Lords Sitting of 25 March 1947

Preamble
The House met at half-past two of the clock, The LORD CHANCELLOR on the Woolsack.
Prayers.
The Lord Hesketh—Sat first in Parliament after the death of his father.

WEST AFRICAN EXECUTIONS.
THE MARQUESS OF DONEGALL: My Lords, I beg leave to ask His Majesty's Government the following question of which I have given them private notice: Whether they have any statement to make regarding the executions of the West African natives, Aaron Eugene Dankwa, Kwasi Pippin, Kwame Kugwa?
THE LORD CHANCELLOR (LORD JOWITT): My Lords, as announced from the Colonial Office last night, three men under sentence of death for murder were executed in Accra yesterday. The executions of two others were postponed by the Governor on receipt of notice of intention to lodge a petition with the Judicial Committee of the Privy Council.
THE MARQUESS OF DONEGALL: My Lords, I would like to thank the noble and learned Viscount for his answer. I owe him an apology because I gave him very short notice, and it is indeed gratifying to me that he was able to answer it at all. I wish to make my position clear. I am not questioning the justice of the verdict; I am merely questioning the procedure and the long time that these things have taken. The noble and learned Viscount's answer will help me to decide whether to put down a Motion and to move for Papers.

BUSINESS OF THE HOUSE.
THE LORD CHANCELLOR: My Lords, I beg to move the Motion that stands in my name on the Order Paper.
Moved, That the Order of the House for receiving the Report of Amendments to
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the Companies Bill this day, be discharged, and that the Bill be re-committed to a Committee of the Whole House forthwith.—(The Lord Chancellor.)
On Question, Motion agreed to, and ordered accordingly.

SUNDAY ENTERTAINMENTS ACT, 1932.
COUNTY BOROUGH OF HUDDERSFIELD ORDER:
BOROUGH OF BRIDGWATER ORDER:
URBAN DISTRICT OF BLAYDON ORDER.
LORD WALKDEN: My Lords, I beg to move that these Orders be approved.
Moved, That the Orders made under the Act by the Secretary of State for the Home Department, for extending Section I of the Act to the said areas, be approved—(Lord Walkden.)
On Question, Motion agreed to.

VIOLATION OF TREATIES.
2.38 p.m.
THE EARL OF PERTH: 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 in the future they will arrange for the insertion in any bilateral treaty or agreement which they may conclude, of a clause to the effect that in case of a violation or of an allegation by one of the parties of a violation of the terms of such treaty or agreement the matter will be referred to the United Nations; and whether they will endeavour to secure the insertion of an analogous clause in any multilateral treaty or agreement to which they may become a party.]
THE FIRST LORD OF THE ADMIRALTY (VISCOUNT HALL): My Lords, His Majesty's Government have in the past endeavoured, and will continue in the future to endeavour, to insert in both bilateral and multilateral treaties and conventions to which they are parties a provision to the effect that disputes arising out of the interpretation or application of the instrument in question shall be referred to the International Court of justice. Such a provision seems particularly suitable in view of the fact that the Charter states, in

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Article 36, that legal disputes should, as a general rule, be referred to the International Court, and that Article 36 of the Statute of the Court describes legal disputes as, inter alia, those concerning the interpretation of a treaty and the existence of any fact which, if established, would constitute the breach of an international obligation.
THE EARL OF PERTH: My Lords, arising out of the answer, for which I thank the noble Viscount, may I ask him whether he considers this is a reply to the question on the Order Paper? I asked whether in the case of an allegation by one of the parties of the violation of the terms of such treaty or agreement the matter will be referred to the United Nations. The noble Viscount refers to the Court of International Justice. I hope, therefore, that he will reconsider the point I have raised, because I believe it would be of great help in carrying out the policy of all-round good faith which His Majesty's Government so strongly support.
LORD VANSITTART: My Lords, before the noble Viscount replies to that question, may I ask him another one? Is the reply which we have just received a mere statement of principle, or does it foreshadow that that state of things will, in fact, be embodied in any future treaty? If it is merely a statement of principle, I do not think it answers the purpose for which I imagine the question was asked. What I would really like to see included in any treaty—bilateral or multilateral—concluded in future would be a clause covering the points proposed by the noble Earl. I cannot tell whether or not the answer that we have received foreshadows that as a prospect. Will there be included in any treaty a clause drawn in the terms of the noble Lord's reply? Even if there is I do not think it will be quite satisfactory, but without it will be wholly unsatisfactory.
VISCOUNT HALL: I am advised that Article 36 of the Charter does provide for what the noble Earl has asked. That is the advice I have received, but I will certainly look at Article 36 and ask my right honourable friend who deals with this matter to take into consideration the points which have been put.
VISCOUNT SAMUEL: May I ask, on a point of order, for the sake of establishing precedent, whether it is in order for any noble Lord other than the one who has put the starred question to ask any supplementaries?
THE LORD CHANCELLOR: In so far as it is for me to reply, though I have no more authority than any of your Lordships, I understand the Rules of Order to say that it is not in order.

MALAYA CONSTITUTION.
2.41 p.m.
VISCOUNT ELIBANK: My Lords, I beg to ask the question standing in my name.
[The question was as follows:
To ask His Majesty's Government, whether a draft of the Revised new Malaya Constitution will be laid before Parliament at an early date so that there may be full opportunity to debate it before it takes legislative shape.]
VISCOUNT HALL: My Lords, my right honourable friend the Secretary of State for the Colonies has arranged for copies of the constitutional proposals now under discussion in Malaya to be placed in the library. These proposals were published in Malaya in December last, and shortly thereafter a Consultative Committee was appointed by the Governor, for the purpose of affording to all interested individuals, bodies and groups in Malaya, full and free opportunity for expressing their views on them. This Committee have been charged with the task of collecting all such views, and will present their report to the Governor of the Malayan Union for consideration in his Advisory Council. Shortly thereafter the Governor hopes to submit his recommendations for consideration by His Majesty's Government. Before any final decisions are reached, Parliament will have the opportunity of commenting upon the recommendations, but I regret that, I cannot at present forecast with any certainty when they will be available to the House.
VISCOUNT SWINTON: My Lords, I will defer in a moment to my noble friend Viscount Elibank, but I wish to ask a supplementary question, particularly in view of what was said by the noble Viscount, the Leader of the Liberal Party. May I with great respect, put to the noble

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and learned Viscount on the Woolsack that it is quite in order for a noble Lord, other than the noble Lord who puts the question, to ask a supplementary question provided he does not make a speech? That, I venture to submit, has been the uniform practice with regard to supplementary questions in the ten or twelve years I have been in this House. Perhaps the noble and learned Viscount would deal with that point.
THE LORD CHANCELLOR: I am now better able to answer than I was earlier. I understand that the Rule of Order is that a supplementary question may be asked by any Peer, but it must be strictly a supplementary question and not a speech.
VISCOUNT SAMUEL: I must apologize for having raised a false point, but I did so on what I thought was the best advice I could obtain.
VISCOUNT ELIBANK: Perhaps I may now ask my supplementary question, being naturally gratified at the statement which has just been made, and which I think represents the practice that has always obtained in this House. I wish to thank the noble Viscount for the reply which he has given, and for the hope it sets out that Parliament will have full opportunity to consider these proposals before they come into force. I should, however, like to ask the noble Viscount, as my question indicates, whether these proposals will be put into legislative shape before we have had an opportunity of considering them. In his reply he did not actually answer that point, and I should be grateful if he would be good enough to do so now, because it is a very important point. As proposals we can discuss them and mould them. If we have them as a Bill, we have not the same opportunity for moulding them.
VISCOUNT HALL: May I, for the benefit of the noble Viscount, repeat the latter part of the reply: "Before any final decisions are reached, Parliament will have an opportunity of commenting upon the recommendations, but I regret that I cannot at present forecast with any certainty when they will be available to the House." I think that meets the point.
VISCOUNT ELIBANK: Thank you.
LORD BARNBY: My Lords, may I, with the indulgence of the House, before putting my question, ask for a further interpretation of the matters that have just been discussed? With regard to starred questions, is it in order for any Peer to intervene with a supplementary question before the Peer who asks the original question has had a chance to ask a supplementary question? Having been absent abroad for three months, I wondered if there was any change?
THE LORD CHANCELLOR: I understand the practice—it was always the practice in the other place—is that the Peer who asks the question is entitled to the first supplementary; and thereafter other Peers may ask supplementary questions.
LORD BARNBY: Thank you.

WOOL BALE DISPOSALS.
2.45 p.m.
LORD BARNBY: My Lords, I beg leave to ask the question which stands in my name on the Order Paper.
[The question was as follows:
To ask His Majesty's Government if they are prepared to publish as soon as possible after March 31 figures supplied to them of total wool bale disposals by the Joint Organization up to that date from the stocks taken over by them officially on July 1, 1946.]
LORD CHORLEY: My Lords, it is the intention of the Joint Organization to publish from time to time information similar to that issued to the Press in August last. Any necessary revision of published figures for earlier periods will be made at the same time.
LORD BARNBY: Do I understand from that reply that the Government are in possession of the information and it is to be withheld?
LORD CHORLEY: I cannot follow the point of the noble Lord.
LORD BARNBY: The question asks for definite information. The reply given by the noble Lord indicated that the Government are in possession of the information. Is it to be understood from his reply that it is not the intention to give it now?
LORD CHORLEY: It will be made available very shortly. I am not able to inform the noble Lord of the exact time, but certainly it will be quite soon.

COMPANIES BILL. [H.L.]
2.47 p.m.
House in Committee (according to Order) on recommitment of the Bill.
[The Earl of Drogheda in the Chair.]
Clause 1 agreed to.
Clause 2:
Length of notice of meetings and of business thereat.
2.—(I) For paragraph (a) of subsection (I) of Section one hundred and fifteen of the principal Act (which, subject to the company's articles, provides that a meeting of a company other than a meeting for the passing of a special resolution may be called by seven days' notice in writing) there shall be substituted the following paragraph:-
"(a) a company's annual general meeting may be called by twenty-one days' notice in writing, and a meeting of a company other than an annual general meeting or a meeting for the passing of a special resolution may be called by fourteen days' notice in writing;"
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.
(4) In the provisions of the principal Act hereafter mentioned in this subsection there shall be substituted the longer for the shorter time limit so mentioned, that is to say—
(c) in subsection (3) of Section one hundred and thirty-two (which relates to notices of resolutions as to the appointment of a company's auditors at the annual general meeting) twenty-eight days for fourteen days, in both places, and twenty-one days for seven days, and in proviso (a) to subsection (4) of that section (which makes similar provision as respects auditors appointed before the first annual general meeting) fourteen days for seven days.
LORD SALTOUN LORD SALTOUN moved, at the end of subsection (I), to insert:
"Provided that in the case of an unlimited company any meeting may be called by such notice (not being less than seven days) as is enjoined in the company's articles."
The noble Lord said: My Lords, I have put down the Amendment which stands in my name as an expression of anxiety for the protection of minority share-
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holders, especially in unlimited companies, and I venture to think that this Amendment gives that protection. In dealing with those companies, about which our official advisers have no or very little information, I must ask your Lordships to consider them not so much in terms of companies as in terms of partnerships, because that is what they really are. Some unlimited companies I know do most of their business through their directors, in whom they have great confidence, but it is quite common for partnerships to have frequent meetings to decide the policy of the partnership; in fact, I think that is probably a rule in most partnerships.
Three weeks' notice for any meeting of an unlimited company is, I think, contrary to the interests of the shareholders of the company, because, as in most partnerships, they are in the habit of meeting and taking a real live part in their proceedings. I know of no business where matters drag on for three weeks—not if it is a live business. Things come up from day to day and are settled very quickly. The result of the Bill as it stands might well be that for members of an unlimited company there would actually be three notices of a meeting out at any one time. Moreover, these notices must be incomplete, because by giving three weeks' notice in advance, matters arising out of a meeting which is to be held in a week cannot be put down. Therefore the result of the Bill as it stands, as applied to unlimited companies, will in many cases be that the shareholders of such companies will be compelled to put a great deal more power in the hands of their directors, and confine their tasks to what in Scotland we call homologating the acts of the directors. They will therefore be deprived of a great deal of management of their own concerns, and for this reason I cannot help thinking that it is a great mistake to apply to these partnerships the same iron law that you are applying to big limited joint stock companies. I beg to move.
Amendment moved—
Page 2, line 40, at end insert said proviso.—(Lord Saltoun.)
THE LORD CHANCELLOR: The noble Lord has referred to "big joint stock companies." Let him consider, for a moment, the quite small exempt private companies. What reason is there that I should grant to these companies which

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are dealt with in his Amendment—unlimited companies—concessions which I have not granted to small exempt private companies? There is no essential difference between the two. In this respect meetings of both of them, the exempt private company and the unlimited company, if they have sufficiently few members—and they generally have—could be called at short notice. Both might be inconvenienced by the longer period laid down in the clause. I have been asked for no special treatment for these exempted private companies, and I cannot see any reason why I should make a special concession with regard to the unlimited companies. After all, there is this objection to the Amendment. It is extremely awkward, in a general Bill of this kind, to have one rule for a meeting of one class of company and another rate for a meeting of another class of company. If it is necessary to protect the minorities in one case as in the other, I suggest we had better make the unlimited companies adhere to the same rule as is applicable to the small exempt private company.
LORD SALTOUN: With a part of what the noble and learned Viscount has said 1 am in agreement. I think there is a very strong case for adopting, my Amendment for exempted private companies. But There is a reason for this Amendment, which I shall possibly emphasize later on, and it is one which has been mentioned by the noble and learned Viscount in the course of our debates on this Bill. It is that the liability of the members of these companies cannot be measured. There is that difference. But if Parliament does decide that these people must have three notices of future meetings at one time, and carry on their business under this handicap, then they must do it. I venture to suggest to the noble and learned Viscount, however, that. the argument of uniformity is not a very good argument in a Bill which applies to every single detail of British business, which is possibly the most varied thing on the face of the earth. I will not press my Amendment, but I feel it my duty to put before your Lordships and His Majesty's Government the really cogent reasons I have for moving it. If the noble and learned Viscount is determined, then I beg leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
THE LORD CHANCELLOR: The next is a drafting Amendment, anticipating the Amendments to Clause 17 which we shall come to presently. It is concerned with the appointment of auditors. This particular Amendment merely deals with the appointment of auditors before the first annual general meeting. That is the subject matter of Section 132 (4) of the Act of 1929, and the effect of this Amendment is to provide notice of fourteen days instead of seven days. I beg to move.
Amendment moved—
Page 3, line 40, leave out paragraph (c) and insert:
"(c) in proviso (a) to subsection (4) of Section one hundred and thirty-two (which relates to notice of a proposal to appoint other auditors in place of a company's first auditors): Fourteen days for seven days.")—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after subsection (5) to insert:
"(6) Where by any provision hereafter contained in this Act special notice is required of a resolution, the resolution shall not be effective unless notice of the intention to move it has been given to the company not less than twenty-eight days before the meeting at which it is moved, and the company shall give its members notice of any such resolution at the same time and in the same manner as it gives notice of the meeting or, if that is not practicable, shall give them notice thereof, either by advertisement or in any other mode allowed by the articles, not less than twenty-one days before the meeting:
Provided that if, after notice of the intention to move such a. resolution has been given to the company, a meeting is called for a date twenty-eight days or less after the notice has been given, the notice though not given within the time required by this subsection shall be deemed to have been properly given for the purposes thereof."
The noble and learned Viscount said: This Amendment defines what is meant by "special notice of an ordinary resolution." As your Lordships will remember, in the Bill we have now there are many illustrations of this type of resolution—that is to say, a resolution which is going to be carried by a bare majority, which is therefore like an ordinary resolution, but which is a resolution of which twenty-eight days' notice must be given. Here I am, setting out what is meant by if "special notice of a resolution"; that is to say, twenty-eight days' notice to be given to the company, and then the directors have to give twenty-one days' notice to the shareholders. I beg to move.
Amendment moved—
Page 4, line 10, at end insert the said subsection.—(The Lord Chancellor.)
VISCOUNT MAUGHAM: There is one thing I would like to say on the Amendment as moved, and that is with reference to advertisement. After saying that the company shall give its members notice of any such resolution, the Amendment says:
"at the same time and in the same manner as it gives notice of the meeting or, if that is not practicable, shall give them notice thereof, either by advertisement or in any other mode allowed by the articles, not less than twenty-one days before the meeting."
In another part of the Bill there is also a reference to notice by advertisement. I confess I do not quite know when that will be desirable, but if we are going to insert the provision in the Bill, I venture to think that we must state what we mean by "advertisement." I would suggest the addition after "advertisement," of the words "in a newspaper circulating in the neighbourhood of the registered office of the company." If we do not do that, the advertisement might be in some local newspaper a long way from the company's office, and nobody would see it. So far as I know, whenever notice by advertisement is' authorized by any Act of Parliament it has always been found desirable to state what is meant by "advertisement," and to make the best endeavours to cause the advertisement to reach the minds of the persons whom it is intended to affect. I did not invent these words. They are, in substance, what is to be found in Table A of the principal Act, which deals with a case of advertisement. The Act states that it must be a newspaper circulating in the neighbourhood of the registered office. I do not think that will in any way harm the Amendment of the noble and learned Viscount; in fact, I think it will serve to render it more nearly perfect.
THE LORD CHANCELLOR: This illustrates the usefulness of having this discussion in Committee instead of on Report. I think there is great substance in what the noble and learned Viscount has said, and this is what I would suggest. A great many Amendments will be thrown up and will have to be considered in another place, and I think this is plainly one of them. My own doubt about it is that I am not certain that "the neighbourhood of the registered
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office of the company" is the right form of words. We had some illustrations given—and we shall no doubt have some more—of a company incorporated in Scotland with all its shareholders in London. Therefore, it might be that the location of the registered office is not the right test. However, on principle I think there is great force in what the noble and learned Viscount has said. He will remember—indeed I think he has said it—that this provision about advertisement, without a definition, is already in the Act of 1929. It would be useful to have some kind of a definition, and the matter will certainly be looked into.
VISCOUNT MAUGHAM: I would just like to add that I thought it was in Table A in the principal Act, but I may be wrong. In any case, with regard to the question of the registered office of the company, I have taken that from Table A, and it is a little difficult to give an alternative. I knew that we could not amend it here, but I thought it could be done on the next stage of the Bill.
On Question, Amendment agreed to.
Clause 2, as amended, agreed to.
Clauses 3 and 4 agreed to.
Clause 5 [Voting at meetings]:
THE LORD CHANCELLOR: This is a small drafting Amendment to insert the words "of a private company", purely to meet the point made by the noble Lord, Lord Balfour of Burleigh, about the difficulty of having various nominee clients who might want to vote in different ways. I beg to move.
Amendment moved—
Page 6, line 22, after ("member") insert ("of a private company").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is consequential on the Amendment we have just moved. I beg to move.
Amendment moved—
Page 6, line 28, after ("proxy") insert ("or, where that is allowed, one or more proxies ").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This is a consequential Amendment. I beg to move.
Amendment moved—
Page 6, line 28, leave out ("the") and insert ("a").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This is a drafting Amendment. In Clause 108 (4) we state that the expression "officer" shall include a director, and therefore we do not want the word twice. I beg to move.
Amendment moved—
Page 6, line 44, leave out ("director or other").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next is a drafting Amendment on the same point. I beg to move.
Amendment moved—
Page 7, line 4, leave out ("a director or other") and insert ("an").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 5, as amended, agreed to.
Clause 6 [Meetings attended by single member]:
THE LORD CHANCELLOR: In looking at this clause we find that the word "may" occurs twice—"directions which may be given may include." We do not want that, and this Amendment is designed to leave out the second "may." I beg to move.
Amendment moved—
Page 7, line 35, leave out ("may").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 6, as amended, agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after Clause 6, to insert the following new clause:
"Exemption from obligation to print certain resolutions etc.
.Notwithstanding anything in subsection (I) of Section one hundred and eighteen of the principal Act, an exempt private company need not forward to the registrar of companies a printed copy of any resolution or agreement to which that section applies, if instead it forwards a copy in some other form approved by the registrar."
The noble and learned Viscount said: This is to meet the point raised by the noble Lord, Lord Hawke, that documents, so long as they have sufficient legibility and durability, need not be in print. I beg to move.
Amendment moved—
After Clause 6, insert the said new clause.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clauses 7 to agreed to.
Clause it [Books of account]:
THE LORD CHANCELLOR: The next Amendment is to meet a point raised by the noble Lord, Lord Cozens-Hardy; that is to say, where books of account are kept outside Great Britain, a company need disclose its financial affairs only at intervals not exceeding six months, instead of three months. I beg to move.
Amendment moved—
Page II, line 4, leave out ("three") and insert ("six").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause II, as amended, agreed to.
Clause 12 [Periodical accounts (including consolidated accounts of group)]:
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to leave out subsections (2) to (4) and to insert:
"(2) A company's balance sheet and profit and loss account shall comply with the requirements of the First Schedule to this Act, so far as applicable thereto:
Provided that the Board of Trade may, on the application or with the consent of a company's directors, modify the said requirements in relation to that company, for the purpose of adapting them to the circumstances of the company."
The noble and learned Viscount said: The effect of this Amendment is to leave out nearly the whole of the existing Clause 12. There follow—this makes it a little difficult I am afraid—four new clauses, which take the place, in slightly different language, of our old friend Clause 12. It is a little hard for those of us who have become familiar with that clause to try to pick it up again in four new clauses, but that is the task we have to face. I have endeavoured in the four new clauses—and perhaps I may discuss them rather generally on this Amendment—to give effect to the general wish expressed in the House that the requirements in regard to accounts should be made more elastic and should, so far as possible, be simplified. In the redraft, account has been taken of all the points which have been raised by your Lordships and, so far as I am aware, I have given effect to all the undertakings I then gave.
The first and most important concession is that under the new layout the directors of a holding company may give in some other form the information which would be required in consolidated accounts. Consolidation remains the standard way of presenting the position of a group, but the directors may, if they think it is better for the purpose of presenting the same or equivalent information, or of so presenting it that it may be more readily appreciated by the company's members, prepare group accounts in a different way. In particular, they may do so by presenting more than one set of consolidated accounts, each dealing with different groups of companies; or by separate accounts dealing with each of the subsidiaries; or by statements expanding the information about the subsidiaries in the company's own accounts; or by any combination of these four. But, of course, it must be observed that the group accounts, in whatever form they may be presented, must always give a true and fair view of the state of affairs and the profit or loss of the company and the subsidiaries dealt with thereby as a whole, so far as concerns members of the holding company. That is the first alteration made in the new clauses.
As to the second alteration, we have allowed a wide discretion to the directors of a company in determining whether a subsidiary should or should not be dealt with in the group accounts, but they can omit it only if they consider that to include it would be impracticable or of no real value to the members of the company, in view of the insignificant value of the amounts involved, or would involve expense or delay out of proportion to the value to members of the company. Where, however, a subsidiary is left out of the group accounts, certain essential information, which is laid down in paragraph (4) of Part II of the First Schedule, has nevertheless to be given with regard to the subsidiary so omitted. Thirdly, where there is a group or chain of holding and subsidiary companies, consolidated accounts are not required where the holding company is a wholly-owned subsidiary of another company incorporated in Great Britain. That is the substance of the clauses which are coming. I hope I have not been out of order in discussing the matter, but I thought it relevant to point
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out why I was proposing to leave out the great bulk of Clause 12 in order that presently I may put in the substance of it with this greater amount of elasticity. I beg to move.
Amendment moved—
Page 11, line 12, leave out from beginning to end of line 26 on page 12 and insert the said new subsection.—(The Lord Chancellor.)
VISCOUNT SWINTON: If I may follow the example of the noble and learned Viscount, the Lord Chancellor, and deal very briefly with the new clauses which follow, I should like most sincerely to congratulate him and those who have worked with him on a most admirable and practical piece of work. As he said, we were all at one in our intentions. We wished consolidated accounts to be the common form and the normal way of presenting the affairs of a company which has, through its subsidiaries, many ramifications. We also desired that there should be the fullest possible information given. The more we went into the matter, I think, the more we were impressed with the impossibility of having a sealed pattern. Companies vary as much as the manifold businesses conducted in this country vary, and it would be almost impossible to present the accounts of every company in precisely the same form. I do not propose to go again into the sort of questions we discussed on earlier stages of this Bill and which, to anybody with any experience of either Company Law or business practice, make the matter abundantly plain.
Therefore, the noble and learned Viscount, the Lord Chancellor, as I see it, set to work to find a model that will normally be followed, in so far as it is practicable and convenient and in the interests of the company and its shareholders. But that may be varied to suit the exigencies of different cases, provided always that there is the fullest disclosure of profit and loss and that the requisite information is given. If I may say so, I think the form which this clause has now taken is admirable. I would like, if I may, to pay a compliment to the draftsmen. Not only is the requirement now to be imposed by the law the right one for those who have the management of companies, but the method laid down is the convenient way for them to meet that requirement. It has been translated into language which even I can understand, and it is a very remarkable piece of work.
LORD RENNELL: May I follow in all he said the noble Viscount who has just sat down? I would express precisely the same view. I would, however, like to ask a question on one thing which is not quite clear to me. If I may anticipate, again, the term "group" is used, I think for the first time, in the series of Amendments to which the noble and learned Viscount referred, which will be inserted after Clause 12. I think we all know what is meant colloquially by "group accounts," but I am not sure that it is not a new term and might require some definition. A subsidiary may be a company with subsidiaries, and there may be subsidiaries of those subsidiaries. Any one company need not, however, be the subsidiary of a particular company, but may be the subsidiary of two or more companies collectively. There is a point in one of the proposed new clauses where the word "group" is used. It appears in the Marshalled List of Amendments on page 5, and makes clear what is meant. It says: "The company and the subsidiaries thereby dealt with as a whole." I wonder whether the use of the word "group" does not constitute an innovation which might require qualification, either in the interpretation clause or somewhere else.
LORD SALTOUN: I would like to consult your Lordships, and especially the Lord Chairman, with regard to my position. I had an Amendment down to the clause as it stood in the Bill when it left committee. Now that clause is going to be swept away and another one substituted. I conceive that if we accept this Amendment—which I hope we shall—it will then be out of my power to move an Amendment to something your Lordships have already approved; yet the subject of my Amendment is quite different from the point we are now discussing. I should like to ask the Lord Chairman if, after this Amendment is disposed of, I may move my Amendment, or how the matter is to he taken.
THE CHAIRMAN OF COMMITTEES: The noble Lord can move an Amendment to the Amendment already moved by the noble and learned Viscount. Perhaps he would put in manuscript what he wishes to move.
LORD SALTOUN: I will certainly do that. My Amendment was to insert "not being an unlimited company," but with
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the Amendment we are now discussing that would make bad English. I would prefer to say:
"The balance sheet and profit and loss account of a company, not being an unlimited company …."
That would make reasonably good English, if your Lordships would accept my Amendment in that form to the Amendment of the noble and learned Viscount, the Lord Chancellor.
THE CHAIRMAN of COMMITTEES: The Amendment can be taken now, if the noble Lord will -move it in that form.
LORD SALTOUN: This is a very serious Amendment and one of great importance. The object of it is to exempt unlimited companies, that is, partnerships, from presenting their accounts in the form laid down in the schedule. I know perfectly well that in America a great deal of information is given about the affairs of companies. I have had to study American returns, as no doubt have many of your Lordships. It is the object of this Bill to introduce something of a similar system in the business of limited companies in this country. The point about these companies is that they are limited, and, if harm comes, at any rate the shareholders lose only their shares. There is one point about what we arc doing, which I expect has engaged the attention of your Lordships. Perhaps some noble Lords thought it did not matter very much, but it has a big place in my own mind. It is that this disclosure, while in some ways it may be a good thing for the shareholders, will operate rather unfairly as between big companies and small companies. I will pot quote any names, but your Lordships could probably think of ten or twelve of the biggest companies whose balance sheets you are in the habit of studying. You can ask yourselves how much additional information about the company's affairs the provisions of the schedule will give you.
On the other hand, smaller concerns will have to put all their cards on the table, and one of the effects of that, I think, will be to give a great advantage to those companies which I always compare, in my own mind, with Aaron's rod—the rod that ate up all the other rods. I am bound to say that I do not always approve of the activities of these great concerns which eat up all The little

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concerns. I nave often criticized them in my own heart very strongly. This Bill, when it comes into law, will make such activities easier. I may be wrong, but I think I am right. In the case of unlimited companies, every member of the company has a liability which can never be measured. It happened not very long ago—and without my having anything to do with the company whatsoever and without any fault of my own to which I could assign it—that I fell under the shadow of an unlimited liability. I sincerely trust that none of your Lordships may ever lie for as long as I did under that shadow. It was a liability which could not be measured, which would eat up everything I had two or three times, and no action of mine could avoid it if it fell. It is a most appalling position to be in.
We have heard from the noble Lord, Lord Lucas of Chilworth, I think in the debate on this Bill—I hope it was not outside this House—that anybody in business can find out his neighbour's affairs by Gestapo methods. Take, for instance, a village Inn which is a family concern and which is an unlimited company. It has a secretary and a clerk, and perhaps a small boy. Fifty pound notes is not a very big sum to spend. It is not an enormous price for Gestapo work for a small boy. It is all very well to say that whatever form the accounts are in, they are absolutely secret; they are not; and it means that this partnership has to give a great deal of information which other partnerships do not in practice give, and would not give. I suggest that it is a very rash thing to do. I go farther and point out to your Lordships that this is a matter on which Parliament has no official knowledge at all—the Department have no official knowledge at all. This is a subject which was not examined by the Cohen Report. As a matter of fact, it was suggested to one of the members that they should examine it and they chose not to take the opportunity.
I suggest it is a dangerous thing to legislate in the dark, simply for the sake of uniformity, and what is more I think any of those who have been working on this Bill, if in consequence of this Bill something were to happen which brought down any of these companies, would find himself loaded with a reproach that he
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would be sorry to have incurred. Even when I was an apprentice working in Scotland not very long ago, I found that amongst the clerks in my office there was a bitter memory of the City of Glasgow Bank and the Trust that had to take over the assets of that Bank. You would be surprised how long these thoughts reign in the hearts of people. I agree with the noble and learned Viscount, the Lord Chancellor, about minorities in unlimited companies—that it might be a good thing to give them some protection. As a matter of fact, that is a matter to which I turned my mind before we began discussing this Bill, and I have a suggestion which I will make, with your Lordships' permission, when we come to the question whether this Bill be reported, in order to show which lines I think should be adopted. But I do not see how the inclusion of unlimited companies in this part of the Bill is for the protection of minorities. I think it is not for the protection of minorities, and the risks of minorities in this case are much greater than in the normal case of a limited company which has the great privilege of limited liability. I think, therefore, that unlimited companies might very well be left out of the provisions of this clause. I beg to move.
Amendment to Amendment moved—
In the proposed new subsection, leave out line r, and insert:
("The balance sheet and profit and loss account of a company, not being an unlimited company,").—(Lord Saltoun.)
VISCOUNT MAUGHAM: May I say one word in support of this Amendment? I have always understood that the price of limited liability was one of disclosure, and I am not at all surprised that at intervals—generally of twenty years or so—the amount of disclosure that has to be given by a limited company is increased. But I have never understood that an unlimited company got anything from the State or Legislature beyond the fact that they are entitled to a name which represents the corporation and, if you like, a seal, and that they therefore have a slight advantage in the sense of having a heading to their notepaper and a signature to their letters. I am quite unaware of any reason for imposing upon a partnership that have turned themselves into an unlimited company the obligation to disclose their affairs to the extent to which they would be subject under the clause in the Bill.

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Much injustice and inconvenience would be caused to certain companies of unlimited liability if they had to make this disclosure. Some of them would be bound to wind themselves up, and revert to the position of ordinary partnerships. A. partnership may not, if I remember rightly, consist of more than twenty—though I do not know what happens if they have more than twenty. Nobody ever bothers about it. But it is an advantage to be able to have an unlimited company which is, in substance, a partnership with more than twenty persons. I am very desirous of not putting any difficulties in the way of a perfectly straightforward and honest partnership, carrying on business with unlimited liability, and with the advantage of becoming as I have stated, persona in law but having in that respect not a single advantage as between itself and its creditors or in respect of the ordinary carrying on of its business. Accordingly I support this Amendment and hope the noble and learned Viscount will be able to accept it.
THE LORD CHANCELLOR: I am sure I could not accept this Amendment. It is riot necessary. It is not a question of imposing an obligation to publish accounts. There is no obligation on an unlimited company to publish accounts. They must keep accounts; even if you are a partnership you must keep accounts. Clause 26 of this Bill makes the matter plain, I think. It is a fact that an unlimited company has not got to publish its accounts.
VISCOUNT MAUGHAM: I am sorry to interrupt. Can the noble and learned Viscount tell me the section to which he is referring?
THE LORD CHANCELLOR: For the moment I cannot, but I will look at it again later. Let us assume it as a fact. It is not a question of publishing accounts; it is a question of keeping accounts. I do not care whether it is an unlimited company or a partnership. I cannot conceive of a law in Scotland where a partnership, as an entity separate from the partners—there may be a subtle distinction between a partnership and an unlimited company in Scotland; in England a partnership consists of its members—does not keep accounts. I do not see why accounts should not be kept in the rather elastic form we have allowed in the First Schedule. I agree that they should not
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have to be published. There is no reason why they should, any more than an exempt private company has to publish its accounts. I will satisfy myself between now and the Report stage that these accounts have not to be published to the world, but I see no reason whatever why the accounts of an unlimited company should not be kept in what is now regarded as the appropriate and right form, with that very large degree of elasticity which we haveo now given. For that reason, and on that assumption, I cannot possibly accept the Amendment.
LORD SALTOUN: Of course, unlimited companies keep accounts. They keep accounts just as do ordinary companies. What I was trying to get removed was the obligation to produce a profit and loss account and balance sheet in the prescribed form, because while every member of a company may know the company's business very well, these things are apt to fall into the wrong hands. Nobody ever comes into your office and steals the whole of your books, but there may be people, some of them minors (even in spite of the Law of Trustees, minors can hold shares in unlimited companies—sometimes they have to) whom information reaches. Where you have to circularize these things it is easy for this information to fall into wrong hands. I agree that those concerns ought to keep books. I have nothing against Clause 26—if it is Clause 26 that deals with the point. I am very sorry that the noble and learned Viscount, the Lord Chancellor, will not accept this Amendment, because I think it touches a very important matter of principle. It is with the greatest reluctance that I do not press my Amendment. I do not suppose that any noble Lords will support me, but if anyone wants to do so I will divide the House on it. I think I am right, and I believe that the future will show that I am right. I am very sorry to have to withdraw this.
Amendment to the Amendment, by leave, withdrawn.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is consequential.
Amendment moved—
Page 12, line 31, leave out ("subsections (1) and (2)") and insert ("subsection (I)").—(The Lord Chancellor.)
On Question, Amendment agreed to.
3.32 p.m.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after subsection (5), to insert:
"(5) Subsections (1) and (2) of this section shall not apply to a company's profit and loss account, if—

(a) the company has subsidiaries; and

(b) the profit and loss account is framed as a consolidated profit and loss account dealing with all or any of the company's subsidiaries as well as the company, and—

(i) complies with the requirements of this Act relating to consolidated profit and loss accounts; and

(ii) shows how much of the consolidated profit or loss for the financial year is dealt with in the accounts of the company."

The noble and learned Viscount said: This Amendment allows a holding company to dispense with a separate profit and loss account of its own business, so long as it supplies a consolidated profit and loss account embracing all the companies in the group as a whole as well as itself. From a practical point of view there is no advantage in giving a separate profit and loss account of the holding company, and to do so might be prejudicial to the interests of some companies and their shareholders—such, for instance, as insurance companies.
May I take this opportunity of saying, since I have used the word "group" here, that I agree with Lord Rennell that there is no definition, hitherto, as to what is a group account? I do not think that there is. I would myself attempt to describe it—not to define it—in this way. We know what is a consolidated account: the essence of that is that you bring all the accounts into one. A group account obviously differs in that they need not all be brought into one. If I wanted something further, I think I would look at page 5 of the Marshalled List of Amendments, where there is something nearer in the way of a definition. If you look at a passage about a quarter of the way down the page you will see this:
"The group accounts laid before a company shall give a true and fair view of the state of affairs and profit or loss of the company and the subsidiaries dealt with thereby as a whole so far as concerns members of the company."
If there is that positive obligation (negative in that they need not all be embraced and brought into a consolidated account) I think it describes what I understand a group account to be. I consider this
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Amendment is a necessary one, and I beg to move.
Amendment moved—
Page 12, line 32, at end insert the said new subsection.—(The Lord Chancellor.)
VISCOUNT ELIBANK: May I ask the noble and learned Viscount if he means by group accounts that the accounts shall be attached to each other? Can they be on separate sheets so long as they are attached?
THE LORD CHANCELLOR: Yes, I think that that would do. So long as a true and fair picture of the activities of the association, of the group as a whole, is given, it need not necessarily be in one account in the way that a consolidated account would have to be.
LORD RENNELL: I feel a certain difficulty about this matter of a group. I accept what the noble and learned Viscount has said about a group, and I think that the description in the Amendment on page 5 to which he has referred is accurate. But it comes a little way down the clause from the first reference to the word "group." I do not wish to press this, but I wonder if, for the sake of clarity, it would not be desirable to consider describing or defining group accounts somewhat more clearly, either at the beginning of the clause or in some other appropriate place where a definition can be given.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is merely drafting. I beg to move.
Amendment moved—
Page 12, line 34, leave out ("the accounts of the company") and insert ("any accounts laid before the company in general meeting").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next one is drafting also. I beg to move.
Amendment moved—
Page 13, line 10, leave out ("accounts") and insert ("balance sheet or profit and loss account").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This too, is drafting. I beg to move.
Amendment moved—
Page 13, line 21, leave out ("or consolidated accounts").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 12, as amended, agreed to.
3.39 P.m.
THE LORD CHANCELLOR THE LORD CHANCELLOR had given notice to move to insert, after Clause 12, the following new clause.
"Obligation to lay group accounts before holding company.
.—(I) Where at the end of its financial year a company has subsidiaries, group accounts dealing with the state of affairs and profit or loss of the company and the subsidiaries shall, subject to the next following subsection, be laid before the company in general meeting when the company's own balance sheet and profit and loss account are so laid.
(2) Notwithstanding anything in the foregoing subsection—

(a) group accounts shall not be required where the company is at the end of its financial year the wholly owned subsidiary of another body corporate incorporated in Great Britain; and

(b) group accounts need not deal with a subsidiary of the company if the company's directors are of opinion that—

(i) it is impracticable, or would be of no real value to members of the company, in view of the insignificant amounts involved, or would involve expense or delay out of proportion to the value to members of the company; or

(ii) the result would he misleading, or harmful to the business of the company or any of its subsidiaries; or

(iii) the business of the holding company and that of the subsidiary are so different that they cannot reasonably be treated as a single undertaking;

and, if the directors are of such an opinion about each of the company's subsidiaries, group accounts shall not be required.
(3) If any person being a director of a corn-patty fails to take all reasonable steps to secure compliance as respects the company with the provisions of this section, 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.
(4) For the purposes of this section a body corporate shall be deemed to be the wholly owned subsidiary of another if it has no members except that other and that other's wholly owned subsidiaries and its or their nominees."
The noble and learned Viscount said: This is the first of the new clauses. I have rather anticipated what I had to say. The first part deals with the obligation to lay group accounts before a holding company, and your Lordships will see that by subsection (2) (b) it is laid down that:
"group accounts need not deal with a subsidiary of a company if the company's directors are of opinion that—

(i) it is impracticable, or would be of no real value to members of the company, in view of the insignificant amounts involved, or would involve expense or delay out of proportion to the value to members of the company; or

(ii) the result would be misleading, or harmful to the business of the company or any of its subsidiaries; or

I am a little worried about that. I know that some directors of companies take what I think is too restrictive a view about this matter, and think it is harmful to the interests of the company to publish anything at all. Therefore, I am proposing an Amendment: o that by adding at the end of paragraph (b) these words:
"Provided that the approval of the Board of Trade shall be required for not dealing in group accounts with a subsidiary on the ground that the result would be harmful, or on the ground that the difference between the business of the holding company and that of the subsidiary is so great that they cannot reasonably be treated as a single undertaking."
If you are going to leave out one of the subsidiaries from your group accounts on the ground, not that it is a trivial or small matter, or too expensive to deal with, but on the ground that it would be harmful to the interests of the company to state its accounts, then in that case you ought to get the approval of the Board of Trade to leave it out. With that qualification of the Amendment as drafted, I beg to move the first of these new clauses.
Amendment moved—
After Clause 12, insert the said new clause as amended.—(The Lord Chancellor.)
LORD BARNBY: Whilst appreciating the attempt of the noble and learned Viscount to be helpful by his elucidation of this rather difficult point, I would respectfully ask his interpretation of one point. Is he not thereby rather inclined to throw an obligation on the Board of Trade? I admit that at the moment I should have a difficulty in finding an alternative to involving the Board of

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Trade in intimate examination of the details of a large organization and its subsidiaries, thereby bringing to light a great deal of its information (to which I would admit there might be no objection) which would normally be disclosed to the Inland Revenue Department and not to the Board of Trade. Inevitably the Board of Trade to-day, under the tendency of Regulations, would become informed of operations which, while legal, might yet be to the disadvantage of the company concerned.
THE LORD CHANCELLOR: I do not think there will be great difficulty. In the case of an ordinary decent company—not being dishonestly run—a vast mass of detail would not be required. I think the directors will go to the Board of Trade and say: "We propose to leave out this controlled subsidiary's account altogether. It is quite true it does not come under (a)—that is to say, the amount involved is substantial—but we want to leave it out because to include it would do our business some harm and possibly enable our rivals to do us an injury. These are the facts, and we want your approval to leave it out."
VISCOUNT SWINTON: I see the difficulty in this matter, and, generally speaking, I do not much like giving this amount of discretion to Government Departments. It is much better if we can lay down what is to be done, and then people can follow it. On the other hand, we are here giving—and rightly giving—very wide discretion to directors to publish or withhold certain information. If these words stood with no proviso at all, the result would be that directors could really defeat the object which we all have in view. The great majority of them would not, but someone who wished to present accounts in the form which some of us have met—where everything is put under a single head—could do so. All they would have to do would be to say, "We think it is in the interest of the company."
With great respect to the noble Lord, Lord Barnby, I do not think that it is either necessary, or indeed, would it be the intention of the Board of Trade, to go into details of how the company is run. Prima facie the board is entitled not to present group accounts if one of these three conditions is fulfilled, and the people who
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are to be the judge of that are the directors. But they have to be honest judges. They have to direct their minds, and the Board of Trade have to be satisfied that the directors have honestly directed their attention to the questions which are set out in (i), (ii), and (iii). If the Board of Trade are satisfied that that is the honest opinion of the directors after directing their minds to that problem, then it is not for the Board of Trade to quarrel with them in their honest judgment; it is only for the Board of Trade to refuse if what the directors have done is not to direct their minds at all to the particular matters they have to consider. I would venture to advise the House that this is a reasonable and necessary proviso to impose on the very wide latitude which it is intended to give here.
LORD RENNELL: I entirely agree with what the noble Viscount has said. I think it is a necessary provision; otherwise a coach-and-four could be driven through the whole of the consolidation proposals.
LORD DE L'ISLE AND DUDLEY: At the risk of harking back to what has been discussed already by the noble Lord, Lord Rennell, may I express the opinion that what has been said does rather reinforce his point: we ought to have a definition of group accounts. There might even 'be differences between the Board of Trade and the directors of a company about the definition of group accounts. What happens where a company has an interest in another company which is not a wholly-owned subsidiary or is not a subsidiary within the meaning of the Act, but is definitely within the grouping? I think it would be extremely helpful to all directors of companies and to the Board of Trade if the noble and learned Viscount could address his mind to this very important subject.
LORD BALFOUR OF INCHRYE: I wonder if I might ask one question? Are we going to run into an administration difficulty here? Directors are under an obligation to get their accounts out within a certain period of time. Supposing there is a conflict between directors who as a matter of policy do not wish to publish, and the Board of Trade who do not agree with that policy of the company. Obviously the Board of Trade will have to go into the matter fairly deeply, and rightly so. You may get a position where

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the Board of Trade, through this duty, is going to overrun the time that is allotted to the company.
THE LORD CHANCELLOR: Difficulties may arise, but, of course, wise people start preparing their accounts a good time in advance, and allow themselves time for it. I think such a difficulty would be quite exceptional.
LORD SALTOUN: I beg the noble and learned Viscount's pardon, but the object of many companies is to get the accounts to the end of the financial year as soon as possible after the close of that financial year.
On Question, Amendment agreed to.
THE LORD CHANCELLOR moved, after Clause 12, to insert the following clause:
Form of group accounts.
—(I) Subject to the next following subsection, the group accounts laid before a holding company shall be consolidated accounts comprising—

(a) a consolidated balance sheet dealing with the state of affairs of the company and all the subsidiaries to be dealt with in group accounts;

(b) a consolidated profit and loss account dealing with the profit or loss of the company and those subsidiaries.

