HL Deb 10 March 1947 vol 146 cc210-45

4.45 P.m.

House again in Committee (according to Order).

[The Earl of Drogheda in the Chair.]

Clause 92 [Amendment as to persons liable for certain offences]:

LORD CHORLEY had moved, on the Fifth Day of the Committee stage, to insert at the end of Clause 92, the following subsections:

(2) In subsection (9) of Section one hundred and thirteen of the principal Act (which penalises directors for defaults in relation to the statutory meeting or the statutory report) for the words 'every director of the company who is guilty of or who knowingly and wilfully authorises or permits the default' there shall be substituted the words 'every director of the company who is guilty of the default or, in the case of default by the company, every officer of the company who is in default'.

(3) in subsection (3) of Section one hundred and forty-five of the principal Act (which, for default in giving the required particulars as to directors in trade catalogues, etc., penalises every director of the company and, in the case of a director being a corporation, also any officer of the corporation knowingly a party to the default)—

  1. (a) for the words 'every director of the company' there shall be substituted the words 'every officer of the company who is in default'; and
    2. 211
  2. (b) for the words from 'and in the case of a director' to 'liable to a like penalty' there shall be substituted the words 'and for the purposes of this subsection, where a corporation is an officer of the company, any officer of the corporation shall be deemed to be an officer of the company';
and at I he end of paragraph (a) of subsection (4) of that section (which defines the expression 'director' to include persons in accordance with whose directions or instructions the directors are accustomed to act) there shall be added the words 'and the expression "officer" shall be construed accordingly'.

(4) The following provisions of the principal Act, that is to say—

  1. (a) subsection (3) of Section forty (which penalises allotments of shares or debentures without registration of a statement in lieu of prospectus);
  2. (b) subsection (2) of Section two hundred and eighty (which penalises default in stating. in invoices, etc., that the company is being wound up);
  3. (c) subsection (2) of Section three hundred and eight (which penalises default in stating, in invoices, etc., that a receiver or manager has been appointed;
  4. (d) Section three hundred and fifty-one (which penalises default in complying with the provisions of the principal Act regulating foreign companies carrying on business in Great Britain);
shall not penalise an officer, liquidator, receiver, manager or agent except for a contravention or default which he knowingly and wilfully authorised or permitted."

The noble Lord, resuming the discussion, on the proposed subsections, said: I would like to start by apologizing to your Lordships for not having done my homework properly, and for overlooking the fact that the first of the original subsections proposed in the Amendment had fallen as a consequence of the new clause on the subject of altering the Memorandum of Association. I am afraid I addressed some remark to your Lordships on the basis that it was still there. The noble Viscount, Lord Swinton, immediately came to my rescue, and I am very grateful to him. If I may say so, it was characteristic of the very helpful way in which he, and other noble Lords on the other side of the House, have acted in relation to this Bill during its Committee stage.

The object of this Amendment is to add some new persons to those already referred to in Clause 92. It substitutes the expression "every officer of the company who is in default" for a variety of similar phrases which are found in various sections of the Companies Act, and which are collected together in the Fourth Schedule of the Bill. The Amendment proposed makes a number of other alterations to secure a further unification and a tidying up, and it proposes to add three now subsections to Clause 92. The first of these deals with the position when there has been a default by the directors or by the company in relation to the statutory meeting or statutory report. The words which it proposes to insert are similar to those used in Section 238, subsection (6), of the Companies Act. The noble and learned Viscount, Lord Maugham, suggested that this Amendment was open to objection, and I imagine this was because subsection (9) of Section 113 of the principal Act, which it is to replace, uses the words: "knowingly and wilfully." They are now omitted in favour of the words "guilty of the default."

Under Section 365 (2) of the Companies Act there is a definition of the expression "officer who is in default," which states that it means "any director, manager, secretary or other officer of the company, who knowingly and wilfully authorizes or permits the default, refusal or contravention mentioned in the enactment." I should have thought that that was sufficient to make it clear that a director would not have been in default unless it were done "knowingly and wilfully." But, if there is any real doubt about that point, we shall be perfectly willing to insert the words "knowingly and wilfully" in order to make it quite clear that nobody will be penalized unless there is such knowledge and wilful conduct. In subsection (3) the proposal is to make liable to penalty where there is a default in relation to the requirements in connexion with trade catalogues. The Amendment, while it does add certain cases to the penal side, also takes away others. For example, it would let off the director who is not responsible for the default, and it would let off the corporation which is a director, while, on the other hand, it would penalize officers who were responsible for the default other than directors, and, as regards officers of corporations which are directors, it would substitute the phrase "knowingly and wilfully authorized or permitted" for the words "knowingly a party to." Finally it would penalize officers of, for example, a corporation which is a secretary of the company.

The proposed subsection (4), which consists of four paragraphs, deals with a number of different types of cases. In paragraph (a) it inserts the words "and wilfully" after the word "knowingly" in Section 40 (3) which penalizes the company and every director of the company who knowingly authorizes or permits the contravention of the prohibition on allotment of shares or debentures without registration of a statement in lieu of prospectus. The next paragraph, paragraph (b) of subsection 4, secures beyond doubt that the words "who knowingly and wilfully authorizes or permits the default" under Section 280 (2) of the Act apply to all the persons who are made liable by the subsection to penalty for default in stating in invoices and other documents that the company is being wound up.

Paragraph (c) makes a similar Amendment in Section 308 (2) of the Act, which lays down a penalty for the default in stating in invoices and other documents that a receiver or manager has been appointed, and the next paragraph (d), amends Section 351 of the Act; that is a section which penalizes default in complying with the provisions regarding foreign companies carrying on business in Great Britain. At present if the company fails to comply every officer or agent of the company is liable to a fine, and the object of the Amendment is to secure that he shall not be so liable unless he has acted knowingly and wilfully. Those are the main points involved in this Amendment, and I beg to move.

Amendment moved— Page 85, line 46, at end insert the said subsections.—(Lord Chorley.)

VISCOUNT MAUGHAM

I should like to explain quite shortly why I was prepared to make a long speech, and also, still more shortly, why I do not think it is necessary to do so, having regard to the offer which has been most frankly made by the noble Lord. My reasons for objecting to the form of the Amendment to Clause 92 of the Bill were that I was very much afraid that, with that Amendment on the Statute Book, the director who was unintentionally guilty of not complying with Section 113 of the principal Act might be held to be liable to a fine, and for this reason. In the original clause the words "every director of a company who is guilty of, or who knowingly and wilfully authorizes or permits the default" were sufficient, as I thought, having regard to their close collocation, to show that innocent guilt was not in question at all. The phrase together meant, as I thought, "who is guilty in the sense of having a mens rea or who knowingly and wilfully authorizes or permits the default." To that I should have no objection at all. That is what I believed they meant, but, having regard to the alteration, I was afraid that the word "guilt" stood alone and thus a perfectly innocent director who might be said not to have complied with some provision of Section 113 would be liable.

Throughout the Act, where the words "knowingly and wilfully" or similar words are intended to be applied to the liability of a director or other officer, they are inserted. I have taken the trouble to go through the Act and I think, without being quite sure, that I have spotted them all. I have found nineteen cases where, after this Bill is on the Statute Book the words "knowingly and wilfully" will be applied to various defaults of the directors or other officers of the company, and I was afraid that in this particular case their absence in connexion with the word "guilty" as applied to the director might be held by a Bench of Magistrates or by a Judge to mean that innocence was no excuse where the words of the section were not strictly carried out. Section "13 I need not deal with, except to say this (which struck -me as one of the things which a director might well be guilty of without knowing it) that the Statutory Report is a thing which must be forwarded by the directors—that means, of course, the directors or their agent; they have not got to post the thing themselves—and under subsection (3) it has to be certified by two of the directors.

