COMPANIES BILL. [H.L.]

HL Deb 26 May 1927 vol 67 cc537-632

Order of the Day for the House to be put into Committee read.

Moved, That the House do now resolve itself into Committee.—(The Lord Chancellor.)

On Question, Motion agreed to.

House in Committee accordingly:

[The EARL, OF DONOUGHMORE in the Chair.]

Clause 1:

Restriction on registration of companies by certain names.

(2) No company, other than an association which in pursuance of Section twenty of the principal Act is to be registered without the addition of the word "Limited" to its name, shall be registered by a name which contains the words "Chamber of Commerce."

In the case of a company which has been registered by such a name as aforesaid, the notice to be given by the Board of Trade under subsection (4) of the said Section twenty of their intention to revoke the licence granted under the said section shall state that, in the event of the licence being revoked, the company will be struck off the register unless its name is changed to a name which does not contain the words "Chamber of Commerce," and if the licence is revoked in pursuance of the said subsection the registrar shall, unless the name of the company is so changed within six weeks of the date of the revocation of the licence, strike the company off the register, and the company shall thereupon be dissolved:

Provided that the liability of every director, manager, officer and member of the company shall continue and may be enforced as if the company had not been disdissolved.

LORD RIDDELL, Who had given Notice to move, at the end of the first paragraph of subsection (2), to insert "or building society," said: The object of this Amendment is to prevent a company from masquerading as a building society. Parliament has laid down certain rules regarding building societies for the benefit of the small investor and it is undesirable that small investors should imagine that joint stock companies are building societies. There is no desire on the part of the building societies to interfere with joint stock companies in the conduct of building society business. Their only object is to ensure that a joint stock society shall not use the words "building society" in its title, that is to say, a company registered after the date when this Bill comes into operation.

It has been pointed out to me that the Amendment, as framed, is not quite appropriate as it implies that there is a certain class of company which may use these words. It has also been suggested to me that my Amendment should be framed in the following terms:— No company shall hereafter be registered under a name of which the words 'building society' form part. I understand that the Lord Chancellor is prepared to accept an Amendment in these terms and, if I may be permitted to do so, I will substitute an Amendment in the terms which I have just indicated at the end of the clause.

Amendment moved— Page 2, line 9, after the word ("dissolved") insert ("No company shall hereafter be registered under a name of which the words 'building society' form part").—(Lord Riddell.)

THE LORD CHANCELLOR (VISCOUNT CAVE)

I am in sympathy with the object of my noble friend and I am prepared to accept his Amendment.

On Question, Amendment agreed to.

Clause 1, as amended, agreed to.

Clauses 2 and 3 agreed to.

Clause 4

Index of members of company.

4.—(1) Every company shall keep as part of the register of the members of the company an index of the names and addresses of the members and shall, within fourteen days after the date on which any alteration is made in the register, make any necessary alteration in the index.

(2) If a company fails to comply with this section it shall be liable to a fine not exceeding five pounds for every day during which the default continues, 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 moved, in subsection (1), to omit "as part of the register of the members of the company an index of the names and addresses of the members" and to insert "an index of the names of the members of the company." The noble and learned Viscount said: As this is the first of the Amendments standing on the Paper in my name I should like to say a few words in explanation. My Amendments appear rather formidable on the Paper, but the fact is that we have received in full measure the assistance of experts on this subject. They have been good enough to send us a great number of suggestions and we have endeavoured to meet them so far as it is possible to do so consistently with the Report of the Committee which dealt with the matter. We have in every respect adhered as closely as possible to that Report.

The greater part of the Amendments standing in my name are either drafting Amendments, properly so-called, or technical Amendments which are intended to give a better and closer reflection of the recommendations contained in the Committee's Report. Perhaps I should save the time of the House if on every occasion I stated whether the Amendment is a drafting Amendment or a technical one, and if any noble Lord wishes further explanation of any Amendment I shall, of course, be glad to give it. May I say in reference to the series of Amendments put down to this clause that I think that they can all be taken together. The effect of the first Amendment is that the addresses of members will not be required to be placed in the index. That will save a good deal of trouble and time. The effect of the second Amendment is that a company may keep the index in the form of a card index, which is a device becoming increasingly popular, and I think again that that will be convenient to the company. Then the third subsection is required in order to provide for the inspection of the index as a card index cannot well be described as part of the register.

Amendment moved— Page 3, line 4, leave out from ("keep") to the second ("and") in line 6, and insert ("an index of the names of the members of the company").—(The Lord Chancellor.)

VISCOUNT HALDANE

What I wish to say a word about is not the technical Amendment before your Lordships but the general statement which has just been made. I think my noble and learned friend was quite right in speaking of this Bill, as in substance he did, as being a highly technical one. It is founded on a Report of the Committee presided over by one of the most eminent lawyers at the Chancery Bar and the work of that Committee was done with great thoroughness. I think it is a Bill which introduces a great many changes which may be found to be of a difficult order to conform to, but they are changes which in principle certainly ought to be made and they are recommended by the very best authorities that can be collected upon the subject. We now learn from the Lord Chancellor that, in addition to that, he has received a number of suggestions from persons of technical knowledge who sent them in and that these have been adopted so far as is consistent with the Report.

Speaking for myself I think that is not only the right course, but the only course that can be taken with a Bill of this kind. We should be here for weeks if we went through the Bill in the minute fashion which would be required to give it full justice, and we should put ourselves to great expenditure of time. I think we may safely leave ourselves in the hands of the Lord Chancellor, who has taken so particular an interest in this matter. I thoroughly approve of the suggestion he has made as to our general attitude towards these Amendments.

EARL RUSSELL

May I ask the noble and learned Viscount whether the word "index" is perfectly clear and unambiguous? I assume that it means an alphabetical index, but it might mean many other things and, as a penalty is attached to this clause, I think it would be well to consider before the Report stage whether it ought to be made clearer. There is a class of company which has only ten or a dozen members, and it would seem rather superfluous to keep a separate alphabetical index of names that could be displayed on one page.

THE LORD CHANCELLOR

I will consider that point.

On Question, Amendment agreed to.

Amendments moved—

Page 3, line 8, after ("register") insert ("of the members")

Page 3, line 9, at end insert as new subsection: ("(2) The index (which may be in the form of a card index) shall in respect of each member contain a sufficient indication to enable the account of that member in the register to be readily found.

(3) Subsection (1) of Section thirty of the principal Act (which relates to the inspection of the register of members) shall have effect as if the index required to be kept by this section were a part of the register of members, and subsection (3) of the said Section thirty shall apply accordingly").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 4, as amended, agreed to.

Clause 5:

Amendment of Section 26 of principal Act.

5. Section twenty-six of the principal Act (which relates to the annual list of the members of a company and the summary to be contained in that list) shall be amended as follows:— (a) in subsection (2) after the words "the list must state" there shall be inserted the words "the address of the registered office of the company," and the words "or stock" and the words "or amount of stock" shall be omitted therefrom:

Provided that the inclusion in the annual list of a statement as to the registered address of the company shall not be taken to be in satisfaction of the obligation of a company under Section sixty-two of the principal Act to give notice to the registrar of companies of the situation of its registered office and of any change therein;

THE LORD CHANCELLOR moved, before the proviso in paragraph (a), to insert:— and the following shall be substituted for paragraph (l):— (l) all such particulars with respect to the persons who at the date of the return are the directors of the company as are under Section seventy-five of the principal Act required to be contained with respect to directors in the register of the directors of a company.

The noble and learned Viscount said: This Amendment is important as part of the co-ordination of the provisions regarding the register of directors and the notification of particulars contained therein which are carried out by Clause 25. The Amendment makes it clear that the annual summary must state the particulars of directors contained in the register, as set out in Clause 25 (1). The remainder of my Amendments to this clause are drafting.

Amendment moved— Page 3, line 25, at end insert the said words.—(The Lord Chancellor.)

On Question, Amendment agreed to.

Amendments moved—

Page 3, line 33, at end insert: (" (b) in paragraph (m) of subsection (2) for the words 'debt due from' there shall be substituted the words 'the indebtedness of'")

Page 3, line 36, leave out ("there shall")

Page 3, line 37, leave out from ("company") to ("a") in line 39, and insert ("the list aforesaid to be forwarded to the registrar of companies shall include")

Page 4, line 6, leave out ("by the manager or secretary of the company") and insert ("in the prescribed manner")

Page 4, lines 9 and 10, leave out ("this Act") and insert ("the law as in force at the date of the audit").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 5, as amended, agreed to.

Clause 6 [Annual list of members and summary in case of company not having a share capital]:

THE LORD CHANCELLOR

All my Amendments to this clause are drafting or technical.

Amendments moved—

Page 4, lines 29 and 30, leave out ("since the date of the incorporation of the company") and insert ("during the year ending on the day immediately preceding the said fourteenth day")

Page 4, line 39, after ("the") insert ("persons who at the date of the return are the")

Page 4, line 42, leave out ("in the register of directors") and insert ("with respect to directors in the register of directors of a company")

Page 4, line 42, at end insert: ("Provided that the inclusion in the annual list of a statement as to the registered address of the company shall not be taken to be in satisfaction of the obligation of the company under Section sixty-two of the principal Act to give notice to the registrar of companies of the situation of its registered office and of any change therein.")

Page 4, lines 44 and 45, leave out ("debt due from") and insert ("indebtedness of").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 6, as amended, agreed to.

Clauses 7 to 9 agreed to.

Clause 10:

Amendment of Section 42 of principal Act.

10. The following section shall be substituted for Section forty-two of the principal Act:— (1) If a company having a share capital has— (a) consolidated and divided its share capital into shares of larger amount than its existing shares; or

VISCOUNT BERTIE OF THAME moved, in subsection (1) (a), after "larger," to insert "or smaller." The noble Viscount said: As it is more usual to split shares into smaller denominations than to consolidate them into larger amounts, I beg to move the Amendment which stands in my name.

Amendment moved— Page 7, line 13, after ("larger") insert ("or smaller").—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

I am advised that this Amendment is not necessary. Clause 10 substitutes a fresh clause for Section 42 of the Act of 1908, and provides that if a company has consolidated, divided, converted, redeemed or cancelled its shares or reconverted its stock, notice must be given to the Registrar of Companies. The consolidation and so on are carried out under Section 41, which also provides that a company may sub-divide its shares into shares of a smaller amount than that fixed by the memorandum, but that the powers conferred by the section with respect to subdivision of shares must be exercised by special resolution, which must be forwarded to the Registrar under Section 70 of the principal Act. Accordingly I think that this matter is already provided for.

VISCOUNT BERTIE OF THAME

In that case I beg leave to withdraw my Amendment, but it only shows how bad legislation by reference is.

Amendment, by leave, withdrawn.

Clause 10 agreed to.

Clause 11 [Amendment of s. 44 of principal Act]:

THE LORD CHANCELLOR

My Amendments to this clans are drafting.

Amendments moved—

Page 8, line 8, leave out ("are") and insert ("have been or are to be").

Page 8, line 10, after ("a") insert ("printed or typewritten").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 11, as amended, agreed to.

Clause 12 [Prohibition of provision of financial assistance by company for purchase of its own shares]:

VISCOUNT BERTIE OF THAME moved to add to the clause:— If a company fails to comply with the provisions of this clause 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 noble Viscount said: It seems to me that it is not much use to direct people to do certain things unless there is a penalty attached in case they fail to do them. I beg to move.

Amendment moved— Page 8, line 36, at end insert the said words.—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

The form of this Amendment requires a little consideration. I do not know whether it is possible to amend it now, but I am told that the words "fails to comply with" should read "acts in contravention of" and "clause" should read "section." Subject to those alterations I am prepared to accept the Amendment.

VISCOUNT BERTIE OF THAME

I am obliged to the noble and learned Viscount, and will move the Amendment in the form that he suggests.

Amendment, by leave, withdrawn.

Amendment moved— Page 8, line 36, at end insert ("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 and permits the default shall be liable to the like penalty."—(Viscount Bertie of Thame.)

On Question, Amendment agreed to.

Clause 12, as amended, 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 anthorising 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.

(4) The decision of the court on any such application shall be final.

(5) The company shall within fifteen days after the making of an order by the court on any such application forward a copy of the order to the registrar of companies, and if the company fails to comply with this provision it shall be liable to a fine not exceeding five pounds for every day during which the default continues, and every director, manager, secretary or other officer of the company who knowingly and authorises or permits the default shell be liable to the like penalty.

(6) The expression "variation" in this section includes abrogation and the expression "varied" shall be construed accordingly.

EARL RUSSELL

I should like to ask the noble and learned Viscount for a little information about this clause. As I understand the clause what it provides is that in the case of a company where the shareholders are already members under articles of association or a memorandum which gives the company the right to change the respective rights of various classes of shares by passing resolutions by a particular majority, and where such resolutions are passed in accordance with the articles, then, under certain conditions, shareholders of that class may apply to the Court to have the resolution cancelled that confers the powers as between different classes of shares. I should like to ask the noble and learned Viscount two questions: (1), What is the equitable justification of this? (2), On what conceivable principles could the Court decide whether the resolution as passed by the shareholders shall stand or not? It seems to me that unless some perfectly obvious injustice is involved it would be extraordinary difficult for the Court to know on what principle to intervene. Perhaps the noble and learned Viscount would explain this point, which seems to me a little ambiguous. Firstly, why should it be done? And, secondly, on what ground could the Court come to a conclusion, whether it is right or wrong that this should be done?

THE LORD CHANCELLOR

The effect of the clause is as stated by the noble Earl. It is that where the articles provide for modification and then the shareholders agree to such modification by a proper majority, then those who did not agree may apply to the Court. The object of that is that they may go and get the matter reviewed by the Court. The reason for the proposal is this. It is found that this modification clause is becoming more and more familiar, and it sometimes causes hardship, especially to the class of preference shareholders. It sometimes happens that among the preference shareholders are some who hold a large block of ordinary shares and who stand to gain more by the modification as ordinary shareholders than they stand to lose as preference shareholders. That is rather hard on those who hold preference shares only, and therefore it is thought desirable that this power should be open to review by the Court, in order to see whether it fairly gives effect to the claims of different classes of shareholders. Such a power is sometimes exercised by the Court under certain sections of the Act in such matters as amalgamations and therefore they have experience of such matters.

EARL RUSSELL

Might it not be worth while on the Report stage to put in some words giving some indication to the Court of what they should have regard to? The matter is left so entirely at large here that I think the Judge might find himself in a difficulty.

LORD DANESFORT

I should like to support the suggestion of the noble Earl. We are engaged in a rather precarious business, because we are varying a contract entered into by the shareholders, and the Court is given power, on the application of a certain number of shareholders, to modify that contract which has been entered into. I certainly agree with the noble Earl that it would be well to give to the Court some indication of the principle on which it should act in sanctioning such variation.

THE LORD CHANCELLOR

I will look into the matter and if the noble Earl will combine with the noble Lord, Lord Danesfort, and make a proposal, I shall be very much indebted to him.

EARL RUSSELL

The noble and learned Viscount puts a very difficult task upon me.

Clause 13 agreed to.

Clause 14:

Power to issue redeemable 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—

1. (a) no such shares shall be redeemed except out of profits of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purposes of the redemption;
2. (b) no such shares shall be redeemed unless they are fully paid;
3. (c) where any such shares are redeemed out of profits which would otherwise be available for dividend, there shall be transferred out of those profits to a permanent reserve fund, 548 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.

(2) There shall be included in every balance sheet of a company which has issued redeemable preference shares a statement specifying what part of the issued capital of the company consists of such shares and the date on or before which those shares are, or are to be liable, to be redeemed.

If a company fails to comply with the provisions of this subsection 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.

(3) Subject to the provisions of this section, the redemption of preference shares thereunder may be effected on such terms and in such manner as may be provided by the articles of the company.

(4) Where in pursuance of this section a company has redeemed any preference shares, it shall have power to issue shares of the like class up to the nominal amount of the redeemed shares as if the redeemed 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.

THE LORD CHANCELLOR

My first Amendment is drafting.

Amendment moved— Page 10, line 5, leave out ("out of profits which would otherwise be available for dividend there shall be transferred out of those profits") and insert ("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").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE EARL OF HALSBURY moved, in subsection (1) (c), after the last "shall," to insert "'except as hereinafter provided." The noble Earl said: This Amendment must stand or fall by the next Amendment standing in my name, because it is necessary to insert this Amendment in order that the subsequent Amendment shall not be meaningless. Your Lordships will see that Clause 15 deals with redeemable preference shares, and it allows these shares to be issued under certain conditions. If your Lordships will also look at page 10, subsection (1), paragraph (c), you will find that it provides: where any such shares are redeemed out of profits which would otherwise be available for dividend, there shall be transferred out of those profits 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. There is no objection, so far as I am concerned, to that, except that it apparently puts the reserve fund there created in a position that it can never be touched again.

What is going to be the position if the company, for perfectly good and proper reasons, desires to re-issue redeemable preference shares? Surely they ought to be allowed pro tanto the amount they issue, to have the available capital they have put into that reserve fund, and if that is so then this particular Amendment is necessary. I may say one word before formally moving this Amendment, it is this. On, the Second Reading Lord Hunsdon made a remark which affected me very much indeed. He said that one of the bodies who understood the working of the Companies Acts were the City solicitors, and he pointed out that a Committee was sitting of the Incorporated Law Society, and he suggested that the Committee stage should not be taken until they had considered the Bill. That remark put me upon inquiry, and I have found that there is another body even more affected by the Bill, and that is the very large body of chartered accountants. I found that they also had a committee, and it was only after carefully considering the views that they have put before me from their practical point of view that I ventured to put down the Amendments standing in my name. The suggestion of my Amendment is that when a company desires to re-issue redeemable preference shares they should be able to have available for the general purposes of the company what at thy present time would not be open to them because it is made a permanent reserve which can never be touched. I therefore beg to move the first of my Amendments.

