Lords Sitting of 11 February 1947

Preamble
The House met at half past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers.

  BUSINESS OF THE HOUSE.
  VISCOUNT SWINTON: My Lords, I beg leave to ask the Leader of the House a question with regard to business. I understand that there is to be some rearrangement of business, and the House would be grateful for a statement.
  THE SECRETARY OF STATE FOR DOMINION AFFAIRS (VISCOUNT ADDISON): My Lords, I think it would be for the convenience of the House if we re-arranged business so that we should bring to an end at a definite hour the discussion on the Committee stage of the Companies Bill. I suggest that time should be 5·30 p.m., and not later, if that meets your Lordships' convenience. I think it would be generally acceptable if we did not continue the Committee stage on Thursday but resumed it on Tuesday next. I understand that there may be a wish to have a discussion on Thursday on the coal position. I have not had any official confirmation of that from your Lordships, but I think it would be convenient to have it on that day, after the other Orders, which are quite formal.
  VISCOUNT SWINTON: That suggestion will be very much for the convenience of the House, and it will not hold up progress on the Companies Bill.

PALESTINE.
2.35 p.m.
LORD STRABOLGI: My Lords, I beg to ask the question standing in my name on the Order Paper.
[The question was as follows:
To ask His Majesty's Government: whether they are now in a position to make a further statement about the position of British business men still in Palestine; whether in the case of those who are allowed to stay, their families
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are to be compulsorily evacuated; what is the position with regard to British civilians of the Jewish faith, and what is the estimated number of these including their dependants; what is the policy with regard to American and other non-Palestinian residents; how many women in Government employment are being permitted to remain; and whether British business men are to be allowed to enter Palestine on their lawful occasions?]
THE FIRST LORD OF THE ADMIRALTY (VISCOUNT HALL): My Lords, the cases of British business men in Palestine are being considered individually by the authorities, in consultation with the heads of the business houses concerned. Such limitations as are placed on the activities of those allowed to remain will be the minimum which circumstances demand. Their families are being evacuated unless there are reasons which, in the opinion of the Palestine authorities, are sufficient to warrant their remaining. British Jews are not being evacuated. I am not in a position to state their numbers. Foreign nationals are not being evacuated.
As regards women in Government employment, I take it that the noble Lord is referring to British women. There are some fifty British women employed in Government hospitals and only a very few in other Government Departments. As I stated in my reply to the noble Viscount, Lord Simon, on February 4, the only Government officers who are being evacuated are some women teachers who have gone to Trans-Jordan. As regards the entry of British business men, no entry permit for Palestine is being granted to any British subject without reference to the Palestine authorities. In the present situation, only urgent and important cases are being referred.

SUNDAY ENTERTAINMENTS ACT, 1932 (COUNTY BOROUGH OF WALSALL ORDER).
LORD WALKDEN: My Lords, I beg to move that this Order be approved.
Moved, That the Order made by the Secretary of State for the Home Department under the Act, for extending Section 1 of the Act to the County Borough of

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Walsall and laid before the House on Wednesday last, be approved.—[Lord Walkden.]
On Question, Motion agreed to.

SUNDAY ENTERTAINMENTS ACT, 1932 (URBAN DISTRICT OF ROYSTON ORDER).
LORD WALKDEN: My Lords, I beg to move that this Order be approved.
Moved, That the Order made by the Secretary of State for the Home Department under the Act, for extending Section 1 of the Act to the Urban District of Royston and laid before the House on Wednesday last, be approved.—[Lord Walkden.]
On Question, Motion agreed to.

SUNDAY ENTERTAINMENTS ACT, 1932 (RURAL DISTRICT OF DUNMOW ORDER).
LORD WALKDEN: My Lords, I beg to move that this Order be approved.
Moved, That the Order made by the Secretary of State for the Home Department under the Act, for extending Section 1 of the Act to the Rural District of Dunmow and laid before the House on Wednesday last, be approved.—[Lord Walkden.]
On Question, Motion agreed to.

COMPANIES BILL. [H.L.]
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 DROGHEDA in the Chair.]
Clause 1:
Preliminary amendments as to annual general meeting.
(2) The power conferred by subsection (3) of the said section one hundred and twelve, where there has been default in holding a company's annual general meeting, to call or direct the calling of a general meeting of the company shall be exercisable by the Board
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of Trade instead of by the court and shall include power to give such ancillary or consequential directions as the Board think expedient, including directions modifying or supplementing, in relation to the calling, holding and conducting of the meeting, the operation of the company's articles.
LORD CHORLEY LORD CHORLEY moved, after subsection (3), to insert the following new subsection:
"(4) Where a company resolves that a meeting shall be so treated, a copy of the resolution shall, within fifteen days after the passing thereof, be forwarded to the registrar of companies and recorded by him, and if a company fails to comply with this subsection the company and every officer of the company who is in default shall be liable to a default fine of two pounds.
"The noble Lord said: It is intended here to fill a small gap in subsection (2), which gives the Board of Trade power to call a meeting of the company if the company does not hold a meeting within the statutory period as laid down in subsection (1), which in general, amongst other things, requires a company to hold a meeting at least once in every year. Subsection (3) provides that where the Board of Trade do call such meeting it shall be deemed to be the annual general meeting, but that where, for example, a company makes default in holding a meeting in 1947 and the Board of Trade, in consequence, call a meeting which does not take place till 1948, the company can take that as the annual general meeting for 1948; but if they choose to do so they must so resolve. The Amendment requires that a copy of the resolution shall be forwarded to the Registrar; otherwise the company shall be liable to a fine. I hope your Lordships will agree to insert the Amendment to fill the gap.
Amendment moved—
Page 2, line 14, insert the said new subsection.—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 1, as amended, agreed to.
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

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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;"
and, notwithstanding anything in the said subsection (1) any provision of a company's articles shall be void in so far as it provides for the calling of a meeting of the company (other than an adjourned meeting) by shorter notice than that specified in this subsection.
(2) A meeting of a company shall, notwithstanding that it is called by shorter notice than that specified in the foregoing subsection or in the company's articles, as the case may be, be deemed to have been duly called if it is so agreed—

(a) in the case of a meeting called as the annual general meeting, by all the members entitled to attend and vote thereat; and

(b) in the case of any other meeting, not being a meeting for the passing of a special resolution, by a majority in number of the members, being a majority together holding not less than ninety-five per cent. in nominal value of the shares giving a right to attend and vote at the meeting, or, in the case of a company not having a share capital, together representing not less than ninety-five per cent. of the total voting rights at that meeting of all the members.

LORD COZENS-HARDY LORD COZENS-HARDY moved, at the end of subsection (1), to insert:
"unless the company being a private company has by special resolution at its last annual general meeting approved of a shorter period."
The noble Lord said: As the Bill stands twenty-one days' notice of the annual general meeting must be given to all shareholders, and by the next subsection the balance sheet and profit and loss account must similarly be sent twenty-one days before the annual general meeting. In a family business, run as a private company, it is often convenient to have the annual general meeting as soon as possible after the ordinary accounts are ready, but by the Bill an annual general meeting cannot be held earlier than twenty-one days after the accounts are ready. The purpose of my Amendment is to allow a private company, by a special resolution passed at the previous meeting, to adopt a shorter period than twenty-one days. It limits the exception to one year, unless a similar resolution is passed at the preceding annual general meeting. If, as I hope, the noble and learned Viscount, the Lord Chancellor, can agree that some such provision might properly be allowed, I think it will be necessary, to insert in subsection (3) (b) words having the same effect.
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If the exception in favour of all private companies is considered too wide, I should be content with what the Cohen Committee call "exempt private companies," which are, in fact, genuine family concerns. I beg to move.
Amendment moved—
Page 2, line 34, after ("subsection") insert the said words.—(Lord Cozens-Hardy.)
LORD CHORLEY: I regret that we do not see our way to accept this Amendment. We appreciate the point which has been put by the noble Lord, but the arguments on the other side seem to be stronger. If this Amendment were accepted it would permit a private company to pass a special resolution at an annual general meeting so as to absolve itself from the requirement to give twenty-one days' notice of subsequent annual general meetings. It is very important indeed that members of private companies should have good notice of meetings; indeed, from some points of view, quite as important as in the case of a public company, because, as your Lordships are aware, there are very often disputes of a particularly bitter and difficult character going on in these private companies between majority and minority interests. Complaints are often made that the dominant majority interests hold meetings on quite a number of occasions in a very hurried manner, so that the minority interests get no real opportunity of looking after their side of the business.
As your Lordships are aware, a special resolution requires the approval of 75 per cent. of the members, and if the noble Lord's Amendment were accepted it would mean that the remaining 25 per cent. could be put into a most disadvantageous position. Under Clause 2 (2) (a) the twenty-one days' notice of an annual general meeting can be waived if all the members entitled to attend and vote there-at agree. If that were the situation, the difficulty at which the noble Lord's Amendment is aimed would be solved.
LORD COZENS-HARDY: I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
LORD CHORLEY: The next Amendment is that the words "not being a meeting for the passing of a special resolution," on page 2, line 42, should be omitted. Under Section 117 (2) of

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the Companies Act, 1929, it is provided that if all the members entitled to attend and vote at a general meeting so agree, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one days' notice has been given. In practice, it is sometimes important to pass a special resolution at short notice, and it is very difficult, in the case of a company of any size, to secure the agreement of all the members to the waiver of notice. Usually one member is ill, or, maybe, abroad. The Amendment, accordingly, provides that in such a case a 95 per cent. majority shall be sufficient to waive the notice. Ninety-five per cent., obviously, is a very large majority, and in these circumstances I hope that your Lordships will accept this Amendment.
Amendment moved—
Page 2, line 42, leave out ("not being a meeting for the passing of a special resolution").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: The next Amendment is purely drafting. I beg to move.
Amendment moved—.
Page 2, line 44, after ("members") insert ("having a right to attend and vote at the meeting").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY LORD CHORLEY moved, after subsection (2), to insert the following new sub-section:
"(3) In the proviso to subsection (2) of section one hundred and seventeen of the principal Act (which enables a resolution of which less than twenty-one days' notice has been given to be passed as a special resolution) for the words 'if all the members entitled to attend and vote at any such meeting so agree' there shall be substituted the words 'if it is so agreed by a majority in number of the members having the right to attend and vote at any such meeting, being a majority together, holding not less than ninety-five per cent. in nominal value of the shares giving that right or, in the case of a company not having a share capital, together representing not less than ninety-five per cent. of the total voting rights at that meeting of all the members'; and subsection (5) of the said section one hundred and seventeen (which provides for computing the majority on a poll by reference to the votes to which a member is entitled) shall not be taken as applying for the purposes of the said proviso."
The noble Lord said: This Amendment is purely consequential on the Amendment to Clause 2, page 2, line 42, and I do not think that it requires any further explanation. I beg to move.
Amendment moved—
Page 3, line 6, at end, insert the said subsection.—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY LORD CHORLEY moved, after subsection (3), to insert the following new subsection:
"(4) Any document required to be circulated before a meeting by subsection (2) of the said Section' one hundred and thirteen, or by paragraph (a) of subsection (1) of the said Section one hundred and thirty, shall, notwithstanding that it is circulated later than is thereby required, be deemed to have been duly circulated if it is so agreed by all the members entitled to attend and vote at the meeting."
The noble Lord said: This Amendment provides that all members of a company can agree to waive the requirements of Section 113 (2) and Section 130 (1) (a) as to the circulation of documents in advance of a meeting. Clause 2 (3) (a) amends Section 113 (2) so as to require the directors' report to be circulated fourteen days before the statutory meeting, and Clause 2 (3) (b) amends Section 130 (1) (a) so as to require copies of the accounts to be circulated twenty-one days before the meeting at which they are to be laid before the company. This is just filling in a gap. I beg to move.
Amendment moved—
Page 3, line 29, at end insert the said subsection.—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 2, as amended, agreed to.
Clause 3:
Circulation of members resolutions, etc.
3.—(1) Subject to the following provisions of this Section it shall be the duty of a company, on the requisition of such number of members as is hereinafter specified and (unless the company otherwise resolves) at their expense—

(a) to give to members of the company entitled to receive notice of the next annual general meeting notice of any resolution which may properly be moved and is intended to be moved at that meeting;

(b) to circulate to members entitled to have notice of any general meeting sent to them any statement of not more than one thousand words with respect to the business to be dealt with at that meeting.

(4) A company shall not be bound under this Section to give notice of any resolution or to circulate any statement unless—

(a) a copy of the requisition signed by the requisitionists (or two or more copies each signed by some of them) is deposited at the registered office of the company—

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(i) in the case of a requisition requiring notice of a resolution, not less than five weeks before the meeting; and

(ii) in the case of any other requisition not less than one week before the meeting and

LORD MANCROFT: The next is hardly more than a drafting Amendment. Subsection (2) of this clause specifies the number of members necessary for a requisition. In subsection (4), however, it is provided that a requisition may be signed by requisitionists on a number of different copies. As a matter of drafting, it appears to me to be possible that a requisitionist might sign more than one copy and that claims might be counted in respect of each copy. By my Amendment it is made plain that each requisitionist can be counted only once, even if he signs on two or more copies of the requisition.
Amendment moved—
Page 3, line 31, after ("requisition") insert ("in writing").—(Lord Mancroft.)
THE LORD CHANCELLOR: I am happy to accept this Amendment.
On Question, Amendment agreed to.
VISCOUNT MAUGHAM VISCOUNT MAUGHAM moved, in subsection (1) (b), after "to" where that word occurs a fifth time, to insert: "the matter referred to in any proposed resolution or." The noble and learned Viscount said: I daresay that this is really not very much more than a drafting Amendment. I thought, however, that it would be better to make it clear that a requisition need not refer only to the matters intended to be moved at the meeting, but might also refer to a matter concerned in any proposed resolution. The Amendment is really of no very great effect, except that there might be certain resolutions which were not strictly business to be moved at the meeting. I beg to move.
Amendment moved—
Page 3, line 40, after ("to") insert ("the matter referred to in any proposed resolution or").—(Viscount Maugham..)
THE LORD CHANCELLOR: I am grateful to the noble and learned Viscount, and I agree with him. I think that this is a small matter, and I have pleasure in accepting the Amendment.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This Amendment, like the next one, is a drafting Amendment and is designed to get
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rid of the ambiguity inherent in the word "may". I beg to move.
Amendment moved:
Page 4, line 11, leave out ("in which notice of the meeting may be served") and insert ("permitted for service of notice of the meeting").—(The Lord Chancellor.)
VISCOUNT SWINTON: May I congratulate the noble and learned Viscount, the Lord Chancellor, on an admirable precedent which I hope will be followed.
On Question, Amendment agreed to.
LORD CHORLEY: I beg to move the next Amendment.
Amendment moved:
Page 4, line 14, leave out ("in which he may be given") and insert ("permitted for giving him").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD HAWKE LORD HAWKE moved, in subsection (4) (a), to leave out from "copies" to "is" and insert: "which between them contain the signatures of all the requisitionists". The noble Lord said: Subsection (4) (a), as it stands, appears to be a trifle obscure, and I venture to think that the Amendment standing in my name clears up any obscurity there might be. I beg to move.
Amendment moved:
Page 4, line 25, leave out from ("copies") to ("is") and insert the said new words.—(Lord Hawke.)
THE LORD CHANCELLOR: I agree with the noble Lord. His words are an improvement on the Bill, and I have much pleasure in accepting the Amendment.
On Question, Amendment agreed to.
LORD BALFOUR OF INCHRYE LORD BALFOUR OF INCHRYE moved, in subsection (4) (a) (i), to leave out "five" and insert "six". The noble Lord said: Under this clause a specified portion of the members of a company may, by requisition, require a company to circulate a statement to shareholders. The company is, in turn, required to give three weeks' notice of its annual general meeting. As the notice to be given by the requisitionists is five weeks, there are, therefore, only two weeks left for the company to prepare a rebuttal, if they have to do so, and for the printing and filling of the envelopes. It is very difficult for a large company to do this in the fortnight at its disposal, and the Amendment proposes that the fortnight should be increased to three weeks.