It occurred to me that if I was a director of a company—which I am not, and never have been—and if there were ten directors, and two of them certified -the report, it is conceivably unlikely that the other directors would go through the whole thing again to see that it was correct. If two directors, in whom they had, complete confidence, had certified it, they would not go any further, and yet they would not be complying in strictness with the obligation to send to every shareholder a report containing -certain provisions. That is only an example. Rut, as it is, as my noble friend, the Lord in charge of the Bill, is willing to resolve the doubts which I believed would be entertained on: hat matter by anybody who knows how narrow distinctions in a matter of this kind are seized upon when you come into a Court of law, I am perfectly content. I should add that the other subsections in the Amendment proposed, are matters which I have carefully considered and I am quite satisfied they are right and beneficial.

VISCOUNT ELIBANK

May I ask, before the noble Lord replies, whether this will apply in the case of the accounts? There was a question, when this originally arose, as to whether a director was guilty of an offence if he did not exactly understand the accounts. The question arose as to whether he was in default "knowingly or willingly."

VISCOUNT MAUGHAM

It arose on that, but it has nothing to do with the. present Amendment, which is confined to Section 113 of the original Act.

THE LORD CHANCELLOR

I do not think that point really bears on this Amendment.

VISCOUNT MAUGHAM

Only indirectly, of course.

THE LORD CHANCELLOR

What I propose to do is to put in on Report stage the words "knowingly or wilfully," if the Amendment is carried now.

On Question, Amendment agreed to.

Clause 92, as amended, agreed to.

LORD CHORLEY moved, after Clause 92, to insert the following new clause:

Procedure on application for confirmation of reduction of share capital.

So much of subsection (I) of section fifty-six of the principal Act (which relates to confirmation by the court of a reduction of share capital) as requires proceedings thereunder to be by petition shall cease to have effect.

The noble Lord said: The proposal here is to add a new clause after Clause 92, in order to deal with a fairly obvious situation. The effect of the clause is that the procedure on application to the Court for confirmation of a reduction of share capital can be made in any way provided by Rules of Court. As the Act at present stands, it requires that an application of this kind should be made by Petition. It is considered that it might very well be much more satisfactory to have the application made in some other way, as, for example, by means of an Originating Summons, and it is obviously much better that a matter of this kind should be left to be dealt with by Rules of Court. I am sure your Lordships will agree that that is a sensible proposal. I beg to move.

Amendment moved—

After Clause 92, insert the said new clause.—(Lord Chorley.)

VISCOUNT MAUGHAM

I only want to mention this to the noble and learned Viscount. I think he will agree that such proceedings as are the subject of the present Amendment ought to be in public, as they are very important matters. An Originating Summons is almost always dealt with in Chambers. Petitions have to be heard in open Court, and I am well acquainted with the fact that that was the ground for saying that the proceedings should be by Petition. But an Originating Summons can be adjourned into Court. I presume it is intended that that shall be dealt with by Rules of Court. I mention this, because I feel very strongly that it ought not to be a hole-and-corner matter at all, but should be known to the world.

LORD CHORLEY

I am obliged to the noble and learned Viscount for pointing out a matter that is obviously of some importance. In drafting the rules the noble and learned Viscount, the Lord Chancellor, will certainly remember what he has said.

On Question, Amendment agreed to. Clauses 93 to 95 agreed to.

Clause 96 [Prospectus of foreign company]:

LORD CHORLEY

The next Amendment is purely consequential on the Amendment to Clause 52 which your Lordships have already accepted. I beg to move.

Amendment moved— Page 87, line 43, leave out ("on the face of") and insert ("in").—(Lord Chorley.)

On Question, Amendment agreed to.

LORD CHORLEY

The next Amendment is a drafting Amendment. I beg to move.

Amendment moved— Page 87, line 49, at end insert ("so far as applicable").—(Lord Chorley.)

On Question, Amendment agreed to.

LORD CHORLEY moved, after subsection (2), to insert the following subsection:

"(3) The right under subsection (1) of Section three hundred and fourteen of the principal Act of inspecting, or of requiring copies or extracts of, documents kept by the registrar of companies, shall in relation to documents registered by virtue of paragraph (b) of the last foregoing subsection be exercisable only—

  1. (a) during the fourteen days beginning with the data of the prospectus; or
  2. (b) with the permission of the Board of Trade."

The noble Lord said: This is a consequential Amendment. Your Lordships have already dealt with this matter in respect of companies established in this country, and the proposal is to bring the obligations on foreign companies into line, so that these contracts will not be kept open indefinitely but will be open for the period specified, or during such time as the Board of Trade may direct. I beg to move.

Amendment moved— Page 88, line 26, at end, insert the said subsection.—(Lord Charley.)

On Question, Amendment agreed to. Clause 96, as amended, agreed to.

Clause 97:

Power of foreign companies to hold land.

97. Section three hundred and forty-five of tae principal Act (which confers on companies incorporated in a British possession power to hold lands in the United Kingdom) shall apply also to all companies incorporated outside the United Kingdom elsewhere than in a British possession, being companies to which Part XI of the principal Act applies.

THE MARQUESS OF READING moved to leave out Clause 97. The noble Marquess said: I am a little puzzled by the presence of this clause in the Bill. Under the law as it stands, a company incorporated in a British possession is given power to hold lands in the United Kingdom, but that power is confined to companies incorporated in a British possession. Now comes this clause, which suddenly throws the door wide open to companies wherever they may be incorporated, and puts them on the same footing as companies incorporated in a British possession. It is quite true that up to now foreign companies have no doubt been able to get land by creating subsidiary companies in this country and operating through them, but those companies, being British companies, always had this feature to be considered: that they might be investigated under the existing powers of the Board of Trade and under the still stronger powers which are being conferred upon the Board of Trade in the present Bill. This clause is one of the few which does not derive in any way from the Cohen Report, and, as I have said, I am somewhat puzzled at its presence in the Bill. I do not know to what purpose it is directed, or what existing evil it is supposed to remedy. There may be a good explanation, and in that case I shall, of course, reconsider the action I have taken in putting down the Amendment. I beg to move.

Amendment moved— Page 89, line =;, leave out Clause l7.—(The Marquess of Reading.)

VISCOUNT MAUGHAM

May I add one word to what my noble friend has said? I am not at all confident on this matter, but my general impression is that it would be rather undesirable, without any safeguards at all, that some company incorporated outside the United Kingdom, formed for some purpose which was not very reputable, acquiring assets of a very questionable character, should be incorporated here. It might be a company which is used for a very improper purpose. What I would suggest to the noble and learned Viscount, the Lord Chancellor, is that Clause 97 should be comined to cases where the Board of Trade gave consent to the power to hold land—if, for instance, the Board looked into it and said that the people seemed to be respectable and gave the necessary written authority, they would then be entitled to hold land. But I can well imagine some companies which certainly ought not to be allowed to own a square inch of land in this country.

THE LORD CHANCELLOR

The noble Marquess who moved the Amendment is, of course, quite right in having spotted that this is not in the Cohen Report, but, notwithstanding that, I think there is a very real need for it, and I will tell your Lordships why. It will be noticed that Section 345 of the Companies Act does not assert that any company cannot hold land; it merely asserts the particular classes of company which may. The barrier which prevents any company other than those prescribed in Section 345 from holding land is the law of mortmain. It is a necessity to get a licence in mortmain. A foreign company can get such a licence, but it is a troublesome and rather vexatious procedure, involving the payment of a fee. The reason why we want this clause is that we wish our companies trading in foreign countries to have facilities given to them. What we are finding to-day, when we come to consider commercial treaties and the like, is that foreign countries are saying to our people, "We are not going to allow your companies to trade here because you do not allow our companies to trade in your country." That is true, because they can only do it sub modo if they get a licence in mortmain. Though that can be done, it is a troublesome procedure.

