§ House again in Committee on the Companies Bill.
§ 5.44 p.m.
§ LORD CHORLEYI feel that there is a good deal of force in some of the observations that have been addressed to your Lordships on the subject of getting an accurate definition of "provision" and "reserve." It is a matter which has only recently, so to speak, come floating into the compass of company legislation. I think that possibly the view which the noble Viscount, Lord Bridgman, put before your Lordships is the correct one. We shall certainly be very glad to consider the observations which have been put before tu in this connexion between now and the Report stage.
§ On Question, Amendment agreed to.
§ LORD SALTOUN moved in Part IV, paragraph (I) (c) to leave out "not." The noble Lord said: I think the point which I am going to put in submitting this Amendment is of some material substance.
§
I am not really quite sure what is the view of the Government in these matters. The paragraph as it now stands, reads:
the expression 'capital reserve' shall not include any amount regarded as free for distribution through the profit and loss account …
That is quite rigorous. You may not put in any capital reserve sums which might be available for dividend. But that does not appear to me to exclude the reverse action. I think it is much more important to put into capital reserve sums that the shareholders may consider available for dividend but that are not, in fact, regarded as free for distribution through the profit and loss account. I do not think there is any harm in putting into capital reserves sums which have been accumulated by savings out of profit during a series of years, but I think that the reverse is a very dangerous practice. If you are going to have a revenue reserve, shareholders ought to be able to look at that so that they may appreciate what is going to be available for dividend. If you leave out the word "not" in the first line of the sub-paragraph, and put in "not" after "amount" in the second line, it will, I believe, effect the necessary change. I beg to move Amendment moved—,/p>
Page 104 line 4, leave out ("not").—(Lord Saltoun.)
§ LORD CHORLEYThis is all part of the policy which the noble Lord has been putting before your Lordships and which has already been discussed with him by my noble and learned friend the Lord Chancellor. I am afraid that we are not able to accept this Amendment.
LORD SALTOUNI do not wish to press it. I have drawn attention to the point. It will not matter very much to me. I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ LORD CHORLEYThis is an Amendment consequential on the Amendment to page 96, line 12—that is, the new paragraph of the First Schedule. I beg to move.
§ Amendment moved—
§
Page 104, line 10, at end insert
("(2) Where—
is in excess of that which in the opinion of the directors is reasonably necessary for the purpose, the excess shall be treated for the purposes of this Schedule as a reserve and not as a provision.")—(Lord Chorley.)
§ On Question, Amendment agreed to.
§ LORD CHORLEYThis is a further consequential Amendment. I beg to move.
§
Amendment moved—
Page 104, line 15, leave out from ("Schedule") to end of line 27.—(Lord Chorley.)
§ On Question, Amendment agreed to.
§ LORD CHORLEYThe object of the next Amendment is to define the expression "quoted investment" and "unquoted investment" which are referred to in Paragraph 6 (I) (a) and Paragraph (8) of the First Schedule. The term "recognized stock exchange," as used in the definition, means the London Stock Exchange or a body which the Board of Trade has declared by order to be recognized as a stock exchange for the purposes of the Prevention of Fraud (Investments) Act of 1939. A number of such stock exchanges have been declared by the Board of Trade, and I do not think I need trouble your Lordships with their names.
§ Amendment moved—
§
Page 104, line 27, at end, insert:
("3. For the purposes aforesaid, the expression 'quoted investment' means an investment as respects which there has been granted a quotation or permission to deal on a recognized stock exchange, and the expression 'unquoted investment' shall be construed accordingly.").—(Lord Chorley.)
§ LORD BALFOUR OF INCHRYEThe New York Stock Exchange is naturally included. But there is an unofficial stock exchange in New York called the "Curb" where a great many securities are quoted. What happens to Curb exchange quotations? I do not press it now, but would the noble Lord say whether is included or not included?
§ LORD CHORLEYWe will look into that.
§ On Question, Amendment agreed to.
§ First Schedule, as amended, agreed to.
§ Second Schedule:
§ Matters to be expressly stated in auditors' report.
§
4. In the case of a holding company submitting consolidated accounts, whether, in their opinion.—
(b) the reasons given for any difference between the financial year of the holding company and that of any subsidiary are satisfactory.
§ LORD CHORLEYThese are two drafting Amendments which come together. I beg to move.
§
Amendment moved—
Page 105, line 16, after ("the") insert ("consolidated").—(Lord Charley.)
§ On Question, Amendment agreed to.
§
Amendment moved—
Page 105, line 18, leave out the last ("and") and insert ("or").—(Lord Charley.)
§ On Question, Amendment agreed to.
§ LORD CHORLEY moved, in paragraph 4, to leave out sub-paragraph (b). The noble Lord said: The effect of this Amendment is to remove the requirement that the auditor shall state in his report on the accounts whether the reasons given for any difference between the financial year of the holding company and its subsidiary are satisfactory. Your Lordships will recollect that there was an Amendment to Clause 12 under which the position was changed, and it was left to the 320 companies' directors not to bring in the subsidiary account in certain circumstances when there was good reason against it. It would obviously be inadvisable that the auditors should report on the situation in those circumstances, and this Amendment is moved in order to remove that obligation from them. I beg to move.
§
Amendment moved—
Page 105, line 20, leave out from ("company") to the end of line 23.—(Lord Charley.)
§ On Question, Amendment agreed to.
§ LORD CHORLEYThis is purely a consequential Amendment. I beg to move.
§
Amendment moved—
Page 105, line 25, after ("accounts") insert ("on the ground that it is impracticable or would be misleading").—(Lord Chorley.)
§ On Question, Amendment agreed to.
§ Second Schedule, as amended, agreed to.
§ Third Schedule agreed to.
§ Fourth Schedule [Amendments as to Persons liable for defaults under principal Act]:
§ LORD CHORLEYThe next is really a drafting Amendment. The effect is to substitute for the existing phrase in Section 89, subsection (2) of the Companies Act (which lays down a penalty for failure to permit inspection of copies of instruments creating charges and inspection of the register of charges) the words "every officer of the company who is in default." We dealt with this expression when we were discussing Clause 92. The Amendment omits the reference to the offence being committed" knowingly and wilfully," because the expression "every officer of the company who is in default" is defined in Section 365 of the Companies Act to mean any director, manager, secretary or other officer of the company who knowingly and wilfully authorizes or permits the default, refusal, or contravention. I beg to move.
§ Amendment moved—
§
Page 108, line 13, at end insert:
("s. 89 (2) … Any officer of the company refusing inspection and every director and manager of the company authorising or knowingly and wilfully permitting the refusal")—(Lord Chorley.)
§ On Question, Amendment agreed to.
321§ LORD CHORLEYWhen this Schedule was compiled, subsection (3) of Section 91 of the Act of 1929 was included in it, but actually that section was of a purely transitory nature, and has ceased to be effective. Therefore, it ought not to be in the Schedule at all, and the effect of the Amendment is to remove it.
§
Amendment moved—
Page 108 line 14, leave out from beginning to end of line 16.—(Loyd Chorley.)
§ On Question, Amendment agreed to.
§ Fourth Schedule, as amended, agreed to.
§ Fifth Schedule agreed to.
§ LORD CHORLEY moved, after the Fifth Schedule, to insert the following new Schedule: