is found that the congestion is too great the matter can be dealt with then, but I would ask for a little respite. This Bill has had predecessors and there will be successors. I would emphasise the great advantage of these documents which, when once destroyed, cannot be replaced. That is the main point I want to put. I do ask that this respite be granted, because if later there is found to be a possible difficulty—though I cannot see any real difficulty—it can be dealt with. I submit that the reasons in favour of destruction are not nearly so strong as the reasons in favour of the preservation of these documents. I do not think there has been
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any real demand for this from anybody, and on the other hand I may say that there are persons who are entitled to consideration who are greatly concerned about this matter. I hope, therefore, the Government will accept this very modest Amendment. I believe I am right in saying that this is the only Amendment which has been moved from these Benches. In any case it will be certainly the only Amendment accepted.
Amendment moved—
Page 99, leave out line, 27 to 34.—(Lord Arnold.)
THE LORD CHANCELLOR: My Lords, I was very much touched with the appeal of the noble Lord that the Labour Party should be allowed to carry one Amendment to this Bill. But apart from that feeling I have much sympathy with this proposal. I have seen a letter from a gentleman engaged in economic research, who say he is desirous of going through these old company files in order to follow the course of trade during the last century. I do not envy him, but I do not see why his taste should not be indulged. The present position is that the destruction of public documents and records, which must take place from time to time, is carried out under the Public Record Office Acts and is under the control of the Master of the Rolls. The procedure is that when a Department proposes that documents shall be destroyed, a classified schedule of those documents must be submitted to the Master of the Rolls for approval. When the schedule is approved it is laid before both Houses of Parliament for four weeks before it becomes operative. That is a very reasonable and well-guarded procedure and it might well be applied to documents of the nature we are discussing. If the House accepts that view I would propose that the Amendment should be accepted leaving the matter to be dealt with in that way.
On Question, Amendment agreed to.
Amendments moved—
Page 99, line 42, at end, inert:—
("Section 285, At the end of the definition of debenture there shall be added the words 'bonds or other like securities.'")
Page 100, line 24, after ("100") insert ("the above fee of £2 with an additional £1")
Page 100, line 27, leave out ("1 0 0")
Page 100, line 33, after ("unlimited") insert ("a fee of £5 with an additional 5s.")
Page 100, line 35, leave out ("0 5 0")
—(The Lord Chancellor.)
On Question, Amendments agreed to.

WORKMEN'S COMPENSATION (TRANSFER OF FUNDS) BILL. [H.L.]
House in Committee (according to Order): Rill reported without amendment.

SCOTTISH NATIONAL WAR MEMORIAL.
THE DUKE OE BUCCLEUCH THE DUKE OE BUCCLEUCH rose to call attention to the action of the Lyon King of Arms in connection With the Scottish National War Memorial in Edinburgh Castle; and to move for Papers. The noble Duke said: My Lords, I shall not take up very much time on this question, which is not perhaps of first-class importance but is still of considerable interest. Perhaps your Lordships are aware that a Scottish national memorial has been erected in Edinburgh Castle. That memorial is nearly completed. It was started with Government sanction and the Chairman, Committee and secretary, if they were not appointed by the Government, were certainly sanctioned by them. It also had the approval of the Crown and the building, which will shortly be opened, being erected on Crown land, will obviously belong to the Crown, and therefore to the nation, so that it is not a private monument, except that the funds for building it have been collected from private subscriptions.
The great object of this memorial was to represent all of those who were born in Scotland or who were of Scottish domicile and who fell in the Great War, to whatever Service they belonged and whether they were men or women. There are representations of all the Scottish regiments and also memorials of some of the other forces, such as the Navy and the Air Force, but it is obvious that this did not by any means represent the whole of those who served. At the beginning of the War there were a very large number in the South of Scotland and in
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other parts who volunteered but, because the numbers were so great and it was impossible to put them all into Scottish regiments, they were given the option of joining English regiments. Throughout the War, therefore, numbers of these Scottish troops who joined up were sent to English and even Irish regiments.
In order to make this memorial more representative it was decided to have the arms of all the counties and some of the principal burghs. They were all put up by the architect and it was thought everything would be all right. However, the Lyon King of Arms ordered the architect to take them down because certain—I do not know exactly how many—of the counties had not registered their arms. My point is that, in a matter of this kind, the importance of having a correct and proper national memorial was far greater than any petty question of whether these arms had been registered or not. I do not wish to defend those county councils who have not registered their arms, because it is obvious they ought to have done so. There is no reason why, because they have neglected to do so, those who came from those counties should be penalised in a matter with which the county councils have nothing to do.
I do not suppose the order of the Lyon King of Arms would have had any effect, except that it so happened the secretary of the Committee and he were the same individual and he could therefore carry out the order. If anybody else had been secretary, I imagine the order would have been laughed at and the pastime so popular with Americans of twisting the lion's tail would have been indulged in. These arms, however, have had to come down, with the result that the memorial is not as representative as it should be. This is entirely new. These burghs and counties have been using these arms for years without any objection being taken. Here is the opportunity for a great national memorial to be raised up and it is far removed from any question of whether burghs or county councils have arms registered or not. To try to force them to register in this way is an entirely wrong action, one which should never have been carried out, and one of which I hope the Government do not approve. I am not a lawyer, but I should doubt whether Lyon King of

