HL Deb 01 April 1947 vol 146 cc952-71

Amendments reported (according to Order).

Clause 2:

Length of notice of meetings and of business thereat.

2.—(1) For paragraph (a) of subsection (1) of section one hundred and fifteen of the principal Act (which, subject to the company's articles, provides that a meeting of a company other than a meeting for the passing of a special resolution may be called by seven days' notice in writing) there shall be substituted the following paragraph:— " (a) a company's annual general meeting may be called by twenty-one days' notice in writing, and a meeting of a company other than an annual general meeting or a meeting for the passing of a special resolution may be called by fourteen days' notice in writing;

(6) Where by any provision hereafter contained in this Act special notice is' required, of a resolution, the resolution shall not be effective unless notice of the intention to move it has been given to the company not less than twenty-eight days before the meeting at which it is moved, and the company shall give its members notice of any such resolution at the same time and in the same manner as it gives notice of the meeting or, if that is not practicable, shall give them notice thereof, either by advertisement or in any other mode allowed by the articles, not less than twenty-one days before the meeting:

THE LORD CHANCELLOR

My Lords, this small Amendment was indicated by the noble Lord, Lord Saltoun, on recommitment but it was not then accepted. On reflection I think it is reasonable that it should be accepted. The effect of it is to allow a meeting of an unlimited company, other than an annual general meeting or a meeting for the passing of a special resolution, to be called at seven days' notice in writing, instead of the fourteen days' notice laid down for companies generally. I beg to move.

Amendment moved— Page 2, line 35, at end insert ("or, in the case of an unlimited company, by seven days' notice in writing").—(The Lord Chancellor.)

LORD SALTOUN

My Lords, I said all I wanted to say on this point on the previous occasion, but I should like to take this opportunity of thanking the noble and learned Viscount on the Woolsack for the way in which he has met the reasoned case on this Amendment, as well as on a very large number of other Amendments.

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next Amendment arises from a suggestion which emanated from the noble and learned Viscount, Lord Maugham. I do not know whether it adds very much, because of course we cannot attempt to define what "appropriate" is. At any rate it is a signpost which points in the right direction, and I think it will be useful to have these words inserted. I beg to move.

Amendment moved— Page 4, line 13, after ("advertisement") insert ("in a newspaper having an appropriate circulation").—(The Lord Chancellor.)

VISCOUNT MAUGHAM

I think these words will probably carry out what I wish, although I am not sure that they are an improvement on the words which come in Table A of the existing Act. I think "appropriate circulation" would probably mean the district, and it might also mean large enough to reach the shareholders in question. But there is, of course, a difficuay about defining it, and in the circumstances I would simply thank the noble Viscount for the step he has taken in this matter.

On Question, Amendment agreed to.

Clause 14 [Obligation to lay group accounts before holding company]:

THE LORD CHANCELLOR

My Lords, the only effect of the next Amendment is to show that the words "group accounts"—which I am sure, wisely, we do not attempt to define—is a term of art. I beg to move.

Amendment moved— Clause 14, page 13, Line 4, leave out ("group accounts dealing") and insert ("accounts or statements (in this Act referred to as ' group accounts ') dealing as hereinafter mentioned").—(The Lord Chancellor.)

On Question, Amendment agreed to. Fourth Schedule:

Amendments of Third and Fifth Schedules to Principal Act.

2.—(I) In the said Third Schedule there shall be inserted at the end of the entry relating to the vendors of property purchased or acquired or proposed to be purchased or acquired the words "except where the contract for its purchase or acquisition was entered into in the ordinary course of business or the amount of the purchase money is not material."

THE LORD CHANCELLOR

My Lords, the next Amendment is really consequential on an Amendment to Clause 59 (2). I am not sure that we have got the final form of words, but I offer these to the noble Lord, Lord Rennell, as an earnest of the fact that we have this point in mind, and are careful to see that we so word the Fourth Schedule as properly to marry it with the new provisions of Clause 59 (2).