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In order to make this possible, it is necessary that the notices to be given by requisitionists should be increased to six weeks instead of the five weeks mentioned in the Bill. I beg to move.
Amendment moved—
Page 4, line 28, leave out ("five") and insert ("six").—(Lord Balfour of Inchrye.)
THE LORD CHANCELLOR: Let it be accounted to me for righteousness that this is the fourth consecutive time that I have accepted an Amendment.
VISCOUNT SWINTON: May it not be accounted to us for righteousness how much we have improved the Bill?
On Question, Amendment agreed to.
2.53 p.m.
LORD BALFOUR OF INCHRYE LORD BALFOUR OF INCHRYE moved, in subsection 4 (a) (ii), to leave out "one week" and insert "two weeks." The noble Lord said: In a spirit of optimism I beg to move this Amendment. It is not quite clear under this clause who is really to be responsible for the printing or the making of the necessary copies for distribution to members. If the company has to do it, then the one week allowed under subsection (4) (a) (ii) might be inadequate in the case of concerns with many shareholders. The clause appears to call for the deposit with the company of the signed copies of the requisition only. If that is so, the company will presumably have to do the printing or other copying, as well as the addressing and posting. I beg to move the Amendment which stands in my name, therefore, to increase the time limit.
Amendment moved—
Page 4, line 31, leave out ("one week") and insert ("two weeks").—(Lord Balfour of Inchrye.)
THE LORD CHANCELLOR: I am sorry to disappoint the noble Lord, but I do not see my way to accept this Amendment, for this main reason. Though I quite realize the point he has made and the difficulties inherent in the matter, he will remember that, except for the annual general meeting which requires twenty-one days' notice, all other meetings require only fourteen days' notice. Consequently, if you are going to have a requisition you must give the man who is potentially going to requisition time to
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digest that which is in the notice. And, further, you must give him a chance of getting his battalions together and a certain number of collaborators to act with him. That takes him some time, and if you insist that the copy shall be deposited not less than fourteen days before the meeting, he may have to give notice of his requisition before or at the same time as he receives the notice of the meeting about which he wants to requisition. This is manifestly impossible. That being so, it is essential that you should have some shorter period than that of the notice necessary for the meeting, within which the requisition must be put forward. That is why the Cohen Committee suggested one week, and with that we agree. Therefore, I am afraid I cannot accept this Amendment.
VISCOUNT SWINTON: I think the noble and learned Viscount may be right, but I am sure that we want here to do what is fair both to the people who wish to make the requisition and circulate resolutions and memoranda, and also to the company, which may be a very large company with, perhaps, 100,000 shareholders to circulate. There should be every opportunity for a shareholder to approach the company, and at the same time the company should have time to do all the necessary clerical work which is required. In the case of a small company this is nothing very much, but in the case of a great company it is very extensive indeed, particularly in these days of a shortage of clerks. I think there is much more than that involved, and I am sure that my noble friend the Lord Chancellor will help me on this matter.
Important as it is that the requisitionists should get adequate time to introduce the resolution and any memoranda which they wish to circulate to the shareholders, it is equally important that the directors of the company should have adequate time to consider the requisition and to put out any comments and memoranda for the information of the shareholders, and that the shareholders should receive a considered statement both from the requisitionists and from the board of directors. I am sure that we shall agree that these things are necessary, and I want to be quite sure, if this Amendment is not carried, that nothing is done which prejudices the time that is really necessary for the management of the company

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to do the clerical work and, still more, to pass on to the shareholders a considered judgment upon any proposition which is put forward.
THE LORD CHANCELLOR: I will gladly look into that matter. I do not think that is so. The obligation on the company is to circulate so far as possible, and they cannot, of course, be expected to work the impossible. But I will gladly look into the observations the noble Viscount has made to see whether any further provision is necessary, though I think we have safeguarded the position as fairly as we can.
VISCOUNT SWINTON: I think probably the point I am anxious about is much more safeguarded by the Amendment which the noble and learned Viscount has already accepted, which substitutes "six" for "five," but I rather thought that to some extent the two things hung together.
VISCOUNT ELIBANK: Before we pass on, perhaps the Lord Chancellor may be prepared to compromise and make it ten days instead of two weeks. Both noble Lords have mentioned the amount of work involved in printing and in consideration, and so on, in the case of a large company, and even three days would make a difference. We are talking, of course, about normal times. At present we cannot get any printing done at all—I happen to know that from a case that came before me recently. I urge the noble and learned Viscount to say whether or not he could extend the period by even three or four days. That would be of great assistance.
THE LORD CHANCELLOR: I will look into the matter, but I cannot say more than that.
LORD BALFOUR OF INCHRYE: I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 3, as amended, agreed to.
Clause 4 agreed to.
Clause 5:
Voting at meetings.
5.—(1) Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of him, and a proxy appointed to attend and vote instead of a
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member shall also have the same right as the member to speak at the meeting:
(2) In every notice calling a meeting of a company there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of him, and that the proxy need not also be a member; and if default is made in complying with this subsection as respects any meeting, every officer of the company who is in default shall be liable to a fine not exceeding fifty pounds.
(5) On a poll taken at a meeting of a company, a member entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way, and accordingly in subsection (5) of Section one hundred and seventeen of the principal Act (which provides that the three-fourths majority of the members needed for an extraordinary or special resolution shall on a poll be computed by reference to the number of votes to which each member is entitled) for the reference to the number of votes to winch each member is entitled there shall be substituted a reference to the number of votes cast for and against the resolution:
Provided that a member shall not be entitled to vote both for and against a resolution where the validity or effect of the resolution depends on the number of members voting for or against it or where the rights, if the resolution is passed, of members voting for it differ from those of members voting against it.
LORD COZENS-HARDY LORD COZENS-HARDY moved, in subsection (1), to leave out "whether a member or not" and insert:
"(who, except in a private company which is exempt from the obligation mentioned in Clause 43 hereof, need not be a member)."
The noble Lord said: The object of this Amendment is to preserve the privacy of the family business if it is an exempt private company; that is, a company which complies with the very stringent conditions imposed, and on which is placed the obligation to file its profit and loss account. That privacy will undoubtedly be in danger if a proxy who is not a member has a right to attend the meetings of the company. The reasons given in the Cohen Report in favour of non-member proxies were that a member might not know the names of his fellow-members, or might be far from the offices of the company or of the Registrar of Companies. Those reasons lose much of their force when applied to a family business limited, as it must be, to fifty shareholders, and subject to all the conditions entitling it to exemption. I beg to move.
Amendment moved—
Page 5, line 34, leave out ("(whether a member or not)") and insert the said new words.—(Lord Cozens-Hardy.)
THE LORD CHANCELLOR: I think that we should make a mistake if we were to insert these words. I shall have something to say presently about the right of the proxy to speak, but I think we ought to allow the proxy to go there, even though he is not a member of the company. Let me say, with regard to these private companies and family businesses, that it is just those businesses where there is sometimes a good deal of rough-riding over the interests of particular people. Not infrequently it happens that one member—it may be the widow—finds herself rather put upon the majority. She dm, not understand anything about the business, and it is only right that she should be able to send her solicitor, a family business man or somebody to represent her and put her point of view. It is right that in just this sort of case we should say she may send somebody to represent her in this way. I am going to suggest, later on, that that somebody ought also to have the right to speak. I think it is right, in order to avoid hardship to some minority interests, to permit somebody to be sent to represent some particular member. Therefore, I regret that I cannot accept this Amendment.
LORD COZENS-HARDY: Would it be possible to make some provision to the effect that the non-member proxy is bound to secrecy?
THE LORD CHANCELLOR: I do not think that it would be any good. If he were going to breach a matter which was obviously confidential, he would breach it whether there was any provision in the Bill or not. I do not think that that would be very effective.
LORD DARWEN: Speaking as a member of a private company, I think that to some considerable extent the difficulty would be overcome if the Lord Chancellor would accept an Amendment to restrict proxies to legal representatives. That would seem to me to get over most of the difficulties.
THE LORD CHANCELLOR: In the great majority of cases, I think he would be a legal representative, but there may be occasions where some man of affairs,
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some business man who is not necessarily a lawyer, would be the obvious person. In fairness, I think you must leave the member to select her own proxy.
LORD COZENS-HARDY: I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
VISCOUNT MAUGHAM VISCOUNT MAUGHAM moved, in subsection (1), to leave out from "him" to the beginning of the proviso. The noble and learned Viscount said: This Amendment is one of considerable importance. I confess that I am somewhat astonished that the Committee have suggested that the proxies should always be entitled to attend and speak. That is a revolution in Company Law. I have had considerable experience of meetings of companies; I have actually attended some myself. I have a vision of a company meeting at which two or more members of my old profession, that of the law, have been briefed to attend and make a speech on a resolution designed to be passed on a show of hands at the meeting, or, it may be in certain cases, to delay the proceedings at the meeting. To my mind, it would be quite wrong to have solicitors and counsel of eminence, or perhaps of less eminence, appearing and making long speeches at such meetings.
A great many of these meetings are matters of vital importance to some section of the company. There are, for instance, meetings to change the rights of some of the people under a section of the Act, and large advantages in money may attend the views which the company as a whole expresses at the meeting. It is entirely a revolution in company practice to have a meeting of a public company addressed by professional people who have no personal interest in the matter at all, who are not shareholders and who do not care two straws what the future of the company may be. It is a revolution to have them addressing eloquent harangues to the meeting as a whole.
I know meetings into which it is very difficult to obtain admission at all. In the old days, meetings of large companies with registered offices in London were held in a room in the Cannon Street Hotel. Where they go now I am not so sure. There is, I think, another room in another big hotel. But there are many meetings of this sort where it is very difficult for all the members themselves

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to get in, and you should consider the matter very carefully before you permit people to attend as a proxy and speak. I suppose a proxy in such a case could come as well as the member, because he might easily be appointed as proxy to vote in respect of only a portion of the shares of the member. The member would say: "I am holding one share, and I am going to vote for myself, but I have a proxy here who is going to vote in respect of 1,000 shares." The room might be full of people and the secretary or other officers of the company would be quite unable to prevent complete strangers from entering the room and starting, as soon as possible, to address harangues to the meeting. That would be a revolution in company practice, and would be greatly against the interests of the company. Whether there ought to be some modification to my Amendment is another thing altogether; but as a whole, on the general principle, I think it is only in exceptional circumstances, which may possibly be capable of definition, that a proxy, not being a member of the company at all, and whether or not a professional man, ought to be entitled to interfere in the actual conduct of the meeting. I beg to move.
Amendment moved—
page 5, line 35, leave out from ("him") to the end of line 37.—(Viscount Maugham.)
VISCOUNT SWINTON: It would probably be for the convenience of the House if we took all these Amendments together, if your Lordships are agreeable, because they deal with the same subject. I should like very briefly to support what the noble and learned Viscount has just said. Popular as it might be to have meetings where the board of directors had briefed Sir William Jowitt and one of the shareholders had briefed Sir Frederick Maugham, and long and entertaining as no doubt would be the speeches they would deliver in consideration of an adequate fee, I cannot think that such an innovation would serve any useful business purpose, other than that of their private businesses. As the noble Viscount has said, it would utterly and entirely alter the whole character of a general meeting of a company. It would also quite interminably prolong its proceedings, because obviously if Sir William Jowitt is retained for one side then someone as nearly as possible of equal weight and learning must be retained on the other
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side, and heaven knows whether there would not be an "inter-pleader," if that be the right expression, by somebody else. The place would be as full as a popular libel action, with silks in one row and juniors in the other. The wretched board of management would have little time to conduct their business and to fill up those many forms which they are required to fill up after the meeting has closed. That that would not be at all a good innovation I am sure that the noble and learned Viscount, the Lord Chancellor, would readily agree.
At the same time I am bound to say that my Amendment, which follows next, does propose a case for making an exception in regard to a genuine private company. I am not sure that I shall carry my noble friend Lord Cozens-Hardy with me in this. I can well imagine, as the noble and learned Viscount, the Lord Chancellor has said, that there are cases of a private company where there is an issue between, say, two members of a family and a third. The third may be an invalid or a widow, quite incapable of attending—though far be it from me to say that women are less capable than men of putting their case, or talking at great length. In that case it would not be inappropriate that the proxy should be entitled to pm the case. I suggest to your Lordships that the practical compromise is the one which I have put down, and which I think the noble and learned Viscount, the Lord Chancellor, adumbrated earlier that he would be prepared to accept: that in a public company the proxy can attend but should not be able to speak, and in the genuine private company the proxy can vote and, if necessary, speak.
LORD RENNELL: The Amendment which has just been discussed stands also in my name, and I should like to support what has been said. I think it is a compromise view of the rather more far-reaching doctrine put forward by the noble and learned Viscount, Lord Maugham. The real difficulty, in regard to which I find myself in disagreement with the noble Lord, Lord Cozens-Hardy, is that one knows of cases of private companies where, owing to the limited membership, it is not possible to get a proxy who is a member to represent anybody in the event of a shareholder being ill. There are countless cases of small private companies with not more than two or

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three members altogether, and put of two or three members you cannot find another proxy. So the conclusion I have come to, after hearing the various points of view, is that expressed in the Amendment which stands in the name of the noble Viscount, Lord Swinton, and myself.
I would like to emphasize very strongly what the noble and learned Viscount, Lord Maugham, has said about the representation of members by non-members in the case of public company meetings. We have, over many years between the wars, had experience of cases where proxies have been members, and of what might be termed almost the professional agitator coming in for self-interest, to advertise himself and very often to get business of a similar character—in other words, to exert himself as a nuisance. In the case of a public company that is obviously a thing that is to be deplored and must be stopped. In regard to the arguments for one course being adopted in respect of public companies and another being adopted in the case of private companies, especially those private companies that are exempt from the publication of their balance sheet and profit and loss account, I think there is a great deal to be said for the adoption of that compromise, in the form either of the Amendment which stands in the name of the noble Viscount and myself, or one similar to it.
VISCOUNT MAUGHAM: May I just interpose to say that, for my part—if I may say so with great respect to anybody who thinks that I am doing something wrong—I would be quite willing to accept the alteration to my Amendment which my noble friend, Lord Rennell, suggests, as regards private companies which are exempt under Clause 43. If that could be in some way put to the vote, it might be a way of clearing up the matter and satisfying nearly everybody here.
LORD BALFOUR OF BURLEIGH: Before the noble and learned Viscount replies, may I raise one point with reference to the Amendment of the noble Lord, Lord Rennell? I would ask the noble Lord whether his attention has been called to the special difficulties which this clause would make for the nominee companies of a bank, who at present are able to appoint proxies in respect of different holdings. A nominee company frequently
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holds shares on behalf of a number of different customers, and the present practice is to appoint several proxies. Has the noble Lord had his attention called to the effect this Amendment would have upon those nominee companies of a bank?
LORD ROCHESTER: Before the noble and learned Viscount replies, I would like to raise one further point. In the event of an agitation taking place in the case of a public company, unless the position is safeguarded it is quite possible that with all those agitators banding together, their voting strength on a poll might be doubled as against the ordinary shareholders. In other words, a member might attend and vote as a member, and also attend and vote as a proxy. If there were a sufficient number joining in such an agitation, they would be doubling the voting strength of those taking part in the agitation.
THE LORD CHANCELLOR: In that case you would ask for a poll.
LORD ROCHESTER: But in the case of a poll they would have the double voting value.
THE LORD CHANCELLOR: No; only on a show of hands. If you have 1000 shares and you send 1,000 proxies, to take an extreme case, on a show of hands that would count as 1000; but if you had a poll, all you would poll would be 1,000 votes. I have given a good deal of thought to this matter, and I confess that I do not think it is an easy one at all. In the course of my thoughts my mind has somewhat fluctuated. On the one hand I have started with this fact—and I do not like to disregard it—that the Cohen Committee, which consisted not only of very eminent lawyers but of very eminent business men, bankers, and so on, said this:
"We think that such proxy should be entitled to speak as well as vote. If not, the right loses a great deal of its value."
That is their recommendation, and obviously I am bound to attach great weight to it.
On the other hand, this is a complete revolution in our existing system, and though when I first heard the suggestion about proxies speaking I rather looked forward to a comfortable retirement, thinking that I might find some useful or, at any rate, some lucrative employment,

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on reflection I am bound to say that I do think that to allow it in the case of the public company would be going rather too far. The meetings would tend to be unduly long, and I am not certain that the results arrived at would be any more satisfactory than they are to-day. Then I thought to myself: Well, if that is so, is it not possible to devise some sort of test? There are some sorts of questions with regard to which this might be allowed, and other questions in regard to which it should not be allowed. I asked myself whether some test could not be devised and, frankly, I came to the conclusion that it could not, except the somewhat crude test—and I admit it is a crude test—of adopting it after paying regard to the nature of the company. I admit that it is a compromise and, like all compromises, I am not sure that it is wholly logical. I think the best compromise is to say that we will allow this to take place in the case of the private company but we will not allow it in the case of the public company.
I considered whether we should confine it still further and allow it only in the case of the exempted private company. I say, frankly, that I feel quite certain that after we have passed this Bill, after we have got it consolidated, we shall learn a good deal. We shall have to find out where the shoe pinches, and where Amendments must be made. On the whole, I came to the conclusion that to confine this to the exempted private company at this stage would be a bit too narrow. The distinction between the exempted private company and the private company turns on a rather narrow and, one might say, artificial difference. That means that we had better say we will allow it in the case of a private company but we will not allow it in the case of the public company.
A NOBLE LORD: That is, the right to speak?
THE LORD CHANCELLOR: That is, the right to speak. That is the suggestion I make to your Lordships. Therefore, I would ask you not to accept this Amendment proposed by the noble and learned Viscount, Lord Maugham. In due course, when we get to the Amendment standing in the name of the noble Viscount, Lord Swinton, and the noble Lord, Lord Rennell—that is the one on page 5, line 36
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—I shall ask your Lordships to accept it. It limits the right of the proxy to speak to the case of the private company. The noble Lord, Lord Balfour of Burleigh, asked me a question with regard to the proxies which banks send. I say frankly that I had not had that point brought to my attention, but I shall be pleased to look into it and to see whether any difficulty arises there. I quite appreciate, of course, that representing, as they do, different clients, they may have different instructions and they may therefore have to send different proxies to take different sides. I will look into it to see if there is a difficulty there, and if there is I will do what I can to surmount it.
VISCOUNT SWINTON: Would that not be covered by the Amendment proposed by the noble Lord, Lord Rennell, on page 6, line 39, which asks that the proviso should be deleted?
THE LORD CHANCELLOR: I am going to advise your Lordships to accept that Amendment. It may be that that will take care of this point.
VISCOUNT MAUGHAM: In the circumstances, I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
VISCOUNT SWINTON: I beg to move the next Amendment.
Amendment moved—
Page 5, line 36, after the first ("member") insert ("of a private company").—(Viscount Swinton.)
On Question, Amendment agreed to.
LORD RENNELL LORD RENNELL moved to leave out the proviso in subsection (5). The noble Lord said: This probably refers to the point raised by the noble Lord, Lord Balfour of Burleigh. At the bottom of page 6 there is a proviso on the subject of voting by proxies. Subsection (5) provides that proxies may vote in more than one way, according to their directions or the persons they represent. The proviso in itself is not very clear to me. I am not quite clear what its object is and what danger it purports to guard against. It seems to be fairly clear that the provisions of subsection (5), omitting the proviso, are necessary, especially in the case of nominee companies, trust corporations and trustees who may be called upon by the persons for whom they act to vote both for and against a resolution, according to