Amendment moyed— Page 10, line 13, after ("shall") insert ("except as hereinafter provided").—(The Earl of Halsbury.)

THE LORD CHANCELLOR

I would have liked to know what is the general view of the House as to this Amendment, for it departs from the general recommendation of the Committee, which, as my noble friend opposite said just now, was composed of very experienced men, including some of the City solicitors. That Committee recommended that the course adopted in the Bill should be taken. If these Amendments are adopted the effect would be to depart from the Report of the Committee by making the capital redemption reserve fund no longer a permanent reserve fund, and under the Amendments it will be possible to use the fund for the general purposes of the company as soon as the redeemed shares have been re-issued. It will also be possible to apply the reserve fund in the issue of fully-paid bonus shares. I feel grave doubt whether I ought to agree to a modification of these carefully thought out proposals of this Committee, and I hope that the noble Earl will not press his Amendments to-day. I know he feels strongly about them, but if he will withdraw them to-day I will have them further considered before the Report Stage.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR

I have some Amendments to subsection (4) of Clause 14. These Amendments are also upon the clause authorising the redemption and reissue of shares. The object is to enable the company to raise new capital to finance the redemption without losing the protection with regard to Stamp Duties. They are based on the precedent of the Public Utility Companies (Capital Issues) Act, 1920. Any possible evasion of the Stamp Duties is provided against by the words in the new proviso which we propose to add to the subsection.

Amendments moved—

Page 10, line 33, after ("redeemed") insert ("or is about to redeem")

Page 10, line 35, leave out ("redeemed shares as if the redeemed") and insert ("shares redeemed or to be redeemed as if those")

Page 10, line 39, at end, insert: ("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.")—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 14, as amended, agreed to.

Clause 15 [Reduction of capital]:

THE LORD CHANCELLOR

There are two technical Amendments to this clause.

Amendments moved—

Page 11, line 19, after ("not") insert ("as regards any class or any classes of creditors")

Page 11, line 20, after ("relates") insert ("and where the court so directs, the consent of the creditors of that class or those classes to the reduction shall not be required").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 15, as amended, agreed to.

Clause 16 [Amendment of s. 62 of principal Act]:

THE LORD CHANCELLOR

These are also drafting amendments.

Amendments moved—

Page 11, line 31, leave out ("registration") and insert ("incorporation")

Page 11, line 34, leave out ("registration") and insert ("incorporation").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 16, as amended, agreed to.

Clause 17 agreed to.

Clause 18:

Amendment of s. 66 of principal Act.

(d) At the end of subsection (5) there shall be inserted the following new subsections:— (6) Any reasonable expenses incurred by the requisitionists by reason of the failure of the directors to convene a meeting shall be repaid to the requisitionists by the company.

THE LORD CHANCELLOR

This is another drafting Amendment.

Amendment moved— Page 12, line 38, leave out ("power") and insert ("rights").—(The Lord Chancellor.)

On Question, Amendment agreed to.

VISCOUNT BERTIE OF THAME moved, in the substituted subsection (6), in paragraph (d), to leave out "company" and to insert "directors responsible." The noble Viscount said: It is obvious that the company is not at fault, and there-fore I think the directors themselves ought to be made responsible for any reasonable expenses the shareholders are put to.

Amendment moved— Page 13, line 13, leave out ("company") and insert ("directors responsible").—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

I am afraid I cannot accept this Amendment. What the noble Viscount proposes is that any reasonable expenses incurred by the requisitionists who desire a meeting to be called and which is not called by the directors shall be repaid by the directors personally. I think that is going too far. We have followed the recommendation of the Committee that the expenses should be paid by the company. The meeting is probably in the interests of the company. It may be that for the purposes of the company it is better not to call a meeting and to get the requisition with drawn. The proposal of the Committee is that the expenses be paid out of the funds of the company, and I think that to provide otherwise would really be too hard on the directors.

VISCOUNT BERTIE OF THAME

I am still of the same opinion, but I will withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 18, as amended, agreed to.

Clause 19:

Amendment of s. 67 of principal Act.

19. The following section shall be substituted for Section sixty-seven of the principal Act (which makes provision with respect to meetings and votes):— (1) The following provisions shall have effect in so far as the articles of the company do not make other provision in that behalf:— (c) two members may call a meeting; (f) in, the case of a company having a share capital, every member shall have one vote in respect of each share or each ten pounds of stock held by him, and in any other case every member shall have one vote.

THE EARL OF HALSBURY moved, in subsection (1) (c), after "members" to insert "holding not less than one-tenth of the share capital." The noble Earl said: This is the section which deals with calling a meeting, and, as it at present stands, two members may call a meeting. Does it not seem a little strong that two members, perhaps only holding £2 worth of the capital between them, should call a meeting? Surely it would be better to provide that at least they should have some substantial interest in the company.

Amendment moved— Page 13, after line 39, after ("members") insert the said words.—(The Earl of Halsbury.)

THE LORD CHANCELLOR

I accept the Amendment.

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next is a drafting Amendment.

Amendment moved— Page 14, line 1, after ("company") insert ("originally").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 19, as amended, agreed to.

Clause 20 [Amendment of s. 68 of principal Act]:

Amendments moved—

Page 14, line 28, leave out the first ("company") and insert ("corporation")

Page 14, line 42, leave out ("company") and insert ("corporation")

Page 15, line 8, leave out ("company") and insert ("corporation").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 20, as amended, agreed to.

Clause 21:

Amendment of s. 69 of principal Act.

21. Section sixty-nine of the principal Act (which defines extraordinary resolutions and special resolutions) shall be amended as follows:—

(1) In subsection (1) for the words "entitled to vote as are present" there shall be substituted the words "as, being entitled so to do, vote."

(2)The following shall be substituted for subsection (2):— (2) A resolution shall be a special resolution when it has been passed by such a majority as is required for the passing of an extraordinary resolution and at a general meeting of which not lees than fourteen days' notice, specifying the intention to propose the resolution as a special resolution, has been duly given: Provided that, if all the members entitled to vote at any such meeting so agree, a resolution may be proposed and passed as a special resolution at a meeting of which less than fourteen days' notice has been given

(3) In subsection (3) the words "or confirmed" shall cease to have effect.

(4) The following shall be substituted for subsection (4):— (4) At any meeting at which an extraordinary resolution or a special resolution is submitted to be passed a poll shall be taken to be effectively demanded, if demanded by three members for the time being entitled according to the articles to vote, or by such other number of members so entitled as under the articles have the right to demand a poll, so however that it shall not be necessary in any case for more than five members to make the demand.

THE LORD CHANCELLOR

This is also a drafting Amendment in the proviso in subsection (2).

Amendment moved— Page 15, line 28, after ("to") insert ("attend and").—(The Lord Chancellor.)

THE EARL OF HALSBURY

It is not clear what the effect of this is going to be. It looks as if no proxies at all would be accepted, and as, if you had to have a unanimous vote of all the shareholders in the company. The proviso says that "if all the members entitled to vote at any such meeting so agree" a resolution may be proposed, but the Amendment also refers to members entitled "to attend." Therefore it looks as if there has to be a unanimous vote, and no proxies are to be allowed.

THE LORD CHANCELLOR

I think the intention is this, that unless there is to be a special resolution, properly passed at a meeting, all the shareholders must agree, not only those who may turn up at the meeting but those who are entitled to attend and vote, so that you do get a unanimous resolution of all the shareholders if you are going to dispense with the proper formality of passing an extraordinary resolution.

LORD DANESFORT

Would not that make it practically nugatory?

THE LORD CHANCELLOR

No, there are many small companies with quite a few shareholders whom it is not worth while to call together, and they would be quite ready to agree to the matter.

THE EARL OF HALSBURY

May I ask whether proxies are included or not? If they are not included surely it would be nugatory. You might have one member who was abroad, and who could not get there, and unless he was entitled to vote by proxy you would not have unanimity.

THE LORD CHANCELLOR

I think he would be entitled to vote by proxy if the articles so authorised.

LORD BANBURY OF SOUTHAM

Will proxies be permitted?

THE LORD CHANCELLOR

That always depends upon the articles of the company. In most companies they are permitted.

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved, in the substituted subsection (4), after "vote," to insert "or by one member or two members so entitled if he holds or they together hold not less than fifteen per cent. of the issued share capital of the company." The noble and learned Viscount said: It has been pointed out that the clause as it stands might act unfairly on a single member holding a substantial proportion of the shares of the company. Such a member might conceivably hold more shares than all the other shareholders present at the meeting, but would be unable to demand a poll unless two other members should support the demand. It is, therefore, provided that the demand proposed should be effective if it is demanded by one member or two members holding not less than fifteen per cent. of the issued share capital of the company.

Amendment moved— Page 15, line 41, after ("vote") insert the said words.—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 21, as amended, agreed to.

Clause 22 [Amendment of s. 70 of principal Act]:

THE LORD CHANCELLOR

These Amendments are all drafting.

Amendments moved—

Page 16, line 10, after ("A") insert ("printed or typewritten")

Page 16, lines 12 and 13, leave out ("printed or typewritten and")

Page 16, line 14, at end insert: ("(b) in subsection (3) for the words 'a copy' there shall be substituted the words 'a printed or typewritten copy' and the words 'in print' shall be omitted")

Page 16, line 15, after ("(4)") insert ("the words 'printing or' and")

Page 16, line 16, at end insert: ("(d) in subsection (5) the words 'in print' shall be omitted").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 22, as amended, agreed to.

Clause 23 agreed to.

Clause 24 [Resolutions passed at adjourned meetings]:

THE LORD CHANCELLOR

These are also drafting Amendments.

Amendments moved—

Page 18, line 1, leave out ("A resolution") and insert ("Where after the commencement of this Act a resolution is")

Page 18, line 7, at beginning, insert ("the resolution").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 24, as amended, agreed to.

Clause 25:

Amendment of s. 75 of principal Act.

25. The following shall be substituted for Section seventy-five of the principal Act (which provides for the keeping of a register of the directors of a company):—

"(1) Every company shall keep at its registered office a register of its directors or managers containing with respect to each of them the following particulars, that is to say—

1. (a) in the case of an individual, his present christian name and surname, any former christian name or surname, his usual residential address, his nationality, and, if that nationality is not the nationality of origin, his nationality of origin, and his business occupation, if any, or, if he has no business occupation but holds any other directorship or directorships, particulars of that directorship or of some one of those directorships; and
2. (b) in the case of a corporation, its corporate name and registered or principal office.

(2) The company shall, within the periods respectively mentioned in this subsection, send to the registrar of companies a return in the prescribed form containing the particulars specified in the said register and a notification in the prescribed form of any change among its directors or in any of the particulars contained in the register.

For the purposes of this section the period within which the said return is to be sent shall be a period of fourteen days from the appointment of the first directors of the company, and the period within which the said notification of a change is to be sent shall be fourteen days from the happening thereof.

(5) In this section the expression 'director' includes any person in accordance with whose directions or instructions the directors of the company are accustomed to act."

EARL RUSSELL moved, in subsection (1) (a) to leave out all words after "any," where that word secondly occurs, to the end of the paragraph. The noble Earl said: These are the particulars which are required to be given in the register about directors, and, after dealing with his name and his nationality they con-chide in this way: "and his business occupation, if any, or, if he has no business occupation but holds any other directorship or directorships, particulars of that directorship or of some one of those directorships." What is the use of those last words, beginning "or if he has no business occupation"? I could understand it if the desire were to show that he had directorships in another twenty or thirty companies, and therefore he could not give much attention to this one, if there were any reason of that sort; but, as I read this paragraph, although he has twenty or thirty other directorships, the requirements of the clause would still be fulfilled if only one directorship were put down. That is how the clause reads. If that is all that it means is it worth having at all? I would move to leave out all the words after "if any" in line 23, subject to anything the noble and learned Viscount has to say. It seems to me that merely to put down that a man has some one directorship does not tell the shareholders anything worth knowing.

Amendment moved— Page 18, line 23, after ("any") leave out ("or, if he has no business occupation but holds any other directorship or directorships, particulars of that directorship or of some one of those directorships").—(Earl Russell.)

THE LORD CHANCELLOR

I should like to consider this. If a man has no occupation but his real business is to be a director of companies, I rather think that people ought to know that is so in some form or other, and I rather sympathise with what the noble Earl says. It is no use to mention only one of his directorships and it may be that all of them ought to be mentioned. If the noble Earl will withdraw his Amendment to-day I will have the matter looked into.

EARL RUSSELL

I will certainly with draw. Merely to mention one of the directorships is camouflage.

LORD RIDDELL

May I ask the Lord Chancellor whether directorship is not a business occupation?

THE LORD CHANCELLOR

It may become so. Taken by itself I think not.

Amendment, by leave, withdrawn.

Amendment moved— Page 19, lines 3 and 4, leave out ("in general meeting may") and insert ("may by its articles or in general meeting").—(The Lord Chancellor)

On Question, Amendment agreed to.

THE EARL OF HALSBURY moved to, add to the clause:— Provided that nothing in this section shall be deemed to apply to a receiver or to a receiver and manager or to any person who gives advice professionally to the directors of the company.

The noble Earl said: This Amendment has regard to subsection (5) of Clause 25. It is very obvious what subsection (5) is aimed at. It is aimed at the person who really is the power behind the throne, having put a dummy director into a company, and one who is trading and taking no responsibility. It is an obvious evil and it is an evil that was dealt with in the Report. It is a simple evil to conceal, but it is by no means a simple evil to frame words against. For that reason I do not in the least complain of the very wide net that subsection (5) has spread. But I think there are certain matters which undoubtedly neither the Report nor those who framed the Bill meant to bring in and by the Amendment which stands in my name I have attempted to except, and I have asked your Lordships to except, a receiver and manager. Clearly those are not the people aimed at, they are not the power behind the throne in a fraudulent company.

Surely any person who gives advice professionally to the directors of the company is not aimed at. It may be said that in that case the directors might get might, out of it because of subsection (4) which says: "who knowingly and wilfully authorises or permits." What about the case of a company which is running a complicated chemical patent or something of that kind? What about the case of the auditors who give technical advice? When you look at the wording of subsection (5) you find that anybody is to be considered a director if he is a person in accordance with whose directions or instructions the directors of a company are accustomed to act. That is very wide. The technical person who is telling them what they have to do with regard to working their patent, or the auditor who gives them advice with regard to their financial position, under this subsection is to be considered, or may be held by the Courts to be considered, a director. Nobody doubts that anybody in that capacity, if guilty of negligence or if guilty of fraudulent misrepresentation, would undoubtedly be liable at Common Law, but this goes much further. This says they are to be deemed to be directors. I ask your Lordships to say that in the three classes I have enumerated, a receiver, a receiver and a manager, and a person who merely gives professional advice to the directors, shall not, because the directors constantly act on that advice, be deemed themselves to be directors. I beg to move.

Amendment moved— Page 19, line 25, at end insert the said proviso.—(The Earl of Halsbury)

THE LORD CHANCELLOR

There are, I think, two observations to be made on this Amendment. From one point of view it is unnecessary, because in my view the expression "any person in accordance with whose directions or instructions the directors are accustomed to act" does not include a person who merely gives them advice. Directors do not act by the directions or on the instructions of their solicitor or their auditor. Those persons advise them, but do not direct or instruct them. The same applies to a receiver or manager. On the other hand, the Amendment goes too far, because it would exempt from liability a man who was a director but was also a manager or a receiver. Surely if a man is a director he ought to be liable even though he holds some office in which he advises the directors of the company. I think, therefore, the Amendment is un- desirable and I hope the noble Earl will not press it.

THE EARL OF HALSBURY

With the greatest respect to the learned Lord Chancellor, subsection (4) is dealing with the offence and with the people who are to be dealt with. The director, manager, secretary or other officer of the company is immediately mentioned and is immediately to be hit. I have no objection to that. Subsection (5), with which I am dealing, hits a person who is not a director but is to be deemed a director, for something that he has done. When you are dealing with a receiver or a receiver and manager he, by his position as a receiver or receiver and manager, has to give directions and constantly is giving directions to the directors and they have to act upon them, but that is not the class of person against whom this section is framed. This section is framed against a person who is really the power behind the throne. I think I am right in saying that is the spirit of the Report and that it was never intended to deal with a person who was appointed receiver or receiver and manager, nor is it intended to deal with a person who merely gives technical advice. Indeed, later on in the Report and in this Bill the position of a director who is appointed for a particular object, such as dealing with technical matters, is dealt with. He is fully exempted from many of the penalties that are attached to people who are responsible for the general direction of the company. I regret that I am unable to withdraw this Amendment.

LORD DANESFORT

May I ask the Lord Chancellor whether my noble friend is right in suggesting that the definition of director in subsection (5) could possibly in any way include a receiver and manager? Take the case of a receiver and manager appointed by the Court. That receiver and manager or receiver, as the case may be, does not act under the directions of the directors nor do the directors act under his direction. He acts under the orders of the Court. I do not know whether such a person as that would come within the description of directors in subsection (5). If he does not then part of this Amendment at any rate would be unnecessary. As regards the rest of it, as to a man coming in as a technical adviser and advising the directors, I am not at all sure that it does not require what is suggested by my noble friend.

LORD PARMOOR

I hope the views expressed by the Lord Chancellor will be accepted on both grounds. I do not think these persons who are now to be exempted come within subsection (5) as it stands and, on the other hand, I think it would be inadvisable if a man was a director and also occupied one of these technical posts that he should be exempted. I understand those are the two points Which the Lord Chancellor makes and they seem to me to be conclusive.