Amendment moved— Fourth Schedule, page 119, line 30, leave out ("or") and insert ("and there is no connexion between the contract and the company ceasing to be a private company or where").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Then, Standing Order No. XXXIX having been suspended (in pursuance of the Resolution of March 24):

THE LORD CHANCELLOR

My Lords, I beg to move that this Bill be now read a third time. I should say that I have it in command from His Majesty to acquaint this House that His Majesty, having been informed of the contents of the Companies Bill, is pleased to give his consent so far as His Majesty's interest is concerned on behalf of the Crown, of the Duchy of Lancaster and the Duchy of Cornwall, that the House shall proceed therein as they shall think fit.

I hope it will be useful and not unduly tedious to your Lordships if before we finally part with this Bill I review briefly some of the provisions and the alterations we have made. Since this Bill was introduced on Second Reading the form and substance of the Bill has, in many important respects, been changed. We have been concentrating on isolated sections of the Bill and, I may use the well-known metaphor, we have so concerned ourselves with looking at particular trees that perhaps we do not now realize the shape of the wood we are leaving behind us. Several of your Lordships in various parts of the House have suggested that it might be useful, therefore, if I were to give a brief summary of the Bill as it now stands.

We have disposed of over 300 Amendments. The first point about which I would like to remind your Lordships concerns the position of nominee shareholders. I confess that when the Cohen Committee were appointed I was strongly in favour of this particular matter being reviewed, and I hoped that the whole business of nominee shareholders was once and for all to be done away with. But I confess that having read their Report—and in particular paragraph 78 —I was surprised to find to what a large extent nominee shareholdings were used for perfectly legitimate purposes. I wanted to do away with nominee shareholdings, largely because it had come to my knowledge that directors of companies were themselves operating in the shares of their own companies in the names of nominees. I discovered, greatly to my surprise, that the Committee did not seem to think there was any impropriety in so doing. That evil has now been dealt with, in that the group of Clauses 35 to 39 of the present Bill deals, with that matter quite satisfactorily. But there remains, of course, the broad question as to whether or not the register of shareholdings should reveal the real ownership of the shares in all cases. The Cohen Committee shrank from that conclusion, but they accepted a compromise that in cases where a shareholder was an owner of more than 1 per cent. of any class of issued share capital it should be declared on the register.

I confess I have always had grave doubts as to whether any such compromise would work. I believe in this case it is either all or none, and by that I mean you must say either that there must be no nominee shareholdings at all, or the reverse. I think it will be very difficult indeed to calculate in any particular case as to whether or no the shareholding did amount to 1 per cent., and I am quite certain we should be in great difficulties if we were to attempt to define what constitutes a real ownership of the shares. I confess that when the Bill which carried out the Cohen Committee's recommendations was before your Lordships' House, I had grave doubts about those clauses. They have been criticized by noble Lords on the ground that whereas they would give a great deal of extra work to registrars of companies at the present time, they would not succeed in catching the sort of person we want to catch; he would almost inevitably find a loophole which would enable him to get through the net. On the discussion in your Lordships' House I came to the conclusion that the labour involved—and make no doubt about this—to re-write all the registers, would be very substantial. I came to the conclusion that that labour was not worth the resulting catch.

If I had been able to discover any satisfactory way of dealing with evasion I would have pressed these clauses upon your Lordships, but I confess that, having given great time and thought to this matter, I was unable to evolve any scheme which would have prevented it. Therefore, I thought that the sensible thing to do was to abandon those clauses in return for a right of inspection by the Board of Trade, powers which are very much more drastic than any powers the Board of Trade have hitherto enjoyed. These drastic powers should in particular serve to reinforce the clauses requiring directors to disclose their dealings, and they should enable the Board of Trade to deal with any cases where it appears to them that there have been undesirable transactions, and where investigation is therefore clearly desirable. The provisions must necessarily be experimental, and the Government will be able to judge in the light of their working whether further powers are required. So much for the nominee position.