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the interests of the persons they represent. That is quite right. It arises very clearly in the case of corporate trustees as well as private trustees. If, as I understood the noble and learned Viscount to say just now, my proposal to omit the proviso is accepted, I have no more to say. I beg to move.
Amendment moved—
Page 6, line 39, leave out lines 39 to 44.—(Lord Rennell.)
LORD BALFOUR OF BURLEIGH: May I be quite sure what happened just now? I gather that in the case of a public company more than one proxy now can be appointed. If these lines are left out, I think that completely meets the situation. I should be very much obliged to the noble and learned Viscount if he would explain what those five lines meant when they were there.
THE LORD CHANCELLOR: As I am going to accept this Amendment, wild horses would not make me waste your Lordships' time by telling you what these lines meant. It is sufficient to say that although I accept this Amendment, I am afraid it may involve consequential Amendments on the Report stage, in order to adapt the clause to cases where there are provisions (Section 153 of the Companies Act is an illustration) referring to a majority in number representing three-quarters in value. We may have to have consequential Amendments, but so far as this Amendment is concerned, I accept it.
LORD RENNELL: I am much obliged to the noble Viscount. There are, of course, obvious consequential Amendments.
VISCOUNT SWINTON: May we be quite clear what it is we are doing? Certainly nothing we have done so far affects the number of proxies you can appoint. If you have twenty shares and like to fill up the room, you can appoint twenty proxies, so long as they do not on a poll cast more than twenty votes. We have not been concerned with that at all. Therefore it will be perfectly competent, in either a public or a private company, if' two conflicting interests are represented, to appoint two proxies. Whether the votes are given by the members themselves or by one or more proxies, they can be cast in exactly the way in which the
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proxies have received their directions. There is nothing to stop a trustee, if he is there in person, or a proxy, in accordance with his duty and the interests of his beneficiaries, from casting one vote one way and another vote in another way. In the same way, where directors have been appointed proxies in the ordinary way before a general meeting and have received a large number of proxies—some of which may be in favour of a proposition and some against it—the wishes of the members will be carried out by the directors casting their votes on a poll in accordance with the wishes expressed on the proxy forms. That, I take it, is what we intend to do by the Amendments, and that seems to me to be obviously fair and just. Is that correct?
THE LORD CHANCELLOR: That is correct. I quite agree with the noble Viscount.
On Question, Amendment agreed to.
Clause 5, as amended, agreed to.
Clause 6 [Meetings attended by single member]:
LORD COZENS-HARDY: This is only a drafting Amendment. It does not seem clear whether it is intended that directions which may be given "do include," "may include," or "shall include." I beg to move.
Amendment moved—
Page 7, line 13, at beginning insert ("shall").—(Lord Cozens-Hardy).
LORD CHORLEY: I am very glad to give a morsel of comfort to the noble Lord who has so far been sent empty away. We are very much obliged to him for pointing this out. The only thing is that the word "may" should be inserted and not the word "shall." Perhaps he will accept that.
LORD COZENS-HARDY: Yes.
On Question, Amendment, as amended, agreed to.
Clause 6, as amended, agreed to.
Clause 7 agreed to.
Clause 8:
Alternative remedy to winding up in cases of oppression.
8.—(1) Any member of a company who complains that the affairs of the company are being conducted not with a view to the interest of the whole body of members, but in a

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manner oppressive to some part of them (including himself), may make an application to the court by petition for an order under this section.
(2) If on any such petition the court is of opinion—

(a) that the company's affairs are being conducted as aforesaid; and

(b) that to wind up the company would unfairly prejudice that part of the members, but otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up;

the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company's affairs in future, or for the purchase of the petitioner's shares by other members of the company, or for the surrender and cancellation of the petitioner's shares and the reduction accordingly of the company's capital, or otherwise.
(4) Any order under this section altering, or adding to, or giving leave to alter or add to, a company's memorandum or articles shall, within fourteen days after the making thereof, be delivered by the company to the registrar of companies for registration; and if a company makes default in complying with this subsection, the company and every officer of the company who is in default shall be liable to a default fine.
3.30 p.m.
VISCOUNT MAUGHAM VISCOUNT MAUGHAM moved, in subsection (1), after "conducted" to insert "contrary to the interests of the company or." The noble and learned Viscount said: This is not a very important Amendment, because I think the court would have power to deal with the matter if my words were not inserted, but it occurred to me that Clause 8 refers only to cases where some part of the body of members were acting in their own interests, and that it did not quite cover the cases where certain people were proposing something contrary to the interests of the company as a whole. To make it quite clear that in these cases application could be made to the court by a petition for an order under the section, it would be just as well to insert the words proposed. It is a very small Amendment, because in most of the cases the words as they are in the clause would meet the evil which the Amendment is designed to meet. However, I thought it might clarify the matter to add these words. I beg to move.
Amendment moved—
Page 7, line 24, after ("conducted") insert ("contrary to the interests of the company or").—(Viscount Maugham.)
THE LORD CHANCELLOR: I have put down two Amendments which I think would satisfy the noble Viscount. May I read the clause as it would be with my Amendments?
"Any member of a company who complains that the affairs of the company are being conducted in a manner oppressive to some part of the members (including himself), may make an application to the court."
I think in that way we get rid of the rather objectionable words, because, of course, the directors have to conduct the affairs of the company not merely with a view to the interests of the whole body of members but with a view to the interests of the company. I think that by omitting those words we get rid of the mischief to which the noble and learned Viscount, Lord, Maugham, has called attention. I hope the noble and learned Viscount will be satisfied with that suggestion, and will think that it improves the clause and meets the point he has been good enough to raise.
VISCOUNT MAUGHAM: Will the noble and learned Viscount tell me whether that covers a case where a member of the company complains that a proposal is being made which he can satisfy the court is one which will ruin the company—some hopelessly violent speculation which was not within the purview of the shareholders when the company was formed? Would that be covered by his words or would it not?
THE LORD CHANCELLOR: No, I do not think it would.
VISCOUNT MAUGHAM: It would not be oppressive to a particular person, but it would be quite wrong in the interests of the company as a whole, having regard to the objects of the company as they were originally defined by the prospectus.
THE LORD CHANCELLOR: If the case is ultra vires no doubt it could be stopped. If, on the other hand, it is intra vires it seems to me a matter for the company to decide and not a matter for the court to decide. That case, therefore, would not come within my words. My words hit only the case of the oppression of the minority. Where you have the oppression of the minority, then this clause will operate. I think the noble and learned Viscount will find that that is a better way of dealing with it than by inserting his words.
VISCOUNT MAUGHAM: I am not thinking of a case where the proposal is one ultra vires the company, because, of course, that could easily be stopped. The noble and learned Viscount knows perfectly well that under the modern form of Memorandum of Association a company which is formed to carry on some small tin mine in Cornwall can no doubt enter into the enormous transaction of trying to find diamonds in Bolivia. There is practically nothing that you cannot do under the modern Memorandum of Association. I am thinking of a case where, not long after the formation of a company, we will say for legitimate tin mining in Cornwall, the directors think fit to embark on an enterprise which nobody ever thought of when the company was formed. That is not ultra vires. I would not be sorry if Clause 8 of this present Bill were so worded that you could go to the company by petition and say: "This is humbug, because the company is being changed from its original intentions." Having said that, I hope the noble Viscount will consider the matter. To my mind it is a real point of value, but I do not think it is right for me at the present moment to insist upon my Amendment, and I therefore beg leave to withdraw it.
VISCOUNT SWINTON: May I suggest this? Is not really what my noble and learned friend has in mind a case where the members want to get rid of the board of directors? If they are conducting the business scandalously and foolishly there is the opportunity in general meeting, and indeed by a special resolution, to get rid of the board of directors. When we vote at an election no such opportunity presents itself year by year. I suggest that it would place the court in an extraordinarily difficult position if, whenever any part of the shareholders thought that the business was being badly or foolishly conducted, they could then apply to the court. Would that not really be making the Court of Chancery and the Company judge almost the manager of any business which happened to be taken there? That was never contemplated. If there is a bad management it has to be sacked by the shareholders and not dealt with by the court.
LORD SIMONDS: I would like to support what the Lord Chancellor has just said. I doubt very much the wisdom
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of allowing the court to intervene except in one of two circumstances. One is, either that what is proposed is ultra vires, or secondly, that it is oppressive to a minority. That, of itself, is a sufficiently vague expression to cause enough trouble. I would hesitate very much to allow the court to go further and intervene if it was satisfied that something was not in accordance with the general interest of the members, or something of that kind. Therefore, I would carry what aid I may to the Lord Chancellor—although I do so with great diffidence, sitting beside the noble and learned Viscount, Lord Maugham.
THE LORD CHANCELLOR: I also differ with very great diffidence, but I would point out that it is plain that this clause is dealing with minorities, and the rubic says: "Alternative remedy to winding up in cases of oppression." I am quite certain we ought to confine this clause to what is called oppression of minorities, and not to extend it further. Myself, I think it would be unwise to invest the court with the duty of being a sort of super-manager, even although what is being done is within the vires of the company. I think the right course is to sack the board of directors.
LORD SALTOUN: Before we leave this point may I ask the noble and learned Viscount if there is any particular virtue in the words "(including himself)" being between brackets. Would he consider that another time?
VISCOUNT MAUGHAM: I have already asked leave to withdraw my Amendment, and I now ask leave to withdraw it again.
Amendment, by leave, withdrawn.
THE LORD CHANCELLOR: The next is the Amendment which I indicated just now, which makes it plain that the proper way in which to consider this matter is that the directors have to act in the interests of the company. The effect of this Amendment and the succeeding one is to achieve this end. I beg to move.
Amendment moved—
Page 7, line 24, leave out from ("conducted") to ("in") in line 25.—(The Lord Chancellor.)
On Question, Amendment agreed to.
LORD CHORLEY: The next is a drafting Amendment.
Amendment moved—
Page 7, line 26, leave out ("them") and insert ("the members").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: This also is a drafting Amendment. As the clause stands, it might be thought to imply that when the purchase of the petitioner's shares by other members of the company takes place, there would be a reduction in capital. The proposed words have been suggested in order to prevent that construction of the clause. I beg to move.
Amendment moved—
Page 8, line 1, leave out ("for the surrender and cancellation of the petitioner's shares and") and insert ("by the company and, in the case of a purchase by the company, for").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: With reference to the next Amendment, subsection (4) provides that where on the application of oppressed minority shareholders the court make an order regulating the conduct of the company, or something of that kind—possibly an alteration or an addition to the Memorandum or Articles of the company—the order made by the court must be filed with the Registrar of Companies. Quite obviously, it would not be equally convenient to file the order itself, and the Amendment requires instead that the office copy shall be filed. Obviously this is very much for the convenience of the company, and there are already precedents for it. In these circumstances I hope your Lordships will insert the Amendment, which I beg to move.
Amendment moved—
Page 8, line 16, at beginning insert ("an office copy of").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY LORD CHORLEY moved, at the end of subsection (4), to insert the following new subsection:
"(5) In relation to a petition under this section, section three hundred and five of the principal Act (which confers power among other things to regulate the procedure and fees on winding-up petitions) shall apply as it applies in relation to a winding-up petition."
The noble Lord said: This Amendment makes procedure on petition under Clause 8 subject to the rules made, in the same way as winding-up rules, and not to the ordinary rules of court. Clause 8 gives to the court wide discretion to make orders in the case of the oppression of minority
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shareholders, and to a large extent questions arising will be identical with those which a court has to decide in connexion with a petition to wind-up a company on the grounds that it is just and equitable to do so. The petitioner may well wish to ask for both forms of relief in the alternative. The Cohen Report is not perfectly clear, but it rather seems to take the view that the relief for which Clause 8 provides should be granted only on a winding-up petition. It does seem that, on balance, it should not be confined to a winding-up petition but that the right to make these applications, should exist in good cases and apart from such petitions. In the circumstances, I hope that the Amendment will receive the approval of your Lordships. I beg to move.
On Question, Amendment agreed to.
Clause 8, as amended, agreed to.
Clause 9:
Extension of time limit under s. 61 (2) of principal Act.
9. In subsection (2) of section sixty-one of the principal Act (which limits the time allowed a dissenting minority for applying to the court to cancel a variation of the rights attaching to any particular class of shares to seven days after the agreement of the majority is given) for the words "seven days" there shall be substituted the words "twenty-one days":
VISCOUNT MAUGHAM VISCOUNT MAUGHAM moved to leave out "twenty-one days" and insert "fourteen days" The noble Viscount said: This Amendment was put down only to make sure that the point was considered. I may say that I have had a great deal to do with the alteration of rights of shareholders where there has been a dissenting minority, and it is quite clear that the Cohen Committee did right in thinking that seven days was not long enough to allow a dissenting minority to apply to the court. It really did not give them sufficient time. I quite agree with the Committee, but I think it would probably be enough if the time were extended to fourteen days. I could not quite see why the Cohen Committee jumped to the conclusion that three times the previous period should be allowed. After consideration, however, it has been thought that the Cohen Committee's suggestion is the one which should guide the House. I should therefore be quite willing to withdraw my Amendment, because I do not consider it is of particular importance. I beg to move.
Amendment moved—
page 8, line 28, leave out ("twenty-one") and insert ("fourteen")—(Viscount Maugham.)
THE LORD CHANCELLOR: As between twenty-one and fourteen days I have only this to say. The Cohen Committee recommended twenty-one days, and when we bear in mind that the minority shareholders have to secure a total of 15 per cent.—which needs a bit of organizing—it seems to me there is no good ground for saying that the recommendation of the Cohen Committee should not be adhered to. We have looked into this matter, and we came to the conclusion it was better to stick to twenty—one.
VISCOUNT MAUGHAM: In these circumstances, I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
Clause 9 agreed to.
Clause 10:
Acquisition of shares of shareholders dissenting from scheme or contract approved by majority.
10.—(1) In subsection (1) of section one hundred and fifty-five of the principal Act (which enables a company, where a scheme or contract involving the transfer to it of shares in another company has been approved by the holders of nine-tenths in value of the shares affected, to acquire the shares of the dissentients) the reference to the shares affected shall be taken as referring only to the shares whose transfer is involved, and as not including shares already held at the date of the offer by the transferee company or a nominee for it.
(2) Except where either there are no shares held as aforesaid, or the shares held as aforesaid (or, in the case of a scheme or contract relating to a class of shares, such of the shares held as aforesaid as are of that class) are not of a value greater than one-tenth of the aggregate of their value and that of the shares affected, the said subsection (1) shall apply only if—

(a) the transferee company offers the same terms to all holders of the shares affected or, where those shares include shares of different classes, of each class of them; and

(b) the holders who approve the scheme or contract, besides holding not less than nine-tenths in value of the shares affected, are not less than three-fourths in number of the holders of those shares.