As has been rightly said, there is no really effective provision against a foreign company holding land over here, because the difficulty can be overcome very easily, either by forming a subsidiary or by having the land held in the name of an individual, to which case Section 345 does not apply. At the present moment, therefore, we have this law of mortmain which can very easily be overcome, but the fact that a foreign country cannot hold land over here except under those conditions is being used as an argument against us when our companies are trying to negotiate in foreign countries. Consequently we have come to the conclusion that on balance we shall gain very much more than we shall lose by allowing those foreign companies to do directly what they can do indirectly.

VISCOUNT SWINTON

That is a very strong argument and one which carries conviction with me. The only thing about which I am not quite clear is the form of words. This clause, which likens foreign companies to companies registered in some parts of the British Empire, would give power to any foreign country anywhere to own land here. The reason—I think it is a sound one—which is advanced for that is that in negotiating commercial treaties the Board of Trade have found that they are being held up by a particular country saying, "I will not let you in unless you will let me in." Would it not be wiser to have this in the form of an enabling power, so that the Board of Trade could by certificate, by Order, or by some appropriate instrument, apply this to any other country? As a very old negotiator of commercial treaties, I do not much like giving away the trump cards in my hand before I begin to play the hand.

THE LORD CHANCELLOR

I will certainly look at that. If we do that, we have to remember that we shall have to do the same thing in foreign countries. We shall have to go to their Board of Trade, or whatever is the equivalent department, to get a licence, and that may not be easy. I will certainly look at the matter as requested by the noble Viscount, who has great experience in this branch of the law, but I am a little inclined to doubt whether, if we do that, our companies trading abroad will get the benefit which they would derive from this permission.

VISCOUNT SWINTON

Apparently I did not put my case quite clearly. I would not suggest that there should be power vested in the Board of Trade to license a particular foreign company—leaving a discretion as to which companies were licensed. I quite agree that the Board of Trade would give a licence every time, and quite properly give it every time, if that was the general understanding, and that we might not do quite so well in certain countries. What I mean is that there shall be power—by Order in Council, if that is the right way—to apply this to a particular country. That would be part of the treaty negotiations and there would then be two concurrent Orders in Council (I use that term for convenience, although I do not know what would be the appropriate instrument in any of the foreign countries) which would come into force on an identical date; and as from that date these would be in each country an absolute right for a foreign company to own land.

THE LORD CHANCELLOR

I quite follow the point. There is obviously force in the suggestion, and it shall be looked into.

VISCOUNT MAUGHAM

Before we finally depart from this, may I say that s it stands I am not quite sure what it means? The phrase "companies incorporated in a British possession" does not mean companies incorporated with any regard to our rules as to companies. A company incorporated in France, of course, is completely different, as I happen to know, from a company incorporated in this country, and that is so in certain other countries on the Continent. Mere incorporation according to foreign systems of law may have very different results from incorporation according to the English system. I confess that I am not in a position now to give your Lordships a lecture on French companies, though once I could have done so. I only want to see that the matter is looked into.

THE LORD CHANCELLOR

The words "company incorporated in a British possession" extend to all sorts of British possessions which have very different company laws from our own. Those are the words of Section 345 of the existing Act. I am going to look into this point generally, and I will at the same time look into that matter.

VISCOUNT ELIBANK

The noble and learned Viscount, Lord Maugham, in his first speech on this Amendment, raised the question of undesirable companies coming here. How can that be prevented if wq merely have a general omnibus arrangement that foreign companies can come here and buy land? I do not see how you are going to prevent that. You will get undesirable companies coming in. I do not want to bring up the question of, for instance, the Nazis in Germany, but we know that there are many still there and we also know that they have companies in various other countries, such as Switzerland, the Argentine, and so on. How are we to prevent those people from coming here and making further use of us, beyond the use which they arc making to-day? If we have a treaty with Germany, we say, "We shall let your companies come in here and buy land and operate freely, because our companies are doing the same." At the present moment, as I understand it, the Foreign Office have just arranged for British traders to go into Germany and trade. That is another question; that is merely a question of trading. The formation of companies raises an entirely different issue. I hope that the noble and learned Viscount will look into that point.

THE LORD CHANCELLOR

We cannot guarantee that undesirable companies do not hold land; we cannot guarantee that today. Even some British companies may be undesirable, and with regard to foreign companies, as I pointed out, they can get round the existing mortmain requirements in the simplest possible way, either by having an individual buy the land and hold it as their trustee, or by forming subsidiaries here. It is just this technical trouble about getting a licence in mortmain, which has no equivalent in foreign countries, which is handicapping us in our foreign relations.

VISCOUNT MAUGHAM

You have to remember, with regard to the existing Act, that "company" is defined as meaning "a company formed and registered under this Act or an existing company." So that the companies registered in British Possessions abroad have all to be registered, as I understand it, under this Act unless they were existing companies.

THE MARQUESS OF READING

I have no regrets for having moved this Amendment because it has produced a certain number of interesting and not unimportant points. I quite accept the cogency of the explanation which the noble and learned Viscount, the Lord Chancellor, has given of the main purposes of the Act and as he is going to consider before the Report Stage some of the matters which have been raised, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn. Clause 97 agreed to.

Clauses 98 to 100 agreed to.

Clause 101 [Bankruptcy]:

5.20 p.m.

LORD CHORLEY

On a previous occasion when we were discussing this matter your Lordships accepted a new clause which was inserted after Clause 84, the object of which was to give power to the Court to set aside executions in favour of creditors in certain circumstances. On moving that Amendment I pointed out that it would involve an Amendment to the Bankruptcy Act, in order to bring the two matters into line. This Amendment is the one which was consequential for the Bankruptcy Act. I beg to move.

Amendment moved— Page 9o, line 19, at end insert:—

("(2) The rights conferred by sections forty and forty-one of the Bankruptcy Act, 1914, on the official receiver or trustee in bankruptcy in relation to executions against the goods or other property of the debtor and attachments of debts due to the debtor may be set aside by the court in favour of the creditor to such extent and subject to such terms as the court may think fit.")—(Lord Charley.)

On Question, Amendment agreed to

Clause 101, as amended, agreed to.

Clause 102 agreed to.

Clause 103:

Prevention of fraud (unit trusts).

103.—(I) In the Schedule to the Prevention of Fraud (Investments) Act, 1939 (which relates to the constitution of an authorised unit trust scheme for the purposes of that Act)—

  1. (a) for any reference to the sale price of units there shall be substituted a reference to the manager's prices for units on a sale and a purchase respectively; and
  2. (b) in paragraph 2 (which relates among other things to securing that the property will be vested in the trustee before unit certificates are issued) after the words "will be vested in him" there shall be inserted the words or, subject to any prescribed conditions, in a nominee for him approved by the Board of Trade".

VISCOUNT BUCKMASTER moved, in subsection (i) (a), to leave out "for any" and insert: "in paragraph I for the." The noble Viscount said: It may be convenient if, with your Lordships' permission, I speak to the first two Amendments which stand in my name. The purpose of these two Amendments is to secure that the holder of units in a unit trust shall be able to dispose of these on an equitable basis. The two Amendments seek to achieve this purpose, first by stipulating that in paragraph 1 of the Schedule to the Prevention of Fraud (Investments) Act there should be a provision for determining the bid price as well as the offered price of the units. At present there is no provision for fixing any price at which units are to be repurchased from their holders. Nor can there, I feel, be any objection to this proposal, because the price which the unit is worth is a matter of simple and accurate calculation.