Now with regard to accounts, I should like to make it quite plain that we have not departed from the proposals which are designed to secure that the accounts of a company must give a fair and true view of the state of the company's affairs, and of its profit and loss. Where there is a group of companies, the accounts of the group must give a fair and true view of the group and the profit and loss of the group. We have made no change in this drastic principle, but we have allowed more latitude—and I think rightly—to the directors, both in the details which they have to present and in their manner of presentation. The whole is subject to the scrutiny of the auditors, and so the law will ensure that shareholders shall get a fair and true view of the finances of the body of which they are members. The detailed requirements are set out in the First Schedule, which can be modified by Regulation. To guarantee the business community against arbitrary exercise of departmental power, it is now provided that Regulations making more onerous the requirements of the First Schedule will have to be affirmed by affirmative Resolution of both Houses' of Parliament. On the other hand, if it should be desired to ease the burden for the business community, particularly where action may have to be taken quickly, requirements can be made subject only to the right of either House to present an Address against them within the usual period.

With regard to accountants, we are placing grater responsibility by, this Bill on the accountancy profession than there is under the existing Act. It is most important therefore that auditors should be skilled. The clause which deals with the qualifications of auditors does not go so far as some members of the profession would wish, and in particular doubts have, been raised whether under the clause as drawn persons might qualify as auditors who are not really skilled to undertake their duties. All I can say is that this Bill seeks to do no more than to carry out strictly the recommendations of the Cohen Committee. These recommendations go beyond the existing law, but a rule ordering all the profession can be made only in a Bill especially directed to that purpose. Such a Bill is being prepared by the accountancy profession.

As to exempt private companies, we have made the Amendment that an exempt private company may hold shares in another such company without the latter ceasing to be an exempt private company. This is subject to the stringent conditions laid down in the Third Schedule that individual members of any such group must in the aggregate not exceed fifty. The point raised by the noble Lord, Lord Cozens-Hardy, as to a trustee holding shares for employees, will receive further consideration before the Bill reaches another place. Companies, whether they are of limited or of unlimited liability, may be public companies, private companies or exempt private companies. But in any case they must let the shareholders have all the accounts and in any case they must rely on the discretion and good sense of the shareholders not to publish them.

On the matter of the necessity for the disclosure of inner reserves, I have seen some criticism of the Amendment we accepted by which the Government are empowered to exempt companies of a class from having to disclose reserves. I do not think such criticisms are well founded. The obligation to disclose inner reserves is now introduced for the first time into our Company Law and we must proceed with caution. It has been represented to me with great cogency that national interests might be prejudiced by the requirement, and the Government so far concur that they consider that power should be taken in this Bill to dispense particular interests from this requirement. Any exemption will be subject to the stringent conditions which will be laid down from time to time by the Board of Trade. These conditions would certainly provide that where dividends are paid otherwise than out of current profits the fact will have to be disclosed in the accounts: and if it is a fact that all the goods are not put in the shop window, the shop window must no be so dressed as to suggest that the financial position of the company is better than it really is. In any case these powers would be exercised only in the national interest.

With regard to special notice, I would say this. The Cohen Committee rightly made a recommendation to make it easier for shareholders to get rid of directors who did not carry out their duties satisfactorily, and they also recommended that over-age directors should not be retained unless there was some provision in the articles of the company fixing the age limit, or unless the term of office of such a director was continued by a special resolution of the company. The special resolution is, I think, a procedure more suited for matters such as changes in the constitution of a company than for such day-to-day or year-to-year matters as the appointment of directors. On the other hand, there is a danger that a snap vote may be taken to the embarrassment of directors and to the detriment of the company. This applies equally to the removal and appointment of auditors, a matter which was raised during the Second Reading discussion.