(2) If the company's directors are of opinion that it is better for the purpose—

(a) of presenting the same or equivalent information about the slate of affairs and profit or loss of the company and those subsidiaries; and

(b) of so presenting it that it may he readily appreciated by the company's members;

the group accounts may be prepared in a form other than that required by the foregoing subsection, and in particular may consist of more than one set of consolidated accounts each dealing with different groups of companies, or of separate accounts dealing with each of the subsidiaries, or of statements expanding the information about the subsidiaries in the company's own accounts, or any combination of these forms.
(3) The group accounts may be wholly or partly incorporated in the company's own balance sheet and profit and loss account.
The noble and learned Viscount said: This is the second new clause. In view of the observations made by the noble Lord, Lord Rennell, and the noble Lord, Lord De ('Isle and Dudley, it is worth studying. It starts:
"Subject to the next following subsection, the group accounts laid before a holding company shall be consolidated accounts comprising,—"
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Therefore the norm of group accounts is a consolidated account. Now you get the next subject:
"If the company's directors are of opinion that it is better for the purpose—

(a) of presenting the same or equivalent information about the state of affairs and profit and loss of the company and those subsidiaries; and

(b) of so presenting it that it may be readily appreciated by the company's members;

the group accounts may be prepared in a form other than that required by the foregoing subsection,"—
that is to say, it may be other than a consolidated account. Then it goes on—and this answers the question of the noble Viscount, Lord Elibank—
"And in particular may consist of more than one set of consolidated accounts each dealing with different groups of companies, or of separate accounts dealing with each of the subsidiaries, or of statements expanding. the information about the subsidiaries in the company's own account, or any combination of these forms."
I think that gives us a pretty fair definition. The group accounts are. normally to be consolidated, but if the. company's directors think it is better, and these two conditions (a) and (b) are satisfied, then a considerable variation is allowed as to the way in which the group accounts are presented, without consolidation. This is an illustration, therefore, of considerable latitude being allowed to directors, which we all desire, and at the same time it gives, perhaps as nearly as anything can give, a definition of what group accounts should be. I beg to move.
Amendment moved—
After Clause 12 insert the said new clause,—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after Clause 12, to insert the following new clause:
Contents of group accounts.
.—(i) The group accounts laid before a company shall give a true and fair view of the state of affairs and profit or loss of the company and the subsidiaries dealt with thereby as a whole, so far as concerns members of the-company.
(2) Where the financial year of a subsidiary-does not coincide with that of the holding: company, the group accounts shall deal with: the subsidiary's state of affairs as at the ends of its financial year ending with or last before that of the holding company, and with the subsidiary's profit or loss for that financial year.
(3) Without prejudice to subsection (I) of this section, the group accounts, if prepared as consolidated accounts, shall comply with the requirements of the First Schedule to this Act, so far as applicable thereto, and if not so prepared shall give the same or equivalent information:
Provided that the Board of Trade may, on the application or with the consent of a company's directors, modify the said requirements in relation to that company for the purpose of adapting them to the circumstances of the company.
The noble and learned Viscount said: This carries on the good work and makes it plain that "the group accounts laid before a company shall give a true and fair view of the state of affairs and profit or loss of the company and the subsidiaries dealt with thereby as a whole, so far as concerns the members of the company." That again is another qualification attaching to group accounts. The remainder of the clause, apart from that subsection which I have just quoted, is lifted almost entirely from the old Clause 12, which we passed on the previous Committee stage and, therefore, I do not think I need trouble your Lordships by discussing it further at this stage. I beg to move.
Amendment moved—
After Clause 12 insert the said new clause.—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after Clause 12, to insert the following new clause:
Financial year of holding company and subsidiary.
—(I) A holding company's directors shall secure that, except where in their opinion there arc good reasons against it, the financial year of each of its subsidiaries shall coincide with the company's own financial year.
(2) 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 and learned Viscount said: The fourth new clause, again, is stolen from the old Clause 12. It provides that
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a holding company's directors shall secure that except where in their opinion there are good reasons against it, the financial year of its subsidiaries shall coincide with the company's own financial year. As a matter of practice, that would be a very great benefit in reading the accounts of a group of companies. I beg to move.
Amendment moved—
After Clause 12 insert the said new clause.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 13 [Meaning of "holding company" and "subsidiary"]:
THE LORD CHANCELLOR: This and the next Amendment give effect to an undertaking I gave to put down an Amendment to express that which the noble Lord, Lord Rennell, was moving. Its effect is that any shares held or power exercisable by a company the ordinary business of which includes the lending of money as security, should be disregarded in deciding whether that company is a holding company in relation to the company in which it holds shares. I beg to move.
Amendment moved—
Page 14, line 26, leave out ("following paragraph") and insert ("two following paragraphs.")—(The Lord Chancellor.)
LORD RENNELL: I am much obliged to the noble and learned Viscount.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: I have already referred to this Amendment.
Amendment moved—
Page 14, line 38, at end insert—
("(d) any shares held or power exercisable by, or by a nominee for, that other or its subsidiary (not being held or exercisable as mentioned in the last foregoing paragraph) shall be treated as not held or exercisable by that other if the ordinary business of that other or its subsidiary, as the case may be, includes the lending of money and the shares are held or power is exercisable as aforesaid by way of security only.")—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 13, as amended, agreed to.
3.55 P.m.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after Clause 13, to insert the following new clause:
General provision as to liability of directors for defective accounts.
.—(I) A director shall not be liable to fine or imprisonment under Section one

713
hundred and twenty-two or one hundred and twenty-three of the principal Act or any provision contained in the sections of this Act relating to a company's accounts for failing to take reasonable steps to comply or secure compliance with any provision of that Act or this Act, if he shows that he had reasonable ground to believe and did believe that a competent and reliable person was charged with the duty of seeing that that provision was complied with and was in a position to discharge that duty."
The noble and learned Viscount said: My Lords, this is to meet a point that was raised by the noble and learned Viscount, Lord Maugham. I said I thought there was no need for the new clause but, as so often happens when I find myself in conflict with the noble Viscount, I find on reflection that he was right and I was wrong. It is to meet this point. Your Lordships will remember that throughout this Bill we are confining the possible penalty of imprisonment to cases of wilful default. Negligence might be dealt with by a fine. I was asked to make it quite plain that if, for instance, directors had gone away—I think it was said to Malaya, or something of the sort—and entrusted the work to somebody whom they believed to be competent over here, there was no risk that they would be fined. I said I thought there was no such risk, but, as I say, on reflection I think it is much better to deal with the matter. I am grateful to the noble and learned Viscount, Lord Maugham, for calling my attention to it, and I hope that this new clause meets the point which he indicated on the previous occasion. I beg to move.
Amendment moved—
After Clause 53 insert the said new clause.—(The Lord Chancellor.)
VISCOUNT MAUGHAM: I am grateful to my noble and learned friend the Lord Chancellor for having been able to agree this new clause on behalf of the Government. To my mind, it is a clause of great value. I quite appreciate what he says as to the somewhat remote example of the director who was sent to Malaya, but it also meets the much more common case of a director who, full of honesty and integrity, is yet wholly unable to look at the book of accounts without a feeling of nausea and complete inability to understand it. Such a person as that ought not to be treated as if he were a criminal, because the position of directors, as is not always understood in the general business world, is a very singular one. They are
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not trustees. They have not got property in their hands. They are, in a sense, trustees of the powers committed to them. Even so, their powers are limited, because in general they only relate to actions at a hoard meeting—sometimes once a fortnight, sometimes at even more remote intervals—and in the meantime they are not obliged to think of the company. They may live a long way away; they turn up at the board meeting and give their best attention to what takes place, and that is the end of their obligation.
Their duties being intermittent and generally exercised at a time when they are liable to be out-voted by other members of the board, and since they are, very often, people who are appointed to exercise particular duties in connexion with the company——such as, for instance, helping in matters of transport or matters of sales of property and things of that kind, and in no way concerned directly with the accounts—I thought it was most dangerous to pass the new clauses in this Bill, which direct them to do certain things in relation to accounts, and which provide that profit and loss accounts and balance sheets are not deemed to be proper accounts unless they meet all the obligations that we are imposing upon the company. I was afraid it would be said that directors had to do very much more than they had ever thought of doing, or than they were in general competent to do, because everybody knows that these questions of accounts are done by staffs of accountants, or by special accountants who are appointed by the company, and that the directors are bound to trust them.
This clause, which I know has been the subject of a good deal of consideration, exactly meets the difficulties which I thought might arise in its absence. It satisfies what I think is just: it imposes upon directors a certain obligation to see that certain work is done by people who are properly supposed to be competent and reliable. But, once that is done, there is no personal liability on the directors in relation to the particular matters with which the clause is concerned. Accordingly, I thank the noble and learned Viscount, the Lord Chancellor. I am content with this clause, and I think it will be of great use hereafter, to various honest directors who are attacked because something has gone wrong with the accounts, whether by accident or fraud, so that a company gets into difficulties. In such

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cases as those of the City Equitable Insurance Company and the National Bank of Wales, perfectly honest directors have been attacked, but unsuccessfully attacked, under the law as it stands. And I am glad to think that that will still be the case after this Bill has passed into the legislation of the country.
VISCOUNT SWINTON: Speaking neither as a lawyer nor as one who is nauseated (though I am sometimes somewhat puzzled) by accounts, I should like to thank the noble and learned Viscount, the Lord Chancellor, for this clause. If I may say so, I think it clearly defines the position of a director—and not only a director who is merely a part-time director. It is equally important from the point of view of the whole-time executive directors of whom I hope there will be increasing numbers. Whichever they are, in this matter I regard it as the function of a director in relation to accounts, and a common function of the board, to be satisfied that there is a thoroughly competent chief accountant appointed. I would go further, and say that the relations with the auditors are those which a company should always have as to the general form of account. But having established that position, whether they are part-time directors or whole-time executives, technical directors, or sales directors, it is quite impossible for those directors continually to examine the accounts to see whether the chief accountant is carrying out his duties. If they were to attempt to do that, they would be grossly neglecting the job for which they were employed, and any chief accountant worth his salt would immediately resign his position and be snapped up by a company which conducts its business more satisfactorily. I thank the noble and learned Viscount for putting down this Amendment. From the practical point of view I think it is wholly satisfactory.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: May I move that the House be now resumed, in order that I may make a short statement?
Moved, That the House be now resumed.—(The Lord Chancellor.)
On Question, Motion agreed to.
House resumed accordingly.

FLOOD DISTRESS.
4.3 p.m.
THE LORD CHANCELLOR: My Lords, the following statement is now being made by the Chancellor of the Exchequer in another place:
"His Majesty's Government fully realize, and deeply deplore, the heavy losses caused by the floods to great numbers of individuals and also to local authorities. They are now considering, as a most urgent matter, how they can best help to relieve agricultural and other losses, and also the emergency expenditure of public authorities within their areas. A further statement on this subject will be made next week. Meanwhile the Lord Mayor of London is opening a fund for the relief of distress throughout the United Kingdom, and I have informed him that His Majesty's Government will give a lead to other subscribers by contribution forthwith £1,000,000 to this fund. It must be the aim of us all in face of this latest trial to do our utmost to help our fellow citizens and to make good all damage as son as we can."

COMPANIES BILL. [H.L.]
Clause 14 [signature and copies of accounts]:
THE LORD CHANCELLOR: This Amendment is consequential on the new clause we have just passed. I beg to move.
Amendment moved—
Page 15, line 5, leave out ("consolidate") and insert ("group")—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This Amendment enables the directors, whilst approving the profit and loss and group accounts, to sign only the balance sheet. I beg to move.
Amendment moved—
Page 15, line 7, leave out from ("and") to the end of line 17 and insert ("approved by the board of directors before the balance sheet is signed on their behalf.")—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE CHAIRMAN OF COMMITTEES: The next Amendment is consequential.
Amendment moved—
Page 15, line 20, leave out ("consolidated") and insert ("group").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 14, as amended, agreed to.
Clause 15 [Extension of rights and duties of auditors]:
THE CHAIRMAN OF COMMITTEES: This is a similar consequential Amendment.
Amendment moved—
Page 15, line 45, leave out ("consolidated") and insert ("group").—(The Lord Chancellor.)
On Question, Amendment agreed to. Clause 15, as amended, agreed to.
Clause 16 [Extension of disqualifications for appointment as auditor]:
LORD CHORLEY: My noble and learned friend has been bowling for a very long time, during which he has bowled a substantial number of maiden avers, if I may say so; in fact, I think except for one half volley which he bowled to the noble and learned Viscount, Lord Maugham, he has had very few runs scored off him. This Amendment to Clause 16 is inserted purely for the purpose of enabling the Board of Trade to recognize the Institute of Chartered Accountants in Ireland as a body of which the members are qualified to audit accounts of companies. They are practitioners here, and it is obviously very desirable that the; qualification of this Institute should be accepted. I beg to move.
Amendment moved—
Page 16, line 36, leave out ("Great Britain") and insert ("the United Kingdom").—(Lord Chorley.)
On Question, Amendment agreed to.
THE CHAIRMAN OF COMMITTEES: The next is a similar Amendment.
Amendment moved—
Page 15, line 40, leave out ("Great Britain ") and insert (" the United Kingdom ").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: The next Amendment is purely drafting. I beg to move.
Amendment moved—
Page 17, line 1, leave out from ("exempt") to end of line 3 and insert ("private company").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY LORD CHORLEY moved, at the end of subsection (I), to insert:
"(2) In the application of the foregoing sub-section to a person who on the said eighteenth day of July was or had within the preceding six months been—

(a) engaged in a whole-time capacity in war service; or

(b) detained or interned in any enemy or neutral country as a prisoner of war or otherwise in consequence of war;

there shall be substituted for the reference to that day a reference to the first day of January, nineteen hundred and forty-seven; and for the purposes of this subsection the expression 'war service' means service in His Majesty's Forces and any employment which the Board of Trade consider may properly be treated for those purposes in the same manner as service in those forces."
The noble Lord said: This is an Amendment which we have put down to meet an undertaking given to the noble Lord, Lord De L'Isle and Dudley, in order to cover the position of ex-Servicemen who have not yet been able to embark upon the profession of accountancy. The date fixed in the Cohen Report was felt to be rather unfair to them. We have considered the suggestion which the noble Lord made and, as your Lordships will see, we have inserted the date January 1, 1947. It seems undesirable to fix a later date than this, and I hope your Lordships will agree that the difficulty has been effectively met. 1 beg to move.
Amendment moved—
Page 17, line 3, at end insert the said few subsection.—(Lord Chorley.)
LORD DE L'ISLE AND DUDLEY: I should like to express my gratitude to the noble and learned Viscount, the Lord Chancellor, for having this Amendment inserted. I think it should meet the hardship which might haw been caused by the words which stood in the Bill as originally drafted. It now gives an opportunity to ex-Servicemen who have come back and who will not, I trust, find that their livelihood has been removed by this Bill.
On Question, Amendment agreed to.
LORD CHORLEY: This next Amendment is an attempt to meet the difficulty which arose in connexion with the disqualification of employees of directors and officers of the company from appointment as auditors. In English law, your Lordships will remember it was pointed out that the appointment of a firm as auditor would have the same effect as the appointment of the individual partners in the firm, but in Scotland, where a firm is a legal entity, the position is different. I beg to move.
Amendment moved—
Page 17, line 12, at end insert ("and to any Scottish firm of which a director or officer of the Company is a partner").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: The next Amendment is consequential. I beg to move.
Amendment moved—
Page 17, line 17, leave out from ("exempt") to end of line 19 and insert ("private company").—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 16, as amended, agreed to.
Clause 17:
Appointment and remuneration of auditors.
17.—(i) The auditors of a company appointed at any annual general meeting shah be appointed to hold office from the conclusion of that, until the conclusion of the next, annual general meeting; and at any annual general meeting a retiring auditor, however appointed, shall be reappointed without any resolution being passed, unless—
(b) a resolution has been passed at that meeting that he shall not be reappointed (whether or not the resolution appoints some other person instead of him); or
(3) A resolution that a retiring auditor shall not be reappointed without the appointment of another person instead of him shall require the same notice to the company as would have been required had the resolution extended to the appointment of another person instead of him; and where notice of the intention to move ouch a resolution is given to the company, the company shall give notice thereof to the auditor and members of the company as if it had extended to the appointment of another person.
(4) The notice to be given to a retiring auditor of an intended resolution that he shall not be reappointed or that some other person shall be appointed instead of him, shall be given forthwith after receipt by the company of notice of the resolution.
LORD CHORLEY LORD CHORLEY moved to leave out paragraph (b) of subsection (I) and to insert "(b) a resolution has been passed at that meeting appointing somebody instead of him or providing expressly that he shall not be reappointed; or". The noble Lord said: This Amendment and the Amendment to line i of page 18 go together. They give effect to an undertaking to give further consideration to Clause 17, especially in so far as it might make it unduly difficult for directors to change their auditors for good reasons. The Amendments provide in effect that the retiring auditor shall be reappointed unless a resolution is passed either appointing somebody in his stead or providing expressly that he shall not be reappointed, and that anybody wishing to put forward such a resolution must give twenty-eight days' notice to the company in the ordinary way. I beg to move.
Amendment moved—
Page 17, line 33, leave out paragraph (b) and insert the said new paragraph.—(Lord Chorley.)
LORD SALTOUN: With great deference, I do not really see how these Amendments improve the present position, and indeed I think that if they are carried they may well lead to the creation of some difficulties. If I am rightly informed, the present position is perfectly simple. Nobody except the existing auditor can be appointed as the auditor of a company unless his name has been put forward and appears on the notice convening the meeting, and if that is done the existing auditor must be perfectly well aware of it. I am quite agreeable to a provision requiring that notice shall be given, but here there is the possibility of a negative resolution, because the proposed new paragraph (b) contains the words "or providing expressly that he shall not be reappointed." I cannot help thinking that that is rather a dangerous provision. I do not think it improves the present position, which is perfectly clear and which gives to the auditor the certainty that he will be reappointed unless somebody else is nominated and appointed.
This proposal puts it within the power of any member of a company to give notice to the directors that he is going to propose that the auditor shall not be reappointed. That member may be merely an ordinary trouble-maker or he may be the representative of the hidden

721
hand of an enemy. In that event the directors will immediately be placed in a very difficult position. The resolution may or may not be carried, and being a purely negative resolution it will not propose the appointment of another auditor. The directors will not want to be left without an auditor. Are they to put forward another name, or are they not? It seems to me that this procedure would place them in a great difficulty and would not improve the present position. I respectfully beg His Majesty's Government, therefore, to reconsider this matter. These proposed Amendments do not strengthen the auditor's position but they do weaken the position of the company as a whole, because they put it within the power of any single member of the company to place the company in what might be a position of some difficulty.
VISCOUNT MAUGHAM: May I say a word upon this clause, which I have always thought was rather troublesome arid difficult? I am not quite sure that I understand how it is going to work. I am assuming that we are discussing not only the Amendment at the bottom of page 7 of the Marshalled List but also that at the top of page 8, which provides that special notice shall be required for a resolution appointing as auditor a person other than a retiring auditor. If somebody gives notice within the required period of twenty-eight days that he intends to put forward a resolution that the existing auditor shall not be reappointed, that resolution will be discussed at the meeting and may be carried. In the meantime, what arrangements can be made for the appointment of somebody to take the place of the man who is being, in effect, dismissed? If notice of the intention to move that the existing auditor, Mr. A., shall not be reappointed has been given only twenty-eight days before the meeting, there will not be time for the directors to say, "If that resolution is passed, we shall propose Mr. B. as auditor"; and if the resolution is passed the position will be that there is no auditor appointed to act after the meeting.
Let us suppose that the other course is taken and that a shareholder gives notice that he will move that Mr. A be not appointed but that Mr. C be appointed in his place. What is the position of the directors then? They may approve of Mr. C or they may not. What is their
722
proper course? They probably want Mr. B to be appointed in the event of the appointment of Mr. A not being agreed to. I can see that they are going to be in a position of great difficulty in dealing with the matter. If the Amendments we have before us are agreed to and. Clause 17 of the Bill comes into effect, Section 132 of the Act of 1929 will remain, except in so far as it is altered, as the code for the appointment of auditors. With the greatest respect to the noble Lord and to those who are assisting him, I think it would be desirable to reconsider Clause 17 with a view to seeing whether it can be made a little easier for the ordinary company to deal with this matter in the event of somebody wanting to appoint a new auditor. The precise form in which that should be done is not a matter on which I am at the moment in a position to help, but I am quite sure that some procedure could be devised which would be a little easier to work than Clause 17 would be if these Amendments were passed.
LORD RENNELL: I think the noble and learned Viscount has made a very good point and one that requires further consideration. There is yet another point that arises on the wording of Clause 17 as it would be if these Amendments were passed, and it concerns the word "expressly." Your Lordships will recollect that when this clause was debated at an earlier stage in Committee, one of the points made was that a company might wish to change its auditor for the perfectly bona fide reason that the auditor hitherto employed had not the capacity or the qualifications to carry on the business of a larger company, or that the company had developed along particular lines and that the auditor therefore ought to be changed. It ought to be possible to change the auditor in such a manner as not to injure the outgoing auditor by having to make a statement that he is no longer sufficiently qualified, or something of that sort. I am going to ask the noble and learned Viscount exactly what is intended by the word "expressly," which is twice used. I submit it might be read that the word "expressly" means that where a resolution is tabled providing that an auditor shall not be reappointed, it shall be explained why he was not to be reappointed. At least that is an interpretation which might be put upon the word "expressly."

723
If that is so, this Amendment will produce precisely the result which we have been seeking to avoid in altering the terms of the original draft of Clause 17 as it appeared in the printed Bill. Whether or not the new draft of paragraph (b), to which the noble and learned Viscount, Lord Maugham, has referred, is right or not on the procedure, I submit that the word "expressly" is unnecessary and perhaps dangerous in the Amendments which appear in the Marshalled List. Even if the Amendment were to satisfy the points raised by the noble and learned Viscount, Lord Maugham, the clause is not strengthened by the use of the word "expressly," and would be just as strong from the point of view of those who drafted the Amendments if that word was omitted, both in this Amendment and in the one following.
LORD CHORLEY: With regard to the last point made by the noble Lord, Lord Rennell, as to the meaning of the word "expressly," I am rather inclined to agree with him. I think it is intended to mean in terms the interpretation the noble Lord put forward, and it might be possible to leave that word out and improve the draftsmanship. We will certainly look at it, and I am much obliged to the noble Lord for his suggestion. With regard to the more substantial point which has been made by the noble Lord, Lord Saltoun, and the noble and learned Viscount, Lord Maugham, I really doubt whether there is all this difficulty. This resolution has to be brought forward at the Annual General Meeting, and I should think it will be very rarely that anything of the kind happens. But I would have thought it was only right that shareholders who had an objection to the auditor should be allowed to table a resolution to the effect that he should be removed, and it does seem to me that it is unlikely to give rise to so much difficulty as noble Lords anticipate. After all, the directors still have a week at their disposal in which to find an alternative auditor, in the event of the twenty-eight days' notice having been given. If, by the end of that period, they cannot find another auditor and the company is left without one, there is always the power left in the Board of Trade who, in the event of an auditor not being properly appointed, have powers to appoint one themselves. We cannot
724
envisage a situation in which a company would be left without an auditor.
VISCOUNT MAUGHAM: Would the noble Lord forgive me for one moment? It is quite possible that he is right, and I am not in the least dogmatic about this matter. But is not the difficulty partly this: that the Amendment requires special notice for a resolution which is to be proposed at a company's annual general meeting appointing as auditor a person other than a retiring auditor? The board of the company, when they receive notice of a resolution to displace the existing auditor, may not have twenty-eight days during which to give notice that they want to appoint somebody else. I hope I have made myself clear.
LORD SALTOUN: I do not think the noble Lord is really dealing with my point. My point is that you are putting the directors in a hole. If I am an ordinary shareholder, perhaps having one share in the company, and I write in and say, "I am going to move that the present auditor be not re-appointed," I put the directors in a hole. They may disregard me, but I may have been lobbying behind the scenes, and they do not know whether to stick to their auditor, who may be a good man, or put up somebody else in his place. The present position is perfectly clear, and the auditor is just as strong under the present law as he can be: he is going to be reappointed unless he is not re-elected at the meeting. If any rival comes into the field he has to be named in the notice of the meeting. I do not see that these Amendments give him a stronger position.
VISCOUNT SWINTON: With great respect, I should have thought that the directors were in a better position if notice was given. As the noble Lord says, a shareholder may have a grudge against the auditor, or he may be a nuisance shareholder with one share. If he really wants to make himself a nuisance what he does is not to give the directors twenty-eight days' notice, but he goes round collecting a lot of other nuisance people and turns up at the meeting and votes against the auditor. The directors are much less likely to be taken by surprise if they have twenty-eight days' notice, and naturally if their auditor is a good man they will stand up for him and will fortify themselves with an

725
adequate number of proxies. The other point is more difficult, but with that one I think we agree.
LORD RENNELL: The point in my mind was that if a shareholder waits until the last possible moment to put in a special resolution, under the terms of this clause the directors may not then have time within the twenty-eight days to put forward an alternative suggestion.
VISCOUNT MAUGHAM: They have to hunt for the man, and it may take them a week to find a suitable person.
LORD CHORLEY: There may be some practical difficulties there, I quite agree, but nothing like the difficulty which arises when the shareholders act in the way the noble Viscount, Lord Swinton, suggested, and carry out this nefarious scheme actually at the meeting. But surely one has to look at this from the commonsense point of view. On how many occasions is this thing going to arise in practice? I should imagine practically never. In the one case in a thousand where it does arise there is the reserve power in the Board of Trade to appoint an auditor because no auditor was appointed at the annual general meeting. I shall, however, be glad to have a look at the matter, and if we think something ought to be done we will put an Amendment down.
On Question, Amendment agreed to.
LORD CHORLEY: I have already dealt with this Amendment. I beg to move.
Amendment moved—
Page 18, line I, leave out subsections (3) and (4) and insert—
("(3) Special notice shall be required for a resolution at a company's annual general meeting appointing as auditor a person other than a retiring auditor or providing expressly that a retiring auditor shall not be reappointed.
(4) On receipt of notice of such an intended resolution as aforesaid the company shall forthwith send a copy thereof to the retiring auditor (if any).").—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 17, as amended, agreed to.
Clause 18 agreed to.
Clause 19 [Director and secretary]:
4.30 p.m.
LORD CHORLEY LORD CHORLEY moved, after subsection (3), to insert:
"(4) A provision requiring or authorizing a thing to be done by or to a director and the
726
secretary shall not be satisfied by its being done by or to the same person acting both as director and as, or in place of, the secretary.
The noble Lord said: This is a small but, I think, useful Amendment. Except where a company has only one director, a director may also be the secretary. There are, on certain occasions, requirements that documents shall be signed both by a director and the secretary—for example, the annual return. Obviously it is very undesirable that one person should fulfil the functions of both secretary and director for a purpose of this kind. The Amendment has been drafted to meet this difficulty. I beg to move.
Amendment moved—
Page 19, line 23, at end insert the said new subsection.—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 19, as amended, agreed to.
Clause 20:
Register of directors.
20.—(i) Every company shall, in the register of its directors required to be kept by Section one hundred and forty-four of the principal Act, include with respect to the secretary or each of the joint secretaries of the company the following particulars, that is to say
(a) in the case of an individual, his present Christian name and surname, any former Christian name and surname and his usual residential address;
and accordingly;—
(ii) in subsection (2) of the said Section one hundred and forty-four any reference to directors shall include a reference to the secretary, and in subsection (4) thereof the references to subsections (I) and (2) thereof shall include a reference to this subsection.
(2) The period within which a company is required to make a return to the registrar of companies under the said subsection (2) of the particulars specified in the said register shall in relation to the particulars so specified with respect to any person who is the company's secretary at the date of the coming into force of the last foregoing subsection, be fourteen days from that date.
(4) Paragraph (d) of subsection (I) of section one hundred and forty-five of the principal Act (by which every company to which that section applies is required in all trade catalogues trade circulars. show cards and business letters to state with respect to every director his nationality of origin, if his nationality is not the nationality of origin) shall cease to have effect.
4.32 p.m.
LORD CHORLEY: There are a number of Amendments here which, with

727
your Lordships' permission, I should like to take together. They are to line 26, line 32 and line 42 of page 19, and to line 6 on the next page. These Amendments all go together and are framed to give effect to an undertaking to put down an Amendment to make it clear that Scottish firms could be appointed as the secretary of a company, and also to meet the point raised by the noble Viscount, Lord Swinton, to provide that in England where a firm is appointed secretary, information will not have to be given in the Register of Directors and Secretaries regarding the names and addresses of each of the partners of the firm. Where there are a number of partners in the firm this might be a very onerous business, as pointed out by the noble Viscount, Lord Swinton, and this little group of Amendments is framed to meet these difficulties. I beg to move.
Amendments moved—
Page 19, line 26, leave out ("or each of the joint secretaries").
Page 19, line 32, leave out ("in the case of a corporation, its corporate name") and insert (" in the case of a corporation or a Scottish firm, its corporate or firm name ")
Page 19, line 42, at end insert—
("(2) Where there are joint secretaries, the particulars required by the foregoing subsection shall be given with respect to each of them, except that where all the partners in a firm are joint secretaries, the name and principal office of the firm may be stated instead of the said particulars.")
Page 20, line 6, leave out ("the last foregoing subsection") and insert ("subsection (I) of this section").—(Lord Chorley.)
On Question, Amendments agreed to.
LORD CHORLEY: This Amendment is really consequential on an Amendment inserted previously on the Motion of the noble Viscount, Lord Bridgeman, relating to the statement of nationality of origin.
I beg to move.
Amendment moved—
Page 20, line II, at beginning insert—
("So much of subsection (I) of the said section one hundred and forty-four as requires a director's nationality of origin to be stated and").—(Lord Charley.)
On Question, Amendment agreed to.
Clause 20, as amended, agreed to.
Clause 21 agreed to.
Clause 22:
Removal of directors.
22.—(1) A company may by ordinary resolution, if notice is given in accordance with the next following subsection, remove a direc-
728
tor before the expiration of his period of office, notwithstanding anything in its articles or in any agreement between it and him:
Provided that this subsection shall not, in the case of a private company, authorize the removal of a director holding office for life on the eighteenth day of July, nineteen hundred and forty-five, whether or not subject to retirement under an age limit by virtue of the articles or otherwise.
(2) Notice of intention to move a resolution under this section shall be given to the company not less than twenty-one days before the meeting at which it is to be moved, and the company shall forthwith after receipt of any such notice send a copy thereof to the director and shall give notice thereof to the members of the company, either by advertisement or in any other mode allowed by the articles, not less than fourteen days before the meeting:
Provided that if, after notice of the intention to move the resolution has been so given, a meeting is called for a date twenty-one days or less after the notice has been given, the notice, though not given within the time required by this subsection, shall be deemed to have been properly given for the purposes thereof.
(3) Where a director is removed by virtue of this section, the appointment of another person in his place at the meeting at which he is removed shall be business which may be transacted at that meeting without notice; but, if at that meeting the vacancy is not filled, it may be filled as a casual vacancy.
(5) Nothing in this section shall be taken as depriving a person removed thereunder of compensation or damages payable to him in respect of the termination of his appointment as director or of any appointment terminating with that as director.
LORD CHORLEY LORD CHORLEY moved in subsection (1) to leave out "if notice is given in accordance with the next following subsection." The noble Lord said: This and the next Amendment go together. They have been framed in order to give, effect to the undertaking which was given to the noble Lord, Lord Rennell, to move an Amendment to ensure that the same notice be given of a resolution to appoint a director in place of one removed, as is required under the clause in the case of a resolution to remove an auditor. The effect of the Amendment is to require that in both cases twenty-eight days' notice of any resolution to remove or appoint somebody should be given to the company, and the company shall then give to its members in the ordinary way notice of not less than twenty-one days.
Amendment moved—
Page 21, line I, leave out ("if notice is given in accordance with the next following subsection ").—(Lord Chorley.)
VISCOUNT MAUGHAM: I should like to say this, before passing from this clause. As I indicated on the previous occasion, I strongly object to this clause, because 1 think it will lead to very great trouble and be of no real use to companies. It would be much better if the matter had been left as it exists under the Act of 1929. However, I am not going to repeat my arguments. I am only going to suggest that you are putting it in the power of a single, ill-intentioned shareholder who has a grudge against a particular director to attempt to remove that director by a bare resolution, and the directors are bound to have printed and to take all the trouble that is involved in sending out the notice of the resolution to maybe a thousand shareholders. There are cases where it is clone out of spite, where the resolution is not supported and where it is probable that the whole thing in done to annoy by a disgusted shareholder. There should be a provision under which the expenses incurred ought to be paid by the person who insists on the resolution being sent out to the shareholders. Otherwise it seems to me you are giving a chance to some of those people whose one idea is to make trouble and to advertise themselves in some way, and who are also spiteful and vindictive. You are giving them an opportunity to advertise themselves and to do all these things at no expense to themselves at all, and I do not believe that that will be good.
My recollection of companies goes back a long way, and I have known in my day at least half a dozen people who went about making trouble. Some of them were stopped by provisions which had been put in other Acts. I can mention the names of some people who were an absolute terror to company directors and who were deliberately trying to make trouble in such ways as by attacks on directors, and so forth. If you are resolved to retain this Clause 22, which enables a bare resolution to have this very serious result against a director, you should know that even the fact that the resolution is to be proposed has a very serious effect on professional men. Directors ought not to be removed unless there is really a good reason. The mover of the resolution has not to give any grounds whatever. He cannot be attacked by proceedings in slander. He need say nothing except propose that the director should be removed. The Government
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should consider whether there should not be put in this Bill a provision imposing the expense of applying for the notice, sending it out, and so forth, on the shareholder. If that is done, I think it will in many cases prevent useless and vindictive resolutions being passed.
VISCOUNT SWINTON: I am in favour of this clause. Here I differ from my noble and learned friend. 1 think there ought to be a right to move a resolution to remove a director, and I agree it ought to be by ordinary resolution. I said on a previous stage of the Bill that, whether approving of or removing a director over the age of seventy, majority rule ought to hold. But I do think the noble Viscount has raised a great point of substance in regard to this clause being abused, and here I speak not at all in the interests of the particular director but in the interests of the company. It might be a most serious thing for a company if some mischievous person who buys one share in it—and it might be a company with 8o,000 shareholders—should proceed, either for fun or for spite, to put in three or four resolutions (your Lordships will observe that they will have to be separate resolutions) expressing his desire to get rid of certain directors—they might be Lord Rennell, Lord Balfour and Viscount Maugham. This mischievous person, we will assume, puts all these resolutions down one after the other, The result is that the board have to go to the expense of printing these resolutions and also of issuing some statement, as no doubt they would wish to do, making it clear that they entirely disapprove of the resolutions. There would be the expense of printing (and, be it remembered, we are short of paper) and the expense of postage. And after all this expenditure it may well be that when the matter goes to the poll, the proposer of the resolutions may poll only one vote in a company with a capital of £20,000,000. That really would be perfectly outrageous.
The person who moved these resolutions might be a sort of practical joker. It might be that he would not bother to turn up at all at the meeting to move his resolutions or to vote. He might simply-make himself a nuisance by putting them down. There is a very good rule concerning General Elections, by which,: I believe, candidates who fail to get one-eighth of the total votes polled forfeit their

731
deposits. I think that there ought to be a similar sort of rule applicable to cases such as those of which I am now speaking, so that in the more serious cases the culprit would be required to forfeit a deposit. I believe that when investigations are called for, which are, of course, matters of greater substance, a deposit is required. I am not sure how what I suggest ought to be accomplished—whether there ought to be a discretion vested in the Board of Trade, or whether the company ought to be able (and I am sure this would be a fair thing) to put the matter to the majority vote of the shareholders. I think the latter course would be very reasonable. I throw this out as a suggestion.
If a person proposes resolutions of this kind he ought to make some sort of a deposit, and then it should rest with the company to vote whether the company itself should bear the expense of this business. Or, if the resolution were thrown out, I will not say by a bare majority but by a big majority, the kind of majority which, in proportion, causes a man to lose his deposit at a general election—that is to say, if the proposer fails to get the votes of one-eighth of the shareholders for his resolutions—then he should forfeit to the company a deposit which would roughly cover the expenses to which the company has been put. I think that this is really a substantial point. I dare say that the sort of situation which I have visualized would not happen very often, but I am sure that what I have suggested would be a great deterrent to mischief makers and frivolous people who might be inclined to do this sort of thing.
LORD CHORLEY: I was interested to note that the disgruntled shareholder of whom the noble Viscount, Lord Swinton, spoke did not include the noble Viscount himself among the directors whom he proposed to throw out. The noble and learned Viscount, Lord Maugham, has referred to a bare resolution. The difficulty would, of course, be exactly the same if it were required to be a special resolution. The difficulty lies in the expense and the trouble of sending out notices. Therefore, it does not really matter whether it is a bare or a special resolution. There obviously is a possible difficulty here, and we will look into it between now and the
732
Report stage. I am much obliged to the noble Viscount for his suggestion about deposits.
On Question, Amendment agreed to.
Amendment moved—
Page 21, line II, leave out subsections (2) and (3) and insert—
"(2) Special notice shall be required of any resolution to remove a director under this section or to appoint somebody instead of a director so removed at the meeting at which he is removed, and on receipt of notice of an intended resolution to remove a director under this section the company shall forthwith send a copy thereof to the director concerned.
(3) A vacancy created by the removal of the director under this section, if not filled at the meeting at which he is removed, may be filled as a casual vacancy."—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: This is purely a drafting Amendment.
Amendment moved:—
Page 21, line 38, at end insert ("or as derogating from any power to remove a director which may exist apart from this section.")—(Lord Chorley.)
On Question, Amendment agreed to.
VISCOUNT MAUGHAM: Before we leave this clause may I say—and the Government have kindly consented to consider this—that the real point in substance (though in a sense it is a strange one if you are not accustomed to dealing with these things) about the Amendments which we are making in reference to removing directors is that practically nobody, except in cases of crime or grave misconduct, has ever thought that they could get an extraordinary resolution passed to remove a director. Since the passing of the Act of 1929, I do not suppose there have been more than two or three such attempts during the whole period of nearly twenty years. This has got nothing to do with the merits of the matter, but as soon as you make an alteration in the law so that a bare resolution can effect this object you will at once get into a different country altogether. You will find that people will put down a resolution with the hope of getting a majority of those present at a meeting. They will have a shot at it so to speak, whereas under the existing section of the Act of 1929 they would never have dreamt of trying to get such a resolution passed. Accordingly, I do invite the Government to consider this as a much more serious

733
matter and one much more likely to occasion trouble under the present dispensation than has been the case since 1929.
Clause 22, as amended, agreed to.
Clause 23:
Retirement of directors under age limit.
(4) A person appointed director in place of a director retiring by virtue of subsection (2) of this section shall be treated, for the purpose of determining the time at which he or any other director is to retire, as if he had become director on the day on which the person in whose place he is appointed was last appointed a director; but, except as provided by this subsection, the retirement of a director out of turn by virtue of the said subsection (2) shall be disregarded in determining when any other directors are to retire.
(5) Nothing in the foregoing provisions of this section shall prevent the appointment of a. director at any age, or require a director to retire at any time, if his appointment is made or approved by ordinary resolution and his age is disclosed at the meeting at which the resolution is passed.
(6) This section shall have effect subject to the provisions of a company's articles, except in so far as the next following section provides that it shall have effect notwithstanding the articles.
LORD CHORLEY LORD CHORLEY moved to leave out subsections (4) to (6) and insert:
"(4) Subsection (2) of this section shall not apply to a director who is in office at the date when it comes into force so as to terminate his then appointment before the conclusion of the third annual general meeting commencing after that date, but shall apply so as to terminate it at the conclusion of that meeting if he has attained the age of seventy before the commencement of the meeting.
(5) Nothing in the foregoing provisions of this section shall prevent the appointment of a director at any age or require a director to retire at any time, if his appointment is or was made or approved by the company in general meeting. but special notice shall be required of any resolution appointing or approving the appointment of a director for it to have effect for the purposes of this subsection and the notice thereof given to the company and by the company to its members must state or must have stated the age of the person to whom it relates.
(6) A person reappointed director on retiring by virtue of subsection (2) of this section, or appointed in place of a director so retiring, shall be treated, for the purpose of determining the time at which he or any other director is to retire, as if he had become director on the day on which the retiring director was last appointed before his retirement; but, except as provided by this subsection, the retirement of a director out of turn by virtue of the said subsection (2) shall be disregarded in determining when any other directors are to retire.
(7) In the case of a company first registered under the principal Act after the beginning of the year nineteen hundred and forty-seven, this section shall have effect subject to the provisions of the company's articles; and in the case of a company first so registered before the beginning of that year—

(a) this section shall have effect subject to any alterations of the company's articles made after the beginning thereof; and

(b) if at the beginning thereof the company's articles contained provision for retirement of directors under an age limit or for preventing or restricting appointments of directors over a given age, this section shall not apply to directors to whom that provision applies."

The noble Lord said: I rise to move this and the following Amendment with mixed feelings. My noble and learned friend described me as "the world's greatest authority" on the original Clause 23, which now, if your Lordships accept the Amendment, will be eliminated. I was not the world's greatest authority on anything else, so I shall no longer be the world's greatest authority on anything. But even the "world's greatest authority" on the original Clause 23 was not altogether satisfied that he understood the whole of the clause as it stood. Therefore it may well be right that we should place the new clause, which I think your Lordships will agree is very much clearer, on the Statute Book. The main difficulty in drafting, of course, arose in connexion with the Cohen Committee transitional recommendations, which were embodied in the original Clause 23 (now Clause 24) which it is proposed to remove. We promised before that we would try to simplify that clause. We also promised, at the same time, to try to amend the earlier clause, Clause 22 as it then was, so as to require adequate notice to be given of any resolution to appoint or keep in office any director who had passed the retiring age.
The effect of the new provision is that a company is free to do whatever it. likes under its Articles with regard to the retirement of its directors. Existing company provisions, such as those allowing directors to stay in office until they attain a given age, will be allowed, even though that age might be over seventy. With regard to those directors who are already in office on the date when the Act comes into force, it provides that they will now have a period of grace, and they will not leave until the third annual general meeting commencing after that

735
date. That will have the effect in some cases of extending the period, but in other cases, where they have been appointed for a long period of time, say five or ten years, it will, in fact, cut them down. Of course, the very large majority of these cases are cases of three years' appointment, so that in practice it probably will not make very much difference. I hope your Lordships will agree that this clause as it is now proposed to be amended is a very great improvement over the earlier clause, and that you will accept it. I beg to move.
Amendment moved—
Page 22, line 9, leave out subsections (4) to (6) and insert the said new subsections.—(Lord Chorley.)
VISCOUNT SWINTON: This certainly makes it all very intelligible, and we can now share with Lord Chorley the understanding of what it really means. For my part, I was always quite prepared to accept the general rule that people should retire at seventy, and that shareholders should have a right to say, by an ordinary resolution with a bare majority, whether they wanted to keep them or not. I would have been quite happy to stick to that. I think it is not a great matter—a year or two this way or that—and I am rather glad that people who would go on until they are 101 are going to be removed before they reach their second childhood. That certainly is an improvement, and, broad and large, I think the seventy-year-olds get a good run for their money.
VISCOUNT MAUGHAM: I would only add this, in oblique reference to what has fallen from my noble friend, Viscount Swinton. I have never thought it would be an insult to any man to be removed from the office of director at seventy. It is a very different thing for him to be removed from a directorship when he is twenty-five years old, simply upon a vote of a majority of members.
VISCOUNT SWINTON: I did not think we were in disagreement over this.
On Question, Amendment agreed to.
Clause 23, as amended, agreed to.
Clause 24 [Application of age limit to directors of existing companies]:
LORD CHORLEY: This Amendment is consequential on the last Amendment.
Amendment moved—
Page 22, line 26, leave out Clause 24— (Lord Chorley.)
On Question, Amendment agreed to.
Clause 25 agreed to.
Clause 26 [Power to restrain fraudulent persons from managing companies]:
LORD CHORLEY: With your Lordships permission I would like to take this Amendment and the next Amendment together. They are both consequential to another clause which defines the expression "officer."
Amendment moved—
Page 24, line 23, leave out ("a director or") and insert ("an").—(Lord Chorley.)
On Question Amendment agreed to.
Amendment moved
Page 25, line 14, leave out (" "director" ") and insert (" "officer" ").—(Lord Charley.)
On Question, Amendment agreed to.
Clause 26, as amended, agreed to.
Clause 27 agreed to.
Clause 28:
Prohibition of loans to directors.
28. It shall not be lawful for a company to make a loan to any person who is its director or a director of its holding company, or to enter into any guarantee or provide any security in connexion with a loan made to such a person as aforesaid by any other person:
Provided that nothing in this section shall apply either

(a) to anything done with the approval of the company in general meeting, where

LORD CHORLEY LORD CHORLEY moved to leave out sub-paragraph (a) and insert:

"(a) to anything done by a company which is for the time being an exempt private company; or

(b) subject to the next following subsection, to anything done to provide any such person as aforesaid with funds to meet expenditure incurred or to be incurred by him for the purposes of the company or for the purpose of enabling him properly to perform his duties as an officer of the company; or ".