(3) Where in pursuance of any such scheme or contract as is mentioned in the said section one hundred and fifty-five shares in a company are transferred to another company or its nominee, and those shares together with any other shares in the first-mentioned company held by the transferee company or a nominee for it at the date of the transfer comprise or include nine-tenths in value of the shares in the first-mentioned company or of any class of those shares, then—
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(a) the transferee company shall within one month from the date of the transfer (or the first such transfer) give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class, as the case may be, who have not assented to the scheme or contract; and
(5) In subsection (2) of the said section one hundred and fifty-five (which enables the transferee company, if dissenting shareholders after being given notice under subsection (1) of the company's desire to acquire their shares fail to transfer them, to become registered as holder thereof, without execution of any instrument of transfer, on transmitting to the transferor company a copy of the notice requiring the transfer and on complying with certain other requirements), after the words "transmit a copy of the notice to the transferor company" there shall be inserted the words "together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company."
VISCOUNT SWINTON VISCOUNT SWINTON moved, in subsection (1), to leave out "by the transferee company or a nominee for it "and to insert" by, or by a nominee for, the transferee company or its subsidiary." The noble Viscount said: In a sense, this is a technical Amendment, but I think one of some substance. Clause 8 has given this wider protection to minorities. I had a number of Amendments suggested to me but I think almost every suggestion made is amply met 'by the excellent provisions in subsection (2) of Clause 8, which enables a court, if a minority is being in any way oppressed, to make whatever order it thinks right in the circumstances. That seems to me much better than trying to provide in detail for a whole heap of circumstances by a great many provisions, none of which in the event may exactly meet the particular case.
Clause 10, however, does deal with a particular prohibition. Let us suppose that there is a proposal that all shares in Company A should be transferred to Company B, which I will call the transferee company. It has always been allowed, and it is confirmed and reinforced here, that that may be done if you get 90 per cent of the shares voting. It is possible to compel the dissentient to come in. But this clause reinforces the provision of the old Act which provides that if the transferee company hold shares in Company A, it is not allowed to count the shares in ascertaining whether there is a 90 per cent. vote. That is obviously

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right, because they have a vested interest in trying to get hold of the rest of the shares. They are a very directly interested party.
Clause 10 provides that any nominee of the transferee company may not count its shares. You may have cases—I know such cases have arisen—where shares are not held by the transferee company or nominee company but by some subsidiary or associated company, which is just as directly interested as the transferee company itself. Obviously, whatever form this second company takes, if it is under the direction, or can be placed under the direction of the interested transferee company, its shares ought not to count in the voting. Therefore, I beg to move my Amendment.
Amendment moved—
Page 8, line 39, leave out ("by the transferee company or a nominee for it") and insert ("by, or by a nominee for, the transferee company or its subsidiary").—(Viscount Swinton.)
LORD CHORLEY: I am glad to say that we shall be pleased to accept this Amendment. It does dot the "i's" and cross the "t's," and improves the clause.
On Question, Amendment agreed to.
LORD CHORLEY: This is a mere drafting Amendment filling out this particular clause. I beg to move.
Amendment moved—
Page 8, line 41, leave out from beginning to ("a") in line 1 on page 9, and insert ("Where shares in the transferor company of the same class or classes as the shares affected are held as aforesaid to").—(Lord Chorley.)
On Question, Amendment agreed to.
VISCOUNT SWINTON: This is consequential upon the Amendment which has just been accepted. I beg to move.
Amendment moved—
Page 9, line 17, leave out ("by the transferee company or a nominee for it") and insert ("by, or by a nominee for, the transferee company or its subsidiary").—(Viscount Swinton.)
On Question, Amendment agreed to.
LORD CHORLEY: This is another drafting Amendment. As the clause is drafted, it suggests that the transferee company has to give notice, within one month of the first transfer of shares to it, of the fact that it holds nine-tenths in value of the shares in the transferor com
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pany, whereas the first such transfer might occur before the transferee company had acquired nine-tenths in value of the shares. I beg to move.
Amendment moved—
Page 9, line 22, leave out ("or the first such transfer") and insert ("unless on a previous transfer in pursuance of the scheme or contract it has already complied with this requirement").—(Lord Chorley.)
On Question, Amendment agreed to.
3.56 p.m.
LORD CHORLEY LORD CHORLEY moved at the end of subsection (5), to insert:
"and at the end of the said subsection there shall be added the following proviso:—
'Provided that an instrument of transfer shall not be required for any share for which a share warrant is for the time being outstanding."
The noble Lord said: This Amendment exempts bearer shares from Clause 10 (5). Clause 10 (5) provides that where in pursuance of a scheme which under Section 155 of the Companies Act has been accepted by 90 per cent. of the members of a company for the transfer of their shares to another company, the latter company compulsorily acquires shares of a dissenting minority; the necessary instrument of transfer has to be executed, naturally, on behalf of the shareholder on the one hand, and by the company which is acquiring the shares on the other. It is not appropriate that this procedure should apply in the case of bearer shares, which are not susceptible of this sort of treatment, and the Amendment proposed is to remove bearer shares from the ambit of the subsection. I beg to move—
Amendment moved—
Page 10, line 7, at end insert the said words.—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 10, as amended, agreed to.
Clause 11:
Books of account.
(2) A company shall not be deemed to comply with the requirements of the said section one hundred and twenty-two by keeping books of account at a place outside Great Britain, unless there are sent to, and kept at a place in, Great Britain and are at all times open to inspection by the directors such returns, made out for periods of three months or less, of the contents of the books of account kept at any place outside Great Britain as will disclose all information material for the purpose of preparing the next profit and loss account and balance sheet.
LORD DE L'ISLE AND DUDLEY LORD DE L'ISLE AND DUDLEY moved to leave out subsection (2) and insert:
(2) Where a company carries on business at one or more places outside Great Britain there shall be kept at the registered office of the company in Great Britain or at such other place or places in Great Britain as the directors may decide, such accounts and returns from the business carried on as shall disclose with reasonable accuracy the financial position of such business at intervals not exceeding three months and shall enable the company to prepare a balance sheet and profit and loss, or income and expenditure, account required by this Act.
The noble Lord said: The Amendment which stands in my name is really one of drafting more than one of principle. My intention has been to carry out what is obviously meant by this Clause of the Bill, but it seemed to me that the words of the Cohen Committee Report would do so in a more workmanlike way than the words which are actually in the Bill as drafted. The words in the Bill might imply that a company making returns from a foreign branch would have to take stock every three months. That would obviously be an onerous provision and would cause unbusiness-like procedure. I suggest that it is not a provision which ought to be allowed in the Bill. The actual words in the clause are:
"As will disclose all information material for the purpose of preparing the next profit and loss account and balance sheet."
As I read those words it might mean taking stock in the way I have suggested. There may be some strong reasons why the words in the first part of the clause should be as they are, but, reading the two side by side, it seemed to me that the wording of the Cohen Report was simpler and more straightforward. I beg to move.
Amendment moved—
Page 10, line 20, leave out subsection (2) and insert the said new subsection.—(Lord de L' Isle and Dudley.)
THE LORD CHANCELLOR: In substance, I agree with the noble Lord, but not with the actual form of his Amendment, the wording of which, I think, comes straight out of the Cohen Report. It is defective, I suggest, because it does not bring in the pains and penalties of Section 122 of the Companies Act. That section is the section which provides that a company must keep proper books of account, and provides penalties for not doing so. The effect of those words in
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the first part is, of course, to bring in the Penalty Clause of Section 122. When we get past that opening, I agree with the noble Lord. I think that his words which, as I say, I believe are the wards of the Cohen Report—are preferable to our words. What we have endeavoured to do is to combine the good features of both. Your Lordships will see that I have put down an Amendment to page 10, line 24, to leave out from "such" to the end of the clause and insert certain new words. I think the new words are the ones which the noble Lord has in mind. So what will happen is that after our introduction, those words will go in. I consider that in that way we combine the best of both these features. If the noble Lord is prepared to accept my Amendment, I think we shall both be satisfied.
LORD COZENS-HARDY: After the noble and learned Viscount, the Lord Chancellor, has considered the wording of this clause, I should be grateful if he would direct his attention to one other matter. Some companies make a practice of having half-yearly meetings, and I suggest that where those half-yearly meetings have before them audited accounts, it is unnecessary to call upon the company to furnish quarterly un-audited accounts and returns.
THE LORD CHANCELLOR: I will look into that.
LORD DE L'ISLE AND DUDLEY: In view of what the noble and learned Viscount, the Lord Chancellor, has said, I will certainly withdraw my Amendment. It is clear that the compromise which the noble and learned Viscount has outlined will meet the case. I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
THE LORD CHANCELLOR: This next Amendment is the Amendment to which I have referred, bringing in the noble Lord's wording. I beg to move.
Amendment moved—
Page 10, line 24, leave out from ("such") to the end of the clause and insert ("accounts and returns with respect to the business dealt with in the' books of account kept outside Great Britain as will disclose with reasonable accuracy the financial position of that business at intervals not exceeding three months and will enable the company's balance sheet and

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profit and loss account to be prepared in accordance with the principal Act and this Act").—(The Lord Chancellor.)
On Question, Amendment agreed to.
LORD HAWKEhad given notice that he would move, in subsection (2), to leave out from "all," where that word last occurs, to the end of the subsection and insert: "material information which could reasonably be required if the books were kept in Great Britain." The noble Lord said: I do not propose to move this Amendment at this stage, but I want to have a more careful look at what the noble and learned Viscount said in replying to a previous Amendment.
Clause 11, as amended, agreed to.
Clause 12:
Periodical accounts (including consolidated accounts of group.)
(2) Where the company is a holding company, there shall with every balance sheet and profit and loss account laid before the company in general meeting be laid also

(a) a consolidated balance sheet dealing with the state of affairs as at the end of the company's financial year of the company and its then subsidiaries; and

(b) a consolidated profit and loss account dealing with the profit or loss of the company's financial year of the company and those subsidiaries;

and the holding company shall secure that, so far as practicable, the financial year of each of its subsidiaries shall coincide with its own financial year:
Provided that, if in the opinion of the company's directors it is impracticable or would be misleading for any subsidiary to be dealt with in the consolidated accounts, those accounts shall relate only to the company and the other subsidiaries or, if there are no other subsidiaries, consolidated accounts shall not be required.
(3) The balance sheet and profit and loss account of every company shall comply with the requirements of Part I of the First Schedule to this Act, and the balance sheet and profit and loss account of a holding or subsidiary company and any consolidated accounts of a holding company shall comply with the requirements of Part II of that Schedule:
Provided that—

(a) the said Part I shall, in the case of a company which is a holding company, be subject to the provisions of paragraph 1 of the said Part II;

(b) the said Parts I and II shall, in the case of any such company as is referred to in Part III of that Schedule, be subject to the provisions of the said Part III; and

(c) the said Parts I, II and III shall be construed in accordance with the provisions of Part IV of that Schedule.

(5) If any person being a director of a company fails to take all reasonable steps to secure compliance as respects the accounts of the company with the provisions of this section and with the other requirements of the principal Act and this Act as to the matters to be stated in accounts, he shall, in respect of each offence, be 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 any such offence unless in the opinion of the court dealing with the case the offence was committed wilfully.
THE LORD CHANCELLOR: The next Amendment is a mere drafting Amendment, and it has the effect of defining consolidated accounts. I beg to move.
Amendment moved—
Page 10, line 36, at end insert ("consolidated accounts comprising").—(The Lord Chancellor.)
On Question, Amendment agreed to.
LORD CHORLEY LORD CHORLEY moved, in subsection (2) (b), to leave out "so far as practicable" and insert "except where in the opinion of the company's directors there are good reasons against it". The noble Lord said: This Amendment has been designed to meet the following Amendments in the names of the noble Viscount, Lord Swinton, and the noble Lord, Lord Rennell. Clause 12, subsection (2), provides that the holding company shall ensure, so far as practicable, that its financial year and that of its subsidiaries shall coincide. It is understood that in certain cases, particularly those where foreign subsidiaries are involved, this may give, rise to difficulty, especially in taxation matters. Therefore we have put down these words which will give the directors in a proper case an opportunity of making arrangements to meet that difficulty.
Amendment moved—
Page 11, line 1, leave out "so far as practicable" and insert the said new words.—(Lord Chorley.)
VISCOUNT SWINTON: I am very much obliged to the noble Lord for putting down this Amendment. I think it is an improvement on mine, and I venture even to think that it is an improvement on Lord Rennell's, because it is only the directors who can say whether there are any good reasons, and certainly this clause should be left reasonably flexible. "Practicable" is a very popular word, but I am not at all sure that you can define it. I am not sure that there is very much difference

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between "practicable" and "physically possible". I suppose that if a thing were very inconvenient but could be done, it would be practicable because you could do it; but it certainly might not be desirable. Unquestionably that would be far too strict a test to put upon this matter. After all, what we desire to do here is to get, full and complete consolidated accounts, and to do that in a way which not only gives information to the shareholders but, equally, is in the best interests of the company and, therefore, of the shareholders. Therefore it might be practicable and physically possible to produce all these accounts on one day, but extremely disadvantageous to the company.
The noble Lord has raised the question of foreign companies. I know from my own experience that if you were to alter the dates of accounts of a number of existing foreign companies who are subsidiaries of British companies, the result would be to attract a very large measure of additional taxation. That might be of benefit to the foreign exchequer, but it certainly would not be of any benefit to the British holding company. I could take other examples, but in the same way difficulties do not exist only outside this country. I can think of a number of cases where it is undoubtedly more convenient to close the subsidiary accounts a month, say, before the close of the year of the accounts of the holding company. It certainly may be more convenient where these accounts are in a Colony or a Dominion. What this Amendment does is to say that the general rule should be that the accounts shall have a uniform date, but where, in the opinion of the directors, it would be contrary to the interests of the company that they should have a uniform date, then they should have the date the directors of the managing company consider is in their best interest. I think it is obvious and in all good sense.
LORD RENNELL: I entirely agree with what the noble Viscount has said, and in due course I shall beg leave to withdraw my Amendment.
On Question, Amendment agreed to.
LORD CHORLEY LORD CHORLEY moved, in the proviso to subsection (2), after "accounts," where that word first occurs, to insert:
"or if on the application or with the consent of those directors the Board of Trade so direct
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on the ground that it is not required in the interests of members of the company or in the public interest that the subsidiary should be so dealt with".
The noble Lord said: There are really two Amendments here which go together, and I propose to deal with them together. The clause requires the holding company to prepare consolidated accounts, with a proviso that if, in the opinion of the company's directors, it is impracticable or would be misleading, they may omit from those accounts any subsidiary. There has been a certain amount of criticism of this proviso on the grounds that it is thought to be insufficiently elastic. For example, it may give a company a very great deal of trouble to consolidate with its own accounts the accounts of a solitary subsidiary in which its interest was a very small one in relation to its own total assets as a holding company. These two Amendments have been designed to overcome that difficulty, and I hope your Lordships will agree that they successfully do so. I beg to move.
Amendment moved—
Page 11, line 6, after the first ("accounts") insert the said new words.—(Lord Chorley).
On Question, Amendment agreed to.
LORD CHORLEY: The next Amendment I have already referred to. I beg to move.
Amendment moved—
Page 11, line 9, at end insert ("but where a subsidiary is not dealt with in consolidated accounts by virtue of a direction of the Board of Trade, the company's accounts shall give with respect thereto such information, if any, as may be required by the direction as a condition of the subsidiary not being so dealt with.")—(Lord Chorley.)
On Question, Amendment agreed to.
VISCOUNT SWINTON VISCOUNT SWINTON moved, at the end of subsection (2), to insert:
"and provided also that where the accounts of any subsidiary company have been dealt with in the consolidated accounts of a holding company, such subsidiary company shall not be required to furnish consolidated accounts in relation to itself and its then subsidiaries."
The noble Viscount said: This is a rather complicated-looking Amendment to a rather complicated clause, and I do not know if I have put the words into the best form. We all agreed that the idea is that there shall be a consolidated account which shows a true picture of the holding company and its subsidiaries and its sub-subsidiaries, if sub-subsidiaries there be. I do not know whether I have read the

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clause aright, and have been rightly advised, but, as my friends and I read it, it appears to me to say that there must be not only that consolidated account to give the full picture of the holding company and all its subsidiaries, but one for the subsidiary company which has sub-subsidiaries—grandchildren, if I may put it in more colloquial terms. No useful purpose would be served by demanding that the grandfather should have to get out a whole set of consolidated accounts relating to the sons and to the grandsons. I think that will make my meaning clear.
I leave aside the case where a so-called subsidiary company may have a great many outside shareholders as well as the holding company. In that case, no doubt, it may be necessary for the interest and information of the outside shareholders to have consolidated accounts. Leaving aside that case, where some useful purpose would be served by this multiplication of consolidated accounts, surely a company should not be forced, if that be the effect of the Bill, to produce such consolidated accounts if it is producing a satisfactory consolidated account for the main company and all the other companies which radiate from it. I beg to move.
Amendment moved—
Page 11, line 9, at end insert the said proviso.—(Viscount Swinton.)
LORD CHORLEY: I hope that the noble Viscount will not press this Amendment too hard. I quite appreciate the point which he has made, that a certain amount of extra work might be involved by this clause when and if the Bill becomes law. On the other hand, if it is accepted, the Bill would have the effect of creating a class of holding company which would be required to submit consolidated accounts. Clause 13 of the Bill, which defines "holding company" and "subsidiary," does so by reference to effective control of the subsidiary by the holding company. In practice it is possible for there to be a very substantial number of shareholders quite apart from the holding company, and if the subsidiary were itself a holding company, its members, other than its own holding company would not receive information concerning their investments to which they would be entitled. With regard to the suggested difficulty about the preparation of the accounts, in actual fact we feel
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that this is very largely imaginary; there should not be any great difficulty in preparing consolidated accounts for the intermediate holding company, because practically the whole of the information, if indeed not the whole of it, will be required in order to prepare the consolidated accounts of the group as such. In those circumstances all the material would be there, and there should not be so very much difficulty in preparing the separate series of accounts which are called for. I do not know whether the noble Viscount feels he should press his Amendment. If he would like us to do so, we certainly would be prepared to consider the matter further between now and the Report stage.
LORD RENNELL: Might I add one thing? My main object in supporting this Amendment, or something like it, is to try to save unnecessary work. That is the sole object of it. There is no question of concealing the activities of subsidiaries. Perhaps some method could be devised whereby groups of companies—and there are certain groups which obviously leap to the mind—would not be obliged to publish unnecessary consolidated accounts where there are no outside shareholders and where nobody would be any the wiser. I hope that the noble and learned Viscount will find some method between now and the Report stage to achieve that object.
THE LORD CHANCELLOR: I will look into this between now and the Report stage. I am at one with the noble Viscount in his desire.
VISCOUNT SWINTON: I am much obliged, because I did not feel that the answer was completely convincing. In moving this Amendment, I said I wanted there to be the fullest possible information where there were any outside shareholders. The noble Lord, Lord Rennell, has supported me in this matter. I do not want companies, which are terribly overworked to-day, with small staffs, and which will have an enormous amount of work put upon them by this Bill when it becomes law, to have unnecessary work. It is not quite good enough, if I may respectfully say se, to say: "Well, it will put a certain amount of extra work upon you which will not serve any useful purpose in the case of these, wholly-owned subsidiaries, but you ought to put up with it because we want to deal with