The second Amendment seeks to oblige the management to re-purchase units from unit holders at a price which has been correctly determined. Your Lordships appreciate that a unit trust represents a fractional holding in a large number of different securities. It appeals primarily to small people. There are times when those small people want their money, and they want it quickly. It is a hard thing for them if, when the price of the units can readily be ascertained, they should be denied the free market which they would enjoy if they had invested in any other way. I beg to move.

Amendment moved— Page 91, line 11, leave out ("for any") and insert ("in paragraph I for the").—(Viscount Buckmaster.)

LORD CHORLEY

We are in sympathy with the Amendment moved by the noble Viscount, but it has been suggested that if the Amendment were accepted it would place the managers under the onerous duty of buying these units in cases where it might not be altogether to the advantage of the trust to be under such an obligation. No doubt the difficulty can be overcome by a suitable alteration in the deed of trust, and it is thought that there are probably powers under the Prevention of Fraud (Investments) Act, 1939, to secure that there should be such alterations. However, the matter will be looked into before the Report stage. We are prepared to accept the Amendment now, but it will be necessary to make sure that these powers exist under the Act of 1939. On the basis that the noble Viscount understands that we may have to come back to the matter on the Report stage, we will accept the Amendment.

On Question, Amendment agreed to.

Amendment moved— Page 91, line 13, at end insert ("at the end of that paragraph there shall be inserted the words 'and for entitling the holder of any units to require the manager to purchase them at a price calculated accordingly'; and").—(Viscount Buckmaster.)

On Question, Amendment agreed to.

VISCOUNT BUCKMASTER had given notice that he would move, at the end of subsection (I) (b), to insert: and (c) in paragraph 3 (which provides for securing that certain documents shall not be issued by or on behalf of the manager if disapproved by the trustee) for the words 'For securing that any advertisement, circular or other document containing any statement with respect to the sale price of units or the yield therefrom, or containing any invitation to buy units shall not' there shall be substituted the words 'For securing that any advertisement, circular, or other document containing any statement with respect to the units, or containing any invitation to buy units, shall rot be issued by or on behalf of the manager unless it specifies the yield therefrom, and that any such advertisement, circular or other document shall also not'".

The noble Viscount said: This is a perfectly simple Amendment. Its purpose is to ensure that the buyer of units shall know the correct yield, but, like many simple matters, there are difficulties in its achievement. It has been brought to my notice that as worded the Amendment is somewhat wide in its terms. It refers to any "other document containing any statement"; that is to say, if the Amendment, as now worded, were carried, you would have to put the yield on any document which discusses unit trusts at all. Therefore, with the permission of your Lordships, I would like to add certain words which I have endeavoured to circulate, although under the difficult conditions in which we exist it is not easy to achieve everything one wishes. I would like, therefore, for the convenience of your Lordships, to state what I propose: that is to say, to insert in line ro of the Amendment instead of the words: with respect to the units the words: with respect to the sale price of units or the payments or other benefits received or likely to be received by holders of units. The clause would then read as follows: 'For securing that any advertisement, circular or other document containing any statements with respect to the sale price of units or the payments or other benefits received or likely to be received by holders of units, or containing any invitation to buy ….' The yield on the unit is, of course, a vital thing to the person who buys it, and Paragraph r of the Schedule to the Prevention of Fraud (Investments) Act, provides that the yield shall be correctly calculated. This Amendment seeks, through the clause of this Bill, to amend Paragraph 3 of the Schedule to the Prevention of Fraud (Investments) Act so that documents as specified in the present Amendment shall show the yield as correctly calculated. This is a matter I think of real importance, because while I do not suggest any evil intent, it is perfectly clear that items of capital can be included as income. It is perfectly possible, and it is a thing which is done, to set out the price of the unit at which it can be bought and to set against it money paid out during the past twelve months or so, leaving the buyer to infer what is in fact an incorrect yield. I feel that those associated with unit trusts can only wish that the public should not be misled, and I hope they will support this Amendment.

Amendment moved— Page 91, line 20, at end insert: "and (c) in paragraph 3 (which provides for securing that certain documents shall not be issued by or on behalf of the manager if disapproved by the trustee) for the words 'For securing that any advertisement, circular or other document containing any statement with respect to the sale price of units or the yield therefrom, or containing any invitation to buy units shall not' there shall be substituted the words' For securing that any advertisement, circular or other document containing any statements with respect to the sale price of units or the payments or other benefits received or likely to be received by holders of units, or containing any invitation to buy units, shall not be issued by or on behalf of the manager unless it specifies the yield therefrom, and that any such advertisement, circular or other document shall also not: '".—(Viscount Buckmaster.)

5.32 p.m.

LORD RENNELL

May I say how much I feel myself in support of the noble Viscount, Lord Buckmaster, on this Amendment? The difficulties of calculating yields are notorious to all those who have tried it, and there are various legitimate differences of opinion about what a yield is or how a yield should be calculated. The object which the noble Viscount seeks to achieve is that obvious capital items should not be included, either by inference or directly, in the probable yield of unit trusts. That is a principle to which everyone can subscribe without any qualms of conscience even on practical issues. It really resolves itself into this: that where the legitimate yield of a unit trust is stated it should be so stated as to distinguish any item which was received in cash and was a non-recurrent item or an item on capital account. Otherwise there is quite frankly a suggestio falsi in regard to a return on a unit trust investment. It is the noble Viscount's object to try and remove any possibility of suggestio falsi, even if unwitting or fortuitous, and I do not think anyone in your Lordships' House could in any way be against it. Whether the actual wording is appropriate or not I could not say, and if the noble Lord opposite would say he would at any rate look into the matter, to achieve the object stated by the noble Viscount, Lord Buck-master, I feel that it would be a great advance on the present practice in many cases.

LORD HAWKE

I should like to associate myself with what the noble Lord, Lord Rennell, has said, because it is most important that in this matter of investments, especially in the case of the small investor, there should be no suggestio falsi as regards the yield. I have myself to confess ignorance as to whether the wording proposed meets the point, but I hope the Government will be able to deal with it before Report stage.

LORD PIERCY

The point raised by the two previous speakers is thoroughly laudable and in so far as this Amendment aims at achieving their object there is nothing to be said against it. The only think I would beg noble Lords to do is to dismiss from their minds, if they can, any innuendo that there is in the practice of unit trust management, as existing at the moment, extensive garbling of yields or setting them out falsely.

VISCOUNT BUCKMASTER

They can state against the price of the unit the amount paid in the past year. They are not allowed to state a false yield.

LORD PIERCY

There is an innuendo that by various methods the regulations of the Board of Trade with regard to the calculation of yield can be evaded and a suggestion conveyed amounting to suggestio falsi, which is, I feel, unjust as regard the actual practice of unit trust managers. As regards the wording, I would say that it is a very tricky piece of drafting to get this thing down in terms which do not involve some absurd consequences. Although I know that the new words were very carefully looked at, I rather doubt whether they do at this moment avoid absurd consequences. For instance there might be an advertisement to-morrow saying that holders of bearer units in trust XYZ are entitled to a distribution of so many pence and decimal points per unit which can be obtained if a surrender of coupons is made to the managers through the prescribed channels. It would be absurd to add to an advertisement of that sort any calculation of yield from the trust. I do not believe the words as they stand avoid that difficulty. In dealing with a detailed matter of this kind it is difficult to set down the matter in general terms appropriate to an Act and avoid that sort of consequence. I would myself be satisfied if the officials who are dealing with this subject would consult the principal unit trust interests on the wording, of this Amendment, to make certain that any untoward consequences in practice have been avoided.