The noble Lord said: Again we have two Amendments which go together, and with your Lordships' permission I would like to take them together. These Amendments have been framed in order to give effect to two undertakings which were given on the previous occasion. In the first place, an undertaking was given to put down an Amendment to express in

737
correct form an Amendment which the noble Lord, Lord Saltoun, moved to allow a loan to be made by the directors of a company to one of their members to be approved by the company in genera) meeting after the making of the loan. The other one was an undertaking given to the noble Lord, Lord Balfour of Inchrye, to put down an Amendment to exempt private companies from the clause. We have given the noble Lord, Lord Saltoun, a rather greater period than he asked for, and the Amendment allows the loan to be approved at the next annual, general meeting, so it will not be necessary to call a special meeting for the purpose of approving the loan. This I am sure he would say, if he were here, was an improvement on the Amendment which he himself moved. I beg to move.
Amendment moved—
Page 26, line 2, to leave out paragraph (a) and insert the said new paragraphs.—(Lord Charley.)
On Question, Amendment agreed to.
Amendment moved:
Page 26, line 16, at end insert—
"(2) Proviso (b) to the foregoing subsection shall not authorize the making of any loan, or the entering into any guarantee, or the provision of any security, except either—

(a) with the prior approval of the company given at a general meeting at which the purposes of the expenditure and the amount of the loan or the extent of the guarantee or security, as the case may be, are disclosed; or

(b) on condition that, if the approval of the company is not given as aforesaid at or before the next following annual general meeting, the loan shall be repaid or the liability under the guarantee or security shall be discharged, as the case may be, within six months from the conclusion of that meeting.

(3) Where the approval of the company is not given as required by any such condition the directors authorizing the making of the loan, or the entering into the guarantee, or the provision of the security, shall be jointly and severally liable to indemnify the company against any loss arising therefrom."—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 28, as amended, agreed to.
Clause 29, agreed to.
Clause 30 [Register of directors' shareholding, etc.)]:
4.48 p.m.
LORD CHORLEY LORD CHORLEY moved, after subsection (2) to insert:
738
"(3) Where a director is concerned only in a fiduciary capacity with any shares or debentures recorded in relation to him in the said register, that fact shall, if he so requires, be indicated in the register.
(4) The company shall not, by virtue of anything done for the purposes of this section, be affected with notice of, or put upon inquiry as to, the rights of any person in relation to any shares or debentures."
The noble Lord said: This Amendment has been framed in order to give effect to an undertaking which we gave to the noble Lord, Lord Rennell, to put down an Amendment to make it clear that directors who are merely concerned as trustees or in some other fiduciary capacity should be able to have words to that effect put against their names on the register of the directors' shareholdings. I beg to move.
Amendment moved—
Page 28, line 22, at end insert the said new subsections.—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: There are again two Amendments which go together. These Amendments give effect to our undertaking to put down an Amendment to express in correct form the Amendment moved by the noble Lord, Lord Rennell, with a view to securing that the register of directors' shareholdings should be open for inspection by the members of the company, not only for the period of fourteen days before the date of the annual general meeting, but also for a period of three days afterwards.
Amendment moved—
Page 28, line 30, leave out from beginning to ("it") in line 33 and insert ("(a) during the period beginning fourteen days before the date of the company's annual general meeting and ending three days after the date of its conclusion").—(Lord Charley.)
On Question, Amendment agreed to.
Amendment moved—
Page 28, line 38, at end insert—
"In computing the fourteen days and the three days mentioned in this subsection any day which is a Saturday or Sunday or a bank holiday shall be disregarded.")—(Lord Charley.)
On Question, Amendment agreed to.
LORD CHORLEY: This is purely a drafting amendment.
Amendment moved—
Page 29, line 4, after ("subsection insert ("or (2)").—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 30, as amended, agreed to.
Clause 31 [Particulars in accounts of directors' salaries, pensions, etc.]:
LORD CHORLEY: The next Amendment gives effect to an undertaking which we gave to look into the criticism which was made by the noble Lord, Lord Saltoun, that Clause 31 imposed a duty on the company, as opposed to the directors, to give information of sums received by a director from persons other than the company, and that the company will not be able to fulfil its obligations to disclose if the director does not give the company the necessary information. I was not quite convinced that there was this difficulty, but the position should be made quite clear, and we have, therefore, tabled this Amendment in order to safeguard the position. I beg to move.
Amendment moved—
Page 29, line 31, at end insert ("so far as the information is contained in the company's books and papers or the company has the right to obtain it from the persons concerned").—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 31, as amended, agreed to.
Clause 32 [Particulars in accounts of loans to directors and officers]:
LORD CHORLEY: There are a number of small consequential Amendments following which, with your Lordships' permission, I should like to move together—one at Page 32, line 27, one at line 29 on the same page, one at line 3o and one at line 31. They are really all the same point; they are consequential on Clause 108 (4) which we have already looked at earlier this afternoon. I beg to move.
Amendments moved—
Page 32, line 27, leave out ("directors and");
Page 32, line 29, leave out ("a director or") and insert ("an");
Page 32, line 30, leave out ("a director or") and insert ("an");
Page 32, line 31, leave out ("a director or") and insert ("an").—(Lord Chorley.)
On Question, Amendments agreed to.
Clause 32, as amended, agreed to.
Clause 33 agreed to.
Clause 34 [General duty to make disclosure]:
LORD CHORLEY LORD CHORLEY moved, in subsection (I), after "has" to insert "at any time during the preceding five years." The noble Lord said: This Amendment gives effect to an undertaking given to the noble Marquess, Lord Reading, and
740
to the noble Lord, Lord Balfour of Inchrye, to limit the period from the date of retirement within which a past director is put under an obligation to give notice to the directors of the company of which he was formerly a director of such matters relating to himself as may be necessary for the purposes of the clauses relating to the disclosure of payments to and interest of directors. The noble Marquess, Lord Reading, moved an Amendment to limit the period to the preceding ten years and an assurance was given that an Amendment would be put down on Report to give effect to his suggestion, on the understanding, however, that the period would be less than ten years.
LORD RENNELL: The noble Marquess, Lord Reading, is very much obliged.
Amendment moved—
Page 34, line 6, after ("has") insert ("at any time during the preceding five years").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: The next Amendment is consequential on Clause 108 (4). I beg to move.
Amendment moved—
Page 34, line 17, after ("officers") insert ("other than directors").—(Lord Charley.)
On Question, Amendment agreed to.
Clause 34, as amended, agreed to.
Clause 35:
Inspection of company's affairs on application of members.
(4) If an inspector appointed under the said Section one hundred and thirty-five thinks it necessary for the purpose of his investigation that a person whom he has no power to examine on oath should be so examined, he may apply to the court and the court may if it sees fit order that person to attend and be examined on oath before it on any matter relevant to the investigation, and on any such examination—
(c) the person examined shall answer all such questions as the court may put or allow to be put to him, but may at his own cost employ a solicitor with or without counsel, who shall be at liberty to put to him such questions as he court may deem just for the purpose of enabling him to explain or qualify any answers given by him;
and notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined, and may thereafter be used in evidence against him.
(5) If an inspector appointed under the said Section one hundred and thirty-five to investi-

741
gate the affairs of a company thinks it necessary for that purpose to investigate 'also the affairs of any other body corporate which is the company's subsidiary or holding company or a subsidiary of its holding company or a holding company of its subsidiary, he shall have power so to do, and shall report on the affairs of the other body corporate so far is he thinks the results of his investigation thereof arc relevant to the investigation of the affairs of the first mentioned company.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (4), at the end to insert:
"Provided that, notwithstanding anything in paragraph (c) of this subsection, the court may allow the person examined such costs as in its discretion it may think fit, and any costs so allowed shall be paid as part of the expenses of the investigation."
The noble and learned Viscount said: This Amendment gives effect to a Government undertaking, given to the noble Lord, Lord Balfour of Inchrye, to put down an Amendment to provide that where an inspector appointed by the Board of Trade to investigate the affairs of a company applies to the Court for an examination before the Court of a person whom the inspector has no power to examine on oath, the Court may have discretion to order the costs incurred by the person examined to be borne by the Board of Trade. I beg to move.
Amendment moved—
Page 35, line 47, at end, insert the said proviso.—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: With regard to the next Amendment, Clause 35 (5) gives an inspector appointed by the Board of Trade to investigate the affairs of a company power to investigate, if he thinks it necessary, the affairs of any other body corporate which is a member of the same group. This Amendment secures that this power shall extend to a company which has been, but is no longer, a member of the group. I beg to move.
Amendment moved—
Page 36, line 4, after ("is") insert ("or has at any relevant time been").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 35, as amended, agreed to.
Clauses 36 and 37 agreed to.
Clause 38 [Expenses of 'inspection of company's affairs]:
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after subsection (I), to insert:
742
"(2) The report of an inspector appointed otherwise than of the Board of Trade's own motion may, if he thinks fit, and shall, if the Board so direct, include a recommendation as to the directions (if any) which he thinks appropriate, in the Egli,: of his investigation, to be given under paragraph (c) of the last foregoing subsection."
The noble and learned Viscount said: This is my effort to meet the criticism that arose on the question of inserting the word "adversely". As your Lordships may remember, I promised to consider suggestions made by the noble Marquess, Lord Reading, and the noble Viscount, Lord Swinton, that we should try to introduce some safeguard against the possibility that the Board of Trade might try to recover the costs of an investigation from a company which had been within the purview of the investigations but which had. not been adversely referred to in the report of the inspector. I beg to move.
Amendment moved—
Page 39, line 3, at end, insert the said subsection,—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 38, as amended, agreed to.
Clause 39 [Appointment and powers of inspectors to investigate ownership of company]:
THE LORD CHANCELLOR: The next Amendment leaves out subsections (5) to (11) of Clause 39, in order to reinsert them after subsection (12) as two separate clauses which we will come to in a moment. I beg to move.
Amendment moved—
Page 40, line 30, leave out from the beginning to the end of line 17 on page 42.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 39, as amended, agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after Clause 39 to insert the following new clause:
Power to require information as to persons interested in shares or debentures.
".—(1) Where it appears to the Board of Trade that there is good reason to investigate the ownership of any shares in or debentures of a company and that it is unnecessary to appoint an inspector for the purpose, they may require any person whom they have reasonable cause to believe—

(a) to be or to have been interested in those shares or debentures; or

(b) to act or to have acted in relation to those shares or debentures on behalf of someone interested therein;

743
to give them any information which he has or can reasonably be expected to obtain as to the present and past interests in those shares or debentures and the names and addresses of the persons interested and of any persons who act or have acted on their behalf in relation to the shares or debentures.
(2) For the purposes of this section, a person shall be deemed to have an interest in a share or debenture if he has any right to acquire or dispose of the share or debenture or any interest therein or to vote in respect thereof, or if his consent is necessary for the exercise of any of the rights of other persons interested therein, or if other persons interested therein can be required or are accustomed to exercise their rights in accordance with his instructions
(3) Any person who fails to give any information required of him under this section, or who in giving any such information makes any statement which he knows to be false in a material particular, or recklessly makes any statement which is false in a material particular, shall be liable to imprisonment for a term not exceeding six months or to a fine not exceeding five hundred pounds or to both."
The noble and learned Viscount said: We now come to two new clauses. I hope they are quite clear to your Lordships. I believe they are. The object is to put into different, and plainer, language the provisions previously in Clause 39, which we have now deleted. The only thing I need observe, if 1 may take them together for the moment, is that subsection (3) of the second new clause is new. It provides for an appeal to the Court against an order of the Board of Trade restricting the transfer and exercise of voting rights in respect of any shares or debentures. I am not sure that any of your Lordships pressed me with regard to this, so I shall account this little bit of righteousness unto myself. I beg to move.
Amendment moved—
After Clause 39 insert the said new clause.—(The Lord Chancellor.)
LORD BALFOUR OF INCHRYE: We are very grateful to the noble and learned Viscount, the Lord Chancellor, for putting these clauses in plainer language. There are only two points I should like to mention. In the first line of the first new clause it says: "Where it appears to the Board of Trade that there is good reason to investigate …" Would it not be more appropriate to put in these words: "Where the Board of Trade consider it in the public interest", because "good reason" is very indefinite? It does seem to me that a purpose which would cause the Board of Trade to conduct an investi-
744
gation is the public interest. Perhaps the noble and learned Viscount would consider that point. The other remark I would like to make is as regards the stopper on share dealings. We think it is absolutely right to have this inserted, although we are grateful that provision is made for appeal to the Court in the case where a person affected considers himself aggrieved.
THE LORD CHANCELLOR: Your Lordships will remember that we all agreed when we gave up the clauses about nominees that we should give a very wide power to the Board of Trade in regard to inspection or investigation. I do not like the phrase "in the public interest," for this reason. It might be simply a case of a majority oppressing some individual, and if the Board of Trade thought there was such a case they should have the right to investigate. There is no public interest, of course, save this: that it is always the public interest that no individual should be oppressed. I want to use the widest possible words I can here, and that is why I selected these words.
LORD BALFOUR OF INCHRYE: The noble and learned Viscount has given us so much in other directions that I will not press it.
On Question, Amendment agreed to.
5.10 p.m.
THE LORD CHAIRMAN OF COMMITTEES: The next new clause has already been referred to.
Amendment moved—
After Clause 39 insert the following new clause:
Power to impose restrictions on shares or debentures.
".—(I) Where in connexion with an investigation under either of the two last foregoing sections it appears to the Board of Trade that there is difficulty in finding out the relevant facts about any shares (whether issued or to be issued), and that the difficulty is due wholly or mainly to the unwillingness of the persons concerned to assist the investigation as required by this Act, the Board may by order direct that the shares shall until further order be subject to the restrictions imposed by this section.
(2) So long as any shares are directed to be subject to the restrictions imposed by this section—

(a) any transfer of those shares, or in the case of unissued shares any transfer of the right to be issued therewith and any issue thereof, shall be void;

745

(b) no voting rights shall be exercisable in respect of those shares;

(c) no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder thereof;

(d) except in a liquidation, no payment shall be made of any sums due from the company on those shares, whether in respect of capital or dividends.

(3) Where the Board of Trade make an order directing that shares shall be subject to the said restrictions, or refuse to make an order directing that shares shall cease to be subject thereto, any person aggrieved thereby may apply to the court, and the court may, if it sees fit, direct that the shares shall cease to be subject to the said restrictions.
(4) Any order (whether of the Board of Trade or of the court) directing that shares shall cease to be subject to the said restrictions which is expressed to be made with a view to permitting a transfer of those shares may continue the restrictions mentioned in paragraphs (c) and (d) of subsection (2) of this section, either in whole or in part, so far as they relate to any right acquired or offer made before the transfer.
(5) Any person who—

(a) exercises or purports to exercise any right to dispose of any shares which, to his knowledge, are for the time being subject to the said restrictions or of any right to be issued with any such shares; or

(b) votes in respect of any such shares, whether as holder or proxy, or appoints a proxy to vote in respect thereof; or

(c) being the holder of any such shares, fails to notify of their being subject to the said restrictions any person whom he does not knew to be aware of that fact but does know to he entitled, apart from the said restrictions, to vote in respect of those shares whether as holder or proxy;

shall be liable to imprisonment for a term not exceeding six months or to a fine not exceeding five hundred pounds or to both.
(6) Where shares in any company are issued in contravention of the said restrictions, the company and every officer of the company who is in default shall be liable to a fine not exceeding five hundred pounds.
(7) A prosecution shall not be instituted in England under this section except by or with the consent of the Board of Trade.
(8) This section shall apply in relation to debentures as it applies in relation to shares.") —(The Lord Chancellor).
On Question, Amendment agreed to.
Clause 40 [Saving for solicitors and bankers]:
THE LORD CHANCELLOR: This Amendment gives effect to an undertaking which I have previously given. The solicitor will now have to reveal only the name and address of his client.
Amendment moved—
Page 42, line 26, leave out ("and any person for whom his client acts or has acted").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 40, as amended, agreed to,
Clause 41 [Power to keep register where made up]:
THE LORD CHANCELLOR: This and the next Amendment really go together. The Amendments give effect to a Government undertaking which I gave to the noble Viscount, Lord Bridgeman to put down an Amendment to provide that the register of members may he kept at the office of the company, or of its agent, at which the work of compiling the register is done. I beg to move.
Amendment moved—
Page 42, line 32, at beginning insert—("A company's register of members may be kept at any office of the company where the work of making it up is done, instead of at the company's registered office, and").—(The Lord Chancellor.)
LORD BALFOUR OF INCHRYE: With the permission of your Lordships I will deal in my remarks with these two Amendments and the Amendment in my name, which really cover the same point. It has been represented to us that the Amendment of the noble and learned Viscount does not meet the case for Scottish accountants and others, who are anxious that the register should be able to be kept in England, where a. majority of the shareholders in a Scottish company might live. Indeed, in an earlier Amendment this afternoon, the noble and learned Viscount, the Lord Chancellor, was postulating that particular possibility. I hope the noble and learned Viscount will be able to say whether my point is a good one, and, if so, if he could reconsider the matter. My Amendment stipulates that the location of the register shall be recorded in the annual return, which I think must meet the point that the register must be kept by responsible people in a responsible place.
THE LORD CHANCELLOR: I confess, as a mere Sassenach, that I think the noble Lord's Amendment is not unreasonable, and I have therefore approached my friends in the Scottish Office. Your Lordships know what these Scotsmen can do when they get together. The noble Lord no doubt remembers it very well in regard

747
to a certain airfield. I am told that Scotland will not have this at any price. I am sorry about it, but whatever we may think, the Scottish Office are quite insistent that if the company is registered in Scotland that is the place where its register and documents must be kept. It is no good saying that you may come and transfer yourself to England, merely because there are a majority of your shareholders in England. I sympathize with the noble Lord, but I cannot promise to accept his Amendment. Indeed, it is odd, as he is a Scot himself, that he should be the one to put forward such a shocking proposal.
LORD RENNELL: The noble and learned Viscount has no doubt represented that this was a view expressed by certain members of that community in cases where a company was largely owned in England, and where most of the share transfers did take place in England. May I ask the noble and learned Viscount if that was represented to his colleagues in the Scottish Office, and that nevertheless this view was held?
THE LORD CHANCELLOR: It certainly was, and I was lucky to leave the Scottish Office alive !
LORD HAWKE: Could the noble and learned Viscount tell us whether the arguments of the Scottish Office are based on the fact that they wish to impose patriotism on the Scots, or whether they do not wish an English company to be allowed to keep its register in Edinburgh, for instance?
THE LORD CHANCELLOR: They assume the principle that Scots have the patriotism without it being pressed upon them,
VISCOUNT ELIBANK: May I, on behalf of Scotland, thank the noble and learned Viscount for having resisted this Amendment and not given way?
LORD BALFOUR OF INCHRYE: Lest I may be thought a renegade Scot, let me clear my position. I put this Amendment forward on strong representations by Scottish accountants who are noted for accuracy and integrity, and who are employed by many English companies, to the advantage of those English companies. However, if the Scottish Office in London (I assume that it was the London Branch of the Scottish Office)
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cannot agree, I do not feel disposed to press the matter.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: I have already dealt with the next Amendment. I beg to move.
Amendment moved—
Page 42, line 36, leave out ("the company's registered office") and insert ("an office of the company").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 41, as amended, agreed to.
Clauses 42 to 44, agreed to.
Clause 45 [Inclusion in annual return of accounts of private companies]:
THE LORD CHANCELLOR THE LORD CHANCELLOR moved in subsection (2) to leave out paragraph (a) and insert:
"(a) that the conditions contained in the Third Schedule to this Act are satisfied as to the persons interested in the company's shares and debentures; and".
The noble and learned Viscount said: The effect of this Amendment is to transfer to the Third Schedule the bulk of the conditions which a private company has to satisfy in order to qualify as an exempt private company; that is to say, a company which has not to file its accounts. It was necessary to do this because I gave several undertakings on this clause. I gave an undertaking to the noble Viscount, Lord Swinton, to put down an Amendment to provide that a company should not be disqualified from being an exempt company merely because some of its shares are held by another exempt company, provided, however, that the total number of shareholders in the exempt company does not exceed fifty. I gave an undertaking to the noble Viscount, Lord Bridgeman, to put down an Amendment to provide that a company should not be disqualified from being an exempt company merely because shares have been acquired in it, not necessarily on its formation, by a banking or finance company, provided that no more than 20 per cent, in the aggregate of the voting power is exercisable by banking or finance companies. When I came, to try to redraft an already complicated clause to give effect to these Amendments, I came to the conclusion that the only thing to do was to put them in a Schedule. That is the explanation of this Amendment. I beg to move.
Amendment moved—
Page 45, line 34, leave out paragraph (a) and insert the said new paragraph.—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, to leave out subsections (3) to (5). The noble and learned Viscount said: This is the same point; it is all part of the striking out. Your Lordships must not, however, imagine that you will not get it all again in the new Schedule because I am afraid you will.
Amendment moved—
Page 46, line 1, leave out from beginning to end of line 41 on page 47.—(The Lord Chancellor.)
LORD COZENS-HARDY: I should have made my remarks on the previous Amendment but, with the leave of the House, I should like to thank the noble and learned Viscount for the Amendment to Clause 45 and for the new Schedule. The position is now much clearer and much improved, but there is still one point to which I think the noble and learned Viscount might direct his attention before the next stage. If a shareholder in an exempt private company wants to benefit the company's employees by settling some of his shares on some form of employees' benefit trust fund, he cannot carry out that generous intention without making the company a nonexempt private company, because the trustees of the fund could not comply with the second basic condition. Similarly, if a private company to-day has trustees of a benevolent fund as shareholders it is, by that fact, prevented from becoming an exempt private company under the Bill, even though it may comply with all the other stringent conditions which are necessary for exemption. I hardly think that the noble and learned Viscount wishes to discourage schemes for giving employees an interest in their employer's success, and I hope, between now and the next stage, he will consider whether it would not be right and proper to make an exception from the second basic condition in favour of shares settled on trustees for the benefit of employees, past or present, and their families.
THE LORD CHANCELLOR: Perhaps we might have a discussion on this when we get to the new Schedule. If that is convenient to the noble Lord, I think that
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would be the convenient time at which to discuss it.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This is a mere drafting Amendment. I beg to move.
Amendment moved—
Page 47, line 42, leave out ("an exempt company as defined in this section") and insert ("an exempt private company.").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 45, as amended, agreed to.
Clauses 46 to 50 agreed to.
Clause 51:
Allotment of shares and debentures to be dealt in on stock exchange.
51.—(I) Where a prospectus, whether issued generally or not, states that application has been or will be made for permission for the shares or debentures offered thereby to be dealt in on any stock exchange, any allotment made on an application in pursuance of the prospectus shall, whenever made, be void if the permission has riot been applied for before the third day after the first issue of the prospectus or if the permission has been refused before the expiration of three weeks from the date of the closing of the subscription lists.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, at the end of subsection (I) to insert:
"or such longer period not exceeding six weeks as may, within the said three weeks, be notified to the applicant by or on behalf of the stock exchange."
The noble and learned Viscount said: This Amendment is intended to make more effective Clause 51, which provides that where a prospectus states that application has been or will be made to a stock exchange for permission to deal in the shares offered, if permission is refused within three weeks from the date of the closing of the subscription list, the money subscribed shall be returned to the subscribers. That is insufficiently elastic in just those cases where it is essential to get more information which would not be forthcoming in the limited period of three weeks. So the stock exchange is allowed, under this Amendment, to extend the period not beyond six weeks from the closing of the subscription list. That is important. I think the stock exchange, before they decide to act, should be given reasonable time to make such inquiries and investigations as they desire. I beg to move.
Amendment moved—
Page 50, line 38, at end insert the said words.—(The Lord Chancellor.)
LORD RENNELL: I think this is a great improvement on subsection (I) of Clause 51. There is one very small point in the proposed Amendment to which I would like to draw the attention of the noble and learned Viscount. When I first read it, I was not absolutely clear about what was meant and I had to read it a second time. I do not know whether my suggestion makes as good English as the Amendment as at present drafted, but I suggest that instead of saying "or such longer period not exceeding six weeks as may, within the said three weeks, be notified …", we should say "or such longer period not exceeding six weeks as may be notified, within the said three weeks, to the applicant by or on behalf of the stock exchange."
THE LORD CHANCELLOR: I will certainly look at that.
On Question, Amendment agreed to.
Clause 51, as amended, agreed to.
Clause 52 [Facts to be stated in prospectus to which Section 35 of principal Act applies]:
THE LORD CHANCELLOR THE LORD CHANCELLOR had given notice that he would move, at the end of subsection (I), to insert:
"(2) The said paragraph 8 shall not apply to any property if