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quite different companies where there are a number of outside shareholders." With great respect to the noble and learned Viscount, the right way of doing it is not to make the path of these companies harder by putting a lot of extra work upon them. It is for the ingenuity of the Companies Department of the Board of Trade and the Parliamentary draftsmen so to devise a clause that the companies which, in the public interests, ought to keep these accounts are required to keep them, and the others go free. I hope that something may be done.
LORD CHORLEY: The noble Lord has suggested a possible way which will enable the draftsmen to obtain the desired end. We shall certainly be very glad to consider it.
VISCOUNT SWINTON: I want to be helpful and I withdraw my Amendment.
Amendment, by leave, withdrawn.
LORD CHORLEY LORD CHORLEY moved, after subsection (2), to insert:
"(3) Where it appears to the Board of Trade desirable for a holding company or a holding company's subsidiary to extend its financial year so that the subsidiary's financial year may end with that of the holding company, and for that purpose to postpone the submission of the relevant accounts to a general meeting from one calendar year to the next, the Board may on the application or with the consent of the directors of the company whose financial year is to be extended direct that, in the case of that company, the submission of accounts to a general meeting, the holding of an annual general meeting or the making of an annual return shall not be required in the earlier of the said calendar years."
The noble Lord said: This Amendment is intended to remove a little difficulty. If a company makes the financial year of its subsidiaries coincide with its own financial year, as it is intended it should do in the ordinary case, it may result in the accounts of a company not being ready presentation before the end of a calendar year in which the company is under an obligation, under Section 123 of the Companies Act, to submit them to a general meeting. The subsection which the Amendment proposes to insert gives discretion to the Board of Trade to waive the requirements of the Act as to the submission of accounts to a general meeting under Section 123, the holding of an annual general meeting under Clause 1, or the making of an
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annual return under Section 108 of the Companies Act. This is all in the way of granting greater elasticity and will, I am sure, meet with the 2.pproval of your Lordships. I beg to move.
Amendment moved—
Page 11, line 9, at end insert the said subsection.—(Lord Charley.)
LORD RENNELL: If I may say so, this is an extremely helpful Amendment, and I am sure that everybody will agree to it.
On Question, Amendment agreed to.
LORD CHORLEY: The next Amendment gives the Board of Trade discretion to modify the requirements of the First Schedule which relate to the contents of the balance sheet, the profit and loss account and the consolidated accounts so as to suit the needs of particular companies. As it stands, the Bill contains such power in Paragraph 8, Part II of the First Schedule, but it is limited to the provisions relating to the consolidation of accounts. In view of the experimental nature of very many of the requirements and the probability that in practice they may not prove to be equally suitable to all companies, it is again thought that wide discretion should be conferred in order that we may see how the thing works out when it comes to be dealt with in practice. In those circumstances I am sure your Lordships will agree that this is a useful Amendment. I beg to move.
Amendment moved—
Page 11, line 25, at end, insert ("and Parts I and II of that Schedule shall, in relation to any company, have effect subject to such modifications as the Board of Trade on the application or with the consent of the company's directors may direct for the purpose of adapting them to the circumstances of that company").—(Lord Charley.)
On Question, Amendment agreed to.
VISCOUNT SWINTON VISCOUNT SWINTON moved, at the end of subsection (3), to insert the following new paragraph:
"The provisions of paragraph 5 of the said Part I shall not apply to the first consolidated balance sheet and consolidated profit and loss account prepared by a holding company after the provisions of this section come into force or to the first such balance sheet and profit and loss account prepared after the date on which a company becomes a holding company."
The noble Viscount said: I think the noble Lord will agree that this is an equally reasonable and practicable Amendment,

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The Schedule provides not only the form of the consolidated accounts to be presented, but that when the accounts are presented there shall appear in parallel (if I may paraphrase) what were the figures for the previous year. It is a very common practice now, and a very good practice, but if you took the Schedule and the clause as they stand what would happen would be this. After the appointed day, a first consolidated balance sheet would have to be produced by those who had not hitherto produced a consolidated balance sheet, and produced in the form which is prescribed in the Schedule. Then, side by side with that first consolidated balance sheet, there would have to come a table of figures showing what were the proper corresponding consolidated figures for the previous year.
In the case of a company which had not kept consolidated accounts like this it would mean that on the first year after the appointed day the company would have to produce not one consolidated balance sheet but two consolidated balance sheets, because, first of all, it would have to produce its balance sheet and profit and loss account for the year, and would then have to go back through all its previous accounts and produce a similar one in order to get the figures which would have to be shown in the left-hand column. I am sure that that is not intended, and that what is intended is that once you have started to produce a consolidated balance sheet year by year, as you produce each one you should give the corresponding figures of the previous year in the margin. This Amendment is only to make sure that two balance sheets do not have to be produced for the first occasion. I beg to move.
Amendment moved—
Page 11, line 25, at end insert the said paragraph.—(Viscount Swinton.)
LORD RENNELL: There is one thing I would like to say before the noble Lord replies. As it stands at present, I do not think the requirement can necessarily be achieved in certain cases, notably the case where a company which has not hitherto produced a consolidated balance sheet does so, let us say, in this present year, 1947, and for that purpose adjusts the financial years of the subsidiary companies to meet its financial year. It can do so for this year, when the financial years of the company itself and the subsidiaries
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have not yet terminated. But in order to produce the comparative consolidated balance sheet for the previous year it could not alter the financial years of the companies which had already closed, and it would, therefore, produce for the various companies a consolidated balance sheet relating to different financial years, and that would be misleading.
LORD CHORLEY: I am very much impressed by the arguments that have been adduced in favour of this Amendment, both by the noble Viscount, Lord Swinton, and by the noble Lord, Lord Rennell. While I am not quite sure that the words of the Amendment as tabled are exactly the right ones—it is a complicated matter, and I think the draftsmen should look at it again—I am very glad to say that we accept the principle lying behind the Amendment, and if the noble Viscount will withdraw it we will possibly table this actual Amendment or some alternative clause to meet the situation.
VISCOUNT SWINTON: I am obliged to the noble Lord, and I am content to leave it with complete confidence in the hands of the skilled draftsmen to produce what we all want. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
4.15 p.m.
VISCOUNT MAUGHAM VISCOUNT MAUGHAM moved, in subsection (5) after "company", where that word first occurs, to insert "wilfully and knowingly". The noble and learned Viscount said: This is an Amendment of a very important character and raises a general principle with which I venture to think the Bill, as it stands, does not accord at all. That principle has been adopted in the principal Act of 1929, which, of course, has been in force now for a great number of years. The point is this: Are directors to be liable to imprisonment and fine for a mere inability to carry out every one of the principles of book-keeping which are involved in Clause 11; or for inadvertence in some respect; or for an inability wholly to understand what accounts the company is bound, under Clause 11, to keep and to provide and exhibit for the benefit of the shareholders? Let me just remind your Lordships of this. We are here only amending the Companies Act, 1929. I would refer your Lordships to Section 122 of that Act. Not everybody has the Act in his hands, but

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I shall try and state Section 122, and two other sections to which I want to refer, with reasonable dearness. Section 122 states:
"Every company shall cause to be kept proper books of account with respect to"—
and then, reading on shortly,
"sums of money received and expended by the company all sales and purchases assets and liabilities,"
and so forth. Then it goes on, after providing that the books shall be kept at the registered office of the company:
"If any person being a director of a company fails to take all reasonable steps to secure compliance by the company with the requirements of this section, or has by his own wilful act been the cause of any default by the company there under, he shall, in respect of each offence, be 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."
In the present case we are departing from that, as I apprehend the clause, because we no longer say that it is only on the happening of a wilful act by the director that there is default and he gets fined or imprisoned. That is Section 122.
Now let me refer you to Section 365 of the principal Act. Section 365 refers, first, to a default fine, and defines it, and secondly, to officers who are in default. The first subsection is as follows:
"Where by any enactment in this Act it is prodded that a company and every officer of the company"—
that, of course, includes a director—
"who is in default shall be liable to a default fine, the company and every such officer shall, for every day during which the default, refusal or contravention continues, be liable to a fine not exceeding such amount as is specified in the said enactment, or, if the amount of the fine is not so specified, to a fine not exceeding five pounds."
Subsection (2) says that for the purpose of any enactment of this Act—and that will include, unless it is altered, as I apprehend it, Clause 12 which is now under consideration—which provides that an officer of a company who is in default shall be liable to a fine or penalty, the expression" officer who is in default" means any director, manager, secretary or other officer of the company who, knowingly and wilfully, authorizes or permits
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the default, refusal or contravention mentioned in the enactment. Now let me come to Section 372 of the principal Act, which carries out, in my opinion, the same idea that inadvertence is not to be punished. Section 372 says:
"If in any proceeding for negligence, default, breach of duty, or breach of trust against a person to whom this section applies it appears to the court hearing the case that that person is or may be liable in respect of the default but that he has acted honestly and reasonably, and that, having regard to all the circumstances of the case he ought fairly to be excused for the default that court may relieve him, either wholly or partly, from his liability on such terms as the court may think fit."
In subsection (2) of that section it is said:
"Where any person to whom this section applies has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty he may apply to the court for relief, and the court on any such application shall have the same power to relieve him.
Then it is said that the persons to whom the section applies are, amongst others, the directors of a company and the officers of a company. As I understand it, the principal Act was framed, as those sections show, upon the footing that you do not become liable either to a fine or to imprisonment unless you have wilfully and knowingly—or at any rate knowingly—disregarded the provisions of the Act. I am unable to find anything which justifies the idea that a man is guilty of a mis-demeanour if he misunderstands the provisions either of the principal Act or of the Act which will come into force when this is passed. I do not believe there is anybody who has listened to this debate who thinks it is easy to understand all these provisions, and I do not believe that there is anybody who will say that even a competent adviser will be able to tell him in every case what details he has to put into the accounts for the purpose of complying with Clause 11 of the present Bill.
It seems to me that, especially in cases where there are subsidiary companies and holding companies, it will be almost impossible to be certain exactly what has to be put into the books of accounts of a company. It is for that reason that I suggest there is a tremendously strong case, in regard to inadvertence in complying with the provisions of this Act, for saying that in such instances there is to be no liability. I will add that it will be

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in the very worst interests of companies if directors, after this Bill becomes law, are liable to be brought up either before the High Court or before a court of summary jurisdiction and charged with an offence which renders them liable either to a fine or to imprisonment. An honest man who acts as he best can in performing the very complex duties which may be enforced upon him by virtue of the present Bill ought to be free from worry or liability, or from the stigma attaching to a prosecution. In the ordinary criminal law, in 99 cases out of too the mens rea—the guilty mind—has to be established before a man can be found guilty of a crime. A fortiori is it not the case that a man who is acting as a director of a company ought not to be taken as liable under Clause 11 (or, I would add, some of the other clauses we shall reach later on) unless he has knowingly omitted something which he knew he ought to do to carry out the provisions of the Act?
Subsection (5) here refers to a person who is a director and who fails to take all reasonable steps to secure compliance. It says nothing about his inability to be present. A director is not bound to be all the time within the district so that he may attend a meeting to determine the accounts. In the performance of his duly he may be sent to a Colony or to some distant country. He cannot be in the district all the time, and he is not bound to be there all the time. It may be that he is a director of the company because of some technical knowledge which he has with regard to some process or some engineering enterprise which is one of the businesses of the company. He may know nothing whatever about accounts, and he may be unable—although it may be that he is a man possessing considerable scientific knowledge—to be quite sure that the accounts completely comply with the provisions not only of this section but also of other parts of the principal Act and this Bill regarding the matters to be stated in the accounts.
Any difficulty in Which he may be, especially if he is a person who is not in any way accustomed to dealing with accounts and who knows nothing about them, is nearly always in practice satisfied in his mind by the fact that he thinks his brother directors—one or more of them—who are far better acquainted with the matter than he is himself, have looked
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at the accounts and think they are sufficient to satisfy the provisions of the various Acts of Parliament. Is that sufficient? I venture to think that if this clause stands it is not. He has to take all reasonable steps to secure compliance with the provisions regarding the accounts, although he may know no more about accounts than a child. It will be the worst possible thing in the interests of companies as a whole to have a provision ensuring that no honest man can be confident that he will escape a prosecution unless, in some way or another, he takes a long course in economics and the keeping of accounts. In nine cases out of ten directors rely upon what their auditor tells them or on what the other directors tell them, but this imposes a liability on directors of companies who have not the commercial experience which auditors have and who, as I have said, often know very little about accounts.
More particularly it involves the accounts of subsidiaries. With all the force at my command I ask the noble and learned Viscount to consider whether the present clause is not far too drastic, and whether something ought not to be put in to ensure that a man cannot be held liable to the disgrace of a prosecution for mere inadvertence or mere inability to make sure what has to go into the accounts. For my part, I have never yet been in a court of summary jurisdiction, and I hope to escape, but if I were entering into the dangerous enterprise of being the director of an important public company, I should be very much afraid that I should find myself before very long in such a court, accused of having failed to take all reasonable steps to secure compliance with all the multifarious provisions of these various Acts. On those grounds I beg to move.
Amendment moved—
Page 11, line 32, after ("company") insert ("willfully and knowingly").—(Viscount Maugham.)
LORD SIMONDS: May I say one word in support of the Amendment moved by the noble and learned Viscount? My question is quite a simple one. What do the words "fails to take" mean? If they only mean "does not take," pray let it be said. If, on the other hand, they mean "knowing that he ought to take but does not take," that is a very

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different thing. I cannot help thinking that the phrase "fails to take" is substituted for the simple words "does not take", because I find a point of distinction in the proviso. You will notice that the proviso to this clause says:
"Provided that a person shall not be sentenced to imprisonment for any such offence unless in the opinion of the court dealing with the case the offence was committed wilfully."
That certainly suggests to my mind that at any rate the intention of the clause is that ha may be sentenced to a fine not exceeding £200; that is to say, that he may be subjected to the ignominy of a prosecution and to the more serious loss which a fine will entail upon him, simply because he has not taken certain steps. That, as my noble and learned friend has said, runs contrary to the most sacred principles of our law, and I do, with him, protest most emphatically against the provision in this Bill which imposes upon inadvertence—and inadvertence in a matter of peculiar complication—the possibility of prosecution and fine.
THE LORD CHANCELLOR: I am a little surprised that from two such eminent masters of this topic of the law comes advice which is completely contrary to that which I have received from the Board of Trade. Having read the sections of the Companies Act, I am bound to say, with the greatest respect to the two noble Lords who have spoken, that I prefer the advice of the Board of Trade. These words "fails to take" are taken out of the Companies Act. They are the precise words in Section 122 and Section 123 of that Act. The position which the Companies Act takes up, and which we desire to take up here, is this: Suppose you have a man who has failed to take steps which this Act requires. If he has been Wilful and deliberate about this matter, then we say the penalties are either fine or imprisonment in such a case. It may be either. But we add that so long as he has not been wilful then it cannot be imprisonment. We desire to have that for this reason. It is not infrequent that people are repeatedly fined owing to negligence—they just cannot be bothered. It is not that they are wilful in filling up anything they should not do, or not filling up something which they should fill up; it is that they cannot be bothered. They are negligent and they are careless.
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If there is a case where this sort of thing goes on repeatedly, it is surely right and proper that the Board of Trade should have power to authorize a prosecution—I think it is the Board of Trade who do it—and to obtain a pecuniary penalty. I entirely agree that imprisonment is quite inappropriate where you have mere negligence, but where you have repeated negligence—and the Board of Trade do not desire to use this power except in cases of repeated negligence—we think it ought to be dealt with. I submit it is then right that the Board of Trade should have this power. Let us go for a moment to precedents. Let us look at Section 122 and Section 123 of the Act. Section 123 is the exact counterpart of this section, but may we come first to Section 122? Section. 122 is the section which provides that proper books of account of the company are to be kept. Subsection (3) says this:
"If any person being a director of a company fails to take all reasonable steps to secure compliance by the company with the requirements of this section"—
those are the precise words, and now we come to an alternative—
"or has by his own wilful act been the cause of any default by the company there under"—
those are the two cases—
"he shall, in respect of each offence, be liable on summary conviction to imprisonment … or to a fine. …
Provided that a person shall not be sentenced to imprisonment … unless the offence was committed wilfully."
It is quite plain, therefore, he may be sentenced to a fine, even although the offence was not committed wilfully.
Now we come to Section 123. It is a section which deals with the profit and loss account and balance sheet. Subsection (3) says:
"If any person being a director of a company fails to take all reasonable steps to comply with the provisions of this section, he shall, in respect of each offence, be liable on summary conviction to imprisonment … or to a fine …
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."
There again, it is, with the greatest possible respect, as plain as a pikestaff that where you have this man guilty, but not guilty wilfully, he can be subjected to a fine. This is precisely what we desire in our clause. I had certainly intended to

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follow the precedent of the Act of 1929, and I gladly look to see whether I am not following the precedent of the Act of 1929. I believe that I am, and I desire to. I believe that the effect of the Act of 1929 is this: If the offence is committed wilfully then you are in peril so far as imprisonment is concerned. If the offence is not committed wilfully, then the most you risk is a fine.
But I give your Lordships the assurance that the Board of Trade are not going to be astute to pick out any possible failure to comply with one of the complicated provisions of this Act, and thereupon try to get a fine, because our magistrates are wise, and if they do any such foolish thing I am certain the fine would be the smallest coin in the realm. I do, however, give your Lordships the assurance that that is not the intention at all. We think it right and do desire to have the power to exact a fine in cases of repeated negligence—not wilfulness, but where a person has not bothered about a thing. In those circumstances we consider there ought to be a right to take the matter to the court. It is for the magistrate to decide what the measure of the fault is, and what the extent of the fine shall be. But we think there should be power, in that case, to exact a fine. In view of the fact that some of your Lordships, with great authority, have talked of something new and departing from precedent, I will gladly look at it again. But if, as at the present moment I am advised, and on my own reading of the Act, I am following the precise provisions of the 1929 Act, I should desire in this Bill to adhere to those provisions.
LORD BALFOUR OF INCHRYE: I wonder if I might be able to intervene in this legal argument. It seems to me there are certain aspects of the case put up by the noble and learned Viscount, Lord Maugham, which have not been answered from the point of view of the ordinary citizen who is perhaps exercising the function of a director and who does not want to be guilty of repeated negligence, but who, without any intent to be negligent, fails to take all reasonable steps. Let us take the case of the technical director about whom my noble friend Viscount Maugham spoke. This director is put on the board of the company, not because he has any particular holding in that company, but in order to give him
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the status and position of director in the exercise of his technical functions. Let us assume that he is sent to the Malay States, India, or elsewhere overseas, on duties concerned with his company, and that while he is away the board fail to take certain reasonable steps in accordance with this Act to fulfil the provisions of the Act. Is that director then liable to the stigma of prosecution because he is in fact bearing a share of responsibility—indirect, if you like—as regards the failure of the rest of his colleagues on the board to take reasonable steps? If that is so it seems to me that we are prejudicing the freedom of boards to co-opt people for specific technical purposes and, equally, men will be very hesitant to accept such positions.
THE LORD CHANCELLOR: This is criminal law: you do not hold a man guilty because of a vicarious principle; he is guilty only for what he has done.
VISCOUNT MAUGHAM: Pardon me, the point is whether he is guilty.
THE LORD CHANCELLOR: The noble and learned Viscount does not realize that I am speaking. If a director has gone abroad to Malaya, leaving competent directors behind, it will be absolutely impossible for a common-sense magistrate to hold that he is guilty of a breach of the provisions of the Act.
VISCOUNT MAUGHAM: I apologize to the noble and learned Viscount for intervening while he was speaking. I think he will agree—to pot the case perfectly correctly—that he was stating what the criminal law was in regard to something done by a man; but that is not the question here. The question is whether a man is liable for something he has not done. Therefore the example or the proposition which was advanced by my noble and learned friend was not, I think, apposite in the present case. Let me say this. Certain suggestions have been made as to the intentions of the Board of Trade. Let the intentions be embodied in the Bill. But what the intentions of the Board may be in ten, fifteen or fifty years hence the noble and learned Lord Chancellor knows no more than I do, and his views as to what the Board would then do are, I venture to think—unlike other statements of my noble and learned friend—not really statements which should have very great force in deciding the course which your Lordships should take in this case.