LORD BANBURY OF SOUTHAM

This seems to me to be an extremely complicated Bill and therefore any Amendment which makes it clearer should, I venture to say, be accepted. The Amendment of the noble Earl makes it quite clear that any person who acts as receiver or manager or gives advice professionally shall not be included as a director. The Lord Chancellor says that is not necessary because it is already the meaning and interpretation of the Bill, but speaking only as an ordinary layman, I am not at all sure if I were asked to give my opinion on that, that I should think that really was so. Consequently there might be a certain number of people who would take advantage of this to go to law, spend money in bringing an action and then find they had no grounds for their case. I am not quite certain about a receiver because I do not believe a receiver gives directions to directors. I believe a receiver manages the whole thing, but, subject to that, I do think it would be an advantage if some words were put in to make the section quite clear.

A NOBLE LORD

Would the noble and learned Viscount tell us who is referred to in subsection (5)?

THE LORD CHANCELLOR

The person who is sometimes called the power behind the throne. There are many private companies, sometimes called one-man companies, where the directors are really the agents of somebody who stands behind them, whose instructions they have to obey and by whom they may be removed. We want to hit that man, who is the real person giving instructions. I adhere to my view that these words are unnecessary and would create confusion, but I will promise the noble Earl to look into the matter again and see if we can make an adjustment which will satisfy him without injuring the Bill.

THE EARL OF HALSBURY

I quite accept that and I withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 25, as amended, agreed to.

Clause 26:

Provisions with, respect to offers of shares or debentures for sale.

26.—(1) Where a company allots or agrees to allot any shares in or debentures of the company with a view to all or any of those shares or debentures being offered for sale to the public, the document by which the offer for sale to the public is made shall for all purposes be deemed to be a prospectus issued by the company, and all enactments and rules of law as to the contents of prospectuses and to liability in respect of statements in and omissions from prospectuses, or otherwise relating to prospectuses, shall, subject to any necessary modifications, apply and have effect accordingly, as if the shares or debentures had been offered to the public for subscription and as if persons accepting the offer in respect of any shares or debentures were subscribers for those shares or debentures, but without prejudice to the liability, if ally, of the persons by whom the offer is made, in respect of mis-statements contained in the document or otherwise in respect thereof.

(4) Where an offer to which this section relates is made by a company the document aforesaid shall be signed by two directors of the company.

VISCOUNT BERTIE OF THAME moved, in subsection (1), after the first "debentures," to insert "bonds or similar obligations." The noble Lord said: The object of this Amendment is to bring the wording more in conformity with another clause in which the wording is "the total amount of bonds, debenture stock or similar obligations." If it is right in one place surely it is right in the other.

Amendment moved— Page 19, line 27, after ("debentures") insert ("bonds or similar obligations").—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

I think the word "debentures" includes these other forms of obligation. The word has a very wide meaning. It means a document which either creates or acknowledges a debt. However, if the noble Viscount wishes the words to be inserted I have no great objection to offer.

On Question, Amendment agreed to.

LORD DANESFORT

May I suggest that as these words have been inserted in line 27 they ought also to be inserted at the end of line 28 where "debentures" occurs again?

VISCOUNT BERTIE OF THAME

That is so. I did send in an Amendment but apparently it got lost.

Amendment moved— Page 19, line 28, after ("debentures") insert ("bonds or similar obligations").(Viscount Bertie of Thame.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next Amendment on the Paper is a drafting Amendment.

Amendment moved— Page 19, line 29, leave out the second ("the") and insert ("any").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next Amendment is technical.

Amendment moved—

Page 20, line 27, leave out subsection (4) and insert: ("(4) Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document aforesaid is signed on behalf of the company or firm by two directors of the company or not less than half of the partners, as the case may be."—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 26, as amended, agreed to.

Clause 27:

Prohibition of issue of application forms for shares or debentures unless accompanied by a proper prospectus.

27.—(1) It shall not be lawful for a company or for any person on behalf of a company or intended company, and whether before or after the formation of the company, to issue to any member of the public or to publish a form of application for, or an invitation to subscribe for or purchase, any of the shares in or debentures of the company unless the form or invitation is accompanied by a prospectus which complies with the requirements of Section eighty-one of the principal Act.

(2) The foregoing subsection shall apply to a form of application for, or an invitation to purchase, any shares or debentures which are offered for sale in such circumstances as are mentioned in the last preceding section of this Act, with the substitution for a prospectus of such a document as is required by that section in connection with such an offer.

(3) If any such form or invitation as aforesaid is issued or published ill contravention of the provisions of this section, every person who is knowingly a party to the issue or publication (including, in any case where the form or invitation relates to any shares in or debentures of a company which has been already formed, the company, and, in the case of such an offer of shares or debentures for sale as is mentioned in the last preceding section, the persons signing, in whatever capacity, the document required by that section) shall be liable to a fine not exceeding five hundred pounds.

THE EARL OF HALSBURY moved, in subsection (1), to leave out "any member of." The noble Earl said: The clause as drafted would seem to prevent an invitation being sent by the company to its own shareholders or debenture holders. I do not think that that was the intention.

Amendment moved— Page 20, line 33, leave out ("any member of").—(The Earl of Halsbury.)

THE LORD CHANCELLOR

I think if the noble Earl looks at the next Amendment on the Paper he will see that that alters the form of the clause. If my noble friend wants to move the Amendment he will have to move it to the new clause, but if he likes to leave it over I will consider the matter before Report.

THE EARL OF HALSBURY

I will ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR moved to leave out Clause 27 and insert the following clause:

Prohibition of issue of abridged prospectuses with application forms annexed.

(".—(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 noble and learned Viscount said: The clause as it stands in the Bill has been criticised by the Law Society and we are anxious to meet their criticism. I think they are right in this, that perhaps the clause as drafted goes a little beyond the Report of the Committee. The new clause goes back to the Report of the Committee and adopts the phrase suggested by the Law Society "or otherwise to invite subscriptions for any of those shares or debentures by reference to or in connection with an abridged prospectus." I think those words will get rid of any possibility of evasion.

Amendment moved— Page 20, leave out Clause 27 and insert the said new clause.—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 28:

Amendment of s. 81 of principal Act.

28.—(1) Section eighty-one or the principal Act (which prescribes the particulars which are to be stated in a prospectus) shall be amended as follows:—

(ii) After paragraph (n) of subsection (1) there shall be inserted the following paragraphs:— (p) if the proceeds, or any part, of the proceeds, of the issue of the shares or debentures are or is to be applied in the purchase of any business, the amount, as certified by the persons by whom the accounts of that business have been audited, of the net profits of the business in respect of each of the three financial years immediately preceding the issue of the prospectus":

(iii) The following shall be inserted at the end of subsection (1):— Provided that, in the case of a company which has been carry- ing on business, or of a business which has been carried on, for less than three years the prospectus shall state how long the business, of the company, or the business to be acquired, as the case may be, has been carried on, and where the accounts of any such company or business have only been made up in respect of two years or one year, paragraphs (o) and (p) of this subsection shall have effect as if references to two years or one year, as the case may be, were substituted for references to three years:

(iv) Subsection (6) shall be amended by the insertion after paragraph (b) of the following words: "or, if the non-compliance was in respect of matters which in the opinion of the court dealing with the case were immaterial."

(2) The expression "financial year" in paragraphs (o) and (p) directed by this section to be inserted in subsection (1) of the said section eighty-one means the year in respect of which the accounts of the company or of the business, as the case may be, are made up.

THE LORD CHANCELLOR

The first Amendment in my name is a drafting Amendment.

Amendment moved— Page 21, line 31, after the second ("in") insert ("respect of").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next Amendments are also drafting Amendments.

Amendments moved—

Page 21, line 35, after the second ("in") insert ("respect of")

Page 21, line 40, leave out from ("fact") to end of line 43.

Page 22, line 3, after ("applied") insert ("directly or indirectly").—(The Lord Chancellor.)

On Question, Amendments agreed to.

THE EARL OF HALSBURY moved, in paragraph (p), to leave out "the amount as certified by the persons by whom the accounts of that business have been audited of the net profits" and insert "a report by the auditors of the purchasing company or by accountants specially appointed for the purpose by the purchasing company or by the auditors of the business it is proposed to purchase upon the profits." The noble Earl said: In this subsection as it at present stands the idea is that the certi- ficate of the vendor should be taken, and compulsorily taken, by the purchaser. That does not seem to me either convenient or right. In some instances, such as the case of a foreign company, it would be impossible and in many cases it would undoubtedly be extremely inconvenient. My Amendment would mean that the purchaser would be allowed to appoint his own auditor. If it is suggested that by utilising the services of the auditor or the valuer of the vendor money might be saved, that, surely, is a question for the purchaser. If the purchaser chooses to appoint a vendor's auditor let him do so, but at any rate give him a free hand to appoint another if he so desires.

Amendment moved— Page 22, line 4, leave out from ("business") to the first ("of") in line 7 and insert the said new words.—(The Earl of Halsbury.)

THE LORD CHANCELLOR

I agree with that.

On Question, Amendment agreed to.

LORD HUNSDON OF HUNSDON moved, at the end of paragraph (iv) of subsection (1), to insert "or if in the opinion of the same court it was not reasonably practicable to comply with the requirements of this section." The noble Lord said: May I follow the precedent set by the Lord Chancellor and the Earl of Halsbury and say a few words as to the five Amendments standing in my name on this and other clauses? The Parliamentary Committee of the Law Society made a most valuable report on the Bill, with the result that the Government appear to have accepted a large number of their suggestions. Certain of their suggestions, however, were not adopted by the Government, either, I suppose, because they were doubtful about their merits, or because they thought that they should be put forward by private members in this House. The Law Society, therefore, asked me to bring them before your Lordships in their present form. I wish your Lordships to understand that all my Amendments have the authority of the Law Society. Perhaps I may be allowed to add that, though there are many members of your Lordships' House, such as the noble Earl, Lord Halsbury, who are far more fitted for this charge than I, I readily agreed, because time pressed and because I was only too willing to help the Law Society in their heavy and disinterested efforts to assist your Lordships' House with expert advice. I hope that I shall have your Lordships' sympathy, if not your support, in arguing legal questions with the Lord Chancellor, especially as I have been left only the questions about which the Law Society were unable to convince him.

This clause deals with the particulars that are to be inserted in the prospectus, and gives discretion to the Court to relieve directors from their liability for non-compliance in respect of matters which, in the opinion of the Court dealing with the case, were immaterial, and I propose to add the words that appear on the Paper. The reason for this Amendment is that it not infrequently-happens in the case of large amalgamations of companies that it is practically-impossible to set out all the details required by the law within the limits of an ordinary prospectus. For instance, there may be a very large number of contracts which may be more or less material where a business is or businesses are being taken over, and it is necessary to set out the name, address and particulars of every person who has sold goods to any of the businesses that are being taken over, as well as particulars of their contracts.

I have in my pocket a prospectus, which I could show to your Lordships, illustrating how confused and difficult these prospectuses are. I have also been given a concrete case which involved the purchase of shares by another company. There were 3,000 shareholders in that company, and it was necessary to set out in the prospectus the name and address of each one of them. Apart from the physical difficulty of putting all these particulars into a prospectus, a great responsibility is placed upon the solicitors and directors, for, where the number of names or contracts is very large, there is a great risk that something that might afterwards he considered material might be omitted, however anxious the parties might be to keep within the law. All this information, since it is legally necessary, must, I suppose, be considered as material, but it is safe to say that nobody ever reads it and it renders the prospectus a long and confusing document. It would seem reasonable, there- fore, that the Court should have discretion to authorise non-compliance with the law in such cases.

Amendment moved— Page 2, line 30, at end insert ("or if in the opinion of the same court it was not reasonably practicable to comply with the requirements of this section").—(Lord Hunsdon of Hunsdon.)

LORD DANESFORT

This is an extremely useful Amendment, and the noble Lord who has moved it has given reasons why it is practically impossible in certain cases to comply rigidly with all the terms of the law as to prospectuses. He proposes that the Court should be given discretion in such cases as this to exempt directors from liability. Of course the Court will not exercise discretion in favour of directors if there is anything in the nature of fraud or negligence or an attempt to deceive the public, but only in cases where it is practically necessary for the purpose of bringing the prospectus before the public. If we trust the Court, as I think we are bound to do, I can see no reason why this Amendment should not be inserted.

THE LORD CHANCELLOR

There is some difficulty about this Amendment. I do not like, I confess, to suggest in an Act of Parliament that it may not be reasonably practicable to comply with it. A good many people would like to think that they could put in a plea of that kind against Acts of Parliament. Accordingly I do not like to accept these words. I would meet my noble friend if I could, and would ask him to consider whether he could suggest some less objectionable wording, referring, for instance, to the multiplicity of detail or the special circumstances of the case. If he can find a form of words which is free from objection, I shall be glad to consider it.

EARL RUSSELL

Perhaps it might be possible to extend the word "immaterial" in some way. I quite agree that you do not want to say in the Act that you do not expect it to be obeyed, but you might bring in some words suggesting that the particulars are voluminous or unimportant, or something of that kind.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR

My Amendment to this clause is technical.

Amendment moved— Page 22, line 35, at end insert ("and where by reason of any alteration of the date on which the financial year of the company or business terminates the accounts of the company or business have been made up for a period greater or less than a year, that greater or less period shall for the purpose of the said paragraphs be deemed to be a financial year").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 28, as amended, agreed to.

Clause 29 [Amendment as to minimum subscription]:

THE LORD CHANCELLOR

My Amendments to this clause are drafting.

Amendments moved—

Page 23, line 3, after ("(cc)") insert ("where shares are offered to the public for subscription")

Page 23, line 5, leave out ("the shares offered to the public") and insert ("those shares").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 29, as amended, agreed to.

Clause 30:

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 allot any of its shares or debentures unless at least seven days before the first allotment of either shares or debentures there has been filed with the registrar of companies a statement in lieu 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 moved, in subsection (1), to leave out "at least seven days." The noble Earl said: This is a somewhat important matter. It is laid down under Clause 30 that there shall be seven days between the prospectuses being filed and the allotment, and it is quite true that this applies only to a company having a share capital which does not issue a prospectus on or in 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. A lot of business, however, is done by companies of that kind, and the effect of not going to allotment for seven days might be a very serious thing. What is to be the position of the underwriters? Are they going to underwrite when they do not know what is going to happen in the next seven days? And, if so, at what sort of premium? Consider the case of a company which, normally speaking, could have gone to allotment two days before the General Strike. Supposing it had to have seven days before it could go to allotment, consider how many withdrawals there would have been. The effect would be that the underwriter would have to take over all the shares, and, if you once begin to interfere with such a business as underwriting the issue of a company, especially when you are dealing with some of the big issuing houses, you are beginning to introduce an entirely new principle.

The only reason that one can suggest is that a good deal was said in some of the newspapers at one time about certain swindles that had taken place at Manchester during the cotton boom. Of course, if people will go and put their money into a company that they have not seen anything about, one cannot legislate for them, and one of the things which strikes one about the Greene Report is the well thought out terms in which it points out that in considering any legislation you have to consider first the existing business of the country and not attempt to interfere with that, and that only as a secondary matter must you try your best to protect fools against themselves. Not one word recommending this moratorium of seven days between the filing of particulars and allotment appears in the Report. For the first time it has appeared in this Bill. Therefore I beg to move that the words "at least seven days" shall be omitted from the clause.

Amendment moved— Page 24, line 13, leave out ("at least seven days".)—(The Earl of Halsbury.)

THE LORD CHANCELLOR

It is quite true that this matter was not brought to the attention of the Committee, and therefore was not dealt with by them. It has been brought to the attention of the Board of Trade and I think it is worth a little more consideration. It is the fact, as the noble Earl has stated, that certain abuses occurred in connection with the floating of cotton companies in Lancashire a little time ago. The object of filing a statement is to enable people who are thinking of taking shares to look at it first. If you impose no interval of time it is possible for the company to file a statement in the morning and go to allotment in the afternoon, and in that case intending subscribers have no chance of inspecting the statement before they have to subscribe for the shares. I think if you are going to require filing at all you ought to allow some reasonable interval. I do not say that the period of seven days should be closely adhered to, and if the noble Earl thinks it should be reduced to a smaller number of days I should be content, but I think it would be dangerous not to interpose some interval between the filing of the statement and the allotment of shares.

EARL RUSSELL

Surely that is not what happens in practice. People do not go in for these speculative cotton mill companies, and so on, with the same care as they buy land, with the advice of a solicitor. They think something good is going and they get in as quickly as they can. Surely people do not go to Somerset House and consult a prospectus there before they invest their money. You have already provided that there shall be no offer of shares without a complete prospectus accompanying it, and I do not think people in practice rely upon particulars filed at Somerset House before investing.

LORD BANBURY OF SOUTHAM

I venture to agree with the Lord Chancellor. Only one objection has been raised to seven days, and that has been raised by the noble Earl. The objection was that a person might withdraw his subscription before the end of seven days and the underwriter would not be relieved of his obligation. On the other hand, there have been a great number of these companies which have issued no prospectus or only a mangled prospectus, which is little short of a scandal. If an underwriter goes in for a company of that sort he is bound to take the risk. If he underwrites the shares of a company of which proper details are not given, and he loses, I should not be sorry for him. Therefore I hope that the Lord Chancellor will adhere to the clause as it stands.

THE EARL OF HALSBURY

May 1 say, in answer to Lord Banbury, that the point I was making was not the point that people were underwriting a company which was fraudulent in its inception; but I was pointing out that the underwriter who does not know what the conditions may be at the end of seven days is not taking the same risk as the underwriter who knows what the conditions will be in the next twenty-four hours. It is not a question of fraudulent companies at all. The Lord Chancellor was good enough to say that if I were content to modify my Amendment by making the period a shorter one he might accept it I am perfectly willing to withdraw my Amendment now, if, on consideration, I may bring it up again on the Report stage.