(a) the contract for its purchase or acquisition was entered into in the ordinary course of the company's business; or

(b) the amount of the purchase money is not material;

and in paragraph 9 of Part I of the said Fourth Schedule the expression 'any such property as aforesaid' shall be construed accordingly."
The noble and learned Viscount said: This Amendment gives effect to a Government undertaking, which I gave to the noble Marquess Lord Reading, to put down an Amendment to secure that small routine contracts shall not be required, by paragraph 8 of Part I of the Fourth Schedule, to be disclosed in a prospectus. When I came to look at the clause as we have it here, I was not happy about it. I was not happy about it for this reason. It seems to me that what we want here to eliminate altogether are small routine contracts, made in the ordinary course
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of business, which really have no relevance whatever to the particular matter of disclosure we are here discussing. Accordingly, I beg to move the Amendment in an amended form.
Your Lordships will see that this differs from the Amendment on the Paper by the insertion of the words "the contract not being made in contemplation of the issue nor the issue in consequence of the contract." If we do not include those words, I am afraid the clause will be too widely drawn, and will enable a coach and four to be driven through the very wholesome doctrine of disclosure. With your Lordships' permission, I beg to move the Amendment in that form.
Amendment moved—
Page 53, line it, at end insert:
("(2) The said paragraph 8 shall not apply to any property—

(a) if the contract for its purchase or acquisition was entered into in the ordinary course of the company's business, the contract not being made in contemplation of the issue nor the issue in consequence of the contract; or

(b) if the amount of the purchase money is not material;

and in paragraph 9 of Part I of the said Fourth Schedule the expression 'any such property as aforesaid' shall be construed accordingly.")—(The Lord Chancellor.)
LORD RENNELL: The noble Marquess, Lord Reading, moved an Amendment in this sense during my unavoidable absence. It was an Amendment which stood in my name. I think the Amendment as now moved by the noble and learned Viscount, the Lord Chancellor, entirely meets the point which I had in mind, which was not, as a matter of fact, confined to small contracts or to contracts which were not material. It related to a difficulty which had arisen over paragraph 8 of the Fourth Schedule of the principal Act. I entirely agree that the Amendment in the Marshalled List was far too wide, but the Amendment now proposed entirely meets the point, and makes it perfectly clear that what are required to 'be disclosed in the prospectus are all those contracts which would affect a subscriber to, or a purchaser of, the shares or debentures mentioned in the prospectus, and does not require disclosure of contracts which the company has in the ordinary course of business, which it might be injurious to disclose

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to its competitors and which would in no way affect securities offered for sale.
On Question, Amendment agreed to.
Clause 52, as amended, agreed to.
Clause 53 agreed to.
Clause 54 [Issue and registration of prospectus]:
LORD CHORLEY: Before we come to the next Amendment I would like to remind your Lordships that when we were discussing subsection (I) of this clause the noble Lord, Lord Saltoun, raised a point as to the penalization of a company which had just been formed. He said that if it were penalized at that stage it might be very unfortunate from the point of view of the subscribers. I promised to look at the matter with a view to seeing whether anything could be done to meet that point. I would remind him that this matter is entirely within the discretion of the Court which deals with it, and obviously the fact that the company had only just been formed would be a very material matter to be taken into consideration, and would undoubtedly have due weight given to it in deciding on the amount. This is not on an Amendment, bat on a matter which was raised by the noble Lord, Lord Saltoun. There is nothing on the Amendment Paper about it but I wanted to explain to him that we have in fact looked into the matter.
The Amendment I have to move is, after subsection (4), to insert:
"(3) Where any such contract as is mentioned in the last foregoing subsection is wholly or partly in a foreign language, the reference in that subsection to 'a copy of the contract shall be taken as a reference to a copy of a translation thereof in English or a copy embodying a translation in English of the parts in a foreign language, as the case may be, being a translation certified in the prescribed manner to be a correct translation."
This Amendment deals with the question which may arise on a material contract which has to be disclosed, but which is in a foreign language. The Amendment is intended to enable that contract to be translated and the translation filed in its place. There is a precedent for this in Section 110 to (3) of the principal Act. I beg to move.
Amendment moved—
Page 56, line 6, at end insert the said subsection.—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 54, as amended, agreed to.
LORD CHORLEY LORD CHORLEY moved, after Clause 54, to insert the following new clause:
"Exclusion of s.35 and relaxation of Fourth Schedule in case of certain prospectuses.
—(I) Section thirty-five of the principal Act shall not apply to the issue of a prospectus or form of application relating to shares or debentures which are or are to be in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a prescribed stock exchange.
(2) Where—

(a) it is proposed to offer any shares in or debentures of a company to the public by a prospectus issued generally; and

(b) application is made to a prescribed stock exchange for permission for those shares or debentures to be dealt in or quoted on that stock exchange;

there may on the request of the applicant he given. by or on behalf of that stock exchange a certificate of exemption, that is to say, a certificate that, having regard to the proposals (as stated in the request) as to the size and other circumstances of the issue of shares or debentures and as to any limitations on the number and class of persons to whom the offer is to be made, compliance with the requirements of the Fourth Schedule to the principal Act would be unduly burdensome.
(3) If a certificate of exemption is given, and if the proposals aforesaid are adhered to and the particulars and information required to be published in connexion with the application for permission made to the stock exchange are so published, then—

(a) a prospectus giving the particulars and information aforesaid in the form in which they are so required to he published shall be deemed to comply with the requirements of the Fourth Schedule to the principal Act; and

(b) section thirty-five of the principal Act shall not apply to any issue, after the permission applied or is granted, of a prospectus or form of application relating to the shares or debentures;

and the section of this Act relating to applications for and allotment of shares and debentures in pursuance of a prospectus issued generally shall not apply in relation to a prospectus to which either paragraph of this subsection applies.
(4) Where a (prospectus is deemed by virtue of a certificate of exemption to comply with the said requirements, the provisions of this Act relating to the registration and (inspection of a copy or (memorandum of any contract required by the Fourth Schedule to the principal Act to be stared in the prospectus shall apply in relation to any contract which, or a copy or memorandum of which, is required to be available for inspection in connexion with the application for permission made to the stock exchange.
References in this subsection to a copy of a contract include references to a copy of a translation thereof or a copy embodying a translation of parts thereof."
The noble Lord said: This is a new clause which has been drafted in order to deal with the problem of placings. This question of placings, of course, has given rise to considerable difficulty, and there have been a number of abuses which have often been commented upon in financial journals and elsewhere.
The main abuse in connexion with placings has arisen because of the impossibility of defining legally where the public begins and ends, and whether or not clients of the firm dealing with the matter are members of the public. Clause 58 implies that members or debenture holders of a company, or clients of the person issuing the prospectus, may be members of the public. That is a useful provision and will prevent a good deal of the abuse. On the other hand, it may make the existing provisions unduly restricted and expensive for those placings which are perfectly bona fide, and which should not be held up or impeded. Therefore, I hope we have evolved a rather useful method of dealing with the matter by bringing in the stock exchange. In these cases there is nearly always an application to a prescribed stock exchange for permission to deal or for a quotation. Before giving such a permission or allowing shares to be quoted, of course, the stock exchange imposes rather stringent conditions which, although not so costly to comply with as the strict provisions of the Companies Act relating to prospectuses, are nevertheless perfectly adequate. This clause, therefore, has been framed to bring in the stock exchange. The effect of it is to allow this stock exchange arrangement as an alternative to full compliance with the prospectus requirements. I hope your Lordships will agree that this is a happy solution. I beg to move.
Amendment moved—
After Clause 54 insert the said new clause.—(Lord Chorley.)
VISCOUNT SWINTON: I do not want to go into the details of this clause. I agree with the noble Lord that it is both convenient and practicable. I think it gives the right kind of safeguard and, at the same time, affords reasonable facilities. There is only one point upon which I would like confirmation. Your Lordships will remember that on the previous stage of the Bill either the noble Lord, Lord Rennell, or myself—I forget
756
who it was—moved an Amendment to make clear that offers of shares to existing shareholders were authorized, and also an offer to an individual, or an individual institution, who intended to retain the shares and not to place them. The noble Lord, Lord Chorley, said last time that he accepted my view on both those cases, and he thought it was covered by the existing law that they were free (if I may so put it) and that it was therefore unnecessary to put in any special provisions here. I feel sure that the existing law already covers this, and that both those cases are met and do not require anything in the nature of a prospectus.
THE LORD CHANCELLOR: May I just say this? So far as existing members are concerned, of course, the existing law does not hit them at all. So far as the other point is concerned in Clause 58, page 59, line 34, we have an Amendment on the Marshalled List.
VISCOUNT SWINTON: I am much obliged to the noble and learned Viscount.
On Question, Amendment agreed to.
Clauses 55 and 56 agreed to.
Clause 57 [Statements in lieu of prospectus]:
LORD CHORLEY: This is a drafting Amendment. I beg to move.
Amendment moved—
Page 59, line 20, at end insert—
("(5) Subsection (2) of the said Section twenty-seven and subsection (3) of the said Section forty (which penalize contraventions of those sections) shall apply in relation to subsections (I) and (2) of this section as they apply in relation to the provisions respectively mentioned therein.")—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 57, as amended, agreed to.
Clause 58 [Interpretation of provisions relating to prospectuses, etc.]:
LORD CHORLEY: This next Amendment is the one to which my noble and learned friend referred. It meets the point which was made by the noble Lord, Lord Rennell, under which the professional investor is provided for. I beg to move.
Amendment moved—
Page 59, line 34, at end insert—
("Provided that the said references shall not include any offer or invitation limited to persons carrying on a business which involves the acquisition and holding of investments, where the offer or invitation is intended to be

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accepted by them on their own behalf for the purposes of that business, and not as agents or with a view to the sale by them of the shares or debentures or the right thereto.")—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: This is a drafting Amendment. I beg to move.
Amendment moved—
Page 60, line 9, at end insert ("or statement in lieu of prospectus").—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 58, as amended, agreed to.
LORD CHORLEY LORD CHORLEY moved, after Clause 58 to insert the following clause:
"Certification of transfers.
—.(I) The certification by a company of any instrument of transfer of shares in or debentures of the company shall be taken as a representation by the company to any person acting on the faith of the certification that there have been produced to the company such documents as on the face of them show a prima facie title to the shares or debentures in the transferor named in the instrument of transfer, but not as a representation that the transferor has any title to the shares or debentures.
(2) Where any person acts on the faith of a false certification by a company made negligently, the company shall be under the same liability to him as if the certification had been made fraudulently.
(3) For the purposes of this section—

(a) an instrument of transfer shall be deemed to be certificated if it hears the words 'certificate lodged' or words to the like effect;

(b) the certification of an instrument of transfer shall be deemed to be made by a company if-

(i) the person issuing the instrument is a person authorized to issue certified instruments of transfer on the company's behalf; and

(ii) the certification is signed by a person authorized to certificate transfers on the company's behalf or by any officer or servant either of the company or of a body corporate so authorized;

(c) a certification shall be deemed to be signed by any person if—

(i) it purports to be authenticated by his signature or initials (whether handwritten or not); and

(ii) it is not shown that the signature or initials was or were placed there neither by himself nor by any person authorized to use the signature or initials for the purpose of certificating transfers on the company's behalf."

The noble Lord said: This is a new clause which has been drafted in order to give effect to the recommendation which was made by the Cohen Committee and
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which was not carried out in the Bill as originally drafted. The recommendation is contained. in paragraph 139 of the Cohen Report. The effect of the new clause is to clarify the position in connexion with the transfers of a company. Difficulty has arisen and there have been quite a number of cases before the Courts where a shareholding is split up and a transfer is lodged. The action of the responsible official, the registrar of the company, may give rise to estoppels and this might give rise to the question as to whether there had been negligence. The company will not be held by the certification of the instrument of transfer to warrant the genuineness of the documents submitted to it, but if there is fraud or negligence on the part of a duly authorized officer of the company, the person who suffers as a result will have a remedy.
Amendment moved—
After Clause 58 insert the said new clause. —[Lord Chorley.)
On Question, Amendment agreed to.
Clause 59 [Redeemable preference shares]:
LORD RENNELL: I raised on Second Reading and on Committee stage a question in relation to shares which it was not possible to meet by an Amendment. That is the question about what happens to redeemable preference shares which cannot be redeemed when the time comes. I did not feel capable of putting down an Amendment myself, as it seemed it could have been done better by the noble and learned Viscount, with his advisers. Provision was made under the 1929 Act, but the subject is very obscure and no indication has yet been given before a Court as to the position of shareholders who hold redeemable preference shares which are to be redeemed at a certain date and after that date has arrived the company finds itself neither in a position to redeem the shares out of funds, nor to make an issue out of which to redeem the shares. I submit that this is a gap in the 1929 Act which might have properly been filled in the present Bill, and I must regret it has not been found possible to make provision for it.
LORD CHORLEY: That is one of three points raised—two of them by the noble Lord who has just sat down—in regard to the question of redeemable preference phases. The matter has been gone into

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in the interval since he made his point. There are very considerable difficulties in the way of the suggestion which he made, and on the whole it seems much better to leave the matter to the parties to the contract. There arc parties to the contract, and if circumstances are such that it is difficult to fulfil the contract it is a matter for negotiation between the parties.
LORD RENNELL: I am not sure, in this case, who the parties are. The shareholder is part-proprietor of the company, and he paid for his shares on the basis that at a certain date he would receive his capital back; but I do not know who the other party to the contract is.
LORD CHORLEY: The contract is between him and the company.
LORD RENNELL: He is part-owner of the company.
LORD CHORLEY: It is in the nature of a contract. I think the substance of what I said holds good, and it is a matter of arrangement between those who represent the company as such and the shareholders who hold this particular type of share.
VISCOUNT ELIBANK: May I ask the noble Lord, Lord Rennell, what his suggestion is for meeting this point?
LORD RENNELL: I did not make any suggestion, but certain suggestions have been made to me that when the time comes and the period has expired the directors of companies and holders of ordinary shares of the company should not be allowed to take a dividend until the redeemable preference shares have been redeemed. If any one is a holder of redeemable preference shares on the date for redemption, and wishes to make application to a Court to enforce his right, against whom is he to make his application?
THE LORD CHANCELLOR: May I make a suggestion? We must leave something for other people to do, if only to earn their salaries. We have had a great many things to consider and I have not yet been able to give to this point the mature consideration which I would have liked. But when this Bill passes from your Lordships' House and is sent to another place, I, and those who advise me, will continue to exercise our ingenuity upon it.
VISCOUNT SWINTON: I do not want by passing it in silence to let it be supposed that I accept the suggestion that Lord Rennell has thrown out, that if there is a failure to redeem preference shares, ordinary shareholders should be penalized and get nothing until sufficient is put aside to redeem the preference shares. I am not sure that that would be a good arrangement.
LORD RENNELL: I said it was a suggestion made to me. I did not put it forward as a solution myself.
VISCOUNT SWINTON: Then I hope we need not consider it unduly. I am inclined to agree with the noble Lord, Lord Chorley, that the matter should be left for arrangement between the parties, whoever they may be. I do not think it would be right to lay down a hard and fast rule in the present case.
Clause 59 agreed to.
Clause 60:
Application of premiums received on issue of shares.
(3) The share premium account may, notwithstanding anything in subsection (I) of this section, be applied by the company in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares.
LORD CHORLEY LORD CHORLEY moved, at the end of subsection (3), to insert:
"in writing off—

(a) the preliminary expenses of the company;

(b) the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company;

or in providing for the premium payable on redemption of any redeemable preference shares or of any debentures of the company.
(4) Accordingly in proviso (d) to subsection (I) of Section forty-six of the principal Act (which requires the premium, if any, payable on redemption of redeemable preference shares to be provided for out of the profits of the company) after the words 'the profits of the company' there shall be inserted the words 'or out of the company's share premium account'."
The noble Lord said: This Amendment gives effect to an undertaking which we gave as a result of an Amendment which was put down in the name of the noble Viscount, Lord Elibank, who wished to allow initial expenses to be paid out of share premiums. We agreed with him in principle, and we agreed to look into

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the best way of effecting it. We put down this Amendment, and it covers rather a wider field than he himself originally suggested when he moved the Amendment, because it provides, in addition to paying for preliminary expenses, that share premiums should be allowed to be used to pay the premium on redeemable shares or debentures or used to write off expenses of or discount allowed on any issue of shares or debentures of the company.
Amendment moved—
Page 61, line 19, at end insert the said words.—(Lord Chorley.)
VISCOUNT ELIBANK: I wish to thank the noble Lord for going so carefully into the matter, and for explaining it in a way which has been of great help and value.
On Question, Amendment agreed to.
Clause 60, as amended, agreed to.
Clauses 61 and 62 agreed to.
Clause 63:
Liability of trustees for debenture holders.
63.—(I) Subject to the following provisions of this section, any provision contained in a trust deed for securing an issue of debentures, or in any contract with -the holders of debentures secured by a trust deed, shall he void in so far as it would have the effect—
(b) absolving him, otherwise than by entitling him to rely on opinions formed or information supplied by others, from showing the degree of care and diligence ordinarily required of a trustee in discharging his functions according to the terms of his trust.
(3) Subsection (I) of this section shall not operate—
(a) to invalidate any provision in force at the corning into force of this section so long as any person then entitled to the benefit of that provision remains a trustee of the deed in question; or
LORD CHORLEY LORD CHORLEY moved in subsection (I) to leave out paragraph (b) and insert "conferring on him any powers, authorities, or discretions". The noble Lord said: Before I move this Amendment; there are two points which were raised on the question of redeemable and irredeemable preference shares, to which I might perhaps refer very shortly. The noble Lord, Lord Rennel, suggested, and he received very substantial support from, I think, the noble Lord, Lord Simonds, and from the noble Viscount, Lord Maugham, that there should be a pro—vision to enable a company to convert irredeemable preference shares into re
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deemable preference shares. I promised that that would be looked into, and we have in fact, looked into it. I am advised that the best way of dealing with this matter is to have recourse to the machinery provided in Section 153 of the Companies Act of 1929 for arrangements and reconstruction. That is not a very expensive type of procedure, and it is suggested that if this position is reached there should be recourse to it and a reconstruction carried through. The other point was raised by the noble Lord, Lord Latham, who suggested that where redeemable preference shares had been issued for the purpose of raising money in order to acquire a particular asset which was subsequently sold, the proceeds of the sale of that asset might then be used for the purpose of redeeming those shares. I agreed that that should be looked at, and I am advised that the proper course for dealing with the situation is for the company to reduce its share capital, which is a well known procedure and is provided for by Section 55 of the Companies Act.
Turning to the Amendment which stands in the name of my noble and learned friend, I may say that it has been framed in order to give effect to an undertaking which we gave to consider further the wording of Clause 63. The effect of the Amendment is to allow the trustee for debenture holders the benefit of the provisions in the trust deed which the Cohen Committee considered should be allowed to him. I beg to move.
Amendment moved—
Page 62, line 20, leave out from ("deed") to end of line 26 and insert ("conferring on him any powers, authorities, or discretions").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY LORD CHORLEY moved, in subsection 3 (a), after "provision" where that word occurs the last time, to insert "or afterwards given the benefit thereof under the next following subsection." The noble Lord said: This Amendment gives effect to a Government undertaking, which we gave, to put into correct form an Amendment which was put down by the noble Viscount, Lord Swinton, to secure that, in the case of any trust deed in operation at the date of coming into force of the clause, the debenture holders may, by extraordinary resolution, extend to a new trustee, either in whole or in part, the benefit of the indemnity provisions contained in the trust deed. I beg to move.
Amendment moved—
Page 62, line 42, after ("provision") insert ("or afterwards given the benefit thereof under the next following subsection").—(Lord Chorley.)
VISCOUNT SWINTON: I am much obliged; I think these words are much better than mine.
On Question, Amendment agreed to.
LORD CHORLEY LORD CHORLEY moved, at the end of subsection (3) (b), to insert:
"(4) While any trustee of a trust deed remains entitled to the benefit of a provision saved by the last foregoing subsection, the benefit of that provision may be given either—