LORD CHORLEY

I think it is obvious that if capital assets are brought into distribution one of the main objects of requiring unit trusts to state the yield will have been defeated. Therefore we accept in principle the Amendment which has been moved by the noble Viscount, Lord Buckmaster. The noble Lord, Lord Piercy, has however raised a question as to whether the actual form of words used is the right one. It does appear to us that probably this form of words is a good one, but, as with the last Amendment moved by the noble Viscount, I shall accept this Amendment on the basis that if after we have looked at it again rather more carefully during the longer period at our disposal, we find some slight change necessary in the wording, then the matter will against be brought before your Lordships' House on the Report stage. On this basis I am prepared to accept the Amendment.

VISCOUNT BUCKMASTER

I would like to thank the noble Lord for his patience and courtesy in dealing with these Amendments.

Amendment moved— Page 91, line 20, at end, insert the said paragraph—(Viscount Buckmaster.)

On Question, Amendment agreed to.

Clause 103, as amended, agreed to.

Clauses 104 and 105 agreed to.

Clause 106:

Power to vary certain provisions by regulation or order.

106.—(1) The Board of Trade shall have power by regulation to alter or add to the First Schedule to this Act, and any reference in this Act to the said First Schedule shall be construed as a reference to that Schedule with any alterations or additions made by regulations for the time being in force under this subsection.

(2) The power of the Board of Trade under section three hundred and seventy-nine of the principal Act to alter or add to the provisions of the Schedules to that Act mentioned in that section shall be exercisable by regulations instead of by publishing the provisions as altered in the London Gazette, and the power to alter the table of fees in the Tenth Schedule to the principal Act shall include power to alter the section of this Act amending the said Tenth Schedule.

5.39 P.m.

LORD BALFOUR OF BURLEIGH moved, after subsection (I) to insert:

(2) The Board of Trade shall not have power to alter or to acid to the First Schedule to this Act so as to impose upon a banking or discount company an obligation to show, disclose or publish in its balance sheet or profit and loss account or any consolidated balance sheet or consolidated profit and loss account or in a note or statement or report annexed thereto or in any other manner facts, figures, or information in excess of that required of such a company under the First Schedule to this Act as hereby enacted.

(3) For the purposes of this section the expression "banking or discount company" means any company which satisfies the Board of Trade that it ought to be treated as a banking or discount company for the purposes of this section."

The noble Lord said: This Amendment is one of considerable importance to people who carry on the business of banking in the City of London, and elsewhere. The Cohen Report devotes paragraph 101 to what they call undisclosed reserves and the Report stresses the importance of full information, a point with which, of course, your Lordships are all agreed and which it is one of the main objects of the Bill now before the House to secure. The Cohen Committee say that there are certain classes of companies which should have an exception made for them in this matter of the disclosure of the fullest information. The relevant passage in the Committee's Report states There are, however, three classes of companies where other considerations"— that is, considerations militating against ale fullest information— must be taken into account, namely banking companies, discount companies and assurance companies …. In the case of banking and assurance companies the interests of the depositors and the policy-holders respectively outweigh the interests of the shareholders, and in the case of all three classes o companies considerations affecting the public interest must be taken into account. Then the Committee go on to make very specific recommendations. I will read one more sentence from the end of the paragraph: We consider, therefore, that banking and discount companies should be absolved from the obligation of showing separately reserves anti provisions and transfers to and from such account. I have drafted this Amendment as follows. I am going to ask your Lordships to allow me to refer to my two Amendments together, because the first one is mere drafting. The real effect of the Amendment is contained in these words: The Board of Trade shall not have power to alter or to add to the First Schedule of this Act so as to impose upon a banking or miscount company an obligation to show, disclose, or publish in its balance sheet, or profit and loss account … figures or information in excess of that required of such a company under the First Schedule to this Act. The point is, of course, that it is in the First Schedule to the Act that permission is given, the saving is given, for banking and discount companies in the matter of undisclosed reserves. The recommendation of the Cohen Committee is perfectly specific. I rather hope that this Amendment will find favour in the eyes of the noble and learned Viscount, the Lord Chancellor. I know how much importance he attaches to the recommendations of the Cohen Committee, and I think that I may fairly say that the effect of this Amendment will be to come nearer to giving effect to the precise wishes of the Cohen Committee than does the Bill as at present.

The flaw in the Bill as it now stands, from our point: of view, is that: the Schedule in which this saving is given is entirely subject to the discretion of the President of the Board of Trade. In Clause ro6 it is laid down that the president of the Board of Trade can alter the Schedule. What I am seeking to do is to get this provision about undisclosed reserves enshrined in the Bill. The essence of an undisclosed reserve is that it should be undisclosed, and the less we talk about it the better from every point of view. The recommendation of the Committee is absolute. There is no suggestion that this can ever be altered, and however grateful I might be for an assurance that a President of the Board of Trade did not intend to alter it, and however grateful I might be for the passing of another Amendment which is on the Paper and which goes part of the way towards meeting me, I cannot see that there is any objection to putting this very important provision in the Bill. For that reason I beg to move.

Amendment moved: Page 93, line 27, at end insert the said subsections.—(Lord Balfour of Burleigh.)

THE LORD CHANCELLOR

I should like to he able to feel that the noble Lord, Lord Balfour of Burleigh, and I had met half-way and embraced; but, at any rate, we are very nearly half-way. I confess that it strikes me, though I do not pretend to be a business man at all, as almost inconceivable that anything other than grave public harm would be clone by disclosure of reserves of banks. I cannot help thinking that any such disclosure would shake the fabric of our security. I think the noble Lord can say that he has an absolute recommendation in the Cohen Committee's Report, but although that Committee's Report brackets together banking companies, discount companies, and assurance companies, I have no doubt that there are distinctions between the three. I have no doubt that a concession asked for by one would also be pressed for by another. The length to which I have authority to go is to say this. Although we must have power, as we think, to alter the requirements of the Schedule, lest otherwise we find those requirements becoming too rigid, we consider that if we are going to make them more onerous, we ought to come to Parliament and get an affirmative Resolution to entitle us to do so.

The Amendment which I am moving shortly is to that effect. We shall be able to make the requirements less onerous: that is to say, to get out of difficulties in relation to these sorts of companies, by regulation, which will be subject to negative approval—any one may pray against it if he likes—but if we want to make requirements more onerous we must come to Parliament and get an affirmative Resolution authorizing us to do so. That is as far as I have been able to get. I need not tell the noble Lord, for I think he knows, that I have done my best to meet his wishes, as I always do. No doubt what he has said will be considered by those instructing me. Obeying instructions, as I always do, I can only tell the noble Lord that I cannot go further than the extent which I have indicated, and I hope that going to that extent will, at any rate, remove a great part of his fear.