Therefore we have devised in this Bill something between the ordinary resolution and special resolution: special notice. The principle is that the simple majority rule should prevail in these matters but precautions should be taken against a snap vote or shareholders not being fully apprised of the matter at issue. Therefore, anybody wishing to [...] any of these serious proposals is required to do so by special notice, whiCh_means giving not less than twenty-eight days' notice to the company. It is, however, subject to this important proviso that where an annual general meeting—requiring twenty-one days' notice—or an ordinary general meeting is called after the receipt of the special notice, the resolution which it is proposed to move can be moved at that meeting; but if a special notice is handed in after such a meeting has been called, the matter raised in it cannot be taken at that meeting. Questions were raised as to whether this affords sufficient safeguards against the risk of trouble and expense to which a company might be put if a disgruntled shareholder, anxious to air a grievance and to advertise himself, were to submit to the company twenty of eight days' notice of a resolution which the company in turn-would have to send round to shareholders and which it was pointed out might involve the company in considerable trouble and expense. It was suggested that the matter might be looked at rather from the point of view of a Parliamentary election, where unless the candidate polls a certain proportion of the votes he loses his deposit.

It would be difficult to apply the analogy because it would be hard to discover what proportion of votes were cast supporting the shareholder's proposal, and I am doubtful whether we could work out a scheme on those lines. Moreover I am doubtful whether in practice a company would find itself involved in extra expense. The company would almost certainly have to circularize the shareholders, and in practice it would probably be that they would merely have put at the end of the notice the resolution from the disgruntled shareholder. I confess I think the matter needs further consideration, I think there is danger which we must try to guard against here, and this is a matter which is under examination. If we find some satisfactory way of dealing with it we will suggest an Amendment in another place. I need not say much about placing. We have done what we could to try and distinguish between an offer issued to the public and one which is a private issue, and we have made our proposals in regard to that matter.

I should like to say one or two words further about the retirement of directors, because I think there is some misapprehension about the proposals of the Bill in that regard. The general rule now in the Bill is this: that a director who attains the age of 7c will vacate office at the conclusion of the first annual general meeting after he attains that age. But this rule is subject la certain-exceptions, three of them being of a permanent and one of them of a transitional character. I will state first of all, if I may, what are the permanent exceptions to, or qualifications of, the rule. The first is this. A new director of 70 or more can be appointed, or an existing director who reaches the age of 70 can be continued in office, if his appointment is made or approved by the company in general meeting subject to special notice having been given of the resolution appointing or approving the appointment of the director and subject to this age being stated.

The second is that in the case of a company registered after January 1, 1947, the whole matter is subject to the company's articles, and the company can make whatever provision it likes on the subject of the retirement of directors. The third is that in the case of a company registered before the beginning of 1947, the matter is subject to any alterations of the company's articles made after the beginning of 1947. Changes in the articles made before that date are over-ridden by the clause, except that where the articles contain a provision for retirement of directors under an age limit or for preventing or restricting appointments of directors over a given age, the clause does not apply to directors to whom such a provision in the articles applies.

Now I come to the transitional provision. This is as follows: A director who is in office at the date when the section comes into force can remain in office, notwithstanding that he is 70 or more, but he will have to retire when his period of office ends or before the conclusion of the third annual general meeting after the section comes into force, whichever is the earlier date. Thus, for example, if the section comes into force on January 1, 1948, and the director is 70 at the time but his period of office does not end until March 1, 1950, he will retire then. So your Lordships will realize that a director having reached the age of 70, and the Bill then having the force of an Act, if he is due to retire in the ordinary way by rotation he then, of course, is subject to the provisions of the Act, and he can only be re-elected after the appropriate special notice has been given. I hope that that makes the matter plain, because I think it is desirable that business men should know what is proposed at the present time.

There is one other matter, and I think it is the last which I need mention specifically. It is with regard to the question of turnover. The noble Lord, Lord Lucas, put forward an eloquent plea that the turnover of a company should be disclosed in the accounts. It may be that something of this sort will be required in the future, but the question which he has raised is by no means an easy one to decide. There is already—and will, under the new Bill, be far more—greater general publicity than there is in many other countries, and before accepting the proposal it would be necessary to make sure that many of the smaller and medium sized businesses would not be adversely affected. The Government have not got closed minds on this matter and the whole question w ill be considered further with a view to seeing whether we ought to make any alterations on those lines or not. But I must warn the noble Lord that the matter is one which, as I know, bristles with difficulties.