(a) to all trustees of the deed, present and future; or

(b) to any named trustees or proposed trustees thereof;

by a resolution passed by a majority of not less than three-fourths in value of the debenture holders present in person or, where proxies are permitted, by proxy at a meeting summoned for the purpose in accordance with the provisions of the deed or, if the deed makes no provision for summoning meetings, a meeting summoned for the purpose in any manner approved by the court."
The noble Lord said: This Amendment goes with the one to line 42, and it is covered by what I have already said. I beg to move.
Amendment moved—
Page 62, line 47, at end, insert the said new subsection.—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 63, as amended, agreed to.
Clause 64 [Alteration of company's objects]:
LORD CHORLEY: This is a drafting Amendment. I beg to move.
Amendment moved—
Page 63, line 4, after ("resolution") insert ("under section five of the principal Act").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: This is another drafting Amendment.
Amendment moved—
Page 63, line 15, after the first ("capital") insert ("or any class thereof").—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 64, as amended, agreed to.
Clauses 65 and 66, agreed to.
Clause 67:
Membership of holding company.
(2) Nothing in this section shall apply where the subsidiary is concerned as personal representative, or where it is concerned as trustee, unless the holding company or a subsidiary thereof is beneficially interested under the trust.
LORD CHORLEY: This is a drafting Amendment. I beg to move.
Amendment moved—
Page 65, line 43, leave out ("or a nominee for its subsidiary").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY LORD CHORLEY moved at the end of subsection (2) to insert "and is not so interested only by way of security for money lent in the ordinary course of its business." The noble Lord said: This is an Amendment which has been framed to deal with a situation of the following kind. A bank nominee company which is a subsidiary of a banking company may hold shares in the banking company which have been mortgaged to the banking company as security for the overdraft of a customer. But for the Amendment, this very common and quite harmless practice would be prevented by the provisions of the clause restricting the holding of shares in a holding company by its subsidiary. I beg to move.
Amendment moved—
Page 66, line 4, at end insert ("and is not so interested only by way of security for money lent in the ordinary course of its business").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: This is a drafting Amendment. I beg to move.
Amendment moved—
Page 66, line so, at end, insert ("(4) Subject to subsection (2) of this section, subsections (I) and (3) thereof shall apply in relation to a nominee for a body corporate which is a subsidiary, as if references in the said subsections (I) and (3) to such a body corporate included references to a nominee for it").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: The next two Amendments are both drafting Amendments of the same kind, and I beg to move them together.
Amendments moved—
Page 66, line 12, leave out ("references") and insert ("the reference").
Page 66, line 14, leave out ("references") and insert ("a reference").—(Lord Chorley.)
On Question, Amendments agreed to.
Clause 67, as amended, agreed to.
Clause 68 agreed to.
Clause 69 [Documents of and relating to Scottish companies]:
LORD CHORLEY LORD CHORLEY moved in subsection (I), after "secretary". where that word occurs a first time, to insert "for the words 'in Scotland' there shall be substituted the words according to the law of Scotland', and". The noble Lord said: This Amendment makes a small drafting alteration in Section 29 (4) of the Act of 1929. It deals with the case where a deed to which a company is party and to which Scottish law applies is executed on behalf of the company outside Scotland. I beg to move.
Amendment moved—
Page 67, line 21, after the first ("secretary") insert ("for the words 'in Scotland' there shall be substituted the words 'according to the law of Scotland,' and").—(Lord Chorley.)
On Question, Amendment agreed to.
Clause 69, as amended, agreed to.
Clauses 70 and 71 agreed to.
Clause 72 [Special provisions as to statement submitted to receiver]:
THE LORD CHANCELLOR: This is a drafting Amendment. I beg to move.
Amendment moved—.
Page 70, line 9, leave out ("directors or").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 72, as amended, agreed to.
Clause 73 agreed to.
Clause 74 [Receivers appointed out of Court]:
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (2), after "functions" to insert, "except in so far as the contract otherwise provides." The noble and learned Viscount said: This Amendment gives effect to an undertaking which I gave to the noble Viscount, Lord Maugham, to consider further whether any Amendment was necessary to make it clear that the receiver or manager of the property of a company, appointed under
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the powers contained in any instrument, will not be personally liable on any contract entered into by him in the performance of his functions if the contract provides that he shall not be liable. I beg to move.
Amendment moved—
Page 71, line 44, after ("functions") insert ("except in so far as the contract otherwise provides").—(The Lord Chancellor.)
VISCOUNT MAUGHAM: I am much obliged to my noble and learned friend for what he has done here. I have always taken the view that an Act of Parliament ought to resemble ,a cross word puzzle in only a very remote degree. Accordingly, I beg to thank the noble and learned Viscount, the Lord Chancellor.
On Question, Amendment agreed to.
Clause 74, as amended, agreed to.
Clauses 75 to 78 agreed to.
Clause 79 [Amendments as to fraudulent preference]:
THE LORD CHANCELLOR: This is a drafting Amendment. I beg to move.
Amendment moved—
Page 75, line 25, at end, insert ("In the application of this provision to Scotland, for the reference to three months there shall be substituted a reference to sixty days.")—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 79, as amended, agreed to.
Clauses 80 to 85 agreed to.
6.2 p.m.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after Clause 85, to insert the following new clause—
Liability for rentcharge on company's land after dissolution or disclaimer.
".—(I) Where by operation of law land in England vests subject to a rentcharge in the Crown or any other person eithers—

(a) on the dissolution of a company; or

(b) on a disclaimer under Section two hundred and sixty-seven of the principal Act;

that shall not, subject to the next following subsection, impose on the Crown or the said other person or its or his successors in title any personal liability in respect of the rentcharge.
(2) This section shall not affect any liability in respect of sums accruing due after the Crown or the said other person, or some person claiming through or under the Crown or the said other person, has taken possession or control of the land or has entered into occupation thereof.
(3) This section shall apply to land vesting and sums accruing due before, as well as after, the coming into force thereof.
(4) In this section the expression 'company' includes any body corporate."
The noble and learned Viscount said: This is a complicated matter. The new clause is really a corollary to Clause 86, which enables the Crown to disclaim onerous property vesting in it on the dissolution of a company. It provides that, where land subject to rentcharge vests by operation of English law on a dissolution of a company or disclaimer in the Crown or any other person, the Crown or that other person shall not be personally liable for the rentcharge unless and until they take possession or control or enter into occupation of the land. It has always been realized that this provision was to some extent ineffective in respect of freehold land, since the theory of English law is that every subject holds his land as of the Crown and, in the absence of a tenant holding of the Crown, the Crown is entitled to the land. The result is that where a liquidator disclaims freehold land, and thereby determines the company's estate in the land, the land becomes vested in the Crown by title paramount, except in very rare cases (which may still occur) where a subject was interposed as the mesne lord of the land between the Crown and the company. Under Clause 86 of the Bill a disclaimer by the Treasury Solicitor has the same effect as a disclaimer by the liquidator, and therefore, in the case of freehold land the Crown's title does not derive from the company but by title paramount.
With regard to freehold land not subject to a rentcharge there is not much risk of any undue liability falling on the Crown. The Crown's immunity from actions in tort is preserved in cases of this sort, unless and until the Crown takes possession of the land by Clause 39 (4) of the Crown Proceedings Bill. The burden of landlord's covenants, in the case of land subject to a lease, or of the mortgagor's covenants, where land is subject to a mortgage, would not in such a case run with the land so as to bind the Crown, and it is of the essence of the equitable doctrine of restrictive covenants that the burden only runs with the land where it does not impose any onerous duty upon the landowner.
The position, however, of rentcharges is unique. The law, in general, seems to be reasonably well settled and to be as follows. First, the amount of the rent-charge which may be imposed on any parcel of land may exceed the yearly value of that land by any amount. Secondly, the freeholder entitled to the rents and profits of the land is personally liable to pay the rentcharge out of his own pocket, whether he has gone into actual possession or not. Thirdly, the personal liability of the freeholder is not limited, any more than the liability of the land itself, by the yearly value of the land. There are dicta in some of the cases to the effect that the personal liability of the freeholder depends on privity of estate, but it is not thought safe to rely on these, inasmuch as the cases in general proceed on the broad general principle that the right to receive rents and profits carries with it the liability to pay the rentcharge.
What is the result of all this learning? The result is that the Crown may, without any act on its part, find itself burdened with a liability enforceable by action in the Courts to pay, say, a rentcharge of £1,000 a year because, on the dissolution of a company, land worth £50 a year passed to it. This state of affairs obviously gives everyone who becomes aware of it a convenient method of acquiring a Government annuity. The clause, therefore, provides that the Crown or the mesne lord shall be under no personal liability for the rentcharge, so long only as they do not take possession or control of the land, or enter into occupation of it. This will not debar the owner of the rentcharge from enforcing his remedy against the land, but merely deprives him of his rights (if any) to sue the Crown or the mesne lord personally for the amount of the rentcharge in respect of any period before the Crown or the mesne lord exercises some act of ownership over the land. I beg to move.
Amendment moved—
After Clause 85 insert the said new clause.—(The Lord Chancellor.)
VISCOUNT MAUGHAM: I do not know whether anybody here is learned enough to criticize the statement that has been made by the Lord Chancellor. I certainly am not, though I think I did hear things that I once heard a long time ago and, so far as I could gather, they were, on the

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whole, perfectly correct. I think the House will be perfectly safe in approving this Amendment.
On Question, Amendment agreed to.
Clause 86 [Property of dissolved company]
THE LORD CHANCELLOR: This is consequential on the Amendment to insert a new clause after Clause 85. I beg to move.
Amendment moved—
Page 81, line 15, after ("Act") insert ("and the last foregoing section of this Act").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This is a drafting Amendment. I beg to move.
Amendment moved—
Page 82, line II, leave out from ("property") to ("in") in line 12.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 86, as amended, agreed to.
Clause 87:
Miscellaneous amendments as to civil and criminal liability.
(3) Subsection (I) of Section two hundred and seventy-four of the principal Act (which penalises the persons responsible where proper books of account were not kept by a company throughout the two years immediately preceding the commencement of its winding tip) shall have effect and be deemed always to have had effect as if after the words "the period of two years immediately preceding the commencement of the winding up" there were inserted the words "or the period between the incorporation of the company and the commencement of the winding up, whichever is the shorter".
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (3), at the end to insert:
"and as if, in the phrase 'unless he shows that he acted honestly or that in the circum- stances in which the business of the company was carried on the default was excusable' for the word 'or' there were substituted the word 'and'".
The noble and learned Viscount said: This Amendment corrects a small drafting error in Section 274 of the Act of 1929, relating to the liability where proper books of account have not been kept by a company in liquidation. Therefore, in one sense it is a drafting Amendment—or it would have been were we discussing the Act of 1929. It is merely a drafting blemish which has been on the Act of
770
1929 ever since that time, and we are now putting it right. I beg to move.
Amendment moved—
Page 83, line 13, at end insert the said words.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 87, as amended, agreed to.
Clause 88 [Production and inspection of books where offence suspected]:
THE LORD CHANCELLOR: This is consequential. I beg to move.
Amendment moved—
Page 84, line 2, leave out ("a director or") and insert ("an").—(The Lord Chancellor).
On Question, Amendment agreed to.
Clause 88, as amended, agreed to.
Clauses 89 and 90 agreed to.
Clause 91 [Amendment as to persons liable for certain offences]:
THE LORD CHANCELLOR: This Amendment gives effect to an undertaking I gave to the noble Viscount, Lord Maugham, to insert the words "knowingly and wilfully" in Clause 91 (2) in order to make certain that a director who unintentionally fails to comply with Section 113 was not to be liable to a penalty. I beg to move.
Amendment moved—
Page 87, line 7, after ("is") insert ("knowingly and wilfully").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 91, as amended, agreed to.
Clauses 92 to 95 agreed to.
Clause 96 [Prospectus of foreign company]:
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after subsection (3), to insert-
"(4) Where any such contract as is mentioned in the said paragraph (b) is wholly or partly in a foreign language, the reference in that paragraph to a copy of the contract shall be taken as a reference to a copy of a translation thereof in English or a copy embodying a translation in English of the parts in a foreign language, as the case may be, being a translation certified in the prescribed manner to he a correct translation.
(5) The section of this Act excluding Section thirty-five of the principal Act and relaxing the Fourth Schedule thereto in the case of certain prospectuses shall extend to prospectuses to which Section three hundred and fifty-four of the principal Act applies with the substitution for references to Section thirty-five of that Act of references to Section three hundred and fifty-five of that Act."
The noble and learned Viscount said: This Amendment applies to prospectuses of companies incorporated outside, but carrying on business within, Great Britain certain Amendments which apply to prospectuses of companies incorporated in Great Britain. The first of the two subsections which the Amendment seeks to insert is really consequential on the Amendment to Clause 54. The second of the subsections which the Amendment seeks to insert applies to the new clause which follows Clause 54.
Amendment moved—
Page 90, line 40, at end insert the said words.—(The Lord Chancellor.)
On Question Amendment agreed to.
Clause 96, as amended, agreed to.
Clause 97 [Power of foreign companies to hold land.]
LORD RENNELL: On Clause 97, my noble friend the Marquess of Reading raised a point in Committee stage the last time. It was suggested that power should be taken under this clause to include certain countries by Order in Council in order to provide a bargaining counter in commercial treaties I see that no Amendment has been put down. I was wondering if the noble and learned Viscount could say if that matter had been considered, and if it had been found that the present powers are sufficient.
THE LORD CHANCELLOR: Yes, I have looked into this matter; indeed have spent some time over it, and on reflection this is how it strikes me. As your Lordships know, any foreigner can own land in the United Kingdom, and any foreign company can incorporate a subsidiary in this country to hold land. It is anomalous, therefore, that a foreign company should not also be able to own land, and the fact that it cannot do so is a survival from the old mortmain laws. It is an embarrassing point to have to raise every time a commercial treaty is being negotiated, and appears to be out of all proportion to its importance. We were asked whether we should retain power to make the concession reciprocal. We have considered that, and frankly we thought it would be more trouble than it is worth. We think the bargaining value is negligible and it might involve discrimination contrary to our most-favoured nation policy. Whatever the merits of that policy, we
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feel this is not the point at which to raise the issue. Accordingly, I will answer the noble Lord by saying that we have considered 'this matter, and have come to the conclusion that we had better not do it.
Clause 97 agreed to.
Clause 98 [Accounts of foreign companies]:
THE LORD CHANCELLOR: We might take the next two Amendments, if your Lordships will agree, together. Under Clause 98, foreign companies are subject to exactly the same requirements as British companies. This, however, may be inconvenient, particularly as regards laying consolidated accounts, and having to disclose matters under British law which they might not have to disclose under foreign law. The accounts provisions are there mainly for the protection of shareholders, and the shareholders of a foreign company would not be in this country. Moreover, under Section 348 of the principal Act, every foreign company has to exhibit conspicuously the country in which it is incorporated, and has to give this information also in legible characters in all bill heads, letter paper, notices, and so on. Anybody dealing with a foreign company knows, therefore, that he is doing so. It is possible that if we seek to apply these requirements to foreign companies there may be awkward repercussions for British companies abroad, and for that reason power is taken to make exceptions. I beg to move.
Amendment moved—
Page 91, line 34, after ("Act") insert ("subject, however, to any prescribed exceptions").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Amendment moved—
Page 91, line 34, after ("shall") insert ("subject as aforesaid").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is a consequential Amendment. I beg to move.
Amendment moved—
Page 91, line 36, leave out ("consolidated") and insert, ("group").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is consequential on the limitation to exempt private companies

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from the privilege of not having to file accounts. I beg to move.
Amendment moved—
Page 91, line 46, leave out from ("that") to end of subsection (2) and insert (",had the provisions of this Act relating to exempt private companies extended to Northern Ireland, it would at the date of the certificate have been an exempt private company").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 98, as amended, agreed to.
Clauses 99 and 100 agreed to.
Clause 101 [Bankruptcy, 4 & 5 Geo. 5., c. 59.; 3 & 4 Geo. 5., c. 20]:
THE LORD CHANCELLOR: This Amendment which I move is consequential on the insertion of the new clause after Clause 85. I beg to move.
Amendment moved—
Page 93, line 14, at end insert ("(5) The provisions of this Act relating to the liability in respect of a rentcharge on land disclaimed under section two hundred and sixty-seven of the principal Act shall apply also in relation to land disclaimed under Section fifty-four of the Bankruptcy Act, 1914.")—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 101, as amended, agreed to.
Clause 102 [Registration of business names, 6 & 7 Geo. 5., c. 58]:
THE LORD CHANCELLOR: This Amendment gives effect to the undertaking given to the noble Viscount, Lord Swinton, to amend the Registration of Business Names Act, so as to remove the requirements in that Act as to the disclosure of the nationality of origin of persons trading under business names in cases where their nationality of origin is different from their present nationality. I beg to move.
Amendment moved—
Page 93, line 32, at end insert ("(3) So much of any provision of the Registration of Business Names Act, 1916, as requires a person's nationality of origin to be stated shall cease to have effect.")—(The Lord Chancellor.)
VISCOUNT SWINTON: I am much obliged to the noble and learned Viscount.
On Question, Amendment agreed to.
Clause 102, as amended, agreed to.
Clauses 103 to 107 agreed to.
Clause 108 [Construction and application of principal Act and this Act, 19 & 20 Geo. 5., c. 23]:
THE LORD CHANCELLOR: This Amendment defines "exempt private company" by reference to Clause 45 (the contents of which are transferred by Amendments to Clause 45, page 45, line 34, Clause 45, page 46, line 1, and to page 109, line 27, to a new Schedule). I beg to move.
Amendment moved—
Page 98, line 4, at end insert ("the expression 'exempt private company' has the meaning assigned to it by the section of this Act relating to the inclusion of a private company's accounts in its annual return;").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 108, as amended, agreed to.
Clause 109 [Short title, citation, commencement and repeal":
THE LORD CHANCELLOR: This is a drafting Amendment. I beg to move—
Amendment moved—
Page 98, line 44, leave out ("the Eighth Schedule to this Act") and insert ("Part I of the Eighth Schedule to this Act, and the provisions of the Registration of Business Names Act, 1916, specified in Pert II thereof ")—.(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 109, as amended, agreed to.
First Schedule [Accounts]:
THE LORD CHANCELLOR: I beg to move to leave out from the beginning to end of line II, and to insert the words on the Marshalled List. This is a drafting Amendment.
Amendment moved—
Page 99, line 8, leave out from beginning to end of line 11, and insert ("The first seven paragraphs of this Part of this Schedule apply to the balance sheet and are subject to the exceptions and modifications provided for by Part II thereof in the case of a holding company and by Part HI thereof in the case of companies of the classes there mentioned").(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment, too, is a drafting Amendment. I beg to move.
Amendment moved—
Page 101, line 12, leave out ("so far as it relates to provisions").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This next Amendment gives effect to an undertaking I gave to consider further paragraph 7 (6) of Part I of the First Schedule, which requires disclosure in the balance sheet of the aggregate amount, or estimated amount, if material, of contracts for capital expenditure so far as not provided for. The Amendment provides that the information need be given only where practicable. I beg to move.
Amendment moved—
Page 102, line 15, at beginning insert ("Where practicable").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is a drafting Amendment. I beg to move.
Amendment moved—
Page 102, line 35, leave out from ("modifications") to end of line 37 and insert ("provided for by Part of this Schedule in the case of a holding company and by Part III thereof in the case of companies of the classes there mentioned ").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is a consequential Amendment. I beg to move.
Amendment moved—
Page 104, line 23, leave out from beginning to ("there") in line 24, and insert ("Where group accounts are not submitted").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment Is consequential. I beg to move.
Amendment moved—
Page 104, line 26, leave out ("consolidated") and insert ("group").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This Amendment results from the fact that the omission of a subsidiary from "group accounts" is now to be done at the discretion of the directors in accordance with the Amendment, which I moved to-day, subject to the provisions as to approval by the Board of Trade.
Amendment moved—
Page 105, line 8, leave out from beginning to end of line is and insert—
("Provided that the Board of Trade may, on the application or with the consent of the company's directors, direct that in relation
776
to any subsidiary this sub-paragraph shall not apply or shall apply only to such extent as may, be provided by the direction.")—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This and the Amendment to line 44 are both consequential, and I can take them together. I beg to move.
Amendment moved—
Page 105, line 40, leave out from ("accounts") to ("but") in line 42.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Amendment moved—
Line 44, leave out ("for that purpose,").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is a consequential Amendment. I beg to move.
Amendment moved—
Page 106, line 21, leave out ("consolidated") and insert ("group").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The effect of this Amendment is to secure that where the financial year of the subsidiary does not coincide with that of the holding company, the subsidiary's financial year is to be stated, so that those looking at the accounts may have a better idea as to the disparity between the two. I beg to move.
Amendment moved—
Page 106, line 27, after ("accounts") insert ("the subsidiary's financial year and").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This, too, is a drafting Amendment, resulting from the transfer of a paragraph from Part IV to Part III of the First Schedule. I beg to move.
Amendment moved—
Page 107, line 9, at end insert ("(3) In this paragraph the expression 'banking or discount company' means any company which satisfies the Board of Trade that it ought to be treated for the purposes of this Schedule as a banking company or as a discount company").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This Amendment dispenses insurance companies from having to state the basis on which the amount, if any, set aside for

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United Kingdom Income Tax, is computed. This might, by implication, give away some of the facts which they are not required to disclose, and in any case it would be a very troublesome provision for some of the Life Offices to comply with. I beg to move.
Amendment moved—
Page 107. line 17, at end insert ("and subparagraph (10)").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: This Amendment arises in the following way. Some assurance companies do not themselves do their investment business but have a subsidiary company to do it for them. This company's business is an integral part of that of the parent company and should obviously be entitled to the same privileges with regard to the disclosure of reserves as the parent company. This is a necessary consequence of the privilege given to assurance companies. I beg to move.
Amendment moved—
Page 107, line 24, at end insert—
("(2) Where an assurance company is entitled to the benefit of this paragraph, then any wholly owned subsidiary thereof shall also he so entitled if its business consists only of business which is a necessary adjunct to assurance business of the classes carried on by the assurance company.
(3) For the purposes of this paragraph a company shall he deemed to be the wholly owned subsidiary of an assurance company if it has no members except the assurance company arid the assurance company's wholly owned subsidiary and its or their nominees").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after paragraph 2 of Part III of the First Schedule to insert:
"3.—(I) A company to which this paragraph applies shall not be subject to the following requirements of Part I of this Schedule, that is to say—

(a) as respects its balance sheet, those of paragraph I (except so far as the said paragraph relates to fixed and current assets) and paragraphs 2, 3 and 4; and