LORD RENNELL

I may be anticipating matters a little, but I take my cue from the noble and learned Viscount, the Lord Chancellor, when he referred to the Amendment which he is moving to Clause 107, and venture to mention that there is an Amendment immediately following the one we are now discussing, in the names of Viscount Swinton, the Marquess of Reading and myself. I do not intend to speak to that Amendment at all in view of what I am going to say now. Frankly, I would have preferred the Amendment proposed by the noble Lord, Lord Balfour of Burleigh. At the time when the Amendment standing in the names of Viscount Swinton, the Marquess of Reading and myself, was put down, the Amendment of the noble Lord, Lord Balfour of Burleigh, had not been submitted. His Amendment was put down a little later, by which time we had already had a number of discussions on the exact bearing of Clause io6, as it now stands, on the subject of the Schedule, and had decided upon our Amendment. I, personally, would have liked to see the Cohen Committee's recommendations adopted once and for all. I am aware that the Schedule is to some extent an experimental document which may require amending. Of course the Amendment which the noble and learned Viscount, the Lord Chancellor, is to propose goes a very long way to meet our difficulties and, I should think, to meet the difficulties of the noble Lord, Lord Balfour of Burleigh, but, as I say, if Lord Balfour's Amendment had been put down earlier I would have liked to associate myself with it rather than with the one that stands in the names of my two noble friends and myself.

LORD BALFOUR OF BURLEIGH

I am very sorry that my Amendment was not down early enough to get the full support of the noble Lord, Lord Rennell. I shall know better another time. I am grateful to the noble and learned Viscount, the Lord Chancellor, for the very sympathetic answer which he has given, but with regard to one point I am afraid I must make a reply. I think that in the course of his reply the noble and learned Viscount said that if a concession were given to a company of one type, it must be given to companies of other types. I think he must have had in mind—and perhaps he mentioned them specifically—assurance companies. In answer to that, I must make the point that the relationship between a bank and a depositor, and that between an assurance company and a policy-holder, is a very different thing. In the case of a bank depositor, if he begins to have doubts—say he has a doubt as to whether he is likely to get his money—he can withdraw his money the next day. But if a policyholder has doubts about the assurance company's stability he has to think a great many times before he stops paying his premium. Honestly, I do not think that the analogy between a bank depositor and an assurance policy-holder should cause the noble and learned Viscount a moment's hesitation. But he has said the subject may be further pursued between now and the Report stage, and in view of that I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Loan SALTOUN moved to leave out subsections (1) and (2). The noble Lord said: In view of what the noble and learned Viscount has just said, I have not very much hope of carrying my full Amendment. Although I shall riot say as much as I originally intended to say, it seems to me there is some real reason for the full extent of the Amendment I am moving. I honestly believe that if this Statute is going to take that very great place in our legislation which at the beginning of our proceedings the noble and learned Viscount said he hoped: it would, we ought to be sure before we pass these Schedules into law. We ought to take a lot of time over them. In the first place, up in Scotland an auditor does not get such fees as they do in the south, but I am prepared to say that no fee he gets for his first year's work anywhere ever pays the auditor at all. It is a dead loss because he has to consider the nature of the business, and lie has to plan his audit to answer the various questions he will have to answer in passing the account. At the present time, if any question arises, the auditor simply reaches for his "Bible"—the Companies Act—and settles the question not only from the Companies Act, but also from his own knowledge of the meaning of the Companies Act as it has been interpreted.

These Schedules impose a very much more onerous duty on auditors. I may have something more to say about that later, but the point I am now making is that when an auditor has planned his audit of the company's affairs according to the Act he has done a very important and skilful piece of professional work. On the passing of this Bill he will have to find out what is actually meant by all the clauses. When that has been done, he will have a code of practice on which he will he able to make his audit. If that is liable to be changed at any moment will make things very difficult for the auditor. While the intention of the noble and learned Viscount on Clause 107 goes a long way to meet the point, I would like to emphasize that whatever changes are made should be made with the very greatest reluctance. If changes are easily made, it will make the actual execution of the Government's aim in this Bill very much more difficult. I beg to move.

Amendment moved— Page 93, line 22, leave out subsections (1) and (2).—(Lord Saltoun.)

THE LORD CHANCELLOR

I am afraid it is true that the poor auditor in future, instead of being able to have the Bible—the Authorised Version at any rate—will have to have the Revised Version with the Apocrypha, if the President of the Board of Trade makes these regulations. We must remember that this Schedule is largely experimental. We believe and we hope it will work. We have taken advice from the most eminent and distinguished accountants, who also hope and believe that it will work, but we should be very foolish if we did not take steps to guard against undue rigidity. It is. for that reason I must ask your Lordships to agree with me that we must have these subsections left in, so that if we find there is undue rigidity we have this measure of escape. I hope the Amendment I shall move presently will go a long way to meet the noble Lord, but I am sorry, for the reasons I have given, that I must maintain our right to alter our Schedule.

LORD SALTOUN

I am much obliged. After what the noble and learned Viscount has said, I will not press the Amendment, but I did not think it right to let this clause go by without pointing out the difficulty. I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 106 agreed to.

Clause 107 [Laying of regulations and orders]:

THE LORD CHANCELLOR explained the nature of this Amendment when I was dealing with the Amendment of the noble Lord, Lord Balfour of Burleigh. I beg to move.

Amendment moved— Page 94, line 9, at beginning insert— (1) No regulations shall be made under subsection (I) of the last foregoing section so as to render more onerous the requirements of the First Schedule to this Act, unless a draft of the regulations has been laid before Parliament and has been approved by resolution of each House of Parliament."—(The Lord Chancellor.)

VISCOUNT SWINTON

I fully accept this as being a better Amendment than the one which I had on the paper. I entirely agree with the Lord Chancellor that the Schedule is experimental. Indeed, many of us are grateful to him for the trouble which he and many others have taken in order to make the Schedule better. The fact that he has a very large number of Amendments on the Order Paper, largely recasting the Schedule, shows how we must proceed in this matter, by trial and error and in the light of experience. It may well be that practice will show that we need to make changes. The noble Lord, Lord Saltoun, said it would be embarrassing to the accountants if changes were made. I have discussed this matter with some of the most eminent accountants in this country, and I think they would be greatly embarrassed if it were not possible to make a variation when experience showed that a variation was necessary. Otherwise we should have to wait until we could pass an amending Act of Parliament to do something which everybody—companies, auditors, and the Board of Trade—all agreed was a practical and desirable thing to do. I do not think that would be very sensible.

On the other hand, having taken great pains to put obligations into the Schedule, I think it would be wrong to put more stringent obligations upon companies or upon auditors without the equivalent of legislation. For that reason this Amendment proposes that if you are to make any provisions which are more onerous they must be made by affirmative Resolution in both Houses. I think that is a reasonable thing to do, and we ought not to insist upon having the full paraphernalia of an amending Act of Parliament. Full notice will be given, and if either House of Parliament does not like a Resolution which proposes to impose some new obligation they can reject it. I think this is a wise and practical compromise, and I am grateful to the noble and learned Viscount for having proposed it.

LORD RENNELL

Having regard to what I said on the Amendment of Lord Balfour of Burleigh, I do not think I have anything to add. I consider the compromise admirably meets the issue raised by the noble Viscount, Lord Swinton, and by my Amendment. I am very grateful for it.

On Question, Amendment agreed to.

THE LORD CHANCELLOR

This, and the succeeding Amendments are all consequential on the Amendment we have already made.

Amendment moved— Page 94, line 13, leave out paragraph (b).—(The Lord Chancellor.)

On Question, Amendment agreed to.

Amendment moved— Page 94, line 19, at end insert ("not being regulations to which subsection (I) of this section applies.")—(The Lord Chancellor.)

On Question, Amendment agreed to. Amendment moved Page 94, line 23, leave out ("any such regulations or order as aforesaid are or is laid before it ") and insert ("any regulations or order are or is laid before it under the last foregoing subsection.")—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 107, as amended, agreed to.

Clause 108:

Construction and application of principal Act and this Act.