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Arms was legal in his action. Since this property belongs to the Crown, it seems to me that he was putting the office of Lyon above the Crown, and I was always under the impression, and I sincerely hope, that the Crown is above every one, even including the Lyon King of Arms.
I want to ask the Government, in the first place, whether this action was legal, and if the Lyon King at Arms has power to do anything of that kind without the sanction of some superior Court. It seems to me to be a very large order if he is able to remove or to damage any structure without the order of some superior Court. My second question is why this particular occasion has been taken to force this matter through, when the county councils have been using their arms in other ways for years. The Government cannot get out of their responsibility in this matter. I do not know what is the position of the holder of this medi…val office in relation to the Government, but the appointment is made by His Majesty on the recommendation of the Secretary of State for Scotland, and accordingly I think they must have some responsibility. Certainly a great responsibility rests upon them that this monument should be really representative. I hope to hear in reply their view that this action, if not actually illegal, was certainly taken without their approval; for, after all, whatever else may be said, this was a very petty and tactless thing to do in regard to a memorial of such vast importance as the national memorial to all those from Scotland who fell in the War. I beg to move.
THE PAYMASTER-GENERAL (THE DUKE OF SUTHERLAND): My Lords, the Lyon King of Arms Act, 1867, provides that
"The jurisdiction of the Lyon Court in Scotland shall be exercised by the Lyon King of Arms, who shall have the same rights, duties, powers, privileges and dignities as have heretofore belonged to the Lyon King of Arms in Scotland."
The rights, powers, etc., so referred to are embedded in the Common Law of Scotland and in various Statutes with which I need not weary your Lordships as they are considerable in number. To put the position briefly, no person or body in Scotland is obliged to bear arms. If, however, it is desired to bear them the law imposes the obligation, whether on
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private individuals or on burghs, towns or counties, of obtaining the right, either by establishing in the Lyon Court and registering in the Lyon Register a right belonging to their predecessors prior to 1672, or, failing that, by obtaining a new grant. The Lyon King of Arms has no power to permit a contravention of the law on the subject.
The present Lyon King of Arms was appointed to that office only last January. Immediately after his appointment it was brought to his notice that several of the shields of coats of arms intended as decorations in the Scottish national war memorial were not recorded in the Public Register of Arms and Bearings. As the use and display of these arms would be illegal the Lyon King of Arms was bound to take action whether he wished to do so or not. On March 10, 1927, the Lyon King wrote to those county councils who had no registered coats of arms explaining that it was proposed to engrave on the walls of the Scottish national war memorial, in addition to regimental badges, some recognition of the districts from which the various services had been recruited, that in cases where public bodies had duly registered arms these would be recorded on the walls, but that it would not be possible to record arms which were not duly registered. In such a matter his jurisdiction is self-contained and the Secretary of State for Scotland has no power either to give or to withhold approval of any action which the Lyon King may think necessary in regard to enforcement of the law.
The fee for registration of arms is £50. All such fees are paid into Exchequer and go towards relief of the general taxpayer. I believe that this is not so in England, where they go to the responsible authority. Since Lyon King took action in March, twelve counties and two burghs have recorded their arms, and I think only one or possibly two counties have not done so. I think the noble Duke said that in many cases this sort of thing had been allowed before, but this is not by any means the first occasion on which Lyon King has found it necessary to intervene in order to prevent illegal use of arms in connection with public buildings. During the years 1863–5, a number of unregistered armorial bearings were placed in the stained glass windows of Glasgow Cathedral In

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obedience to the commands of Lyon King a number of these were removed whilst many of the persons concerned registered arms in order that they might be permitted to appear. Similar action was taken in connection with a contemplated display of unregistered arms in connection with the McEwan Hall in Edinburgh, and in connection with the renovation of windows in the Parliament House.
It is quite true, as the noble Duke said, that the memorial is being erected on Crown property and that the scheme had the general approval of the Government. On the other hand, the Government have not been consulted regarding, and have no responsibility for, minor details of the scheme, such as the display of coats of arms on the walls, and matters of that sort, which have not been brought into the purview of the Government in any way. When the Committee in charge of the memorial proposed to display arms as part of the decoration, the proper course would have been to ascertain from Lyon that the arms were in order, but the Committee may, mistakenly but not unnaturally, have assumed that arms which were being used by local authorities were being so used with proper authority. However that may be, it was the statutory duty of the Lyon to see that arms were not irregularly displayed, and the action he took seems to the Government quite reasonable and proper.
In reply to the legal point that the noble Duke raised, I may say that this action was perfectly legal. Lyon King of Arms has no authority whatsoever to remit fees, and I really think that one must look at it from the point of view
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of what would have happened if he had not taken action in the way he did. His conduct in that case would have been illegal and totally unauthorised, and some notice must have been taken of it.
THE DUKE OF BUCCLEUCH: My Lords, the answer is somewhat on the lines that I expected, but I think it is very disappointing because, after all, the question of the national memorial is far greater than any question of mere red tape. What I want to know is why these county councils have been allowed for years to use these arms if they are not entitled to them. Apparently nothing has been done, and what was resented, and I think rightly, was that a very solemn occasion was used to force people to register—and people, particularly Scotsmen, do not like being forced. I am sorry that the Government are not taking any action. The only point that I really care about is that the memorial should be really representative of the whole of Scotland, as it will not now be, and that is my reason for raising this question. But since my noble friend tells me that the Secretary of State has no jurisdiction over the Lyon King of Arms, and as I believe that no qualifications are necessary for appointment to that office, I will only suggest that, as much has been said lately about various offices in Edinburgh, I think that this particular office may perhaps require looking into and somewhat overhauling. I do not propose to press my Motion for Papers.
Motion, by leave, withdrawn.
House adjourned at twenty minutes past seven o'clock.