THE LORD CHANCELLOR

Four days?

THE EARL OF HALSBURY

I am not quite certain whether four days would be accepted by the people who know more about the practical working of it than I do myself. I would prefer to take time for consideration.

Amendment, by leave, withdrawn.

Clause 30 agreed to.

Clause 31 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:—

1. (a) Not less than five years must at the date of the issue have elapsed since the date on which the company was entitled to commence business;
2. (b) If the company has already issued shares of the same class as the shares to be issued—
   1. (i) the market price of the shares of the class which have already been issued must be less than their nominal value; and
   2. (ii) the price at which the shares are issued must not be less than the market price of shares of the class which have already been issued by more than ten per cent. or be less than fifty per cent. of the nominal value of the shares;
3. (c) If the company has not already issued shares of the same class as the 574 shares to be issued, the price at which the new shares are to be issued must not be less than the nominal value of the shares by more than twenty per cent.

(3) In the case of any shares for which there is no market price, the market price of the shares shall for the purposes of this section be deemed to be such price as the auditors of the company, having regard to the financial position of the company, as disclosed to them in the accounts of the company, certify to be the fair market price.

(4) For the purposes of this section the market price of any shares already issued shall be ascertained as at the date of issue of the prospectus inviting subscriptions for the new shares or, if there in no such prospectus, as at the date of the contract to take the new shares.

LORD HUNSDON OF HUNSDON moved, in subsection 1 (b) (i), to leave out "be less than" and insert "not exceed." The noble Lord said: This clause makes it lawful to issue shares at a discount in cases where the company has already issued shares of the same class, provided that the issue price is not more than ten per cent. below the market price, or fifty per cent. below the nominal value. It also makes it a condition that "the market price of the shares … must be less than their nominal value." There seems to be no reason for this proviso, for the effect of it would be that if the shares of the company were at par it would not be lawful to issue further shares at 90 per cent. or over; but if the shares were quoted at 99 per cent. it would be lawful to issue further shares at 89 per cent. or over. It would seem clear that whatever objections there may be to issuing shares at a discount, these objections would be less when the shares were quoted at par than when they were quoted below par because the discount would be less. Also if this proviso stands it might not be difficult to put the price of the shares down in the market so as to come within the terms of the Bill.

This Amendment does very little as it merely suggests that the market price of the shares must not exceed their nominal value and the Bill says they must be less than their nominal value. I imagine that the Law Society merely wished to raise this question in order to find out what possible reason there can be for making any statement as to the market price of the shares in this con- nection. Mr. Greene's Committee was—I quote their words—"as a whole not prepared to dissent from the findings of the Wrenbury Committee," except in one respect; and Lord Wrenbury's Committee recommended that shares should only be issued at a discount when the company's share capital was at a discount. If I may be allowed to speak for myself I would appeal to the Lord Chancellor to consider whether he could not delete the proviso altogether on the Report stage. It may very well be that with shares at 1 per cent. or 2 per cent. premium it would be impossible to make a successful issue at over 90 per cent. and therefore the effect of the proviso, even with my Amendment, would be, that a company that was doing fairly well and whose shares were a little above par would not be permitted to raise capital by the issue of shares while a company which was doing so badly that it could not issue shares at more than 50 per cent. of their nominal value might do so.

I can understand—and I am very sorry Lord Wrenbury is not here, because I fancy this is his view—that there might be some reason for prohibiting the sale of shares at a discount altogether, but this Bill surrenders any principle that there may be by permitting the sale at 50 per cent. discount. I understand, and I approve of, the proviso in the next subsection that shares shall not be issued at more than 10 per cent. below the market value, but I am quite unable to realise how it can matter whether the market price is below or above par. The people who now can issue shares by this Bill are simply the people the market value of whose shares is below par. The people whose shares are well above par do not need this provision because they can issue at a premium or at par. The only people who are left out and not allowed to raise money by the issue of shares are the people who are doing fairly well and whose shares stand at a slight premium.

Amendment moved— Page 25, line 5, leave out ("be less than") and insert ("not exceed").—(Lord Hunsdon of Hunsdon.)

LORD DANESFORT

The Amendment as it stands on the Paper is a small one but the principles raised by the noble Lord are rather large. The point raised in the Amendment is simply this. According to the provisions of the Bill if the shares stand in the market at ninety-nine, par being 100, the shares can be issued at a discount. If the shares stand in the market at 100 they cannot be issued at a discount. I confess I see no reason for that restriction and I hope that the Lord Chancellor will accept the Amendment.

THE LORD CHANCELLOR

It has long been the law that shares cannot be issued at a discount at all, but it was represented to the Wrenbury Committee and again to the Greene Committee that that Was a restriction which bore rather hardly upon a company whose shares were already at a discount in the market. Both Committees agreed to this. The Wrenbury Committee Report says in reference to issuing at a discount:— It should be allowed only when the company's issued share capital is at a discount. The effect of the Bill is to carry that out. The noble Lord proposes that even when the company's shares are at par, according to the Amendment, or according to his speech even when they are at a premium, the company should still be allowed to issue its shares at a discount. That is going very much further than the Committee and I hope the House will adhere to the view that it is only when the existing shares are at a discount they should be allowed to issue new shares at par. I must resist the Amendment.

LORD HUNSDON OF HUNSDON

The Lord Chancellor has given no reason in answer to my remarks except that the Wrenbury Committee do not like my Amendment. May I read from the Wrenbury Committee's Report a passage which will show the sort of feeling about issuing shares at a discount:— There should be a statutory limit to the discount allowable and if the disease is so deep rooted that the statutory limit is not sufficient— then something else is to happen. It is not a disease at all. It is an easy and convenient way of raising money and it is allowed to everybody except people whose shares are at par or at 102, and why they should be exempted I do not know. The Law Society asked me to put this Amendment forward in the hope that somebody could be found who could give a reason for the provision in the Bill. With all respect to the Lord Chancellor I do not understand the reasons even now.

THE LORD CHANCELLOR

If the noble Lord will read my speech to-morrow he will see that I did give reasons.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR moved to leave out subsections (3) and (4) and insert:— (3) For the purposes of this section the market price or any shares already issued shall be taken to be—

1. (a) the average of the making-up prices of such shares on the London Stock Exchange for the three accounts immediately preceding the date of the issue of the prospectus, or, if there is no such prospectus, the date of the contract to take the new shares; or
2. (b) if there have not been such making-up prices for the said three accounts, then the price paid on the average for any such shares in respect of which transfers (being transfers for valuable consideration) were registered within the specified period; or
3. (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 company 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 subscriptions for the new shares, or, if there is no such prospectus, the date of the contract to take the new shares."

The noble and learned Viscount said: This deals with the definition of market price. As the law stands there is no definition of market price except when the shares of a company have no market price, which means, of course, that they have no quotation on the Stock Exchange. The market price where there is a quotation has to be taken as at the date of the issue of the prospectus. There is room there for a certain amount of manipulation in the market price and the object of the Amendment is to remove that by taking the average. The Amendment provides three successive alternatives for the ascertainment of market price—namely, either the making-up price or the price realised on actual transactions during a short period, or, if neither of these is available, then the price which in the auditor's opinion is a fair value. I think it is a useful Amendment to the clause.

Amendment moved— Page 25, line 32, leave out subsections (3) and (4) and insert the said new subsection.—(The Lord Chancellor.)

EARL RUSSELL

I would point out that paragraph (b) of this Amendment does still leave room for manipulation in the case of a small company. You could have transfers arranged to show any prices you liked.

THE LORD CHANCELLOR

That is true, but I do not think we can get nearer than giving the average.

THE EARL OF HALSBURY

, who had given notice to move to omit the last seven words of subsection (3) and to insert "and to any other information and explanations given to them, and they shall report accordingly. Provided always that if the auditors report that they are unable for any reason to form such an opinion the directors of the company shall fix the market price," said: I think that the new subsection (3) really meets the first part of my Amendment entirely because now it has been altered to "certify to be in their opinion the fair value," and I think that is quite sufficient for my purpose down to that point. But the difficulty is, what is to happen if the auditors are unwilling to certify an opinion? You cannot make them do it by law and it may very well be that it would be a very great hardship on a perfectly good company because the auditors would not take the responsibility of saying what in their opinion the market price of the shares ought to be.

Take two examples. Take a company whose big asset is a patent. The directors may have a perfectly good and honest view as to what the value of the patent is, but the auditors may well say: "We are not going to take the responsibility of giving to the public our opinion of what the value of this patent is." Take another case, the case of a company which is doing a very good, honest and proper business but which is a success largely due to a very clever campaign of advertising, the company having a very clever advertisement manager who is really responsible for the success of the company. That may be a perfectly honest and good company, but you are asking auditors to certify their opinion in those two cases of what the shares of the company are worth in the market, and it may well be that the auditors will refuse to do so. What is to happen then? Can you get no market price? If you cannot, the suggestion is that the directors are the only people who can. If the directors do it, the public know they are only getting the directors' valuation and not the valuation of the auditors. But if they do not get the valuation of the auditors at all there is a deadlock and you cannot get any further. You certainly cannot compel by law an auditor to put his certificate to an opinion which he is not prepared to put before the public. The object of this Amendment is to get rid of the deadlock that may ma come in a perfectly honest and proper case in which an auditor having a sense of his responsibility says: "I do not care to give any opinion as to what the market price of these shares is."

Amendment to the Amendment moved— In the proposed new subsection (3) at the end of paragraph (c), insert "Provided always that if the auditors report that they are unable for any reason to form such an opinion the directors of the company shall fix the market price."—(The Earl of Halsbury.)

LORD DANESFORT

I think this proviso is dangerous, sorry as I am to differ from my noble friend. The position is this. Directors want to issue shares at a discount for what they consider their own advantage and the advantage of the company. In order to see whether they can do so, according to the Act of Parliament, the market price has to be fixed. My noble friend says that in the last resort the directors are to fix what is the market price. In other words he gives them a power to fix the market price, makes them the judges of what the market price is when it is already their interest to fix that market price in order to carry out their wishes. In other words, he makes them judges as to the market price in their own cause, which I think is a dangerous thing. Then my noble friend says that in the case supposed, where there have been no transfers or no dealings in the Stock Exchange, there is no way of ascertaining the market price except through the directors. It may be very unfortunate. The company will not collapse and all that will happen will be that they will not be able to issue shares at a discount under the provisions of the Act. I think the danger of giving this power to fix the market price is very great.

THE LORD CHANCELLOR

I think it dangerous, too. You are dealing with a case where there is no market price, where there have been no transactions in shares by means of which people can take an average value and where the auditors say: "We really cannot certify the value of the shares." In that case it is proposed to allow the directors who are anxious to make this issue at a discount to fix that value themselves. I do not think it ought to be proceeded with. It seems to me that if you have got that state of things there had better be no issue at a discount at all.

THE EARL OF HALSBURY

By your Lordships' leave I will withdraw the Amendment.

Amendment to the Amendment, by leave, withdrawn.

On Question, original Amendment agreed to.

Clause 32, as amended, agreed to.

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 moved to leave out paragraph (a) and insert:— (a) By inserting at the end of subsection (1) thereof the following proviso: Provided that the amount payable to a person in consideration of his subscribing or agreeing to subscribe, whether absolutely or 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 an agreement to subscribe or in respect of which subscriptions are procured or agreed to be procured.

The noble Lord said: The clause as it stands appears to prohibit the taking of shares firm for a commission and it follows therein a recommendation of Lord Wrenbury's Committee, but it is a change id the existing law and is not, as far as I can see, a recommendation of Mr. Greene's Committee on which this Bill is based. Moreover, taking shares firm is an ordinary and, in my opinion, a reasonable business transaction. Moreover, if this prohibition is maintained it would be perfectly easy to evade it. There is no law which compels the issuing house to allot shares in proportion to the applications, and by private agreement certain persons could be allotted their shares in full. Even if, by law or custom, shares were allotted in proportion to applications, it would be quite easy before closing the lists to increase the application of those who wished to take a definite number of shares. Besides the fact that the prohibition of taking shares firm is not recommended by Mr. Greene's Committee and is an alteration in the existing law, there seem to me to be three objections to the new proposal—(1), that it would stop a reasonable financial transaction; (2), that it would serve no useful purpose; and (3), that it could be easily evaded. And if I am right these would seem to form three rather formidable objections. I beg to move.

Amendment moved:— Page 26, line 3, leave our paragraph (a) and insert the said paragraph.—(Lord Hunsdon, of Hunsdon)

LORD BANBURY OF SOUTHAM

I am afraid that I do not agree with my noble friend Lord Hunsdon in everything he says. I do agree that in all probability this provision, as it stands, might be evaded, but, on the other hand, I do not think it is right when a prospectus is issued to the public and it is stated in the prospectus that 50,000 shares are to be allotted, that while that is stated in the prospectus, 20,000 of those shares have not only been under-written but have been allotted, so that as a matter of fact the only shares which can be divided amongst the public are 30,000 and not 50,000. I do not think that is treating the public fairly. If this is passed and if 50,000 shares are underwritten it is quite possible for the underwriters to put in a separate application for a certain number of shares, and in those circumstances it will be quite possible for the issuing-house to allot to those underwriters and not to allot to a certain number of the public; but it is always in the power of the issuing-house to make their allotments as they think right. My own idea is that it would be far better to leave this provision in and then if the issuing-house think that in certain circumstances they can do certain things let them do them, but do not let us say here that people may ask the public to subscribe to 50,000 shares while, as a matter of fact, they are only being asked to subscribe to 20,000.

THE LORD CHANCELLOR

This Amendment is in the teeth of the recommendation of both Committees. The Wrenbury Committee—and of course Lord Wrenbury has great knowledge and experience in these matters—recommended that the Act of 1908 should be amended so as to exclude commission payable to a person in consideration of his subscribing for shares and to confine the word "commission" to mean either brokerage, which is a payment for services rendered, or underwriting commission, which is a payment for a guarantee given. I think it right to follow the conclusions of the two Committees and do away with commission payable to persons simply for taking the shares. My noble friends behind me seem to think the clause can still be evaded by business men; if they are able to do so, let them try. At all events I think Parliament ought to uphold the rule.

LORD HUNSDON OF HUNSDON

I must have made a mistake in saying Mr. Greene's Committee did not recommend this. I would be much obliged to the noble and learned Viscount if he would call my attention to where they do recommend it.

THE LORD CHANCELLOR

I think the Greene Committee accepted the whole of that part of the Wrenbury Committee's Report. They said they were not prepared to dissent from the findings of the Wrenbury Committee. They made no exceptions.

LORD HUNSDON OF HUNSDON

It does not sound like a very enthusiastic support to say they do not dissent from the findings of the Wrenbury Committee, but as the Lord Chancellor will not accept this Amendment I am afraid I cannot pursue it.

Amendment, by leave, withdrawn.

THE EARL OF HALSBURY moved, in paragraph (a) after the last "shares, "to insert" over and above the 50 per cent. of the nominal value of the shares referred to in Section 32 (1) (b) (ii)." The noble Earl said: I have put down this Amendment because I thought it the most convenient way of bringing forward a difficulty which I feel. On one reading of this clause, as I understand it, it may mean 50 per cent., and on another reading it may mean 60 per cent. I am not concerned in the least which it should be, but my objection to the clause as it at present stands is that it may be read either way. For that reason I have put down an Amendment making it 60 per cent. I have no objection to it being read the other way as long as it is clear which way it is to be read.

Amendment moved— Page 26, line 15 after "shares" insert ("over and above the 50 per cent. of the nominal value of the shares referred to in Section 32 (1) (b) (ii)").—(The Earl of Halsbury.)

THE LORD CHANCELLOR

I have no objection in principle to this Amendment, but I think it would be preferable to leave the matter over for the present. I will see that words are put down on Report.

THE EARL OF HALSBURY

In those circumstances I would ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 33 agreed to.

Clause 34:

Accounts.

34.—(1) Every company shall cause to be kept proper books of account with respect to—

(3) The directors of every company shall at some date not later than eighteen months after the incorporation of the company and subsequently once at least in every year lay before the company in general meeting a profit and loss account for the period, in the case of the first account, since the in corporation of the company, and, in any other case, since the preceding account, made up to a date not earlier than the date of the meeting by more than nine months, or, in the case of a company carrying on business or having interests abroad, by more than twelve months:

(4) The directors shall cause to be made out in every year, and to be laid before the company in general meeting, a balance sheet made up to a date not earlier than the date of the meeting by more than such period as is allowed in the case of a profit and loss account under the last preceding subsection, and there shall be attached to every such balance sheet a report by the directors with respect to the state of the company's affairs, the amount, if any, which they recommend should be paid by way of dividend, and the amount, if any, which they propose to carry to the reserve fund.

(5) If any person being the director of a company—

1. (a) fails to take all reasonable steps to secure compliance by the company with the requirements of subsection (1) or subsection (2) of this section, or has by his own wilful act been the cause of any default by the company under either of the said subsections; or
2. (b) fails to comply with the provisions of subsection (3) or subsection (4) of this section;

he shall, in respect of each offence, he liable on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding two hundred pounds:

Provided that a person shall not be sentenced to imprisonment for an offence under this section unless in the opinion of the court dealing with the case, the offence was committed wilfully.

THE LORD CHANCELLOR moved, in subsection (3) after the first "account," to insert "or, in the case of a company not trading for profit, an income and expenditure account." The noble and learned Viscount said: This Amendment and those which follow it are intended to remedy what I think is an omission. The clause provides that the directors shall lay a profit and loss account before the company in general meeting. There are companies, however, which do not trade for profit (such, for instance, as a chamber of commerce) and therefore they have no profit and loss account. In such cases we propose that they should lay an income and expenditure account instead of a profit and loss account.