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I pass this aside unless and until an effort is made to say that these clauses will be applicable in actual cases of negligence by a director. That would be quite a different matter, but nothing of the sort is in the Bill. Indeed, the whole case of my noble and learned friend was given away when he said, in answer to the argument of my noble friend on my left, that it is true that this means simply that the director does not do something. He does not do something for he is in Malaya, and he is liable then to be prosecuted because he has been away; and I am not prepared to say that in those circumstances it is right to allow this clause of the Bill to pass. It is perfectly easy to put the matter right. We are told that no man in his senses would then prosecute the director. Well, it may be so; yet I know that there are a good many prosecutions which take place in the courts of summary jurisdiction which, according to the opinion of others and the courts before which the matter comes, no reasonable man ought to have brought. Nevertheless they are brought from time to time. I am greatly concerned that directors can be liable for mere inadvertence, even though we have the assurance of the noble and learned Viscount that the Board of Trade would very seldom interfere. My noble and learned friend relies on Section 121 of the principal Act which I endeavoured to read as clearly as I could. I must remind him that this is subject to Section 365 (2) and I should like him to tell me whether he agrees that Section 365 (2) of the principal Act will apply to the present Act when this Bill has come into force.
THE LORD CHANCELLOR: Of course it will apply to the present Bill. I read it that Section 365 deals with civil liability, and does not touch criminal liability.
VISCOUNT MAUGHAM: Surely my noble and learned friend is wrong. If he will look again he will see that it is a provision with regard to default fines and officers in default, and it says distinctly
"For the purposes of any enactment in this Act which provides that an officer of a company"—
which includes director—"
who is in default shall be liable to fine or penalty."
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That is not civil liability; it is criminal liability—liability to default fines, generally speaking, executed by a court. The subsection states:
"The expression officer in default means any director, manager, or secretary or other officer, who knowingly and wilfully authorizes or permits default, refusal or contravention, mentioned in the enactment."
What the precise intention of the draughtsman was in Section 122 when he penned that very curious phrase which I ventured to read, I do not quite know, but he did no harm, as I apprehend the case, because Section 365 has a distinct provision that officers of companies who are in default are not to be liable for fine or penalties unless they knowingly and wilfully have authorized and permitted default. Those, to my mind, are as clear as any words can be in an Act of Parliament in the present year of our Lord. They are absolutely clear. If they apply, and if I am satisfied that they apply, I am not so worried about the present Amendment. If they have nothing to do with the case, but relate only to some civil obligation, then I shall insist upon my point so far as I can, fortified, as I am, by the very distinguished support that I have obtained, and I shall propose to divide the House.
THE LORD CHANCELLOR: I should have thought that Section 365 was really a definition of the default and fine. Is it not Section 372 that the noble Viscount is thinking of? That gives him, I think, what he wants. Of course, Section 372 will be subject to this Bill; it will find its place in an Act of Parliament which will contain both Section 365 and Section 372. I am only making the suggestion. If the noble Viscount wants to divide the House, he can do so. I have already said that I will, with my advisers, look into this to see whether I am right or wrong. I believe I am right, I am advised that I am right and I think that I am right, but on a question of this sort I am willing to look into the matter between now and the Report stage. As at present advised, I am not prepared to give way on what seems to me to be a matter which goes to the root of this Bill. If it is going to mean that, however negligent anyone may be in failing to comply with the provisions of the Act, he is to be immune from all proceedings or penalties, we may as well cease going on with

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this Bill. We regard it as a matter of the first importance that a man who, by his negligence, fails to carry out the duties which this measure thrusts upon him should not be able to get away with it. We say he ought to be subject to the risk of going before a magistrate who will be able, even though it appears that an offence has not been committed wilfully, to consider the circumstances and to say to what extent a penalty is appropriate.
VISCOUNT ELIBANK: I wish to say a few words from the practical point of view rather than upon the legal aspect, which has been so ably put by my noble friend, Viscount Maugham. I have been a director of companies and a chairman of companies for many years, and I have had something to do with the constitution of boards. As has been pointed out this afternoon, boards consist of all kinds of people. They not only consist of the chairman—who may be merely a practical business man—but very often, and indeed usually, comprise technical experts, engineers, scientific men and so on. And, as a rule, there are one or two members who are particularly cognisant of accountancy and financial affairs. In all my experience, I have hardly ever known technical men, engineers or others, who claim any knowledge of accounts, qua accounts. According to this clause, as it is drafted, every director of a company will be in the position of having to know about accounts; otherwise if anything happens—whether inadvertently or otherwise—he may find himself in the dock. What is going to be the effect if this clause comes into force with its present phraseology? I can visualize that on every board, technical and scientific members or other members who are there for specific reasons will consider their positions with a view to deciding whether, in the light of this clause, they will remain in their positions on the board. It is quite likely that many boards, in the circumstances, will lose the services of very useful and eminent persons.
To carry this point still further, I would say that in the constitution of future boards this question will be coming up all the time. The Lord Chancellor shakes his head, but it is a fact. I speak from practical experience. I know that that is what will happen. I think it will be a great deterrent to the efficient constitution of boards in the future if
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this clause is passed in the way in which it is phrased today. I wholeheartedly support my noble friend, Viscount Maugham, in his Amendment. As it is phrased its wording may not be the exact wording that ought to be adopted. But something should certainly be put in the clause which will, at any rate, indicate to technical people, engineers, scientific men and the like, that they are not liable to prosecution because of something that may happen to the accounts of a company. If that is not done, I feel that this will be a very serious blot on the Bill. I hope that the noble and learned Viscount the Lord Chancellor will not remain so adamant as he appears to be at the present moment on this subject. If my noble friend, Viscount Maugham presses to a Division I shall gladly support him. I would rather not see this go to a Division, however. I hope that the noble and learned Viscount will consider the matter and see whether this part of the Bill cannot be put into more practical shape than it is to-day.
THE LORD CHANCELLOR: I have already said that I am prepared to consider this between now and the Report stage in order to see whether I have been following the precedent of the 1929 Act. I believe that the terrors which the noble Viscount has mentioned are there to-day. I have not a shadow of doubt that it would be absolutely foolish to say that a technical director, who leaves matters of accounts to a man far better qualified to understand them than he is himself, commits no offence at all. That is an absolute chimera. I think that the necessary provision is there to-day, and I want it to be there to-morrow.
VISCOUNT MAUGHAM: I am sure that everyone in the House is anxious to assist in making a reasonable amendment of the Companies Act, the principal Act, and we are therefore all in the same position as regards our wishes. At the moment I confess, and I say it without any heat at all, that I do not think the noble and learned Viscount who sits on the Woolsack is taking the right view as to the existing Act. Nor do I think that he is taking quite the right view as to the effect of this clause if it becomes law, having regard to the place where it is and the great by increased obligation that is put on companies with regard to their accounts.

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I know that 'there is a point on Section 122 of some weight. On the other hand, it is a curious thing, as regards the drafting of the principal Act, that Section 274, to which I have not previously referred, seems (as I think) to indicate that there has got to be some knowing act in not insisting upon the accounts being properly kept.
Your Lordships may remember that where a company is being wound up, the provision is that the director who was knowingly a party to or connived at the default of the company with regard to the proper books of account not being kept is to be liable unless he shows that He acted honestly. If something of that sort were inserted in the present clause 1 should be perfectly content. I am sure I have not the reputation of being unreasonable, and I am only desirous of making sure that honest men shall not be subject to the stigma of being attacked in cases where they really have acted honestly. It is not sufficient for me, I must confess, to be told that the Board of Trade will not take unreasonable action, because we have not the Board of Trade here and we do not know what they may do in the future. I think the Bill ought to be put right. The Act, when this Bill becomes an Act, ought not to justify something which is unreasonable. However, we have the promise of the noble Viscount to look into it, and I hope he will do so with a view to the possibility that my noble friends who have supported me really would not have supported me if I had had no grounds for the suggestions that I have made, and that it is possible that we are right. In these circumstances, I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
LORD MANCROFThad given notice that he would move, in the proviso to subsection (5), after "imprisonment" to insert "or fine." The noble Lord said: This Amendment is a consequential one, and in view of the debate that has just taken place I shall not move it. At the same time, associate myself as strongly as I can with the remarks made by my noble friend.
Clause 12, as amended, agreed to.
Clause 13:
Meaning of "holding company "and "subsidiary."
13.—(1) For the purposes of the principal Act and this Act, a company shall, subject to the provisions of subsection (3) of this section, be deemed to be a subsidiary of another if, but only if—
(b) the first mentioned company is a subsidiary of a third company which is that other's subsidiary, whether immediately or as itself falling within this paragraph.
(2) For the purposes of the foregoing subsection the composition of a company's board of directors shall be deemed to be controlled by another company if, but only if, in relation to the directorships or a majority of them, one or other of the following conditions is satisfied, that is to say—
(a) that a person's appointment thereto or continuance therein depends on that other company exercising in his favour or not exercising against him some power exercisable by that other company without the consent or concurrence of any other person, or can be made so to depend by the exercise of any right or power so exercisable; or
(3)In determining whether one company is a subsidiary of another—

(a) any shares held or power exercisable by that other in a fiduciary capacity shall be treated as not held or exercisable by it;

(b) subject to the following paragraph, any shares held or power exercisable—

(i) by any person as a nominee for that other (except where that other is concerned only in a fiduciary capacity); or

(ii) by, or by a nominee for, a subsidiary of that other, not being a subsidiary which is concerned only in a fiduciary capacity;

shall be treated as held or exercisable by that other;

(c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first mentioned company or of a trust deed for securing any issue of such debentures shall be disregarded.

THE LORD CHANCELLOR: The next is a mere drafting Amendment. I beg to move.
Amendment moved—
Page 12, line 40, leave out "a third" and insert "any."—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This is also a drafting Amendment.
Amendment moved—
Page 12, line 41, leave out from "subsidiary" to the end of subsection (1).
On Question, Amendment agreed to.
5.15 p.m.
THE MARQUESS OF READING THE MARQUESS OF READING moved to leave out subsection (2). The noble Marquess said: In putting down the Amendment to leave out this subsection, I have two matters in mind. The first is that I do not think the most admiring supporter of the subsection would describe it as one of the most lucid which has found its place in this particular Bill. I am somewhat fortified in that view by the fact that I see there is an Amendment standing in the name of the noble and learned Viscount the Lord Chancellor which does seek to make some alteration in the rather obscure language at present used. The point is whether this particular subsection is necessary, or whether it is redundant. I do not want at this stage to press this except to get a view from the noble and learned Viscount on that aspect of it, in conjunction with his suggested change in the wording. There is also a proviso, and when I said that this particular clause was not amongst the most lucid I would rather put it the other way round as regards the proviso, and say that it seems to be amongst the least lucid wording in this particular Bill. In view of the fact that the noble and learned Viscount has an Amendment to this clause, it would, perhaps, be convenient to deal with the matter at one time, and at this stage I would merely move my Amendment.
Amendment moved—
Page 13, line 1, leave out subsection (2).—(The Marquess of Reading.)
THE LORD CHANCELLOR: I must say I agree with the noble Marquess who has just spoken as to the obscurity of this wording. It is very easy to criticise draftsmen, but I suppose if we ourselves sat down and tried to draft a Bill, everybody would be absolutely horrified at the obscurity. It may, therefore, be quite inevitable. However, I agree with the noble Marquess myself, having read it over several times. I have been at some pains to find out, and I think I know what the effect of the original clause is, and what the effect of my Amendment is. Your Lordships will see that in Clause 13, page 12, line 36, it says: "controls the composition of its board of directors." That is one of the tests of a subsidiary, and what we deal with next is to say what constitutes the right to control the appointment of a board of directors. The clause as originally drawn says this:
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Company A is to be treated as a subsidiary of company B if company B has the power to veto anybody being appointed to the directorship. You might, by a sufficiently extensive use of the power of veto, so far use that veto that there is only one person left. That, of course, is fanciful, but that is what the clause, as drawn, says.
The new Amendment which I intend to move is this. We said that company A is to be deemed a subsidiary of company B if, and only if, B has the power actually to secure appointment and if company B has the power to secure that Jones, Smith, or Robinson, shall be directors of the other company. If that is so, then we say that the other company must be deemed to be a subsidiary of the first company because the first company can control the position of its board of directors. That is what it is all about, but I will look at it once more and look at my Amendment once more, and see if we can, even now, do something to make the language a little clearer, not only in the interest of myself but also in the interests of the noble Marquess who moved this Amendment and all those unfortunate people who hereafter want to know what it is all about.
THE MARQUESS OF READING: I am very much obliged to the noble and learned Viscount, and I fully appreciate the difficulty of drafting a Bill of this kind. Of course, the difficulty is very great, but it does seem to me that by calling attention to it I have produced from the Government what is a more intelligible meaning. After all, as the noble and learned Viscount himself has said, the point is not that we should rely on a legal or verbal discussion across this House. The persons who have to interpret and operate this Bill after it has become an Act should have the plainest possible indication of what the responsibilities imposed upon them are. I am glad at least that the noble and learned Viscount has, by his speech, saved me from any sense of shame at not having understood what it meant in its original form. In those circumstances, I beg to withdraw my Amendment.
Amendment, by leave, withdrawn.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved in Subsection (2) to leave out from the second "if" to "or" in line 12, and insert:

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"that other company by the exercise of some power exercisable by it without the consent or concurrence of any other person can appoint or remove the holders of all or a majority of the directorships, but for the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to which any of the following conditions is satisfied, that is to say—
(a). that a person cannot be appointed "thereto without the exercise in his favour by the company of such a power as aforesaid;")
The noble and learned Viscount said: I have already indicated in the discussion on the last Amendment what the effect of this Amendment is, and I beg to move this Amendment in place of the words that appear on the Bill.
Amendment moved—
Page 13, line 3, leave out from the second "if" to "or" in line 12, and insert the said new words.—(The Lord Chancellor.)
On Question, Amendment agreed to.
LORD RENNELL LORD RENNELL moved, at the end of subsection (3) to insert the following new paragraph:
"(d) Any shares held or power exercisable by a company the ordinary business of which includes the lending of money ' as security only shall be disregarded."
The noble Lord said: This is an Amendment which I hope the noble and learned Viscount will see fit to accept. It is to exclude, in determining whether one company is a subsidiary of another, any shares held, for instance, by a Bank, or, as put in the Amendment "by a company the ordinary business of which includes the lending of money.
Amendment moved—
Page 13, line 39, at end, insert the said new paragraph.—(Lord Rennell.)
LORD BALFOUR OF BURLEIGH: I would like to support my noble friend in his Amendment. I am not sure if the noble and learned Viscount is going to accept it. I am advised that another way of doing this would be to exclude subsection 2 of Section 127 from the repeal mentioned in the Schedule which proposes to repeal Section 127 of the principal Act. If the noble and learned Viscount is going to accept the Amendment, that satisfies me.
THE LORD CHANCELLOR: I am going to accept this Amendment in principle; that is to say, I am going to put down an Amendment on the Report
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stage to deal with this. I am not quite sure of the form in which to do it. If the noble Lord will withdraw his Amendment now, I will undertake to put down an Amendment—it may be in this form for all I know; but I want a little time to consider what is the right form. In principle, however, I agree. I would ask the noble Lord not to press his Amendment now on the understanding that I will put down suitable words on the Report stage.
LORD RENNELL: I am much obliged to the Lord Chancellor and I have much pleasure in withdrawing the Amendment.
Amendment, by leave, withdrawn.
Clause 13, as amended, agreed to.
Clause 14:
Signature and copies of accounts.
14.—(1) The profit and loss account and consolidated accounts laid before a company in general meeting shall be annexed to the balance sheet and signed on behalf of the board by the directors or director signing the balance sheet.
(2) If—