I apologize for detaining your Lordships for so long in dealing with some of these detailed provisions. But your Lordships will remember that it is twenty years since the last Companies (Amendment) Act was before Parliament, and since that time there have been great developments in accountancy practice and great developments in relation to company organization. We have had to deal, in the present Bill, with many new problems of a most complex nature. This Bill goes down to another place not as my Bill and not as my Party's Bill; it goes down to the other place as a real contribution made by members on all sides of your Lordships' House in trying to work out a very difficult problem. It is to me, I confess, a matter of great personal satisfaction that, having dealt with and disposed of over 300 Amendments, we have not had a single Division on any one of them. I beg to move that the Bill be now given a Third Reading.

Moved, That the Bill be now read 3a.—(The Lord Chancellor.)

3.6 p.m.

VISCOUNT SWINTON

My Lords, the noble and learned Viscount, the Lord Chancellor, has added to the debt under which he has laid us during the long and fruitful passage of the Bill through this House by the very clear and agreeable summary which he has just given us. I am glad, for many reasons, to have been so closely associated with this Bill. I can claim the paternity of the Act of 1908 which has now been so much amended, and so rightly amended, and perhaps I may claim to be a godfather or one of the godfathers of this Bill. I said, when the Bill was introduced here, that I did not think there was any assembly or tribunal more competent to make a practical Companies Act than your Lordships' House. It contains all the experience, legal, business, commercial, financial and administrative, which is necessary for such a task, as well as representing, so to speak, the man in the street, the ordinary investor, and, possibly, in one quarter of the House or another, an occasional plunger or two. After all, we want to consider all interests, but we should not have made the Bill anything like so good a measure as we have done if the noble and learned Viscount, the Lord Chancellor, had not given such an enormous amount of personal time and trouble to this work. He has been good enough to invite me and a few others to work with him, and I know how much labour has gone into this measure.

What I have just said also applies to the very wise advisers whose assistance the noble and learned Viscount has had—advisers from the Companies Department of the Board of Trade, the draftsmen, and the practical accountants—without whose help we certainly could not have recast these complicated schedules. I have had handed to me some statistics which I am afraid I can hardly read, but I gather that some tens of thousands of words have gone into these Amendments. As your Lordships know, 300 Amendments have been proposed, and nearly every one has been accepted, either in the form in which it was proposed or in a better form, as the result of our co-operating to make proposals more practicable. Moreover, as the noble and learned Viscount, the Lord Chancellor, has just observed, we have not had a single Division.

I think it is a good Bill. It may require alteration here and there, but in a complicated matter like the practice of Company Law one must proceed by trial and error. I think it is convenient, particularly when we are laying down not hard and fast rules but general principles and model forms in the way accounts should be kept, that there should be an easy way of altering them if experience proves this to be desirable. It is a typically English way. In fact, it is the typically English Parliamentary procedure that has been followed: that of saying that if you want to make things easier you can do it by negative Resolution, but if you want to make things stricter then you must go to both Houses and get an affirmative Resolution—which is tantamount to an Act of Parliament.

Some of the matters which loomed largest in the nubile eye were not the most important. There has been much talk about this nominee business. Like the noble and learned Viscount, the Lord Chancellor, I approached this problem with the idea that it might be a good plan to get rid of the nominees altogether. The Cohen Committee unanimously said that that would be quite impossible and would do more harm than good; it would interfere with a great deal of practical business, and particularly with the business of people who are abroad. I do not think we could have gone forward in the face of that, and I am quite certain that the sort of compromises which the Cohen Committee proposed are utterly impracticable. It is impossible to have a sort of halfway house; one has either to abandon the system of nominees or have some other way of doing it. May I respectfully say to the House that from my experience during the four periods when I was President of the Board of Trade I am quite certain that, in the interests of the general public as well as the general convenience of business, it is far better to give the President of the Board of Trade a wide general power of investigation on his own motion than it is to try and hedge round the whole administration of companies with a great ring of restrictions. In that way action can be taken quickly and where it is necessary.