Amendments moved— Page 27, line 7, after ("account") insert ("or, in the case of a company not trading for profit, an income and expenditure account").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Amendment moved— Page 27, line 22, leave out from ("sheet") to ("and") in line 25 and insert ("as at the date to which the profit and loss account, or the income and expenditure account, as the case may be, is made up").—(Lord Chancellor.)

On Question, Amendment agreed to.

THE EARL OF HALSBURY

had on the Paper an Amendment to add to subsection (4): "general reserve or reserve account as shown specifically on the balance sheet". The noble Earl said: The wording of the clause at the present time is "reserve fund." That is not an expression which is very ordinarily used and it may mean many things. It may mean what is generally known as the inner reserve fund of a company, which clearly is not included in this case. What is really meant is the fund that is available after a final balance is struck, which may be paid into general reserve or paid outs as dividend. My Amendment is really a verbal one and makes use of the more common expression instead of one that is not usually used—certainly in accountancy or, I think, in business. I think that perhaps my Amendment ought to be in the form of moving to omit the words "reserve fund" and substituting the words on the Paper.

Amendment moved— Page 27, line 30, leave out ("reserve fund") and insert ("general reserve or reserve account as shown specifically on the balance sheet").—(The Earl of Halsbury.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved, in paragraph (b) of subsection (5), after the word "fails," to insert "to take all reasonable steps." The noble and learned Viscount said: The subsection as it stands proposes a penalty on directors who fail to comply with the provision of former subsections of this clause. It has been pointed out that a director might do his best to comply but might not be able to comply. So it is proposed to put it in the words "fails to take all reasonable, steps."

Amendment moved— Page 27, line 38, after ("fails") insert ("to take all reasonable steps").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 34, as amended, agreed to.

Clause 35:

Form of balance sheet.

35.—(1) Every balance sheet of a company shall contain a summary of the share capital of the company, its liabilities and its assets, together with such particulars as are necessary to disclose the general nature of the liabilities and the assets of the company, and to explain how the values of the fixed assets have been arrived at.

(2) There shall be stated under separate headings in the balance sheet—

1. (a) the preliminary expenses of the company so far as not written off; and
2. (b) if it is shown as a separate item in or is otherwise ascertainable from the books or papers of the company, the present value of the goodwill as so shown or ascertained.

(4) Where the assets of a company include shares in a subsidiary company or loans made to a subsidiary company, or where the liabilities of a company include any loans from a subsidiary company, the aggregate amounts of those assets (distinguishing shares and loans) and of those loans respectively shall be set out in the balance sheet of the first-mentioned company separately from all its other assets and liabilities.

THE EARL OF HALSBURY moved, in subsection (2) (b), to leave out "or papers." The noble Earl said: I have put down this Amendment because it seems to me that the word "papers" is very wide and really puts too much upon anybody who has to deal with this matter. "Papers of the company" might refer to anything. They might refer to a letter from some unknown person who simply said that in his opinion something had happened. Surely it is sufficient to say "from the books."

Amendment moved— Page 29, line 8, leave out ("or papers").—(The Earl of Halsbury.)

THE LORD CHANCELLOR

The position is that good will may be kept out of the books, but it may appear in the contract of purchase. If so, it surely ought to be shown in the account. I agree that "papers" is rather a, wide word, but I find it difficult to suggest anything else which would cover a company which has a figure for good will upon its documents but not in its books.

THE EARL OF HALSBURY

After that expression of the view of the Lord Chancellor I beg leave to withdraw.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR

The next two Amendments on the Paper are technical.

Amendments moved—

Page 29, line 9, leave out ("value") and insert ("amount")

Page 29, line 11, after ("secured") insert ("otherwise than by operation of law").—(The Lord Chancellor.)

On Question, Amendments agreed to.

THE EARL OF HALSBURY moved to leave out subsection (4) and insert the following new subsection:— . Where the assets of a company include shares in a subsidiary company or any indebtedness of a subsidiary company by loans or otherwise the aggregate amount of these assets (distinguishing shares and 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.

The noble Earl said: The point dealt with here is that when you are dealing with subsidiary companies it is practically impossible to give complete and absolute information as to every profit and loss account of every subsidiary company. That is especially the case when you are dealing with a subsidiary company that may be a foreign company, for instance, or a company that has a business in a Colony. It makes it almost impossible to deal with every profit and loss account and show it in the affairs of the parent company. For that reason I suggest this Amendment, which does impose a considerably less amount of responsibility in that matter. It allows a much broader statement to be given instead of a detailed statement as to every subsidiary company.

Amendment moved— Page 29, line 16, leave out subsection (4) and insert the said new subsection.—(The Earl of Halsbury.)

THE LORD CHANCELLOR

I think this is not much more than a drafting Amendment and I am prepared to accept it, but I should like to reserve the right to look into the wording of it before Report.

On Question, Amendment agreed to.

VISCOUNT BERTIE OF THAME moved at the end of subsection (5), to insert: If the directors or other officers of the subsidiary company wilfully and wrongfully withhold such information as the holding company may reasonably require for the purpose of carrying out the provisions of this clause they shall be liable to a fine not exceeding one hundred pounds.

The noble Viscount said: I submit that if directors of subsidiary companies are wilfully and wrongfully withholding information and will not give particulars required of them, they should be made liable. I beg to move this Amendment to provide for such a state of affairs.

Amendment moved— Page 30, line 13, at end insert the said words.—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

I think this Amendment is founded upon a misunderstanding. By the clause as drafted, certain information as to the profits of subsidiary companies has to be given in the balance sheet of the holding company, but there is no provision forcing directors of subsidiary companies to give information. Where the subsidiary company is not actually controlled by the holding company, which may only have a minor interest, the directors should not be forced to give information, and it seems to me wrong to put in a provision forcing those directors to give information if otherwise they are not bound by their articles to give it. I hope that the Amendment will not be pressed.

VISCOUNT BERTIE OF THAME

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR

My further Amendments to this clause are technical.

Amendments moved—

Page 30, line 24, after ("company") insert ("(not being a company acting as trustee for the holders of debentures in that other company)")

Page 30, line 29, leave out ("within the meaning of this section") and insert ("for the purpose; of this section, and the expression 'subsidiary company' in this section shall be construed accordingly").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 35, as amended, 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 Amendment to this clause is technical.

Amendment moved— Page 30, lines 30 and 31, leave out ("who is not entitled to receive a copy") and insert ("whether he is or is not entitled to have sent to him copies").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 36, as amended, agreed to.

Clause 37:

Amendment of s. 92 of principal Act.

37. Section ninety-two of the principal Act (which limits the time for the issue of certificates of shares, etc.) shall be amended as follows:—

(1) For the words "and within two months after the registration of a transfer of any such shares, debentures or debenture stock" there were substituted the words "and within two months after the date on which a transfer of any such shares, debentures or debenture stock (being a transfer duly stamped and otherwise valid, but not including such a transfer as the company is for any reason entitled to refuse to register and does not register) is lodged with the company";

(2) After subsection (1) there shall be inserted the following subsection:— (1A) If a company refuses to register transfer of any shares, debentures or debenture stock, the company shall, within two months after the date on which the transfer was lodged with the company, give to the transferor notice of the refusal.

THE LORD CHANCELLOR

My Amendments to this clause are drafting.

Amendments moved—

Page 31, line 12, leave out ("were") and insert ("shall be")

Page 31, line 26, leave out ("give") and insert ("said").—(The Lord Chancellor.)

On Question, Amendments agreed to.

VISCOUNT BERTIE OF THAME moved to leave out subsection (1A) in subsection (2) and to insert: (1A) A company shall not be entitled to refuse to register a transfer of any fully paid shares, debentures or debenture stock into the name of a British subject, but may refuse to register the transfer of any partly paid shares, debentures or debenture stock and on such refusal shall within two months after the date on which the transfer was lodged with the company give to the transferor notice of the refusal. If a company unlawfully refuses to register a transfer the transferee may apply to the Court for an order to rectify the register of the company by substituting his name on the books of the company in place of that of the transferor.

The noble Viscount said: This Amendment has regard to the fact that articles of association have sometimes been misused for the purpose of depressing the price of shares, so that directors and their friends get them cheap. I beg to move.

Amendment moved— Page 31, leave out lines 22 to 27 and insert the said words.—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

It is very common to find in the articles of private companies a provision enabling directors to refuse to register the transfer of shares to a person of whom they do not approve and I am afraid that it sometimes happens that an unlimited power to transfer is taken advantage of by a person who wants to get into the inner circle and find out the secrets of the company. It is only right that there should be power to refuse, and this Amendment is in conflict with Section 121 of the principal Act, under which one of the essential conditions concerning private companies is that they shall by their articles restrict the right to transfer their shares.

VISCOUNT BERTIE OF THAME

I beg leave to withdraw.

Amendment, by leave, withdrawn.

Clause 37, as amended, agreed to.

Clause 38:

Amendments as to registration of mortgages and charges.

(2) It shall be the duty of a company within six months after the commencement of this Act to send to the registrar of companies for registration the prescribed particulars of any mortgage or charge created before the passing of this Act which would, under the provisions of this section, have been required to be registered if it had been created after the commencement of this Act, and the registrar shall, on payment of the prescribed fee, enter those particulars on the register kept in pursuance of the said Section ninety-three.

If the company fails to comply with the requirements of this subsection, the company and every director, manager, secretary or other officer of the company, or other person who is knowingly a party to the default, shall on conviction be liable to a fine not exceeding fifty pounds for every day during which the default continues, but the failure of the company shall not prejudice any rights which any person in whose favour the mortgage or charge was made may have thereunder.

THE LORD CHANCELLOR

My Amendments to this clause are technical and drafting.

Amendments moved—

Page 32, line 43, leave out ("by the secretary of the company") and insert ("in the prescribed manner").

Page 33, line 6, leave out ("property is acquired by the company") and insert ("acquisition is completed")

Page 33, line 14, after ("Penalty") insert: ("Provided that, if the property is situate, and the mortgage or charge was created outside Great Britain, twenty-one days after the date on which the copy of the instrument could in due course of post, and if dispatched with due diligence have been received in the United Kingdom, shall be substituted for twenty-one days after the completion of the acquisition as the time within which the particulars and the copy of the instrument are to be delivered to the registrar.")

Page 33, lines 18 and 19, leave out ("establishes a") and insert ("has an established")

Page 32, line 20, after ("(2)") insert ("Paragraphs (a) and (c) of subsection (1) of this section shall respectively have effect only in relation to mortgages or charges created, or property acquired, after the commencement of this Act, but")

Page 32, line 20, after ("company insert ("(including a company incorporated outside England which has an established place of business in England)")

Page 32, line 24, leave out ("before the passing of this Act") and insert ("by the company before the commencement of this Act, or of any mortgage or charge to which any property acquired by the company before the commencement of this Act is subject,")

Page 32, line 26, after ("created") insert ("or the property had been acquired").—(The Lord Chancellor.)

On Question, Amendments agreed to.

THE EARL OF HALSBURY moved, in the second paragraph of subsection (2), to leave out "but" and to insert "provided that," and after "company" to insert "to comply with any of the provisions of this section." The noble Earl said: This is really a drafting matter. My Amendment is to make the paragraph apply not only to subsection (2) but to the whole of the clause in so far as this is possible.

Amendment moved— Page 33, line 36, leave out ("but") and insert ("provided that") and after ("company") insert ("to comply with any of the provisions of this section").—(The Earl of Halsbury.)

THE LORD CHANCELLOR

I am told that this is not desirable. The subsection as it stands provides that these words shall apply only to matters contained within it, and I think that the noble Earl proposes that they should apply also to matters already subject to Section 93 (1) under which the charge is invalidated. I think that the point is already sufficiently provided for.

THE EARL OF HALSBURY

If the noble and learned Viscount desires it I am willing to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 38, as amended, agreed to.

Clause 39 [Amendment of s. 95 of principal Act]:

THE LORD CHANCELLOR moved, in subsection (1), after "month," to insert "or such longer period as the registrar of companies may allow." The noble and learned Viscount said: I think that this Amendment meets the point which the noble and learned Earl, Lord Halsbury, had intended to raise on this clause.

Amendment moved— Page 34, line 12, after ("month") insert ("or such longer period as the registrar of companies may allow").—(The Lord Chancellor.)

THE EARL OF HALSBURY

I agree that this meets my point.

On Question, Amendment agreed to

Clause 39, as amended, agreed to.

Clause 40 agreed to.

Clause 41 [Amendment of s. 102 of principal Act]:

THE LORD CHANCELLOR

My Amendments to this clause are technical.

Amendments moved—

Page 35, line 14, after the first ("the") insert ("articles or in the")

Page 35, line 15, after ("certificates") insert ("or in the trust deed or other document securing the debentures or debenture stack").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 41, as amended, agreed to.

Clause 42 agreed to.

Clause 43:

Amendments as to investigations of companies' affairs by inspectors.

43.—(1) Section one hundred and nine of the principal Act (which relates to the investigation of the affairs of companies by Board of Trade inspectors) shall be amended as follows:—

(d) There shall be added to the section the following new subsections:—

(8) If where any matter is referred to the Director of Public Prosecutions under this section he considers that the case is one in which a prosecution ought to be instituted and, further, that it is desirable in the public interest that the proceedings in the prosecution should be conducted by him, he shall institute proceedings accordingly, and it shall be the duty of all officers and agents of the company, past and present (other than the defendant in the proceedings), to give to him all assistance in connection with the prosecution which they are reasonably able to give.

For the purposes of this subsection the expression "agents" in relation to a company shall be deemed to include the bankers and solicitors of the company and any persons employed by the company its auditors, whether those persons are or are not officers of the company.

THE EARL OF HALSBUEY moved, in subsection (8) in the paragraph defining "agents," to leave out "employed" and to insert "appointed." The noble Earl said: This is a point that may be of some importance later on. It is simply asking that the word should be "appointed" instead of "employed." As your Lordships are aware, there may be some difficulty about the position of the auditor of a company and as to whether he is an officer or not. Apparently he is in some cases and is not in others. A person may be employed as an auditor without being properly appointed to the company, and that is the reason for my Amendment.

Amendment moved— Page 37, line 22, leave out ("employed") and insert ("appointed").—(The Earl of Halsbury.)

THE LORD CHANCELLOR

This looks like drafting, but I think it is something more. An accountant may be employed by a company but not strictly appointed. I think that the word "employed" was purposely used to cover all those cases.

THE EARL OF HALSBURY

The subsection deals with the agents in relation to a company and says that they shall be deemed to include the bankers and solicitors of the company and any persons employed by the company as auditors. They may not be the auditors who have been properly appointed. It may be somebody who has been employed by the company, and surely, whether those persons are or are not officers of the company, if they are merely employed as outside people it is rather dangerous to suggest that they are agents of the company.

THE LORD CHANCELLOR

I do not think it is. Like the bankers and solicitors, they are agents of the company, but that does not make them officers of the company.

THE EARL OF HALSBURY

If the noble and learned Viscount dislikes the Amendment, I shall not press it.

Amendment, by leave, withdrawn.

Clause 43 agreed to.

Clause 44 agreed to.

Clause 45 [Power to acquire shares of shareholders dissenting from scheme or contract approved by majority]:

THE LORD CHANCELLOR

All my Amendments to this clause are technical.

Amendments moved—

Page 38, line 24, leave out ("this") and insert ("the principal")

Page 38, line 25, after ("has") insert ("within four months after the making of the offer in that behalf by the transferee company")

Page 38, lines 28 and 29, leave out ("date on which the scheme or contract was so approved") and insert ("expiration of the said four months")

Page 38, line 29, after ("notice") insert ("in the prescribed manner")

Page 38, line 33, after ("shareholder") insert ("within fourteen days after the date on which the notice was given")

Page 38, line 34, after ("entitled") insert ("and bound")

Page 38, line 37, at end, insert: ("Provided that, where any such scheme or contract has been so approved at any time before the commencement of this Act, the court may by order, on an application made to it by the transferee company within two months after the commencement of this Act, authorise notice to be given under this section at any time within fourteen days after the making of the order, and this section shall apply accordingly except that the terms on which the shares of the dissenting shareholder are to be acquired shall be such terms as the court may by the order direct instead of the terms provided by the scheme or contract.")

Page 38, line 38, leave out subsection (2) and insert as new subsections: ("(2) Where a notice has been given by the transferee company under this section and the court has not, on an application made by the dissenting shareholder, ordered to the contrary, the transferee company shall, on the expiration of fourteen days from the date on which the notice has been given, or, if an application to the court by the dissenting shareholder is then pending after that application has been disposed of, transmit a copy of the notice to the transferor company and pay or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which by virtue of this section that company is entitled to acquire, and the transferor company shall thereupon register the transferee company as the holder of those shares. (3) Any sums received by the transferor company under this section shall be paid into a separate account, and any such sums and any other consideration so received shall be held by that company on trust for the several persons entitled to the shares in respect of which the said sums or other consideration were respectively received").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 45, as amended, agreed to.

Clause 46 agreed to.

Clause 47 [Enforcement of duty of company, receiver or liquidator to make returns]:

THE EARL OF HALSBURY

My Amendment is merely to leave out "ten" and insert "fourteen."

Amendment moved— Page 39, line 21, leave out ("ten") and insert ("fourteen").—(The Earl of Halsbury.)

On Question, Amendment agreed to.

Clause 47, as amended, agreed to.

Clause 48 [Extension of s. 120 of principal Act to certain reorganisations of share capital, etc.]:

THE LORD CHANCELLOR

This is a drafting Amendment.

Amendment moved— Page 40, line 10, after ("classes") insert ("or by both those methods").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 48, as amended, agreed to.