(2) In this Act, except where the context otherwise requires— the expression "financial year" means, in relation to any body corporate, the period in respect of which any profit and loss account of the body corporate laid before it in general meeting is made up, whether that period is a year or not;

THE LORD CHANCELLOR

By the next Amendment I propose to insert: "the expression 'bank holiday' means a day which is a bank holiday under the Bank Holidays Act, 1871." The ingenuity of my noble friend Lord Saltoun was responsible for his bringing to my notice an occasion which might lead to difficulties. Sometimes, as I gather, in particular Scottish burghs there are days on which banks are shut. He thought it right to call my attention to that fact lest I did not quite realize what I was doing in using the expression "bank holiday." I am grateful to him and I think that this Amendment will meet the difficulty which he was good enough to call to my attention.

Amendment moved— Page 94, line 44, at end, insert ("the expression 'bank holiday' means a day which is a bank holiday under the Bank Holidays Act, 1871;").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next Amendment defines the expression "officer" as including a director, manager or secretary. This will make it possible to achieve greater uniformity in the references in various parts of the Act to the different officers of a company.

Amendment moved— Page 95, line 17. at end insert ("(4) In the principal Act and this Act, the expression 'officer', in relation to a body corporate, includes a director, manager or secretary; and the references to officers in the provisions of the principal Act mentioned in the Sixth Schedule to this Act shall he amended in accordance with that Schedule.").—(The Lord Chancellor.)

On Question, Amendment agreed to.

LORD SALTOUN moved, at the end of subsection (4), to insert: "References in this Act to a company shall be construed as not including an unlimited liability company." The noble Lord said: This Amendment proposes to exempt unlimited companies from the provisions of this Bill. Before moving this Amendment I thought it right to get as much information as I could about those companies. I learn that there are some 148 of them in Scotland. In England I have been informed that there are (I speak from memory, but I know I am about right) some 2,114, but the Registrar says that he is not quite sure that they are all alive. I do not think that many of them can be dead, because an unlimited liability company, as your Lordships arc aware, carries unlimited liability, and it is not the kind of thing that anybody leaves about. It has to make its annual return with the others. It is not going to leave growing debts, for fees and other things. Therefore I think your Lordships may take it that those 2,000 or so English companies are alive.

In proportion to the population, one would not expect so many unlimited companies in England compared with the number in Scotland. If there were only 148 in Scotland, I should have expected something like 1,200 to 1,40o in England. I think I can suggest to your Lordships why England has such a large proportion of unlimited liability companies. It is because in Scotland a private firm has a persona of its own, as the noble and learned Viscount, the Lord Chancellor, has pointed out many times during the discussion of this Bill. In England such a firm has not, and the only way in which a private firm or an association or partnership of persons in England can acquire a persona is by forming an unlimited company. I think that wall explain the difference. These unlimited companies are really only partnerships—neither more nor less; it is only that they have a company form—and I do not think there is any reason to apply this Bill to them. I have some hopes that the noble and learned Viscount, the Lord Chancellor, will meet me on this matter, because on several occasions during the discusson of this Bill indeed on a great many occasions—he has persuaded your Lordships to accept a drastic clause by saying,it is only right that, in return for this very great benefit of limited liability, these conditions should be imposed, and that, of course, implies that where there is no limited liability there is no reason to impose the conditions; and I submit that there is not. I have asked many of my noble and learned friends who sit in this House in a judicial capacity if they have ever had an unlimited company before them, and every' one I have asked has said "No." There may be occasions—perhaps my noble friend Viscount Maugham may know of some; I do not think I have asked him—

VISCOUNT MAUGHAM

I have, unfortunately, come across them.

LORD SALTOUN

I do not think they get into trouble very often. Then are a great many provisions in this Bill which would affect them very adversely. l can give your Lordships a few examples. Study may give me a great many more. The three weeks' notice before a meeting is absurd for a small group of persons who generally live in the same locality. Then there are other things, in the repayment of preference shares, which I do not think have any application to a firm with unlimited liability. There are certain things about winding-up—I will not go into all those. Then there is the matter of accounts. The members of unlimited companies know one another pretty well and know their affairs pretty well. I do not think they should be subjected to all those provisions about accounts, because accounts sometimes fall into wrong hands, and it would be very unfortunate if -hey had to suffer any disadvantage by their accounts falling into wrong hands, especially when their liability is unlimited.

But I have got an even stronger reason, and it is that the Cohen Report, upon which this Bill is founded, expressly did not examine the conditions of unlimited companies. You will find that mentioned several times in the course of reading that Report. I suggest that it is a wrong principle of Parliament, when you are making a very comprehensive Statute for certain parties, who are under conditions which have been examined, to extend it to quite different parties who are acting under conditions which have not been examined. That is legislating in the dark, if ever there was an instance of such a thing, and I submit that it is a very bad principle. I beg to move.

Amendment moved— Page 95, line 22, at end insert the said words.—(Lord Saltoun.)

THE LORD CHANCELLOR

I am afraid I could not agree to this Amendment, but I can go some way to meet the noble Lord. It seems to me that there are many provisions of this Act which should apply to unlimited companies—for instance, take all the provisions that deal with the protection of a minority. You can have a minority in an unlimited company, just as you can in a limited company. On the other hand, to take another group of clauses—those that deal with the protection of the public, filing accounts and all that sort of thing, there I think you may fairly say that if you are not claiming the benefit of limited liability there is no reason why you should be put to the same trouble as a company which is. If the noble Lord (I am sorry to impose a holiday or a term task upon him) will look at the Bill and tell me where he thinks the shoe pinches with regard to the unlimited company—I will give him all the assistance I can—I am willing to go through the various provisions and except them from the sort of provisions I have indicated.

On the other hand, other provisions, such as those for the protection of minorities, apply to unlimited companies, it seems to me, just as much as to any other company. The noble Lord will, of course, remember that they are "caught" under the Companies Act as it is to-day, and they are under all sorts of obligations. In saying what I have said I have gone as far as I can—perhaps too far—to meet the noble Lord. I hope on that assurance he will withdraw his Amendment, and if between now and the Report stage he will tell me the sort of obligations from which he thinks these unlimited companies ought to be exempt, I will see what I can do to meet him.

LORD SALTOUN

I am obliged to the noble and learned Viscount for his offer, which I will gladly accept. I should like to say that although I have never come across a case of the kind, I am perfectly alive to the possibility of the oppression of minorities in unlimited companies. My own view is that that could be better dealt with by a special short Act. I am not at all sure that unlimited companies are not a better subject for an entirely different Act from this one. However, in view of the noble and learned Viscount's assurance, which I gladly accept, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 108, as amended, agreed to.

Clause 109:

Short title, commencement and repeal.

(2) This Act shall come into force on such day as the Board of Trade may by order appoint, and different days may be appointed for the purpose of different provisions thereof.

VISCOUNT SWINTON moved, in subsection (2), to leave out from "shall" to the end of the subsection and to insert: not come into force until such day as may be fixed by or under an Act consolidating the provisions of the principal Act and of this Act".

The noble Viscount said

On the Second Reading I think I carried all your Lordships with me when I said not only that I hoped we would make this Bill as good a Bill as we could, but that it was essential in a Bill which makes an enormous number of reforms in Company Law and which has a large number of clauses which have to be read by reference to other Acts of Parliament, that the new charter should not come into force until a Consolidation Act had been passed, so that there may be one charter of Company Law that he who runs may read. That was the course which was followed after the Greene Committee reported. I had the privilege of introducing the Bill which was then passed, amending the Companies Act, I think it was of 1908, and any preceding Acts. Then in the following year we had a Consolidation Act. As your Lordships know, a Consolidation Act passes automatically without discussion in both Houses on the certificate of the Parliamentary Counsel and Committee that the Consolidating Act contains nothing except a consolidating statement of law which Parliament has already passed.