What has been done with regard to accounts is also very English and very practical. We have laid down the principle that those who are responsible for the conduct of a company must tell not only the true story but also the full story. These accounts must be informative, but they need not be uniform. Indeed, if it were laid down that they should be uniform I believe that in many cases they would be singularly uninformative, because a variety of businesses cannot conform to a sealed pattern. What is done is that a theme is set with occasional variations. A true and a full story has to be told, but it has to be told in the form most convenient to the particular set of readers. That is very sensible and very practical.

Perhaps I shall take a more anxious view with regard to the removal of directors at the age of 70 when I approach more closely that climacteric, but they have had rather a good run for their money. I am not at all averse from saying that shareholders should decide whether or not they want to keep on such directors. There are some directors whom they would very much like to keep on but it would be a very good way of trying to get rid of others with tact. It is sometimes very hard, because people say: "If we get rid of Jones we shall not be able to keep Smith." This is not because Smith likes Jones, but because of the great and collective responsibility which animates members of boards, as it also animates members of Governments, and enables them to hang together. I think the noble and learned Viscount, the Lord Chancellor, has been liberal, and probaby rightly so.

I hope the question of the removal of directors will be looked at carefully. I do not wholly share the view of my noble and learned friend Viscount Maugham, although I think it is a strong thing to have a resolution removing a director and I do not think we ought to pass that very lightly. On the other hand, it is right that there should be power in the hands of the shareholders to remove a director; if they wish to, on notice. But in the interests of the director, of the company, and of the general body of shareholders, it ought to be impossible to start purely frivolous motions. I offered the idea of forfeiting a deposit, and I do not think the noble and learned Viscount, the Lord Chancellor, was very convincing in his reply to it. Neither he nor I have to go through that form of election any more—but the point of not knowing how many votes have been cast is not a good point, because a poll can always be taken. I think there ought to be a deposit, though I do not pledge myself on the size. But if the motion is clearly frivolous, the director has been most unfairly attacked, the company put to considerable expense and the other shareholders to a great deal of bother and annoyance, then there ought to be some way of penalizing the person responsible.

With regard to the disclosure of reserves, as a general rule I am quite sure, on consideration, that they ought to be disclosed. There are cases where they ought not to be disclosed, but in that regard I entirely agree with the noble and learned Viscount, the Lord Chancellor: the test is entirely one of public and national interest, and nothing else. It is not a question of giving favour to this or that company or this or that type of business; the only exception should be where unquestionably it is in the national interest. And where it is in the national interest that there should be no dis- closure, it is also in the interest of the shareholders of the company itself.

The difficulty in trying to make a great Companies Act that will be a charter, under which the business of the country is conducted for ten or twenty years (it is twenty years since we last reviewed the law) is that one has to steer between Scylla and Charybdis, between preventing, so far as one can, wrong things happening, and, at the same time, not handicapping normal decent businesses which form the great bulk of business. It is easy to make a case by quoting some particular fraud or rogue and say:"Let us try and put up a whole set of barbed wire entanglements which will prevent a fellow like that getting away, "but you probably do not catch that man, whereas you make the business of hundreds of other people quite impossible. The way to catch a man is by powers of inspection vested in the Board of Trade. Indeed the criminal law provides for such a position, if a man has done something wrong. That power of inspection, the power to be able to go into the company's affairs, will, I believe, be a much better way of catching a rogue. However much you legislate, you will not turn a bad investment into a good investment, nor a bad investor into a good investor. All you can do is to see that business is honourably and honestly conducted, and that the ordinary, sane, practical investor knows the state of his investments. I think we have succeeded in the Bill in doing that, and I believe we are sending from this House a fair and practicable charter which will serve both the interests of investors and the interests of English business in the years to come.