Clause 49 [Provisions for facilitating reconstruction and amalgamation of companies]:

THE LORD CHANCELLOR moved, after subsection (2), to insert:— (3) Where an order is made under this section every company in relation to which the order is made shall cause an office copy thereof to be filed with the registrar of companies within seven days after the making of the order, and if a company makes default in complying with the foregoing provision it shall be liable to a fine not exceeding five pounds for every day during which the default continues, 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 noble and learned Viscount said: This is a mere technicality. Where an order is made by the Court under this clause it is necessary that office copies of the order should be placed on the files kept by the Registrar of Companies.

Amendment moved— Page 41, line 36, at end, insert the new subsection (3).—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 49, as amended, agreed to.

Clauses 50 to 60 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 net 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:

Provided that the creditors may, it they think fit, resolve that all or any of the persons so appointed by the company ought not to be members of the committee of inspection, and if the creditors so resolve, the persons mentioned in the resolution shall not, unless the court otherwise directs, be qualified to net as members of the committee, and on any application to the court finder this provision the court may, if it thinks fit, appoint other persons to act as such members in place of the persons mentioned in the resolution.

THE EARL OF HALSBURY moved to leave out subsection (1). The noble Earl said: Here I am bold enough to move that the whole of subsection (1) be struck out. To begin with it is putting a director in an extraordinary position. It is asking him, when a company is undoubtedly in difficulties, to swear a statutory declaration that the company is in his opinion going to be able to pay its debts in full within six months; but the extraordinary part of this is that if you look at the Wilfrid Greene Report you find that the Report suggests that the law be amended in favour of creditors, and that: it should be made stronger in favour of creditors.

If you look at this section, however, you find that if subsection (1) stands as it is there appears to be a moratorium and the creditors cannot hold a meeting for six months if the directors so desire; and I cannot see why a company going into voluntary liquidation, which after all is something akin to a person making a composition with his creditors, should be entitled to keep its creditors at bay for six months and not allow them to hold meetings, or do anything. That seems to be going straight against the finding of the Wilfrid Greene Report, which was to make the law more in favour of creditors. I beg to mote that subsection (1) be deleted.

Amendment moved— Page 46, line 12, leave out subsection (1).—(The Earl of Halsbury.)

LORD DANESFORT

I should like to support the noble Earl's Amendment. The subsection seems to give a dangerous power to directors. They naturally want the company to go on, and it gives them power to make a statutory declaration saying they have looked into the matter and have formed the opinion that the company will be able to pay its debts in full. Then there is to be what the noble Earl calls a moratorium. I think it is very unfair to creditors that upon the opinion of two directors they are to have their rights, it may be, prejudiced in a way which can never be recovered.

LORD BANBURY OF SOUTHAM

Might not the directors in the six months enter into a business which would result in a loss, and leave a company hitherto solvent at the end insolvent?

THE LORD CHANCELLOR

There is obviously a misunderstanding about this clause. It does not interfere in the least with creditors, or have anything to do with a company going into compulsory liquidation. It is confined entirely to voluntary winding-up and gives a new power to creditors in that event. The Greene Committee said: In order to give creditors mere effective control in voluntary liquidations where the company is or is expected to be unable to pay its debts in full, it should be provided that in all cases where the directors …. do not make a statutory declaration that the company is in their opinion able to pay its debts in full within a period not exceeding six months after the commencement of the liquidation, a meeting of creditors shall be summoned by notice issued at the same time as the notices to the shareholders and they may take control. It is a new provision adding to the existing rights of creditors, that where a company is not believed to be solvent the creditors may intervene. If subsection (1) was struck out the effect would be that Clause 61 would apply to all voluntary liquidations and not, as proposed, to insolvent companies only. If creditors' rights are in danger they can come in now, but this is a new remedy given to them and I think we ought to follow the recommendation of the Committee.

THE EARL OF HALSBURY

I still do not see why, because two directors choose to swear a statutory declaration that in their opinion the company will be able to pay, these things should happen. Observe this. It is quite obvious to anybody who has had any dealings with the Criminal Law that you could never get a conviction for perjury on such a declaration. It will become more or less like the plaintiff's affidavit under Order 14, but it will keep creditors out for six months, and it is an extraordinary thing to call it in favour of the creditors.

EARL RUSSELL

I think the noble Earl opposite has omitted to notice, what no doubt the Lord Chancellor did not think it necessary to tell us—namely, that the creditor's right of compulsory liquidation is still there.

LORD DANESFORT

Before the matter is finally disposed of I hope the Lord Chancellor will consider this point. He says that this clause gives a new right to creditors. That is presumably a proper right, but this subsection (1) says, in effect, that this just and reasonable right given by subsection (2) shall not be exercised if two directors swear that in their opinion the company is solvent. I should be perfectly ready to accept that if the persons to make the declaration were persons other than directors—if, for instance, the Court on proper evidence said that the company was solvent. Then it would be quite reasonable to say that nothing should be done for six months. Otherwise it does not seem reasonable. Perhaps the Lord Chancellor will consider whether there shall be something more than a declaration by two directors before creditors are deprived of their rights.

LORD HUNSDON OF HUNSDON

The Law Society are very anxious I should say that in their opinion this is a very bad clause, because two directors, if dishonourable people, will not have the slightest difficulty in making a declaration. It is true that the Law Society cannot suggest a better one, but this they think is a very bad clause.

LORD BANBURY OF SOUTHAM

I am not convinced by the arguments of the Lord Chancellor. I do not see why in a company having more than two directors only two can make the declaration. Does it mean that two directors alone without authority from the remaining four, may make this declaration and so stop the winding-up of the company, which the other directors and the shareholders are all anxious to carry out? It may be that those two particular directors have some reason for doing this. My noble friend Lord Hunsdon says it is quite possible it may be a bad reason. I have no acquaintance with the Criminal Law, but apparently Lord Halsbury has not much opinion of the Criminal Law, and thinks it can easily be evaded by a printed form which is apparently applicable to every question. In these circumstances I think this clause requires a little further consideration. May I ask the Lord Chancellor whether he would consent to its withdrawal on the understanding that if he finds before the Report stage that it is absolutely necessary to have some clause of this sort it should be restored?

THE EARL OF HALSBURY

In answer to the noble Earl opposite I am quite aware of the powers of the Court under a compulsory winding-up order, but if the noble Earl will look at the Report of the Greene Commission he will see that the Greene Commission was dealing with the question of voluntary winding-up, and it was on that point that they recommended that the powers of the creditors should be strengthened. I have no doubt that he, like everybody on the Committee was well aware of the powers of winding-up, but he was not dealing with that, and the Committee thought proper to report, with regard to voluntary winding-up, that the powers and rights of creditors should be looked after and their powers strengthened. Therefore it seems to me no, answer to say that this is perfectly true, but it does not seem to work very well in a voluntary winding-up.

EARL RUSSELL

I only drew attention to that because the noble Earl said creditors were being deprived of their rights and were being kept at bay. The Report referred to it to show that if creditors were under any apprehension they could not be kept at bay. As I understand this clause, it gives the creditors the new right of nominating a liquidator in a voluntary winding-up That is, I understand, a new right, and the only effect of the first provision is that if the directors of a company are found to be either brave enough or unscrupulous enough to make the statutory declaration asked for, then they do not get this right of nominating the liquidator, but if they are still afraid they still have the remedy of compulsory liquidation. That is how I understand it.

THE LORD CHANCELLOR

I certainly could not agree to hamper in this way every voluntary liquidation. Really, if the Amendment is accepted voluntary liquidation would come to an end, and that is not the object of the Committee or of the Bill Certainly I will accept the proposal of the noble Lord, Lord Banbury, and, if this is withdrawn, I will see whether I can in any way find a better plan.

THE EARL OF HALSBURY

Of course, I accept that at once.

LORD BANBURY OF SOUTHAM

At any rate, it should be all the directors, and not two.

THE LORD CHANCELLOR

Well, it says at a board meeting.

Amendment, by leave, withdrawn.

THE EARL OF HALSBURY moved, in subsection (6), immediately before the proviso, to insert "not exceeding five in number." The noble Earl said: I understand the Lord Chancellor has accepted that.

Amendment moved— Page 47, line 33, at end insert the said words.—(The Earl of Halsbury.)

On Question, Amendment agreed to.

Clause 61, as amended, agreed to.

Clause 62 [Disclaimer of onerous property:]

THE LORD CHANCELLOR

The next Amendments are drafting.

Amendments moved—

Page 50, lines 14 and 15, leave out ("he may disclaim such property") and insert ("the power under this section of disclaiming the property may be exercised")

Page 50, line 43, leave out ("he") and insert ("the company").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 62, as amended, agreed to.

Clause 63 [Restriction of rights of creditor in execution, or attachment:]

THE LORD CHANCELLOR

This is another drafting Amendment.

Amendment moved—

Page 52, line 40, at end insert: ("(3) In this section and the next following section of this Act the expression 'goods' includes all chattels personal, and the expression 'sheriff' includes any officer charged with the execution of a writ or other process").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 63, as amended, agreed to.

Clauses 64 to 66 agreed to.

Clause 67:

Offences by officers of companies in liquidation.

67.—(1) If any person, being the past or present officer of a company which at the time of the commission of the offence is being wound up, whether by the court or voluntarily, or is subsequently ordered to be wound up by the court or passes a resolution under Section one hundred and eighty-two of the principal Act authorising the company to be wound up voluntarily— (c) does not deliver up to the liquidator, or as he directs, all books, documents, papers, and writings in his custody or under his control relating to the property or affairs of the company; or (m) has within twelve months next before the commencement of the winding-up or at any time thereafter, by any false representation or other fraud, obtained any property for or on behalf of the company on credit and not paid for the same; or

(2) Where any person pawns, pledges or disposes of any property in circumstances which amount to a misdemeanour under paragraph (o) of subsection (1) of this section, every person who takes in pawn or pledge or otherwise receives the property knowing it to be pawned, pledged, or disposed of in such circumstances as aforesaid shall be guilty of a misdemeanour, and on conviction thereof liable to be punished in the same way as if he had received the property knowing it to have been obtained in circumstances amounting to a misdemeanour.

THE LORD CHANCELLOR

Another drafting Amendment.

Amendment moved— Page 54, line 23, leave out ("the") and insert ("a").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE EARL OF HALSBURY moved, in subsection (1) (c), to leave out "relating to the property or affairs of the company," and insert "belonging to the company." The noble Earl said: I understand this Amendment is accepted.

Amendment moved— Page 55, lines 4 and 5, leave out ("relating to the property or affairs of the company") and insert the said new words.—(The Earl of Halsbury.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved, in subsection (1) (c), after "company," to insert "and which he is required by law to deliver up." The noble and learned Viscount said: This meets an objection raised to the Bill. The subsection as it stands makes no provision for the possibility of the party in possession of the books having a mortgage or lien on them. I think the Amendment ought to be accepted.

Amendment moved— Page 55, line 5, after ("company") insert the said words.—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE EARL OF HALSBURY moved, in subsection (1) (m), to leave out "any false representation or other." The noble Earl said: The question here is of any false representation. That does not quite say whether it is an innocent false representation or a fraudulent representation, and, as I gathered that fraudulent was meant, I thought it better to leave out these words.

Amendment moved— Page 56, line 12, leave out the said words.—(The Earl of Halsbury.)

THE LORD CHANCELLOR

These are the exact words in the Bankruptcy Act, and it is very undesirable to have a difference between the two Acts.

THE EARL OF HALSBURY

I was not aware of that, and I certainly will withdraw.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR

The next is a drafting Amendment.

Amendment moved— Page 56, lines 14 and 15, leave out ("and not paid for the same") and insert ("which the company does not subsequently pay for").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE EARL OF HALSBURY had given Notice to move, at the end of the clause, to insert: "Provided that nothing in this section shall be deemed to apply to a receiver or to a receiver and manager or to any person who gives advice professionally to the directors of the company." The noble Earl said: This is exactly the same Amendment as I moved in Clause 25, and the Lord Chancellor said he would consider it before the Report stage, if I would withdraw it. If he will give me the same indulgence here I will do the same.

THE LORD CHANCELLOR

I will consider it.

THE LORD CHANCELLOR moved, at the end of the clause, to insert:— (3) For the purposes of this section the expression 'officer' shall include any person occupying the position of a director or in accordance with whose directions or instructions the directors of a company have been accustomed to act.

The noble and learned Viscount said: The object of the Amendment is to make it clear on the face of the Bill that "officer" in subsection (1) includes directors and also those persons occupying the position of a director.

Amendment moved— Page 57, line 16, at end insert the said subsection.—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 67, as amended, agreed to.

Clause 68 agreed to.

Clause 69:

Provisions with respect to fraudulent trading.

69.—(1) If in the course of a winding-up it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court, on the application of the official receiver or the liquidator, or any creditor or contributory of the company, may, if it thinks proper so to do, declare that any of the directors, whether past or present, of the company who were responsible for the management of the said business shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct.

THE LORD CHANCELLOR moved, in subsection (1), to leave out "responsible for the management of the said business," and to insert "knowingly parties to the carrying on of the business in manner aforesaid." The noble and learned Viscount said: The object here is to prevent directors who are not cognisant of a fraud from being made liable under the subsection.

Amendment moved— Page 58, lines 9 and 10, leave out ("responsible for the management of the said business") and insert the said new words.—(The Lord Chancellor.)

LORD DANESFORT

Are not the words proposed to be left out really better? Is not "knowingly parties," etc., rather too vague? If a man is responsible for the management of the business, of course certain consequences follow, but a man who is "knowingly party" to carrying it on is in a very different position.

THE LORD CHANCELLOR

All directors are responsible for the management of a business, and if the clause is not amended a man would be made liable who really had no knowledge of what had been done, and who ought not to be penalised for it. We desire only to penalise those who are "knowingly parties" to the misfeasance.

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next Amendments are drafting.

Amendments moved—

Page 58, line 39, leave out from ("section") to ("every") in line 44.

Page 59, lines 1 and 2, leave out ("or to the obtaining of credit")

Page 59, line 17, leave out ("or") and insert ("on").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 69, as amended, agreed to.

Clause 70 agreed to.

Clause 71:

Prosecution of delinquent directors.

(4) If where any matter is reported or referred to the Director of Public Prosecutions under this section he considers that the case is one in which a prosecution ought to be instituted and, further, that it is desirable in the public interest that the proceedings in the prosecution should be conducted by him, he shall institute proceedings accordingly, and it shall be the duty of the liquidator and of every officer and agent of the company past and present (other than the defendant in the proceedings) to give to him all assistance in connection with the prosecution which he is reasonably able to give.

If any person fails or neglects to give assistance in manner required this subsection the court may, on the application of the Director of Public Prosecutions, direct that person to comply with the requirements of this subsection, and where any such application is made with respect to a liquidator the court may, unless it appears that the failure or neglect to comply was due to the liquidator not having in his hands sufficient assets of the company to enable him so to do, direct that the costs of the application shall be borne by the liquidator personally.

For the purposes of this subsection the expression "agent" in relation to a company shall be deemed to include any banker or solicitor of the company and any person employed by the company as auditor, whether that person is or is not an officer of the company.

(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 in England, and subsection (3) of section thirteen of the Economy (Miscellaneous Provisions) Act, 1926, shall apply accordingly.

Subject to any direction under this subsection all such casts and expenses as aforesaid shall be payable out of the assets of the company in priority to all other liabilities payable thereout.

VISCOUNT BERTIE OF THAME

had given Notice to move, in subsection (4), after "banker," to insert "broker." The noble Viscount said: I think the noble and learned Viscount will agree that this is little more than a drafting Amendment. If he does not agree and does not like it, I will not move.

THE LORD CHANCELLOR

I think it is unnecessary.

LORD HUNSDON OF HUNSDON moved, at the end of subsection (4), to insert "but nothing in this Act shall oblige any solicitor to supply information which would involve a breach of professional privilege." The noble Lord said: This clause deals with delinquent, directors and it directs that every agent of the company shall give to the Director of Public Prosecutions all assistance in connection with the prosecution which he is reasonably able to give. The word "agent" is defined later on as "any banker or solicitor." The Law Society are very sensitive about this matter, not so much in their own interest as in that of their clients. It would be quite a new departure if clients were not to be able to consult their solicitors freely and without fear. This may not be the intention of the Bill. If it is not there would seem to be no harm in saying so. Therefore I propose to add the words which appear on the Paper.

Amendment moved— Page 62, line 21, at end insert the said words.—(Lord Hunsdon of Hunsdon.)

LORD DANESFORT

I would suggest that the words might be accepted because, when you are imposing an obligation upon persons to tell the Court any facts which are relevant to the question under consideration it would not be proper, I think, to force the witness into a breach of professional etiquette if he is a solicitor. No doubt that is not intended. I think proper words ought to be put in to relieve solicitors from having to commit a breach of professional etiquette.

LORD PARMOOR

Are we not dealing here with a criminal matter? Would a privilege arise in a criminal matter?

THE LORD CHANCELLOR

I am in sympathy with the general principle underlying this Amendment but I would like to consider it. It only came into my hands this morning. I would be glad if the noble Lord would put it down on Report.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR moved, after "subsection" in the second paragraph of subsection (5), to insert "and to any mortgages or charges on the assets of the company." The noble and learned Viscount said: This is to prevent the company's liability for costs coming before mortgages or charges on the assets. Of course, they stand first and this is intended to protect them. The next Amendment on the Paper deals with the same matter. I beg to move.

Amendment moved— Page 62, line 31, after ("subsection") insert ("and to any mortgages or charges on the assets of the company").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Amendment moved— Page 62, line 33, leave out ("the assets of the company") and insert ("those assets").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 71, as amended, agreed to.

Clause 72:

Provisions as to liability of directors, etc.

72.—(1) Subject as hereinafter provided, any 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 of 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, in relation to any such provision which is in force at the date of the commencement of this Act, this subsection shall have effect only on the expiration of a period of six months from that date.