(a) any copy of a profit and loss account or consolidated accounts not signed as required by this section is issued, circulated or published; or

(b) if any copy of a balance sheet is issued, circulated, or published without having a copy annexed thereto of the profit and loss account or any consolidated accounts required by this section to be so attached;

the company, and every officer of the company who is in default shall be liable to a fine not exceeding fifty pounds.
(3) Any member of a company, whether he is or is not entitled to receive notices of general meetings of the company, shall be entitled under paragraph (a) of subsection (1) of section one hundred and thirty of the principal Act to have sent to him a copy of every balance sheet and of the other documents mentioned in that paragraph, and any holder of debentures of a company shall have the same right under that paragraph as a member of the company:
Provided that this subsection shall not require a copy of those documents to be sent to any person of whose address the company is not aware.
(5) Subsection (1), and not subsection (2), of the said section one hundred and thirty shall apply in the case of a private company, as of any other company, except in relation to balance sheets laid before the company before the coming into force of this section.
LORD CHORLEY LORD CHORLEY moved, at the end of subsection (1), to insert:

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"Provided that the signing of the balance sheet shall for the purposes of this section be treated as the signing also of the profit and loss account and any consolidated accounts, if appropriate words are appended to the signature on the balance sheet to indicate an intention that it shall be so treated."
The noble Lord said: The object of this Amendment is to secure that the directors will have to append their signature only once to one of these accounts. As it stands, they would have to append their signature separately to the profit and loss account, to the consolidated accounts and to the balance sheet. Of course, if they are in different places that might be quite an onerous procedure. The object of the Amendment is to secure that, provided signatures are attached in the proper way, one signature will be sufficient. I beg to move.
Amendment moved—
Page 14, line 10, at end insert the said proviso.—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: The next Amendment is merely consequential on the last.
Amendment moved—
Page 14, line 13, after ("signed") insert ("or treated as signed").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: The next Amendment is a small drafting Amendment. The two words "annexed" and "attached" mean the same thing, and the draftsman wishes that the same words should be used in both connotations. As it stands, it might be open to some advocate to suggest that, as "annexed" was used in one case and "attached" in another, the draftsman must have meant to use them with different meanings. That is not so, and in order to make that quite clear, this Amendment is moved.
Amendment moved—
Page 14, line 18, leave out ("attached") and insert ("annexed").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY LORD CHORLEY moved, at the end of subsection (3), to insert: "or to more than one of the joint holders of any shares or debentures." The noble and learned Lord said: This Amendment is designed to secure that the requirement that accounts shall be sent to all members of the company will not have the effect of requiring the company to send copies to
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each joint shareholder where shares are held in the name of more than one person. At present, the usual practice, as I understand it, is to send them to the shareholder whose name appears first. Where there are joint shareholders, it would obviously be very inconvenient that they should have to be sent to each one. Often in these cases there are several of them. The inconvenience of this course has been represented to the Board of Trade by the Chartered Institute of Secretaries, and we are anxious to meet the point, which I am sure your Lordships will think is a fairly reasonable one.
Amendment moved—
Page 14, line 31, at end insert ("or to more than one of the joint holders of any shares or debentures").—(Lord Chorley.)
LORD HAWKE: This is an Amendment which is highly convenient to the companies and for the saving of paper, but I do not think it is quite fair to the shareholders. Under it, in a trust, only one trustee, so far as I can see, would be entitled to receive the accounts of the company in which the trust held shares, unless any of the other trustees made a specific approach to the company, presumably annually, to ask for those accounts. I would suggest that some machinery might be devised whereby the normal thing on registration of shares in more than one name would be that the first-named received the accounts, but that the others, at the time of registration, should be asked whether they wished to receive those accounts annually or not. In the case of existing registrations, I think that those shareholders who receive the accounts at the moment should continue to do so unless the company circularize them and suggest that they should not. I do not think the position as regards the one who does not receive the accounts is quite as the noble Lord says. I know in some cases they are certainly circularized to more than the first named. Perhaps the noble Lord will look into the question and see whether something can be done at the next stage.
LORD CHORLEY: I am much obliged to the noble Lord for his suggestion, and I am very glad to give the assurance for which he asks.
On Question, Amendment agreed to.
House resumed.

MALTA (RECONSTRUCTION) BILL.
5.28 p.m.
Order of the Day for the Second Reading read.
THE FIRST LORD OF THE ADMIRALTY (VISCOUNT HALL): My Lords, there will be no dispute on either side of your Lordships' House as to the great debt which we owe to the people of Malta, and to those of our countrymen who joined with them in the heroic defence of that gallant and war-battered island. The courage and endurance with which they sustained the bitter and heavy attacks of the enemy will always be remembered, and it is the desire of the people of this country that we should do our utmost to restore the damage which has been done, and to contribute, to the limit of our own resources, to raise the social standard of the people of Malta. Your Lordships will be aware that in accordance with the promise made by His Majesty's Government in 1943 steps are now being taken to restore to the people of Malta responsible government within the same sphere which they enjoyed in the years from 1931 to 1933.
In the recent White Paper the Government set out their proposals regarding the form that the new Constitution will take, and it is hoped that speedy progress will now be made towards the establishment of this Constitution. The Bill which is now before your Lordships has a twofold purpose. Its object is, first, to honour a pledge given to Malta in 1942 in regard to the grant of assistance from the British Exchequer for the making good of war damage; secondly, to afford a further measure of assistance to the Malta Government to enable the people of the island to undertake the responsibility of their internal affairs, in the full expectation that the working of the new Constitution will not be unduly hampered by financial and economic burdens thrown on the island by the war. Perhaps I may deal with those two aspects of the Bill separately.
Your Lordships will remember that in November, 1942, at a time when the enemy attack on Malta was still at its height, Parliament was asked to make a gift of £10,000,000 to be used for the purposes of restoration of war damage and the rebuilding of Malta after the war. At the same time the assurance was given that:
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"If the total liability of the Malta Government for compensation and rebuilding, after allowing for contributions from private owners, exceeds the sum of £10,000,000, His Majesty's Government will be prepared to make available such further sums as may be required to meet liabilities which are found in the circumstances as existing after the war to be beyond the capacity of the Government of Malta to meet from its own resources, having regard to all other calls upon those resources at that time."
I understand that the contribution from private owners is negligible in proportion to the extent of the damage done. The grant made in 1942 was based on the best estimate that could be made in the circumstances then existing. It is now clear that the original estimate is likely to be substantially exceeded. Sir Wilfrid Woods, who was appointed in 1945 to undertake a preliminary investigation into the finances of the Malta Government, estimated in the recommendations which he submitted that a sum of probably £42,400,000 would be required if the anticipated budget deficits in Malta during the next year or so were to be covered, and if the activities connected with water supply, sewers, educational development, health development, town improvement, social services and general reconstruction work were to proceed, and war damage compensation were also to be paid. He added that he thought that £42,000,000 was a sum in excess of anything which His Majesty's Government could reasonably be asked to meet. His figure of £42,000,000 was made up of £10,000,000 for reconstruction, £28,000,000 for war damage, £3,057,000 for social welfare and development, and £580,000 to cover budget deficits.
He also pointed out that it would naturally not be possible to make a precise and final estimate of war damage for many years to come. The total for war damage may well be less than the £28,000,000 of his estimate. It was clear from Sir Wilfrid Woods report that this expenditure would be beyond the capacity of the Malta Government to meet unaided from its own resources, and His Majesty's Government, despite the great difficulty confronting them in financing their overseas expenditure, decided, in accordance with their pledge, that it would be necessary to make available the further measure of assistance foreshadowed in the statement of November, 1942, which I have quoted.
The Government gave much thought to the form that such assistance should take.

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It could be given either in the form of a series of additional payments agreed from time to time, as expenditure proved in the future to be necessary, or in the form of agreement now on a definite sum of money to be drawn upon as necessary in accordance with the progress of expenditure. The first method of procedure would, in the Government's view, lead to many difficulties of administration and possibilities of friction between themselves and the Government of Malta, since differences of opinion would be bound to arise as regards the eligibility of particular expenditure, the ability of the Government of Malta to make some contribution towards such expenditure from their own resources and the efficiency and economy of the arrangements for carrying out the works involved. His Majesty's Government would, under such a procedure, need to have powers of control over administration in Malta which would be hard to reconcile with the new status. They therefore reached the conclusion that it would be more satisfactory to fix a definite and total sum at this stage.
The Government considered that the sum to be fixed in this way should leave some margin for reconstruction work not strictly covered by the definition of making good war damage and, after considering the estimates in Sir Wilfrid Woods' very competent report, they decided to seek the approval of Parliament for the provision from United Kingdom funds of a further sum of £20,000,000, making with the earlier grant a total of £30,000,000 in all. They decided that this sum should not be paid into a trust fund, as was done in the case of the earlier grant, but should be constituted by law a charge upon the Consolidated Fund. Payments to the Malta Government will be made annually against reasonable anticipations of expenditure as soon as the earlier grant is exhausted. The new grant, together with the £10,000,000 already granted and the interest received or expected to be received in the future on the earlier grant, will result in there being available for expenditure a total sum of over £31,000,000. The Bill, the Second Reading of which I am moving, provides that the Malta Government shall submit annually audited accounts showing that the funds issued under this legislation have been expended on the purposes for which the grant was voted. This does not mean Treasury control.
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His Majesty's Government did not, however, feel that the financial assistance to be granted to Malta should be limited to the purposes falling within the scope of the above grant. They recognize that the local government is faced with important and pressing demands for public work and the development of social services. While they were not able to accept the proposals made by Sir Wilfrid Woods in their entirety—and indeed Sir Wilfrid himself made it clear that he did not expect the Government to incur commitments to the full extent of his recommendations—still they were anxious to make some contribution towards Malta's needs for social services. It was therefore decided that as an exceptional measure the opportunity of this legislation should be taken to amend the Colonial Development and Welfare Act, to enable Malta to continue to benefit under its provisions, even after the introduction of responsible government.
In the absence of such amending legislation, the Colony would be debarred under the terms of the 1940 Act from so benefiting once the new Constitution had been introduced. Subject to acceptance by Parliament of this amendment, my right honourable friend the Secretary of State for the Colonies proposes to allocate to Malta a sum of £1,000,000, which would be available for grants for suitable schemes of welfare and development. In addition to the £1,000,000 referred to, Malta will, of course, enjoy a number of central services which are provided in London—services such as the training of the Civil Service for Malta, the provision of assistance in respect of higher educational development, and surveys and research schemes which are often necessary in Colonial areas. All of these will be made available to Malta as a result of her participating in the Colonial development arrangements under the Act. Malta will also be eligible for consideration with other Colonies for supplementary allocations from the remaining unallocated reserves, and will similarly be entitled to share in any further provisions which may be made by Parliament on the expiry of the present Colonial Development and Welfare Act in 1956.
So much for the objects of the present Bill. I should, perhaps, mention that in addition to the assistance offered to the Colony under this Bill the Government

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have announced that they will be prepared, if necessary, to make some provision by way of grants-in-aid to meet the costs of administration during the financial year 1947–48, in accordance with Sir Wilfrid Wood's recommendation. They also recognize that the complete cessation of commodity subsidies at the end of the current financial year, as recommended by Sir Wilfrid Woods, might in the circumstances impose an undue burden on the Government and people of Malta. The Government are therefore prepared to meet one-half of whatever provision for such subsidies in the Malta Estimates for 1947–48 is agreed to be necessary, subject to a maximum contribution of £450,000.
As a result of this Bill, with the grants already made the total amount for which it is proposed that His Majesty's Government shall be responsible—for war damage, reconstruction, and other services will be of the order of the £20,000,000 provided under this Bill, £10,000,000 already granted, and a further £1,000,000 interest accumulation on the £10,000,000. To this sum of £31,000,000 must be added an allocation of £1,000,000 from the Colonial Development and Welfare Act. In addition, there will probably be a deficit of £580,000 in regard to the budget for 1946–47 and 1947–48, which will involve a grant-in-aid of a similar amount. Further, there is a commodity subsidy for next year which will probably amount to the figure of £450,000. All of these sums must be taken into account when the degree of assistance which the Government are now offering to Malta is calculated. And it must not be forgotten that some £6,000,000 grants in aid of administration have been paid to Malta since 1941. In addition, there have been large food and other subsidies. Although the provision which the Government makes falls short by £9,000,000 of Sir Wilfrid Woods' estimate, I would point out to your Lordships that this expenditure of £33,000,000 will probably be spaced over a period of fifteen or more years. It will now be the responsibility of the Malta Government to plan their own social programme in the light of the assistance we can give to the island.
His Majesty's Government are confident that these measures can be regarded, not only as honouring in full the
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pledge made by the Government in 1942 but also as affording the people of Malta an assurance that responsible government will not be unduly hampered by financial difficulties. For their part, the British Government can expect the Malta Government to plan their reconstruction programme and their policy of economic and social development in a manner calculated to ensure the most effective and economical use of the resources now made available to them, and to review their system of taxation in order that the fullest contribution from their own resources may be made towards these objects.
Your Lordships, I trust, will agree that considering our own financial difficulties a contribution of some £33,000,000 is not ungenerous, and I ask your Lordships to give the Bill which is now before your House a unanimous Second Reading.
Moved, That the Bill be now read 2a.—(Viscount Hall.)
5.48 p.m.
LORD TWEEDSMUIR: My Lords, I will not detain you for more than five minutes because I know that several other noble Lords wish to speak. The points which I wish to make can be put very briefly. I warmly echo the tribute which the noble Viscount, Lord Hall, has paid to the people of Malta. There have been times in this recent war, and in a previous war, when the fate of Britain and her Allies seemed to depend on the fortunes of this little island.
Malta has been in our charge for nearly 150 years, and came into the British Empire at her own request. Our relations with Malta provide an example of the inter-dependence of the countries of the Empire, for if Britain and her Allies depend on Malta in time of war, Malta is entirely dependent, economically and financially, on Britain, in both war and peace.
I am voicing opposition to two principles which are contained in Clause 1 of this Bill, but before making my case I would like to draw attention to Clause 3. A part of the sum voted to Malta is being offered under the Colonial Development and Welfare Act. With the imminence of responsible government, Malta would normally be ineligible for this grant. I am delighted that she is to receive it. Because a Colony is to receive

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self-government is no reason why it should be debarred from financial benefit.
In 1942, as the noble Viscount, Lord Hall, has pointed out, the Parliament of this country voted £10,000,000 to make good the war damage in Malta, and added the pledge that Whatever further expenditure the Government of Malta might be put to under this head Which it was beyond bier own resources to produce would be made good.
You cannot make a final settlement of a debt until you know exactly how much you owe. To that end Sir Wilfrid Woods went to Malta, made his survey and made his report, reaching various conclusions. He produced certain figures which he himself said were "highly speculative." If a Commission went to Malta this year, next year or the year after, their conclusions would still be highly speculative. The noble Viscount has said that it will take some fifteen years to repair the ravages of war, and it will only be some time near the end of that period that our total indebtedness will be known. Yet we are to understand that although our total indebtedness is a figure that none of us can tell now, this is to be a final settlement.
The noble Viscount outlined very clearly the different courses open to the Government in implementing their pledge. I took the liberty of thinking that His Majesty's Government chose, from the courses outlined, an absolutely wrong one which, whatever its merits, does not in fact honour that pledge. For that reason I consider this Bill to be a bad document. I consider it bad for that reason and for this further reason. Under Clause 1 one of the objects given of this grant is the reconstruction of Malta, in the sense of planning. To my mind that is a clear cut case of a composite sum. If the people of Malta, taking a much larger share than heretofore in the affairs of their own Government, have a composite sum, they will know exactly where they stand. They will know exactly what the scope of their planning can be, because they will know what they have to plan with.
Sir Wilfrid Woods in his report used these words:
"A full and final settlement of the question of financial aid from the United Kingdom to Malta, by payment of a single sum to the
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Malta Treasury, or, to Trustees, would have obvious advantages, but it is not a practical proposition."
I entirely agree—I do not believe it is a practical proposition. This Bill lumps all these issues together into one, and it leads to the rather dreary conclusion that the Government of Malta will find themselves with three choices. The first is to go all out in repairing the Near damage and, because they do not know what it will finally cost, keeping the residue of that sum up their sleeves in case they should eventually need it, in which case the planning would suffer. Secondly, they can go ahead with a fairly, ambitious planning scheme, but always taking a risk that the rubble of over four thousand air raids may continue to lie where it lies now. Thirdly, they can make a half-hearted attempt to do both, and do neither adequately. It is not surprising to me that our integrity has been called into question by the people of Malta. It will be distressing but not surprising if this transaction is regarded as the touchstone of our sincerity in this present day, and then our integrity may become a matter of doubt to countries far beyond Malta, both within the Empire and without it.
5.55 p.m.
LORD STRABOLGI: My Lords, before I make a few comments in answer to the noble Lord opposite, I would like to point out a peculiarity about this Bill. The copy I have in my hand is as the Bill was introduced into another place, and it has a page of explanatory memorandum upon it. The Bill in your Lordships' hands has not the explanatory memorandum. I do not know whether that is a compliment to your Lordships' House or not, but I personally would have been glad of the explanatory memorandum if I had not had the House of Commons copy, and I feel sure that the noble Lord, Lord Tweedsmuir, might have modified some of his rather strong words—
LORD TWEEDSMUIR: I had the honour of pointing out to the noble Lord that this other Bill existed which contained this memorandum, so I think he can assume I have read it.
LORD STRABOLGI: That is just a matter I wanted to point out to your Lordships, and I would suggest it would be better on the whole if we also had explanatory memoranda in future Bills. We have heard some very strong language