3.23 p.m.

LORDRENNELL

My Lords, may I apologize, in the first place, for not having been here when the Third Reading was introduced by the noble and learned Viscount on the Woolsack? I was held up, I regret to say, by the traffic. I do not wish to follow the noble and learned Viscount into any examination of the Bill, and I can usefully do no more than say that I agree with everything he said. I agree in particular that this Bill reflects the greatest credit on your Lordships' House and on those who have taken part in it by the contribution of different ideas to a common end. That end has been achieved without any personal disagreement between any of the Parties who took part in the many debates, both in your Lordships' Chamber and elsewhere. The result has possibly been one of the most valuable contributions by your Lordships —certainly during my very short experience in your Lordships' House—and it is one which is likely, so far as I am concerned, to remain a very living and a very real memory of what can be done by people who have all tried to make their utmost contribution.

The only two points in the Bill to which I think it necessary to allude are both points which the noble and learned Viscount has already raised. One of them is that of the nominee clauses, in respect of which, for better or worse, I was the protagonist in moving complete rejection, not because I found myself in any disagreement with the motives which prompted either the Cohen Committee or those who were responsible in the first place for drafting this Bill as to the objects to be achieved by those nominee clauses, but because I believed they would be wholly impracticable in the form in which they stood, or indeed, in any other form put forward in the course of the discussion which we had. I would like to say here and now that I believe disclosure of real ownership and control of companies is necessary and desirable. It is perhaps regrettable, but also perhaps inevitable, that this form of nominee holdings was adopted, but, it having been adopted, the methods for dealing with it which were presented in the first draft of this Bill were not methods which would, in fact, eliminate the difficulties which have arisen.

The second point to which I think it appropriate to draw attention is that of the form of accounts. I agree that the schedules have been made immensely wider, and far more practicable and able to cope in their present form with the manifold manifestations of human activity in companies. It is arguable whether any standardized form, even in the broadest possible terms, is really practicable. That we shall he able to see only after some years' experience of the operation of this Bill. Provision has been made for modifying the set-up in the schedules which have been presented to your Lordships' House. I am still doubtful about some of the clauses on the purely practical issue, though not indeed, as on the nominee clauses, on the objects which it is intended to achieve.

I would like to say, without any reticence and without any flattery, that the help, advice and assistance which we have received, not only from the noble and learned Viscount on the Woolsack but from his advisers; the contacts which we have made with them, and the several and individual contributions made in the course of the presentation of the clauses in the Committee stage by the noble and learned Viscount, the Lord Chancellor, and by the noble Lord, Lord Chorley, have been of the utmost possible assistance to all of us, certainly to me, and I am profoundly and personally grateful for what has been done. I hope that the contact which has been established on these subjects, not only between those who took part in this Bill in your Lordships' House but with the advisers who have advised the Lord Chancellor, is a contact which may he maintained hereafter for the greater good of the community as a whole.

Your Lordships on the opposite Benches will perhaps forgive me if I say that I think this Bill is perhaps the most constructive and valuable of the considerable volume of legislation which has been presented in this Parliament to date. Noble Lords opposite may not agree with me, but I shall retain that opinion. But if that proves to be a worthy opinion, it will only be so because of the several contributions made to the Bill. I hope that this Bill will serve as a model for further Acts which will be passed by Parliament in the years to come and which will be threshed out and produced in the form of an agreed presentation for the greater good of the community of which we all form part.

3.30 p.m.