(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".

THE LORD CHANCELLOR moved, after subsection (1), to insert and (b) Nothing in this subsection shall operate to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force; and (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.

The noble and learned Viscount said: This is a useful Amendment of an important clause dealing with the liability of directors. It prevents a director from contracting out of his liability under the general law for negligence or breach of duty or breach of trust. As regards such contracts which are in operation when the date of the new Act comes into force, a period of six months grace is given under which the director is still protected. It has been suggested that there is some doubt whether the proviso to subsection (1) as it stands might not conceivably be read as meaning that, while a director is protected for six months against proceedings, yet after the six months has expired he may be proceeded against in respect of some act of negligence committed at any time before. This was certainly not the intention of the Committee, nor would it be equitable. The new paragraph (b) is designed to set, at rest any possible doubt on the matter.

The new paragraph (c) deals with another point. Under the clause as it stands, a director who is perfectly innocent may be proceeded against by some malicious person and must necessarily take, steps to defend himself. It has been suggested that the alteration of the law will, in the absence of some further provision, offer a direct incentive to men of straw, and others, to take proceedings against directors, knowing well that even though the proceedings should fail the director against whom proceedings are taken will be severely damaged in his pocket by having to pay his own costs, the plaintiff having no money with which to pay. Furthermore, a director, though held to be negligent or guilty of some default, may be granted relief by the Court under Section 279 of the Act of 1908 on the ground that he ought fairly to be excused. As the clause stands the director could not be indemnified by his company. It is clearly equitable that he should be so indemnified, and the new paragraph (c) of the present Amendment makes provision for that.

Amendment moved— Page 63, line 4, after ("date") insert the said paragraphs.—(The Lord Chancellor.)

On Question, Amendment agreed to.

LORD HUNSDON OF HUNSDON moved to leave out subsection (2) and insert as a new subsection: (2) Section two hundred and seventy-nine of the principal Act shall be deleted and the following section substituted therefor:— If in any proceeding against a director or person occupying the position of director of the company or against any manager, auditor or officer of a company it appears to the court hearing the case that the director, person, manager, auditor or officer is or may be liable for misfeasance, omission, negligence or breach of trust but has acted honestly, that court may relieve him either wholly or partly from his liability on such terms as the court may think proper, and any such director, person, manager, auditor or officer may in any circumstances in which he considers that he may have become liable for misfeasance, omission, negligence or breach of trust himself apply to the court for relief under this section. In exercising its discretion under this section the court shall have regard to all material circumstances, including in particular any arrangement or understanding as to the nature or scope of the services to be rendered by the director, person, manager, auditor or officer, whether made before or after his appointment, and the magnitude and nature of the business carried on by the company, and also that directors are appointed to supervise matters of general policy, and not the detailed working out of that policy.

The noble Lord said: This, in the opinion of the Law Society, is a very important and necessary Amendment. Section 279 of the principal Act, which it is desired to amend, gives discretion to the Court in certain cases to relieve the directors and officers of a company from liability. Mr. Harold Brown, of Messrs. Linklaters, the well known firm of solicitors, whose authority on Company Law and procedure is second to none in the City of London, was a member of the Committee on whose Report this Bill is based. Mr. Brown appended to the Report the following note:— I have signed the Report, but if it is to be made illegal for directors and auditors and other officers of the company to contract out of their Common Law liability for negligence, in my opinion Section 279 of the Act should be altered so as to give the Court a wider discretion than it has under that section to relieve directors from liability where they have acted honestly. This Amendment substitutes a new section for Section 279 and is designed to carry out Mr. Brown's recommendation and indeed was, I believe, drafted by him except for the last sentence, to which I will refer later.

The amended clause is mainly designed to extend the exercise of discretion by the Court and reads as follows:— If in any proceeding against a director or person occupying the position of director of the company or against any manager, auditor or officer of a company it appears to the court hearing the case that the director, person, manager, auditor or officer is or may be liable for misfeasance, omission, negligence or breach of trust but has acted honestly, that court may relieve him either wholly or partly from his liability on such terms as the court may think proper—— Except that the words "misfeasance" and "omission" are substituted for the words "default and breach of duty" and the words "and reasonable" are omitted the Amendment follows the Act up to this point. The remainder of the Amendment, which is new matter, runs as follows:— And any such director, person, manager, auditor or officer may in any circumstances in which he considers that he may have become liable for misfeasance, omission, negligence or breach of trust himself apply to the court for relief under this section. In exercising its discretion under this section the court shall have regard to all material circumstances, including in particular any arrangement or understanding as to the nature or scope of the services to be rendered by the director, person, manager, auditor or officer, whether made before or after his appointment, and the magnitude and nature of the business carried on by the company, and also that directors are appointed to supervise matters of general policy, and not the detailed working out of that policy. Thus the Amendment gives power to any director or officer of a company to clear himself before any charge is made against him so that he shall not lie under any imputation if the company gets into difficulties, even though no direct charge has been brought against him.

The Amendment instructs the Court to have regard to all material circumstances connected with the appointment of a director or other official, such as expert knowledge of some part of the company's business or the value of his connection to the company; and to have regard to the magnitude and nature of the business which may be such that it would be impossible for any one director to be familiar with every part of it; and finally that the Court is to have regard to the fact that directors are appointed to supervise matters of general policy and not the detailed working out of that policy. This last instruction is worded and approved by the Law Society, but the suggestion was mine. I observe that these last words do not appear in the Amendment of my noble friend the Earl of Halsbury but that otherwise his Amendment follows exactly the lines of mine. I may perhaps be allowed to explain that in reading this Bill it appeared to me that the draughtsman had somewhat misconceived the duty of directors. It is not their business to attend to all the technical matters mentioned in the Bill. These details are part of the duty of the secretary and officials, and it is the duty of the directors to change the secretary and officials if these details are not attended to properly.

Speaking of the Amendment generally the Law Society feel that the new Bill will impose upon directors and officers a large number of new liabilities which are not very well known or defined; and though under the Bill the Court may grant relief if it is satisfied they have acted honestly and reasonably, acts which may have seemed reasonable at the time to a director who had to come to a rapid decision in the stress of business may seem unreasonable in the light of after events. Therefore, the Law Society think that the words "and reasonably" should be omitted from the Bill so as to enable the Court to consider the granting of relief so long as the director has acted honestly. The Law Society also are opposed to the proposition that directors should not be allowed to contract out of their liabilities unless the very widest power is given to the Court to excuse them if it should see fit to do so. My fear is that in our desire to punish dishonesty we may, if this Amendment is not passed, discourage respectable people from joining the boards of companies and that, in the result, the loss to the community may be greater than the gain.

Amendment moved— Page 63, lines 5 to 15, leave out subsection (2) and insert the said new subsection.—(Lord Hunsdon of Hunsdon.)

THE EARL OF HALSBURY

May I say one word following the noble Lord who has just sat down? It is hardly by coincidence that the next Amendment of mine is word for word the same, because they were taken clearly from the same source. All I desire to say is that the chartered accountants are in entire agreement with the Law Society in this matter. They feel that the penalties put on directors by this Bill are so serious that every indication ought to be given to the Court that relief can and ought to be given to a director who has honestly carried out his business, even though he may find himself in a difficulty. It ought to be made quite clear to the Court that the power to give relief is properly to be exercised and a general idea should be given to the Court as to how its discretion should be used.

LORD GAINFORD

I have been asked to put down Amendments dealing with this subject from the point of view of the manufacturing companies. The speech which has just been delivered very largely expresses their views. On their behalf I propose to put down Amendments to this clause for consideration on Report stage if the Lord Chancellor is not prepared to accept the Amendment which is now moved. Of course, if the Lord Chancellor accepts this Amendment, the Amendments which I propose to put on the Paper may possibly need redrafting, but, as I have not been able to give your Lordships notice of the particular Amendments, I propose to put them down on Report.

LORD DANESFORT

May I say quite briefly that I hope the Lord Chancellor will not accept this Amendment, at any rate as it appear on the Paper. There may be some modification required in the clause, but I think the Amendment goes a great deal too far. To my mind Clause 72 is one of the most important clauses in the Bill. While I have no desire to persecute or to punish directors unduly, I have a certain amount of regard for shareholders. I remember a very remarkable case tried not long ago in one of the Chancery Courts. A claim against the directors for misfeasance was brought by the shareholders. I think it was in a winding-up case but I am not sure about that. It was undoubtedly proved that the directors had been guilty of breach of duty and negligence, in other words of misfeasance. Their defence was that by a contract with the shareholders they were exempted from all liability for misfeasance such as negligence. When they were asked: "How did you make this contract with the shareholders?" their reply was: "The contract is in the articles."

Just think what that means. When a shareholder takes shares in a company it is very unusual indeed, so far as my experience goes, for a man to say: "Before I buy those shares send me a copy of the articles and let me send those articles to my lawyer and see whether there is anything in them which would prejudice my position." Of course he does not do that. The consequence is that when there is a case of this kind and directors are exempt from action for misfeasance because of something in the articles, not once in a thousand times, or perhaps ten thousand times, do the shareholders know anything about it. This clause has been properly introduced into the Bill to prevent directors contracting out of liability for misfeasance. The clause, as it stands, in certain cases exempts directors from the result of misfeasance and personally I think the clause goes far enough. I am inclined to think that the clause proposed by my noble friend Lord Hunsdon goes too far. It may be that the clause in the Bill will require some small Amendment, but I should be glad to hear that the Lord Chancellor will not accept this Amendment, because it goes much too far.

THE LORD CHANCELLOR

I shall be glad to consider any Amendment which my noble friend Lord Gainford may put down before Report, but I cannot accept this Amendment as it stands. The matter is rather difficult to follow because the two subsections, the one in the Bill and the one now proposed, are framed in different ways, but the short effect of the Amendment is that, while the existing clause gives power to the Court to grant relief where a director acted honestly and reasonably, my noble friend proposes to leave out the words "and reasonably." Therefore, even if a director acted most unreasonably, if he acted honestly he may get off. We do not think that is right. He asks for relief, but the Court ought to consider, not only whether he is an honest man, but whether he has been reasonable in his action. The second part of the Amendment provides that a director may apply for relief. I am rather inclined towards that proposal, and, if the noble Lord will put down an Amendment dealing with the matter before the Report stage, I will consider it. The third part of the Amendment is contained in the long sentence at the end of it. As the Bill stands, the Court may, if the director has acted reasonably and honestly, give relief, and the Bill adds that the Court may take into account special circumstances connected with the directorship. That means that, if a man is a special expert on one matter and is made a director in order to see to a certain part of the business, that shall be taken into account.

But the noble Lord's Amendment provides for all kinds of other things. He says that the Court is to have regard "to all material circumstances." Of course they would do that without these words. He goes on to say— including in particular any arrangement or understanding as to the nature and scope of the services to be rendered by the director, person, manager, auditor or officer, whether made before or after his appointment"— that, of course, enables them to protect him after his appointment when they see the trouble coming— and the magnitude and nature of the business carried on by the company"— the City Equitable carried on a very large business— and also that directors are appointed to supervise matters of general policy, and not the detailed working of that policy. That is the excuse that I have often heard made in Court and elsewhere for negligent directors. I cannot accept these words, and I hope that the noble and learned Lord will not press this Amendment, although I will, of course, consider any further propositions he has to make.

THE EARL OF HALSBURY

Although my memory may be at fault I believe that the words used in the Amendment are the same as those used in the Report of the Committee. It was intended that when relief was to be given it should be considered whether the director was appointed for some special reason, and this point was specifically recommended to be taken into consideration when it was to be considered whether or not relief should be given.

THE LORD CHANCELLOR

I have the Report here, and the Bill follows the exact words of the recommendations.

On Question, Amendment negatived.

Clause 72, as amended, agreed to.

Clause 73:

Accounts to contain particulars as to loans to directors, etc.

73.—(1) The accounts which in pursuance of this Act are annually to be laid before 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

Provided that the foregoing provision shall not apply— (ii) to a loan made by the company to any employee of the company if the loan does not exceed two thousand pounds and is certified by the directors of the company to have been made in accordance with any practice adopted or about to be adopted by the company with respect to loans to its employees.

VISCOUNT BERTIE OF THAME moved, in subsection (1) (a), to leave out "aggregate" and, after "loans," to insert "the security given therefor and the rate of interest paid thereon." The noble Viscount said: I want your Lordships to bear in mind that directors are in some sense trustees, and the ordinary trustee is not allowed to borrow his trust money, however good the security may appear to be. I think it doubtful whether directors ought to be allowed to borrow the company's money at all, but if they do I submit that the fullest information should be given the shareholders of all such transactions.

Amendment moved— Page 63, line 19, leave out ("aggregate") and after ("loans") insert ("the security given therefor and the rate of interest paid thereon").—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

I cannot accept the Amendment quite as it stands, but I have some sympathy with what the noble Viscount has said. The Committee recommended that only the aggregate amount of the loans was to be shown in the accounts, but I see no very strong objection to stating the details. Apart from the special case of banks, the practice of borrowing by directors from their companies is one to be discouraged. I do not like the words "security given therefor and the rate of interest paid thereon," because I think they would encumber the accounts too much. I should like to consider the terms of the clause before Report and either ask ray noble friend to put down an Amendment again or else do so myself.

VISCOUNT BERTIE OF THAME

I am much obliged to the noble and learned Viscount, but I must say I am disappointed that he does not see his way to have inserted the security given and interest, paid, as I think it is most important they should be.

Amendment, by leave, withdrawn.

THE EARL OF HALSBURY moved, at the end of subsection (1), to insert "or to the supply of goods by the company to any director, officer or employee in the ordinary course of business." The noble Earl said: This is a very small point, but it is the custom in industrial concerns to supply goods from a private company to directors and others in the ordinary course of business.

Amendment moved— Page 63, line 44, after ("employees") insert the said words.—(The Earl of Halsbury.)

THE LORD CHANCELLOR

I am prepared to accept that.

On Question, Amendment agreed to.

VISCOUNT BERTIE OF THAME had given Notice to move to insert the following new subsection:— () If a company makes default in complying with the provisions of this clause 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 not exceeding one hundred pounds. The noble Viscount said: This is merely a penalty provision. But I understand from the Lord Chancellor that it is rendered unnecessary by subsection (2), and do not therefore press it.

THE LORD CHANCELLOR

My Amendment to this clause is drafting.

Amendment moved— Page 64, line 4, leave out ("to include therein") and insert ("either to include in their report on the balance-sheet of the company or to insert as a note on the accounts").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 73, as amended, 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 in writing by members of the company entitled to not less than one-quarter of the aggregate number of the votes to which all the members of the company are together entitled, 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 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, including in the case of a person being by virtue of the nomination, whether direct or indirect, of the company a director of any other company 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 person fails to comply with the requirements of this section he shall be liable to a fine of fifty pounds.

EARL RUSSELL

I have certain observations to make on this clause, and I think it might be convenient to the noble and learned Viscount if I make them now, so that he can reply when he moves his first Amendment. This is rather a curious clause. I suppose it is a compromise clause. It provides that in certain circumstances a certain amount, but not the whole, of the information shall be given as to the remuneration received by the directors. I say not the whole information, because it can only be the aggregate amount that is received. Apparently it is not to be set out in the balance sheet what director receives what amount, but only the total amount, which can probably to some extent be gathered from the balance sheet already. Before this can be done a demand has to be made in writing by one quarter of the voting power of the company. That is a very large proportion, and I rather wonder whether it is worth while including this clause in the Bill. It would only be in a case where everybody was at loggerheads in a company that is on its last legs that a hostile demand of that sort, as it would obviously be, would be made by so large a proportion as one quarter of the voting strength.

The actual remuneration and emoluments of each director could surely be set out quite simply and straightforwardly in the accounts of the company. After all, it is the shareholders' money that he is receiving, and it may interest them, and one knows that it often does interest them, to know how much he is receiving. I know a good many cases of very large sums being received by directors and received by directors of companies unknown to the shareholders. They cannot ascertain it even if they enquire at the general meetings. They are generally put off and not supported by the rest of the meeting. If you are going to leave it to be demanded by one quarter of the members by voting rights you will not get it anyhow. I am not going to move an Amendment now or on Report, but I ask the Lord Chancellor to consider between now and the Report stage whether it is worth while keeping the clause in the Bill in its present form. It seems to be a sort of camouflaged compromise, and I think you should have put in that every report should state fully the directors' remuneration.

LORD GAINFORD

I have handed in an Amendment which I hope will meet the general position and be satisfactory to the Government. My proposal is that you shall omit all the words after "The directors of a company shall" down to "together entitled," and substitute "if required by special resolution of the company so to do." It seems to me to be rather contrary to the ordinary method adopted, and to change the particular proportion of the voting power of the company for a special purpose seems unnecessary. The articles of association are the rules which guide the company, and in every company a special resolution of the company can be passed, so as to meet cases of this kind. I believe that is the right way. I do not know whether the Lord Chancellor is in a position to accept my Amendment at the present moment, but if he would prefer that it should be considered on Report I am prepared to move it then.