This Bill is even more complex than the one for which I was responsible nearly twenty years ago. It imposes a number of new obligations which I think we are getting into the right form. The case for having the whole of the law set out in a single Act is even stronger than it was when the precedent was created twenty years ago. I can conceive that there may be one or two provisions in the Bill we are now passing which ought to -be brought into law in advance. For instance, it may be that the Government will say (I do not know whether they will; I think probably I should if I were in their place) that the provisions about inspection which we agreed upon last time ought to be brought in ahead of consolidation. If that were to be said, I should say at once that that was perfectly reasonable. Those stand in a class by themselves. A new and enlarged power is given to the Board of Trade, and nobody will suffer any disadvantage from that.

It is quite conceivable that there arc one or two other provisions that it may be desirable to introduce in advance of consolidation. If there were, and a case were made out for them, I am sure the House would readily consider it, on one understanding which I would respectfully seek to lay down. That understanding is that if there are to he any clauses in this Bill to be introduced in advance of consolidation, they should be complete in themselves, and the people who have to administer companies should not find it necessary to have two books open in front of them and, with the assistance of counsel, have to interpret one in the light of the other. Subject to any refinements of that kind, I feel sure the Government will accept the old precedent and give me an assurance that we shall have a Consolidation Act before the bulk of this Bill comes into force. I beg to move.

Amendment moved— Page 95, line 31, leave out from ("shall") to end of line 33, and insert the said words.—(Viscount Swinton.)

THE MARQUESS OF READING

I would like very briefly to support the noble Viscount in this Amendment. The subject of Company Law is one which affects many people other than those who actually practise the law, and it is to the general advantage that it should be presented for their study in the most convenient and the simplest form. Certainly the simplest form is to have it consolidated and not to have it in the shape of two or more Acts. If I may say so, I am taking an extremely unselfish view in this matter, because I believe I am still Chairman of the Joint Committee Of the two Houses on the Consolidation Bill. At the same time, I think this is essentially a Bill which requires consolidation. If one required any convincing, one need only look back to Clause 92, which we dealt with to-day, which entails a certain number of references from this Bill back to the Act, from the Act back to the Bill, and then back to the Act again, so that when one had read it for a short time one would have had all the sensation of watching tennis at Wimbledon. In order that this may be placed in a convenient for n, I very much hope that the noble and learned Viscount, the Lord Chancellor, will be able to accept the Amendment proposed.

THE LORD CHANCELLOR

I am afraid I cannot accept the Amendment proposed, although I have complete sympathy with what the noble Viscount and the noble Marquess have said. I have already made my plans to try to get on with consolidation, and to try and set up a regular consolidation branch, and I think that this is the first Bill we ought to tackle. As I have already said, it is more than my position is worth to make any promise, and, therefore, your Lordships must not press me for a promise on the matter. At the same time, I think I may say this: I shall be very disappointed if we have to bring any part of this Bill into operation before we have got consolidation. There are certain clauses of the Bill which I agree should be self-contained. For instance, we might want the power, of which the noble Viscount opposite gave us an illustration, of investigation. That, after all, is something which does not concern the public very much. The Bill confers certain powers upon the Government. That is the sort of illustration I have in mind.

I agree that if another Bill has to be brought into effect it should be self-contained, and even then it should not be brought in without very adequate notice. Take, -for instance, the accounts, which we are going to cover in the Schedule.

There, of course, we have now a little code setting out what the accounts must contain. It is conceivable that we might want to bring that code into force before the rest of the Bill, and before we have been able to get our consolidation. But there you have something which is self-contained. It would be grossly improper to contemplate bringing anything of that sort into force without giving at least six months' notice, or possibly more. I am afraid I cannot accept this Amendment, but I do accept the spirit behind it. I accept the arguments, and I shall do my very best to see that my Consolidation Bill is ready at an early stage, so that the noble Marquess will be able to get on with it very soon through the Parliamentary Counsel. With that assurance, I hope your Lordships will not press me further.

VISCOUNT SWINTON

I am obliged to the noble and learned Viscount, and I think what he has said goes a long way to meet me, because I know that when he gives an assurance of that kind, the assurance will be carried out. I will certainly withdraw this Amendment now. It would be convenient, probably on Report stage, when we come back to this part of the Bill and the clause stands part, if the noble and learned Viscount the Lord Chancellor could tell us whether there are any clauses in the Bill which he thinks it is likely may have to be introduced in advance of consolidation. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.20 p.m.

LORD COZENS-HARDY moved, at the end of subsection (2), to insert: Provided that section 43 shall not come into force before the expiration of six months from the date of passing of this Act.

The noble Lord said: Clause 43 lays down very stringent conditions with which a company must comply if it wishes to be exempt from publishing its balance sheet and accounts. A private company which is now exempt may very well wish to make re-arrangements in order to continue that exemption under the new Act. It may well be, for instance, that it will be necessary to call in debentures or to take some other action requiring several months' notice. To give time for such rearrangements, I beg to move.

Amendment moved— Page 95, line 33, after ("thereof") insert the said proviso.—(Lord Cozens-Hardy.)

THE LORD CHANCELLOR

I am sure the noble Lord will agree with me that this much at any rate is clear—namely, that it would be most unfortunate and most unfair to private companies to contemplate bringing in the requirements as to accounts at a date before we have brought in the provisions with regard to exemption. It is quite clear that we must have the provisions with regard to accounts, and provisions in Clause 43 with regard to exemption, coming into force at the same time. It would be a dreadful thing if we made all these private companies conform with the provisions regarding accounts because we had brought that part of the Act into operation and had not brought into operation Clause 43, which exempts them from having to comply with those provisions. There is not the slightest possibility of this being done before the expiration of six months. We shall certainly give six months' notice, but, for the reasons I have given, we cannot accept the Amendment, and I shall therefore ask the noble Lord to rely on the assurance I gave in the discussion on the last Amendment and to withdraw this one.

LORD COZENS-HARDY

I am much obliged to the noble and learned Viscount for the assurance he has given, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

VISCOUNT ELIBANK

I wanted to raise this point before my noble friend Viscount Swinton withdrew his Amendment, but I had not the opportunity to do so. The noble and learned Viscount has informed us that if any provisions are to be brought into effect they will be published at least six months before they come into force. I want to suggest to the noble and learned Viscount that before the Consolidating Act comes into force, the same time should elapse, in order to enable all those who will have to use this Bill and to understand it, really to understand it before it comes into force. There are an enormous number of new provisions in it, and it is very complicated. All the company officers concerned, the secretaries and so on, will have to spend a great deal of time in making themselves acquainted with these provisions. I ask the noble and learned Viscount to say that he will not suddenly launch the Consolidating Act on the community, but will give us six months before it comes into force.

THE LORD CHANCELLOR

I do not absolutely pledge myself to six months or anything of that sort, but obviously in a case of this sort one wants to give reasonable time to the public to know what it is all about and to prepare themselves for it. On the other hand, one must bear in mind that when this Bill has been through this House and through the other place, those who are skilled in these matters will have a pretty general and shrewd idea of what the provisions arc. I think it is important that we should get the Consolidating Act into force as soon as we reasonably can. We must guide between the Scylla of undue delay and the Charybdis of undue haste, so that people do not suddenly find themselves under a new set of obligations before they have really been able to work out I what they are, I think there is substance in what the noble Viscount has said, and I feel confident that the considerations he has mentioned will be borne in mind.

Clause 109 agreed to.

First Schedule:

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