VISCOUNT MAUGHAM

My Lords, I should like to add a very few words. I need not throw any more bouquets in the direction of the Woolsack; it is sufficient to say that I think the noble and learned Viscount deserves the bouquets he has received. My noble friend Viscount Swinton, in a sentence which I thought required a little amendment, suggested that I was against the possibility of removing a director from his directorship before his term had expired. That was not in my mind at all, and I must have used very inaccurate language if he ever thought, in the various speeches I made on this subject, that I intended such a course. For about twenty years there has been a section in the existing Act of Parliament under which directors are removable by an extraordinary resolution. What shocked me, when I read this Bill in its first stage, was the notion that a mere ordinary resolution, without any special form of notice given in respect of it, proposed by one mischievous or disagreeable shareholder, could result, if there was a badly-attended meeting, in a director being removed from office.

The probability that the fact that a man was being removed from his office as director would he widely advertised or known in a particular district made it no better from my point of view. The question of removal has this peculiarity. I do not know of anybody occupying any position of importance in the whole of our economy being removed without any reason given, or without any suggestion that he has been guilty of an impropriety either in public or in private; but in this case a mere resolution might be moved removing a director. I think a director should only be removed if there is some widespread belief among the members of the company that his continuance in office is quite wrong. That is why the extraordinary resolution under the existing section, which insists on a three-fourths majority, has worked well in practice.

I think have stated before that it has worked well because that section has been practically a dead letter, and unless a director became known as having done something wrong or having been dishonest or convicted of some offence in the past, nobody ever thought of an extraordinary resolution. Accordingly, in my belief it is only in a handful of cases, at the most, in the thousands of companies which exist in this country that such a resolution has been moved at all. I am afraid I remain absolutely convinced that the clause as it stands is unwise.

Although I must admit that I am not very easily converted in a matter with which I have been concerned for fifty years, that is not what gives strength to my idea; it is the fact that the bigger institutions in this country concerned with the matter (the Law Society is one and some of the federations are others) have urged me to raise this question in the House and to maintain it to the best of my power. I do earnestly hope that when the Bill comes before another place this clause will be so altered that mere dislike, mere prejudice, or some fancy of that sort or perhaps a feeling that a particular director is hostile to the interests of somebody who chooses to move such a motion, shall not be at the bottom of a resolution being put forward. As I say, I believe all the big institutions of the country connected with matters of this sort agree with me on this point. I hope that your Lordships will not take it amiss—since the matter was raised by the noble Viscount, Lord Swinton—that I should repeat what is my view. With regard to the rest of the Bill, I may say that I moved a number of the 300 Amendments which were before your Lordships' House. I succeeded on some and I failed on others. I am not quite sure what my record is, but I think on the whole, with the exception of the point which I have mentioned, I may feel that on those in which I failed there were reasonable grounds for their not being accepted. So, wishing good luck to this Bill, which I believe on the whole is a great improvement, I must support the present Motion.

3.32 p.m.

LORD LUCAS OF CHILWORTH

My Lords, I am indeed grateful to the noble and learned Viscount on the Woolsack for his very careful review of the provisions of the Bill which is now leaving your Lordships' House. I feel that this will go a long way towards clearing up a lot of doubts and misapprehensions, particularly those caused by the elimination of the nominee shareholding clauses. I think perhaps the very wise words which the noble and learned Viscount has used will satisfy quite a lot of the critics who have been so critical about removing those clauses from the Bill. I am also deeply appreciative of the kind and encouraging things which the noble and learned Viscount said in his concluding passages. I am most appreciative of the phrase which he used about my advocacy of the Amendment which I placed before your Lordships for the inclusion in the First Schedule of a provision for the disclosure of turnover. I can only regret that my advocacy was not sufficiently strong to stir in the breasts of noble Lords the same approbation as it did in the editorials of all the financial newspapers of the country. Perhaps that has brought enlightenment to the noble and learned Viscount's advisers. I have always had the impression that the noble and learned Viscount's heart was never in his refusal to accept my Amendment, so perhaps on the passage from your Lordships' House to another place he may be able to convert his advisers and guide them into the path of rectitude and enlightenment.

On Question, Bill read 3a; Amendments (privilege) made; Bill passed, and sent to the Commons.