THE LORD CHANCELLOR moved to leave out, after the second "company," in subsection (1), the words "entitled to not less than one quarter of the aggregate number of votes to which all the members of the company are together entitled," and to insert "representing at the date of the demand not less than one quarter of the total voting rights of all the members of the company." The noble and learned Viscount said: I cannot prevent the noble Lord from putting his Amendment down on Report, but I do not want to hold out any hope that I can accept an Amendment in the form which he has indicated. It is rather strange that while the noble Earl opposite thinks 25 per cent. too many Lord Gainford would require a three-quarters majority. The effect of that would, I think, be to nullify the clause altogether, because such a majority would be extremely hard to find. This is a compromise, but I object to calling it "camouflaged." It is a perfectly plain and intelligible compromise. The Committee said there was a demand for more information about the remuneration of directors, but on the other hand they did not want any shareholder, or a small number of shareholders, to have the right to require such information to be given, because the disclosure of the remuneration paid, for instance, to managing directors, or by way of commission, or in some other way, might be harmful to the company, since cases not infrequently occur of attempts by competitors to induce a managing director to change his employment by offers of higher remuneration, and this practice would no doubt tend to increase if companies were compelled to disclose as a matter of course the remuneration which they pay. The Committee therefore say:— We consider that shareholders representing a substantial portion of the voting power (not the share-holding) should have the right to requisition a certain statement of the remuneration, etc., paid to directors, including managing directors. They suggested this proportion should be 25 per cent., and that is the figure we have adopted. I think it is not unfair that the information should be given on demand. The clause prevents the demand being made by a small minority of the voting power, but compels information to be given when a quarter of the shareholders by voting power demand it. The Committee thought that was a fair compromise, and there is nothing secret or camouflaged about it.

Amendment moved— Page 64, line 9, leave out from ("company") to the end of line 11 and insert the said new words.—(The Lord Chancellor.)

EARL RUSSELL

Will the noble and learned Viscount deal with the word "aggregate" in the clause?

THE LORD CHANCELLOR

That is what the Committee suggested should be required—namely, to furnish the total amount, without the details.

EARL RUSSELL

Why?

THE LORD CHANCELLOR

It would be sufficient, they say. I suppose it is to limit the disclosure of the private affairs of the company.

On Question, Amendment agreed to.

THE EARL OF HALSBURY

My next Amendment is, I think, only a drafting Amendment. It is to insert, after "certified as correct," the words "or with such qualifications as may be necessary."

Amendment moved— Page 64, line 14, after ("correct") insert ("or with such qualifications as may be necessary").—(The Earl of Halsbury.)

THE LORD CHANCELLOR

I agree.

On Question, Amendment agreed to.

Amendments moved—

Page 64, line 21, leave out ("including in the case") and insert ("and there shall in respect")

Page 64, line 24, after ("company") ("be included in the said aggregate amount").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Amendment moved— Page 64, line 33, leave out ("person") and insert ("director").—(The Earl of Halsbury.)

On Question, Amendment agreed to.

Clause 74, as amended, agreed to.

Clause 75:

Provisions as to assignment of office by directors.

75. If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company.

THE EARL OF HALSBURY moved, after "company," where that word first occurs, to insert "other than a private com- pany." The noble Earl said: This is not a drafting Amendment, but raises the question of the assignment of office by a director. In private companies it is done when a father is a director and he leaves by will the direction of the company to one particular son. The suggestion which I am making is that in the case of a private company there can be no real objection to the assignment of office by a director, although in the case of a public company there is.

Amendment moved— Page 64, line 36, after ("company") insert ("other than a private company").—(The Earl of Halsbury.)

THE LORD CHANCELLOR

This is a departure from the Committee's recommendation and I hesitate to accept the Amendment. The recommendation of the Committee is quite general, and I would rather not detract from it.

Amendment, by leave, withdrawn.

Clause 75 agreed to.

Clause 76 [Provisions as to undischarged bankrupts acting as directors]:

Amendment moved— Page 65, line 3, after ("company") insert ("including an unregistered company and a company incorporated outside Great Britain which has an established place of business within Great Britain").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 76, as amended, agreed to.

Clause 77 [Companies, &c., disqualified for acting as liquidator, auditor or receiver of a company]:

Amendments moved—

Page 65, line 20, leave out ("person other than an individual") and insert ("body corporate (but not including a firm in Scotland)")

Page 65, line 26, leave out ("person who") and insert ("body corporate which").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 77, as amended, 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 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—

1. (a) the company in general meeting may remove any such auditors and appoint others in their place; and
2. (b) if the directors fail to exercise their powers under this subsection, the company in general meeting may appoint the first auditors, and thereupon the said powers of the directors shall cease."

THE EARL OF HALSBURY moved, in paragraph (a) of the proviso, after "in," where that word first occurs, to insert "special," and after "meeting" to insert "convened for the purpose of which the auditors shall have due notice." The noble Earl said: This is rather an important Amendment, because it is provided in the clause that the company in general meeting may remove the auditors and appoint others in their place. Now the statutory meeting is a general meeting of the company, and before that the auditors who have been used largely by the promoters of the company to get the facts and also to certify in the prospectus may by a snap vote at the meeting be removed and replaced by totally different auditors. My Amendment proposes that that can only be done by special meeting of which the auditors shall have due notice. One cannot quite see that that can be an unreasonable Amendment.

Amendment moved— Page 66, line 2, after ("in") insert ("special"), and after ("meeting") insert ("convened for the purpose of which the auditors shall have due notice.")—(The Earl of Halsbury.)

THE LORD CHANCELLOR

I am prepared to accept this in principle, but I would like to consider the words.

Amendment, by leave, withdrawn.

Clause 78 agreed to.

Clause 79 agreed to.

Clause 80:

Amendment of s. 274 of principal Act.

(5) Subsection (4) of the said section shall apply to every company incorporated abroad which establishes a place of business in Great Britain whether or not the company uses the word "Limited" as part of its name, and where the liability of the members of a company to which the said section applies is limited, notice of that fact shall be stated in legible characters in every prospectus inviting subscriptions for its shares or debentures in Great Britain, in all bill-heads, letter paper, notices, advertisements and other official publications of the company in Great Britain, and shall be affixed on every place where it carries on its business.

THE LORD CHANCELLOR

There are a number of drafting Amendments here.

Amendments moved—

Page 66, line 43, after ("companies") insert ("so incorporated")

Page 67, line 4, leave out ("established") and insert ("incorporated")

Page 67, line 32, leave out ("discontinues a") and insert ("ceases to have any")

Page 67, line 36, leave out ("abroad which establishes a") and insert ("outside Great Britain which has an established").—(The Lord Chancellor.)

On Question, Amendments agreed to.

VISCOUNT BERTIE OF THAME moved, in subsection (5), after "limited," where that word secondly occurs, to insert "or is limited subject to any further statutory liability." The noble Viscount said: I do not think it is generally known in this country, not even by some well-known solicitors in the City of London, that in the case of bank and, I think, insurance shares in the Dominions there is what is called a statutory liability attached to the shares beyond their face value in case of liquidation. In Canada it amounts to 100 per cent. and in New Zealand 10 per cent. I think that this liability should be disclosed.

Amendment moved— Page 67, line 40, after ("limited") insert the said words.—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

I am afraid I could not accept this. To require a person to state all statutory liabilities is putting a tremendous burden upon him. He may not know what Statutes bind him, especially in foreign countries, and this relates to companies outside Great Britain. The Amendment is also too wide. It requires notice in regard to all sorts of documents.

Amendment, by leave, withdrawn.

Clause 80, as amended, agreed to.

Clause 81 [Further provisions as to companies incorporated abroad]:

THE LORD CHANCELLOR

The first Amendment here is drafting, and the second technical.

Amendments moved—

Page 68, line 18, leave out subsection (2) find insert: ("(2) Every company to which the said Section two hundred and seventy-four applies shall once in every year file with the registrar a balance sheet in such form, and containing such particulars and including such documents, as under the provisions of this Act it would if it had been a company within the meaning of the principal Act, have been required to make out and lay before the company in general meeting.")

Page 68, line 40, after ("companies") insert ("(other than provisions requiring the payment of a fee in respect of the registration of a company)").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 81, as amended, agreed to.

Clause 82 agreed to.

Clause 83 [Exemption of certain documents from stamp duty on winding-up of companies]:

THE LORD CHANCELLOR

The next Amendments are drafting.

Amendments moved—

Page 69, line 11, leave out ("either")

Page 69, line 12, leave out from ("or") to ("section") in line 15 and insert ("is being wound up voluntarily and the winding-up is one to which the provisions of Section sixty-one of this Act apply").(The Lord Chancellor.)

On Question, Amendments agreed to.

Clause 83, as amended, agreed to.

Clause 84 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 any member of the public or otherwise by oral solicitation of any kind or in any place to invite or endeavour to induce any member of the public to subscribe for or purchase shares.

(4) The said statement shall contain particulars with respect to the following matters— (b) the date on which and the country in which the company was incorporated, and the, address of its registered or principal office in Great Britain; (f) the names and addresses of the directors of the company and of any person occupying the position of director of the company;

(5) If any person acts, or incites, causes or procures any person to act, in contravention of this section he shall be 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 LORD CHANCELLOR moved, in subsection (1), to insert "the public or" before "any member of the public" and leave out the remaining words of the subsection. The noble and learned Viscount said: This is an important clause. It is the clause which prohibits a person from going from house to house offering shares for subscription or purchase to members of the public or otherwise by solicitation. There has been criticism on the clause, and I want to limit it in any reasonable manner. What I am proposing in this Amendment is to insert "the public" so that it shall cover offers to the public or any member of the public, but to leave out the words about "oral solicitation." I think that would limit the clause to the public or members of the public, and so prevent the criticism based upon the concluding words, which have. I knew, created some anxiety. I hope that these two changes together will put the clause into a form in which it can be accepted.

Amendment moved— Page 69, line 34, after ("to") insert ("the public or") and leave out from ("public") to the end of line 37.—(The Lord Chancellor.)

LORD HARRIS

Does "house to house" mean "business house" to business house," or merely the domestic house to house?

THE LORD CHANCELLOR

I think it means both. I think most people understand what going from house to house means. I am limiting the clause by this Amendment.

LORD HARRIS

The criticism, I fear, is that this is a very negligently-drawn clause, and that there ought to be a definition of the words "house to house," Because they might mean going from business house to business house. I do not know to what extent the omission of the words as proposed by the noble and learned Viscount affects the whole provision. I hope it is sufficient to allay the anxiety of those who think that this is a very dangerous clause, and would involve anyone in conversation with a friend in doing something criminal, without any intention whatever of doing so. I only say that that is the criticism that I have received. Of course, I will wait and see what is the effect of the Lord Chancellor's Amendment, and see whether it is necessary to bring up any proposal on the point.

THE EARL OF HALSBURY

The chartered accountants have considered this section, and in their view the words which the noble and learned Viscount is omitting are exactly the words they wanted to omit, and certainly they would be in complete agreement with this Amendment.

On Question, Amendment agreed to.

VISCOUNT BERTIE OF THAME moved, in subsection (4), after paragraph (b), to insert the following new paragraph:— () Where the offer or the name of the company states or implies that the company is the owner, lessee, concessionary or licensee of or formed to work mines, oil-bearing lands, timber, rubber, tea or other estates, short particulars of any such property in which the company is interested and of the nature of the company's interest therein and a statement that the opinion of a lawyer practising in the country in which the same is situate has been obtained approving of the title to such interest and the name, address and qualifications of such lawyer and a place in Great Britain at which such opinion or a copy thereof can be inspected.")

The noble Viscount said: This is rather an important Amendment. It often happens that companies formed for the purposes enumerated in this Amendment, and whose shares are hawked about, could not show a good title to the property or interest which they are supposed to possess. This paragraph would not apply to any company which acquires property for the purpose of carrying on a trade. If this paragraph is accepted I will, on Report, move a similar Amendment to cover prospectuses.

Amendment moved— Page 70, line 30, at end insert the said new paragraph.—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

I could not accept this. It means that every offer of the shares of a mining company, to put it quite shortly, must contain the particulars of the property and a statement that the opinion of a lawyer practising in the country in which the mine is situated has been obtained proving the title, and a place in Great Britain where the opinion can be inspected. If this were carried out a perfectly reputable outside broker could not possibly offer shares for sale or transfer, because no such broker could obtain the particulars and information required by the Amendment. I am afraid this would put too great a burden upon persons who deal in shares. I could not agree to it.

VISCOUNT BERTIE OF THAME

In these circumstances I will not press it.

Amendment, by leave, withdrawn.

VISCOUNT BERTIE OF THAME moved, in subsection (4) (f), after "names", to insert "occupation". The noble Viscount said: I think the occupation should be in.

Amendment moved— Page 71, line 6, after ("names") insert ("occupation").—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

The Committee considered very carefully what information should be given, and they recommended that it should be confined to the names and addresses, and one is aware of the difficulty sometimes in knowing the occupation of all the persons who are directors, or in whom shares are vested. I would rather the noble Viscount did not press this.

VISCOUNT BERTIE OF THAME

I will not press it.

Amendment, by leave, withdrawn.

VISCOUNT BERTIE OF THAME moved, at the end of subsection (5), to insert "and where such person is not a British subject he may be recommended for deportation as an undesirable alien." The noble Viscount said: I do not think this Amendment requires any argument. I feel sure the majority of your Lordships will agree that it is desirable. I beg to move.

Amendment moved— Page 71, line 36, at end insert the said words.—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

The position, I think, is this. The clause provides that the penalty for contravention of the section shall be on a first offence a fine not exceeding £200, and on any subsequent offence, imprisonment not exceeding twelve months or a fine not exceeding £500. Where an alien is convicted of an offence which carries imprisonment he can already be deported under the Aliens Act. Therefore for that purpose no legislation is needed. But the effect of this Amendment is that he may be deported where he is only fined for a first offence. I do not in principle object to that, but I think the right place to make that provision is in the Aliens Order. That, I agree, could not be done as the Bill stands without Amendment, but I think that if, on Report, we were to amend the clause by authorising imprisonment even for a first offence then the Aliens Order would apply. I shall be glad if the noble Lord will consider the matter and see a representative of the Home Office. I have no doubt it will be possible to agree. In principle I am with him.

Amendment, by leave, withdrawn.

Amendment moved— Page 72, line 3, leave out ("this") and insert ("the principal").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 85, as amended, agreed to.

Clauses 86 to 101 agreed to.

VISCOUNT BERTIE OF THAME moved, after Clause 101, to insert the following new clause:— It shall be unlawful for any person knowingly to publish or directly or indirectly cause to be published a statement affirming or implying that any stock, shares, or securities offered for subscription have been over-subscribed if any such stock, shares or securities has been allotted to an underwriter of any such stock, shares or securities, or any nominee of such underwriter otherwise than pursuant to a firm and unconditional application lodged with the company or its agent not more than two hours after the opening of the subscription list. If any person acts or incites, causes or procures any person to act in contravention of this section he shall be liable to a fine not exceeding one hundred pounds.

The noble Viscount said: the practice has grown up, in cases in which the public do not apply for securities in a public issue which has been underwritten, for the underwriters to apply either by themselves or through nominees for the amount, or perhaps a little more than the amount, which they are informed they will have to take up in any case owing to the abstention of the public from the issue. This enables the interested parties to issue what is really a fictitious statement to the Press that the issue has either been fully or over-subscribed. Tiffs is done to make the public believe that, after all, they have been foolish not to put money into the concern and it enables the underwriters to unload their shares as soon as dealings commence. This new clause would not refuse genuine applications by underwriters nor place them in a less favourable position than the public, because the underwriters know the merits or demerits of the issue certainly sooner and probably better than the public. It would, therefore, be no hardship for them to have to apply within two hours after the opening of the subscription list. I beg to move.

Amendment moved— Page 78, line 25, at end insert the said new clause.—(Viscount Bertie of Thame.)

THE LORD CHANCELLOR

I would like to accept the noble Viscount's Amendment, as I have accepted others, but I do not think it would be effective when these enormous sums are in question. To impose a fine of £100 is not going to deter any fraudulent person from making some mis-statements as to what has happened. If there is real fraud a man can be got at in other ways, including putting the Criminal Law into operation. I am told it is very doubtful whether this clause would have the desired effect and that in fact very few cases would be dealt with under it. This is a new proposal not in the Committee's Report and I rather deprecate accepting it.

VISCOUNT BERTIE OF THAME

I will not persist in it at this late stage.

Amendment, by leave, withdrawn.

Remaining clauses agreed to.

First Schedule:

THE LORD CHANCELLOR

All my Amendments in the Schedules are drafting.

Amendments moved—

Page 83, line 14, at end insert:— ("Amount (if any) of Shares of £ each." above capital which consists of redeemable preference shares. The date on or before which these shares are, or are liable to be redeemed.") …

Page 83, leave out lines 25 to 30.—(The Lord Chancellor.)

On Questions, Amendments agreed to.

First Schedule, as amended, agreed to.

Second Schedule:

Amendments moved—

Page 87, line 11, leave out ("(2)") and insert ("(1)").

Page 89, line 27, leave out from ("the") to the end of line 29 and insert ("words 'the company' there shall be inserted the words 'and all floating charges on the undertaking or any property of the company'").

Page 91, line 19, after ("which") insert ("paragraph (b) or") and leave out ("or paragraph (d)")

Page 91, line 38, leave out ("England") and insert ("Scotland")

Page 91, line 40, leave out ("Scotland") and insert ("England").

Page 92, line 34, leave out ("after the word 'accrued'") and insert ("for the word 'before'")

Page 92, line 35, leave out ("inserted") and insert ("substituted")

Page 92, line 39, after ("voluntarily") insert ("before")

Page 92, line 40, after ("case") insert ("before").

Page 94, line 2, leave out ("for") and insert ("before")

Page 94, line 9, leave out ("substituted") and insert ("inserted").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Second Schedule, as amended, agreed to.

Third Schedule:

Amendments moved—

Page 95, line 25, after ("words") insert ("'printing or' and the words").

Page 96, line 17, at end, insert:—

("In subsection (3) of Section one hundred and ninety-two the words 'at either of the meetings held for passing and confirming the same.'")

Page 96, leave out lines 29 to 37, and insert ("subsection (3) of Section two hundred and seventy-four").—(The Lord Chancellor.)

On Question, Amendments agreed to.

Third Schedule, as amended, agreed to.