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from the noble Lord. He talks of integrity, broken pledges, questions of our sincerity and so on. I read every word of the proceedings in another place, I listened with very great care to the most able speech of my noble friend below me, and I read the Bill. Really, for the life of me I cannot see where broken pledges, the lack of sincerity or integrity come in. If this money is found insufficient for the purposes for which Parliament has provided it, it is open to this Government or any future Government to provide further sums. I cannot see where the finality comes in at all.
Clause 3, with which the noble Lord, Lord Tweedsmuir, agrees, allows the Colonial Development Fund to be drawn on in the future for just this sort of purpose. I cannot see where the temptation lies for the Government of Malta to skimp the work, as was suggested by the noble Lord. All sorts of things' are said in another place; but I think it is unfortunate that in your Lordships' House, where we are supposed to be so dignified, careful of our language, and so well-behaved, such strong language should be used which will be seized upon by the small minority of Fascists in Malta to stir up trouble for us in that hard-pressed Island.
The only part of the noble Lord's speech with which I agreed was when he reechoed the praise of the people of Malta in their hour of trial so eloquently expressed by the noble Viscount, Lord Hall. The explanatory memorandum talks of the "Siege of Malta." It was not a siege in the accepted sense of the term, in that the enemy never had the courage to attempt a landing on the island. They employed every sort of devilment with the least possible risk of themselves, by blockade and by their continuous and promiscuous air-raids. We used to prepare our convoys to Malta consisting of six specially picked ships (Reconstruction) with specially picked crews. Each of those ships was loaded with the same cargo—so much', petrol, so much ammunition, so much medicine and so much food—in the hope that one would get through. One or two did get through. That is what saved the Island, and the spirit of the people was never broken, as both of the noble Lords who have spoken have remarked.
As the noble Lord, Lord Tweedsmuir, said, Malta is in the unique position of
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being the one territory of the British Empire which voluntarily invited the Crown to accept its allegiance. The others were annexed, conquered or colonized, but this is the one case of people of European stock who voluntarily came in with us. We therefore have a special responsibility for them. I am glad that this Bill has been introduced by my noble friend. He is not only the ex-Colonial Secretary, but he is the present First Lord of the Admiralty. Speaking as one who used to know Malta very well in happier days, I must say that the Navy owes a great debt to Malta both to its hospitable and industrious people, and because of its great strategical importance. I understand that the Navy have returned to Malta, and I hope full use will be made of it and its dockyard resources.
There is a grave problem of over population, and it has existed now in Malta for centuries. The natural resources are meagre; the people are prolific, and the population is too great. Emigration is one attempt to deal with it. It is difficult for the people of Malta to emigrate at the present time. I wonder, for example, if inviting the Maltese to come to this country to help us out in our agriculture and our building has been considered. The Maltese are excellent farmers; they are amongst the finest id the world. What they have done with the limited soil they have is miraculous. They are very hard working and sober. They are good husbands and would send the greater part of their wages home to Malta and thus help the economy of the Island. They are also excellent builders. No one who knows the wonderful buildings of Malta would require me to justify that. The last time I was in Mousta I was glad to see standing the second greatest dome in the world after St. Peters in Rome, a building which was erected by the poor villagers of Mousta and took a hundred years to build. That sort of people would, I believe, be extremely valuable at the present time to help us over our problems in this country. They are British subjects and would be very helpful. Moreover we could rely on them to remit the greater part of their earnings to their families in Malta.
I must make one further remark which has no direct bearing on the Bill but has on Malta. Many of your Lordships will know that there have been few debates on Malta in this House since the lamented death of Lord Strickland. He

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had a Maltese mother and he served your Lordships' House with distinction. Against all sorts of coldness, obstruction and indifference from the Government, he used to rise from the Red Benches of the House and present a case for Malta, and urge the need for strengthening the defences of the Island for the war that would come. He was not listened to, but how right he was! When the war came we particularly needed those defences which Lord Strickland had always advocated in this House. I cannot let this occasion pass without paying a tribute to his far-sightedness and his statesmanship. He helped some of the great services of Malta and formed Malta's Labour Party. I think it right to pay that tribute to him. I am sorry there has been this opposition from the other side of the House. I believe the Bill is generous and it has the necessary safeguards. I believe it will be generous and it has the necessary safeguards. I believe it will be accepted by the inhabitants of Malta and will be one more link with this great people.
6.3 p.m.
LORD LLOYD: My Lords, I do not think it necessary for me to embroider the eloquent tributes made by the noble Viscount who opened the debate, or by the noble Lord, Lord Tweedsmuir, and the noble Lord who just sat down, as to our feelings towards the people of Malta and the great part they have played in recent years. I am sure any tributes they paid expressed the feelings of us all. I wish to do no more, therefore, than to associate myself most warmly with those expressions. We feel we are here to-night to endeavour to show our gratitude in some concrete form to the people of Malta. But when I come to examine this Bill I very much regret to say that I cannot find it in my heart to support it as it stands. It seems to me that the main weakness of the Bill is that this is a Bill framed to deal with two different cases in respect of which this country and His Majesty's Government have entirely different commitments. It is framed to deal with war damage, on which there is a pledge which the noble Viscount explained at some detail in his speech, and in the second place it is framed to deal with planning and reconstruction, which is an entirely different matter and one in which we have no such obligations. That is the first fault of the Bill.
The second fault is that this Bill is in the nature of a final settlement, and on
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this question of finality I should like to say a word in connexion with the remarks of the noble Lord, Lord Strabolgi. It seems to me to be plain that it is quite open for any other Government to add to the money we are proposing to give to Malta under this Bill. Why then make mention that this is a final settlement? What is the object of it, if another Government is later going to add to the money? I would much rather, so far as war damage is concerned, see no final settlement. I think His Majesty's Government were extremely unwise to make such a settlement, which has aroused the worst kind of disappointment in Malta.
I would like to deal briefly with the question of war damage. The noble Viscount gave us the figure of £28,000,000, which Sir Wilfrid Woods estimated would be the cost of war damage. I should like to join with Lord Tweedsmuir in saying that it is quite obvious that at the present stage we cannot estimate what is going to be the cost. There are various factors which will affect it, one of which is where the materials are going to come from. Obviously it would make a very considerable difference to the situation if Malta had to buy all her materials abroad in foreign currency, with a depreciated pound sterling. Sir Wilfrid Woods made his estimate in 1945 when he was presumably calculating on the basis that materials were coming from this country. With the present housing situation I cannot conceive how for many years we are going to be able to send much building material to Malta. That seems to me to be the issue which affects the matter of war damage.
The next question is Malta's capacity to pay. That is a point we want to know. All I can do is to take the only evidence available to your Lordships, which is the report of Sir Wilfrid Woods. In this report he estimates that if Malta's budget is cut to the minimum, and if direct taxation and additional customs dues are imposed, Malta's budget will just about balance. He may be wrong or he may be right: we cannot tell at the present time. That is his estimate. Malta is an extremely small island with only one-eighth of its income derived from natural resources and the bulk of its revenue coming from services rendered to the Royal Navy and the Forces. If, as is likely, the amount that is obtained from these services is reduced, it may well be that Sir Wilfrid

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Woods' estimated revenue may be reduced. So much for war damage aspects of the matter. In view of those points, I do feel that the matter should have been left over until we could really see how we stood under our pledge.
With regard to reconstruction, I agree with the noble Lord, Lord Tweedsmuir, that this is a matter which is upon an entirely different footing. So far as reconstruction is concerned, we are planning for the improvement of Malta. Therefore, I think it would be perfectly proper for His Majesty's Government to decide what the British taxpayer can afford to give, and to make a final settlement. One point I would like to make on that matter is that Sir Wilfrid Woods, in his estimates regarding reconstruction, mentioned large sums which would have to be spent on sewerage and water in Malta. He brought out, very plainly, that these were facilities which were not only important to the Maltese but also to our own Forces stationed at Malta. Therefore, in making these payments for reconstruction, we benefit not only the Maltese but ourselves. I should have hoped that His Majesty's Government would have been as generous as possible had they been going to make payment of a fixed sum, but that has not been done. The course which I should have liked to see taken would have been, first, for the contributions under two heads to have been kept separate, second, for the contribution in respect of reconstruction to have been a fixed and final sum, and, third, for the contribution towards the repair of war damage not to have been final but in the form of another instalment similar to the instalment of 1942. As it is, undoubtedly, the impression has been given to the Maltese people that while His Majesty's Government may seem to be generously providing for war damage and for reconstruction, on closer examination the sum provided is inadequate for both. They feel, I think, that in some way, they have been "done down" by His Majesty's Government.
Lord Strabolgi has referred to the words of my noble friend Lord Tweedsmuir. I think he deprecated the language which Lord Tweedsmuir used, and suggested that by what he said he might be raising feelings in Malta that would otherwise lie dormant. I should like to refer the noble Lord to a letter in The Bulletin of Monday, January 27, written by Dr. Paul
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Boffa, Leader of the Maltese Labour Party. Dr. Boffa wrote:
"The decision arrived at by the British Cabinet that the total grant to Malta of 31,000,000 to make good the havoc wrought by the war is to be considered as final, is most unjust, unfair, and illogical."
Further on the letter contains this passage:
"No wonder, therefore, that friends and believers in a 'British Brotherhood of Nations' are fast losing faith in the proverbial British justice and fair play; no wonder that the Egyptians and Indians are after complete and absolute independence, Cypriots for annexation to Greece, and no wonder, therefore, that the proverbial Maltese loyalty is undergoing a process of rapid evaporation under the disillusion and frustration."
I suggest to the noble Lord that those feleings to which he referred already exist in Malta. The writer of that letter, after all, is the Leader of the Maltese Labour Party. But whether what Dr. Boffa wrote is correct or not, I regret infinitely that such an impression could have been aroused by His Majesty's Government. The fact that such an impression can be aroused adds point to what Lord Strabolgi said, and tends to foster such anti-British feeling as already exists in Malta. It tends, moreover, to loosen those ties on which the British Empire is built. I regret to say that I feel there is some justification for these feelings, and I consider that, possibly inadvertently but nevertheless definitely, His Majesty's Government have in effect, broken the pledge that was given in 1942 to the Maltese people.
6.15 p.m.
VISCOUNT CRANBORNE: My Lords, I rise only to speak very briefly. No one in this House, as I think the First Lord of the Admiralty said in his opening speech, will wish to criticize, still less to oppose, the main purpose of this Bill, which is to make reparation to the people of Malta for the cruel losses which they have suffered as a result of their unflagging devotion to the Allied cause. The story of the defence of the Island will, I suppose, go down in history as one of the great epics of this or any other war. It might have been anticipated, I think quite fairly, by any military expert, that that little Island, in the very middle of the Mediterranean, far from any Allied territory and close to the Italian bases, would have been the first of the Allied bastions to fall. But through four years

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—more than four years—of uninterrupted attack by sea, land and air, the people of Malta surmounted the worst that the enemy could do against them, and never to the end were they overcome. That is a magnificent record.
It was my privilege—a privilege which I expect others of your Lordships enjoyed also—to visit Malta during the siege. That was in August, 1942. The worst of the bombing was then over, but in many ways I think that the people of the Island were undergoing the most severe of their trials. Food was short, and there was no immediate prospect of getting any more. Their ancient and beautiful buildings had been battered into rubble, their harbour was filled with rusty and rotting shipping, and the Allied Forces in North Africa (this was before the Battle of El Alamein) were still being steadily rolled towards the east. Indeed, a thousand miles separated the Island from the nearest Allied Forces. Yet at that time—and the Earl of Munster, who was there much longer than I will tell you the same thing—the brave Maltese people never wavered in their faith. Their loyalty to the King never flagged. It was a most moving and unforgettable experience to see their calm, unruffled fortitude. Never was the George Cross more worthily bestowed than upon the Island of Malta.
Now, as the First Lord of the Admiralty said in his speech, the time for reparation has come, and the only question with regard to this Bill, as I see it, is not whether too much is being allotted to the people of Malta but whether too little is being allotted. That has been the burden of some of the speeches that we have heard this afternoon from the Benches behind me. It is a point which has already been thoroughly threshed out in another place, and though, like other noble Lords who have spoken, I do not feel, myself, that the declaration of the Secretary of State for the Colonies in another place was sufficiently elastic to meet the position, I do not propose, personally, to reopen the question here to-day. As your Lordships know, the powers of this House are, in any case, severely limited where matters of finance are concerned. But I feel that, perhaps, in view of what has been said this evening, there is one comment that I ought to make. While it is true that I, as Secretary of State for the Colonies, in 1942 gave an assurance that if the original £10,000,000 was not adequate to provide
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for the repair of war damage, His Majesty's Government would make available such further sums as were required to meet such liabilities as were beyond the capacity of Malta to meet from her own resources, it was clear from my answer at that time—if your Lordships will trouble to look it up—that it was then anticipated that £10,000,000 might well be enough for that purpose. I will quote my own words:
"If the actual expenditure under these heads falls short of the total vote of £10,000,000, the balance will be applied to other purposes beneficial to Malta after the war."
It is, I think, therefore clear that at that time £10,000,000 was regarded as likely to be a fair compensation for the damage that had been done. In the circumstances, and with all deference to other noble Lords who have spoken this afternoon—and I honour their sentiments—I cannot myself feel that the present additional gift of £20,000,000 can be considered mean. I would not like that impression to get abroad with regard to this particular question. Meanness to Malta would be a most deplorable thing, and no one in this House would countenance it for a moment. But I do not personally feel that this additional gift can be considered in that light.
Having said that, I would add, with all the emphasis at my command, that nothing we can contribute is too great for Malta's deserts. Before the war we were a rich, a proud, and a powerful nation. We are still powerful, and we are still proud, but at the moment we are not quite so rich as we were. Yet what we give to Malta we give with a full heart, as a tribute of our affection and esteem for an island which, though small ill area, has proved herself very great in spirit.
6.22 p.m.
VISCOUNT HALL: The debate on the Second Reading of this Bill has been very short, but it has been very interesting. I am pleased that what opposition there has been has centred around just one point: as to whether the amount which this Bill will provide, in addition to the amount already given, is sufficient. I am indeed indebted to the noble Viscount, Lord Cranborne, for saying in his closing remarks that he did hope, notwithstanding the opposition of noble Lords, that they themselves would not like to convey to the people of Malta that there is any intention by His Majesty's Government to

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regard this amount, which is freely given, as being in any way mean. After all, it must be remembered that the contribution, quite apart from the grant-in-aid and subsidies given for war damage and reconstruction, alone is more than the total income of Malta for two years. Sir Wilfrid Woods referred to that fact in his very able report, where he estimated the annual income at about £14,000,000 per annum. To give a free gift of more than the total income for two years cannot be regarded in any way as being mean.
The question of the finality of the amount was fully debated in another place, and I do not know that I can add anything to what has already been said. It is a question very largely of the interpretation of the pledge which was given. May I say that I listened with great pleasure to the speech of the noble Lord, Lord Lloyd? I had the very great pleasure and the privilege of being Under-Secretary to his late and very honoured father; indeed, I assisted in getting the Colonial Development and Welfare Bill through the House of Commons, and the late Lord Lloyd was successful in getting the Bill through your Lordships' House. I regard his passing as a great loss, he was a man of very great ability who did an enormous amount of work for the Empire—Colonies or Dominions. I know that it will be a case of a noble son following a noble father. There is nothing more that I can say, other than that Malta is deserving of every consideration.
It has been my privilege to visit Malta. I have seen the rubble. At the same time it is as well that Malta should know how much she will have to go along with; then she can arrange her own resources. I am hopeful that not Memorial Trust only will she be able soon to balance her budget, but that she will be able to make a valued contribution to the reconstruction and the building up of the social services without in any way expecting, and possibly depending too much on, assistance from a country which is faced with a financial problem which will not only cause us some concern in the near future, but will cause us a great deal of concern for many years to come. A free grant of £20,000,000, plus what will be received out of the Colonial Welfare and Development Fund, is not an amount which any of the members of your Lordships' House—or, indeed, any one in the country—need fear can be described as
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other than a very valuable contribution made to a very gallant people. And it will give them a good deal of assistance in building up their own economy and in improving the social services which are so much desired by the people of Malta.
6.27 p.m.
LORD STRABOLGI: Before my noble friend sits down, would he take note of my suggestion that some of the surplus labour may be invited to come here?
VISCOUNT HALL: I certainly will put the suggestion made by the noble Lord to the Minister of Labour and the Minister of Agriculture.
On Question, Bill read 2a; Committee negatived.

AIR NAVIGATION BILL. [H.L.]
Read 3a (according to Order): Amendments (Privilege) made; Bill passed and sent to the Commons.

CHESHIRE AND LANCASHIRE COUNTY COUNCILS (RUNCORN WIDNES BRIDGE, ETC.) BILL. [H.L.]
DUDLEY CORPORATION BILL. [H.L.]
HAVANT AND WATERLOO URBAN DISTRICT COUNCIL BILL. [H.L.]
NAZEING WOOD OR PARK BILL.[H.L.]
SOUTHEND-ON-SEA CORPORATION BILL. [H.L.]
SUNDERLAND CORPORATION BILL. [H.L.]
Committed: the Committees to be proposed by the Committee of Selection.

COTTON INDUSTRY WAR MEMORIAL TRUST BILL.
Report from His Majesty's Attorney-General received, and ordered to lie on the Table.