(b) as respects its profit and loss account. those of sub-paragraph (I) (a), (e) and (f) of paragraph 8;

but a company taking advantage of this paragraph shall be subject, instead of the said requirements, to any prescribed conditions as respects matters to be stated in its accounts or by way of note thereto and as respects information to be furnished to the Hoard of Trade or a person authorized by them to require it.
(2) The accounts of a company shall not be deemed, by reason only of the fact that they do not comply with any requirements of the said Part I from which the company is exempt by virtue this paragraph, not to give the true and fair view required by this Act.
(3) This paragraph applies to companies of any class prescribed for the purposes thereof, and a class of companies may be so prescribed if it appears to the Board of Trade desirable in the national interest:
Provided that, if the Board of Trade are satisfied that any of the conditions prescribed for the purposes of this paragraph has not been complied with in the case of any company, they may direct that so long as the direction continues in force this paragraph shall not apply to the company."
The noble and learned Viscount said: We had some discussion on the Committee stage (I think the noble Viscount, Lord Swinton, raised the point) with regard to the desirability of exempting shipping companies from having to disclose their inner reserves. I promised to look into the matter, and I have done so. It occurs to me that the powers might have to range wider than shipping companies. Consequently this Amendment has been so framed that the Board of Trade may grant these concessions to companies of any class prescribed for the purpose. They can only do so, however, if it appears to them to be desirable in the national interest. I stress that point. It is not in the company's interest, but in the national interest. This means that a case will have to be made out either on grounds of defence or of other matters of highly important public interest. It is not a concession to be given either in the interests of the company, or in the interests of the shareholders, but in the interests of the nation. Moreover, I would like to stress this. The grant of this privilege will not be by any means one-sided. The company taking advantage of the paragraph will be subject, instead of the requirements referred to in sub-paragraph (I) (a) and (b), to "any prescribed conditions as respects matters to be stated in its accounts or by way of note thereto, and as respects information to be furnished to the Board of Trade or a person authorized by them to require it."
An essential condition will be that if a company pays dividends otherwise than out of the profits of the year, that fact will have to be indicated clearly in the accounts, or in a note thereto. This in itself will, I think, go a very long way to preventing the abuse of that privilege,

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a privilege which I had occasion to remember when I was Attorney-General not many years ago in connexion with an important case. Generally, it is intended to secure that the accounts shall give a fair picture of the company's position, in the sense that it may be an understatement, but never an over-statement. If reserves are put aside for future use, they are put forward essentially to meet contingencies which cannot be exactly foreseen, and they are put aside for that reason in the national interest no less than in the company's interest. The Board of Trade is empowered under the provision—and it will exercise that power—to get full information, and an inspector may be appointed for the purpose. It may be assumed for these reasons that no company will take advantage of this provision unless it feels that it is really essential that it should do so. It may be noted, finally, that the Board of Trade may withdraw the privilege from any company which has not complied with the requirements imposed upon it. That is the endeavour I have made to meet the position put to me, and I hope your Lordships will think that this is a fair way of meeting this point. I beg to move.
Amendment moved—
Page 107, line 24, at end insert the said new paragraph.—(The Lord Chancellor.)
VISCOUNT SWINTON: I accept absolutely and entirely the suggestion the noble and learned Viscount the Lord Chancellor has made. As he is well aware, I put this forward entirely on the grounds of national interest. Those are the grounds on which the Cohen Committee recommended, and the Bill in terms excludes in the matter of these reserves banks, insurance companies and discount companies. As the noble and learned Viscount has said, there is no question of giving a benefit to the company as a company, or to the company's shareholders as individual investors. That was never in the mind of any of us. There can be only one consideration, and that is what is in the national interest; and I think its quite right and proper that the responsible Ministry or Ministries of the Government of the day should decide. I not only accept that, but I should like to associate myself entirely with every word the noble and learned Viscount has said. I fully accept the Amendment which he has proposed in its terms and in its spirit.
LORD RENNELL: There is one small point I would like to make on what the noble and learned Viscount the Lord Chancellor has said. I suppose it is clear that the Board of Trade will have the power to withdraw the privilege which is accorded in the national interest to a company or a group of companies also in the case where it is no longer necessary in the national interest that that exemption should be given. The noble and learned Viscount said that the privilege would be withdrawn if certain provisions were not complied with. It is not only a question of certain provisions being complied with. There may come a time when the necessity no longer arises. The Board of Trade should quite clearly have the privilege of withdrawing the exemption granted, without reason given, when in its opinion the exemption is no longer required in the national interest.
THE LORD CHANCELLOR: I quite assent to that; that, I think, is plainly so.
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is consequential on the new paragraph 3. I beg to move.
Amendment moved—
Page 107, line 25, leave out from beginning to ("the") in line 26, and insert ("Where a company entitled to the benefit of any provision contained in this Part of this Schedule is a holding company,".—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is also consequential. I beg to move.
Amendment moved—
Page 108, line 18, leave out paragraph 2.—(The Lord Chancellor.)
On Question, Amendment agreed to.
First Schedule, as amended, agreed to.
Second Schedule [Matters to be expressly stated in Auditors' Report]:
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in paragraph 3 (i), after "and", to insert "(unless it is framed as a consolidated profit and loss account)". The noble and learned Viscount said: It is obvious that where a holding company presents only a consolidated profit and loss account, as it may do under the new provisions, the consolidated profit and loss account cannot be in agreement with the books of the holding company alone. I beg to move.
Amendment moved—
Page 109, line I, after the first ("and") insert ("(unless it is framed as a consolidated profit and loss account").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in sub-paragraph (2) of paragraph (3), to leave out "as required by this Act". The noble and learned Viscount said: With your Lordships' permission, I propose to take this and the next Amendment together. These Amendments are designed to make it clear that the auditors' certificate as to the accounts giving a true and fair view is given subject to the qualifications in Part III of the Schedule for banks and insurance companies. I beg to move.
Amendment moved—
Page 104, line 7, leave out ("as required by this Act").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Amendment moved—
Page 109, line 12, at end insert ("or, as the case may be, gives a true and fair view thereof subject to the non-disclosure of any matters (to be indicated in the report) which by virtue of Part III of the First Schedule to this Act are not required to be disclosed").— (The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, to leave out from the beginning of paragraph 4 to the end of the Schedule and to insert
"4. In the case of a holding company submitting group accounts whether, in their opinion, the group accounts have been properly prepared in accordance with the provisions of the Act so as to give a true and fair view of the state of affairs and profit or loss of the company and its subsidiaries dealt with thereby, so far as concerns members of the company, or, as the case may be, so as to give a true and fair view thereof subject to the non-disclosure of any matters (to be indicated in the report) which by virtue of Part III of the First Schedule to this Act are not required to be disclosed."—(The Lord Chancellor.)
The noble and learned Viscount said: This Amendment falls into two parts. The first part is really consequential upon allowing group accounts in place of consolidated accounts. Secondly, it dispenses the auditors from having to certify as to the validity of the reasons given by the directors for not including subsidiaries in the group accounts. It has been represented that this is a matter for the directors on which the auditors cannot
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reasonably be expected to pronounce. I beg to move.
Amendment moved—
Page 109, line 23, leave out from the beginning to end of Schedule and insert the said new paragraph 4.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Second Schedule, as amended, agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, after the second Schedule, to insert

THIRD SCHEDULE.

  CONDITIONS AS TO INTERESTS IN SHARES AND DEBENTURES OF EXEMPT PRIVATE COMPANY.
  Basic conditions.
  1. The basic conditions as to the shares or debentures of the company whose exemption is in question are—

  (a) that no body corporate is the holder of any of the shares or debentures; and

  (b) that no person other than the holder has any interest in any of the shares or debentures;

  but these conditions arc subject to the exceptions provided for by the following paragraphs of this Schedule.

Exceptions for normal dealings of a business nature.
2.—(I) The rules contained in the following sub-paragraphs of this paragraph shall apply for the purposes both of the basic conditions and of the exceptions from those conditions.
(2) Where any share or debenture or any interest in any share or debenture is subject to a charge in favour of a banking or finance company by way of security for money lent in the ordinary course of its business as such

(a) any interest under the charge, whether of the banking or finance company or a nominee for it, shall be disregarded; and

(b) if the barking or finance company or its nominee is the holder of the sharer debenture, the person entitled to the equity of redemption shall be treated as the holder, whether he has a present right to redeem or not.

(3) Any interest under a contract for the transfer of any share or debenture or of any interest in any share or debenture shall, until execution of an instrument of transfer by the parties, be disregarded unless execution thereof is unreasonably delayed.
(4) Subject to sub-paragraph (2) of this paragraph, on execution of an instrument of transfer of a share or debenture, the transferee shall be treated as the holder, notwithstanding that the transfer requires registration with the company unless registration is refused.
Exceptions for cases of death and for family settlements.
3.—(I) The basic conditions shall be subject to exceptions, for—

(a) any shares or debentures held by the personal representatives of a deceased holder

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thereof, so icing as administration of his estate has not been completed; and

(b) any shares or debentures held by trustees on the trusts of a will or family settlement disposing of the shares or debentures, so long as no body corporate has for the time being any immediate interest under the said trusts.

(2) For the purposes of this paragraph—

(a) the expression "family settlement" means a settlement made either—

(i) in consideration or contemplation of an intended marriage of the settlor or any of the settlor's issue or in pursuance of a contract entered into in consideration or contemplation of any such marriage; or

(ii) otherwise in favour of any of the following persons, that is to say the settlor, his parents and grandparents, and any other individual who at the date of the settlement is a member of the company or, in the case of a settlement of debentures, a member or debenture holder of the company, and the wife or husband and issue, and the wife or husband of any of the issue, of the settlor, his parents, or any such other individual, and persons taking in the event of a failure of the issue or any class of the issue of any person taking under the settlement;

(b) the expressions "parent", "grandparent" and "issue" shall be construed as if the stepchild, adopted child or illegitimate child of any person were that person's child;

(c) any reference to a wife or husband shall include a former wife or husband and a reputed wife or husband;

(d) the expression "will" includes any testamentary disposition;

(e) any reference to a will or family settlement disposing of any shares or debentures shall include a will or family settlement disposing of an interest under another will or family settlement disposing of the shares or debentures.

Exception for shares held by exempt private companies.
4.—(I) The first of the basic conditions shall be subject to an exception for shares held by another private company which is itself an exempt private company:
Provided that this exception shall not apply if, taking all the following companies together, that is to say—

(a) the company whose exemption is in question (hereafter in this Schedule referred to as "the relevant company");

(b) any company holding shares to which this exception has to be applied in determining the relevant company's right to be treated as an exempt private company; and

(c) any further company taken into account for the purposes of this proviso in determining the right to be so treated of any company holding any such shares as aforesaid;

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the total number of persons holding shares in those companies is more than fifty, joint shareholders being treated as a single person and the companies themselves being disregarded.
(2) Where the relevant company and another company hold shares in each other, the other company shall he treated for the purposes of the foregoing sub-paragraph as an exempt private company if—

(a) in determining its right to be so treated the exception in that sub-paragraph would apply to the shares in it held by the relevant company, on the assumption that the relevant company was an exempt private company; and

(b) in all other respects the other company is entitled to be so treated;

and where another company's right to be so treated depends on the application to any shares in it of that sub-paragraph, and the application thereof to those shares depends indirectly on the relevant company's right to be so treated, this sub-paragraph shall apply as if those shares were held by the relevant company.
(3) Where by virtue of this paragraph any shares are excepted from the first of the basic conditions, the second of those conditions shall be subject to an exception for any interest in those shares which any person has by virtue of debentures of the company holding those shares.
Exception for banking or finance company providing capital.
5.—(I) The first of the basic conditions shall be subject to an exception for any shares or debentures held by or by a nominee for a banking or finance company, where the banking or finance company acquired the shares or debentures or its interest therein in the ordinary course of its business as such and by arrangement with the relevant company or its promoters:
Provided that this exception shall not apply if the banking or finance company has the right (or, where there is more than one such company holding shares or debentures to which this exception has to be applied in determining the relevant company's right to be treated as an exempt private company, they have between them the right) to exercise or control the exercise of one-fifth or more of the total voting power at any general meeting of the relevant company.
(2) Where by virtue of the foregoing subparagraph any shares or debentures are excepted from the first of the basic conditions, the second of those conditions shall be subject to an exception for any interest in those shares or debentures which any person has by virtue of debentures of the banking or finance company.
Meaning of "banking or finance company."
6. In this Schedule the expression "banking or finance company" means any body corporate or partnership whose ordinary business includes the business of banking and any other body corporate whose ordinary business includes the business of lending money or of subscribing for shares or debentures,

785
except that it does not include any such other body corporate unless either—

(a) its shares are quoted or dealt in on a recognized stock exchange; or

(b) it is designated for the purposes of this paragraph by order of the Board of Trade; or

(c) it is a subsidiary of a body corporate whose shares are so quoted or dealt in or which is so designated.")

The noble and learned Viscount said: This Amendment transfers to a schedule the bulk of those conditions which have to be satisfied by a private company in order to qualify as an exempt private company. It takes care of the various undertakings I gave—an undertaking to the noble Viscount, Lord Swinton, to make it plain that a company should not be disqualified from being exempted because some of its shares were held by another exempt company, and an undertaking to the noble Viscount, Lord Bridgeman, dealing with banking and finance companies. The stipulation, however, that there shall be no more than fifty members is, I think, as far as I can go. I think we should be rather careful about extending this privilege of not having to publish accounts. Although I know there are many very worthy schemes whereby workers in the business get shares and so on—and I certainly do not want to discourage them—I think that if a company gets beyond fifty members it reaches a stage at which it ought not to be relieved from the obligation which attaches to any ordinary company, private or public, to publish its accounts. Anticipating something which the noble Lord, Lord Cozens-Hardy, asked me just now, may I say that I cannot go above the figure of fifty, which to my mind is the absolute limit, no matter what the quality of the shareholders may be. I beg to move.
Amendment moved—
After the Second Schedule, insert the said new Schedule.—(The Lord Chancellor.)
VISCOUNT SWINTON: So far as I am concerned, this is very nice, neat and clear, and I think it gives effect to all the undertakings which were given by the Government.
LORD COZENS-HARDY: I am afraid I did not exactly follow the noble and learned Viscount in what he said just now. I was not suggesting that there should be any increase in the numbers; I was merely suggesting that because a particular
786
exempt private company happens now or in the future to have trustees for employees as shareholders it should not thereby either cease to be an exempt private company or be unable to become an exempt private company. It does not seem reasonable that one of the reasons determining whether a company can be exempt or not should merely be whether some generous shareholder happens to have given some of the shares of the company to a benevolent fund.
LORD HAWKE: May I raise a point which I think the noble and learned Viscount will be able to answer at the same time? Subparagraph (b) of paragraph r uses the words "that no person other than the holder has any interest in any of the shares or debentures". Where you have a family trust represented by certain names, the income from that holding may be divided among a considerable number of persons—a number of persons which will be diminishing by death and increasing by birth at perhaps frequent intervals. Does this affect the limit of fifty for the shareholders of a private exempt company?
THE LORD CHANCELLOR: I think the noble Lord will find that that is covered by the family settlement provisions in paragraph 3. Your Lordships will see it is there said that the basic conditions—and the noble Lord, Lord Hawke, referred to the second of those conditions—"shall be subject to exceptions for", and then there are set out the exceptions. I think it will be found that we have met that sort of point. We certainly do not want to prevent a company of the sort described from keeping its exemption. If the noble Lord looks at paragraph 3 I think he will see that we have managed to achieve that result. I will look at the point put to me by the noble Lord, Lord Cozens Hardy, to see if I can meet it.
LORD HAWKE: I thank the noble and learned Viscount. It is the assurance that I value more than my interpretation.
On Question, Amendment agreed to.
Third Schedule [Amendments to Third and Fifth Schedules to Principal Act]:
LORD CHORLEY: This Amendment is consequential on an Amendment to Clause 52. I beg to move.
Amendment moved—
Page 110, line 6, at end insert ("2.—,(I) In the said Third Schedule there shall be inserted at the end of the entry relating to the vendors of property purchased or acquired or proposed to be purchased or acquired the words 'except where the contract for its purchase or acquisition was entered into in the ordinary course of business or the amount of the purchase money is not material'.
(2) At the end of the corresponding entry in the Fifth Schedule to the principal Act there shall be inserted the words 'except where the contract for its purchase or acquisition was entered into in the ordinary course of the business intended to be carried on by the company or the amount of the purchase money is not material'.").—(Lord Chorley.)
LORD RENNELL: This is consequential upon an Amendment, but that Amendment was amended by the noble and learned Viscount. That involves a consequential Amendment to this Amendment, does not it?
LORD CHORLEY: This is the consequential Amendment.
LORD RENNELL: The wording used here is the wording of the first Amendment which was down on the Marshalled List and not the Amendment finally adopted by the Committee.
LORD CHORLEY: I will look into that, but I understand this is consequential on the Amendment as agreed.
LORD RENNELL: I think it is consequential on the Amendment as stated in the Marshalled List but not consequential on the Amendment as finally agreed by the Committee.
LORD CHORLEY: I am much obliged to the noble Lord for pointing that out. We will certainly look into it and make quite sure.
On Question, Amendment agreed to.
LORD CHORLEY: This is a further consequential Amendment, this time on an Amendment to Clause 54.
Amendment moved—
Page 110, line 10, at end insert—
("(2) In both the said Schedules there shall be inserted at the end of the entry relating to a time and place for inspection of material contracts the following words—
'or (I) in the case of a contract not reduced into writing, a memorandum giving full particulars thereof, and (2) in the case of a contract wholly or partly in a foreign language, a copy of a translation thereof in English or embodying a translation in English of the parts in a foreign language, as the case may be, being a translation certified in
788
the prescribed manner to be a correct translation.'")—(Lord Chorley.)
On Question, Amendment agreed to.
Third Schedule, as amended, agreed to.
Fourth Schedule agreed to.
Fifth Schedule [Provisions applied to unregistered companies]:
LORD CHORLEY: There are two Amendments which, with your Lordships' permission, I will take together. They are both consequential on the insertion of new clauses in the Bill. I beg to move.
Amendment moved—
Page 113, line 25, leave out ("seventeen") and insert ("eighteen").—(Lord Chorley.)
On Question, Amendment agreed to.
Amendment moved—
Page 113, line 37, leave out ("thirty-nine") and insert ("forty").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: The next Amendment is a drafting Amendment. It is necessary to bring in the Eleventh Schedule in order to give effect to Section 362 of the Act. I beg to move.
Amendment moved—
Page 113, line 56, leave out ("Schedule") and insert ("and Eleventh Schedules").—(Lord Chorley.)
On Question, Amendment agreed to.
Fifth Schedule, as amended, agreed to.
Sixth and Seventh Schedules agreed to.
Eighth Schedule [Enactments of Principal Act Repealed]:
LORD CHORLEY: This is consequential on the Amendment to Clause 17. I beg to move.
Amendment moved—
Page 116, line 26, leave out from ("subsection (2)") to ("in") in line 27 and insert. ("and subsection (3)").—(Lord Chorley.)
On Question, Amendment agreed to.
LORD CHORLEY: The first part of this Amendment is consequential on the Amendment to Clause 20, and the second part is consequential on the existing provisions of Clause 20 (4). I beg to move.
Amendment moved—
Page 116, line 45, at end insert ("In paragraph (a) of subsection (I) of Section one hundred and forty-four, the words 'and, if that nationality is not the nationality of origin, his nationality of origin'.
Paragraph (d) of subsection (I) of Section one hundred and forty-five.")—(Lord Charley.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is the last, and may I take this opportunity of thanking your Lordships very much for the way in which you have assisted as to get this Bill through. This Amendment is consequential on the Amendment to Clause 102, and I hope you do not think that I was inconsequential myself in tendering my thanks to all your Lordships. I beg to move.
Amendment moved—
Page 118, line 17, at end insert—

PART II.
Enactments of Registration of Business Names Act, 1916, repealed.
In subsection (I) of Section three, the words 'and if that nationality is not the nationality of origin, the nationality of origin', in both. places where they occur.
In subsection (I) of Section eighteen, the words and if his nationality is not his nationality of origin his nationality of origin' in paragraph (a), and the words 'and if the nationality is not the nationality of origin, the nationality of origin' in paragraph (b).
In the Schedule, the words 'and if that nationality is not the nationality of origin, the nationality of origin'.")—(The Lord Chancellor.)
On Question, Amendment agreed to.
Remaining Schedule, as amended, agreed to.
VISCOUNT SWINTON: If I might also inconsequentially give the noble and learned Viscount, the Lord Chancellor, a Roland for his Oliver, I may say that we have made great expedition, and we have made it, thanks not only to the courtesy and knowledge of the noble and learned Viscount, but to the way in which he has co-operated with us all through this Bill. I well know that he has had a very great deal of hard work outside. The Lord Chancellor has a great many jobs to do—as all Lord Chancellors have—besides leading the House and taking charge of Bills. I do not think this Bill could have come from a better place than this House. I should think we have discussed eighty pages of Amendments in the Committee and recommittal stages. We have not had a single Division, and I, and all my friends on this side of the House, are most grateful to the noble and learned Viscount for what he has done inside and outside your Lordships' House. I think we have given not only to the
790
lawyers, but to the business community, a really good charter.
LORD RENNELL: May I add my personal thanks to the noble and learned Viscount and his advisers, not only for the help that I have personally received and for the courtesy I have experienced from their hands, but also for the very great deal I have learned. It is perhaps an example of what can be done to a Bill when all the interested parties in your Lordships' House have had but one single object in view, which was to produce the best Bill it was possible for them to produce, on a subject which was reputedly non-controversial hut which does not only contain controversial matters in the usually accepted sense, but where differences of personal opinion were held and were sustained, but upon which there has been no Division and upon which full agreement has been found as the result of experience and of the giving and taking of each other's point of view. I would like to add my most sincere personal thanks to the noble and learned Viscount, to the noble Lord, Lord Chorley, and all his advisers for what they have done for me personally.
LORD SALTOUN: I should like to concur entirely with what has been said, but there is one quite general point on this Bill which I would be very grateful if the noble and learned Viscount would take into consideration. I am making this suggestion really on what he said at the last stage of this debate. I hope he will not be angry with me if I say that personally I think -le minority shareholders of unlimited companies have not had their position improved by the Bill. That is a point on which we may differ, but I had that matter under consideration long before we started talking on this Bill. The reason I did not put down an Amendment at this stage was because I could not find the form of words which the noble and learned Viscount's advisers would accept. I think we should have in this Bill something to the effect that the minority shareholder of an unlimited company can call upon the directors to accept or find an acceptor for his shares, subject to notification to the creditors and other shareholders of the company and directors and auditor. My reason for saying that is that a lot of these unlimited companies have secretaries who are given small numbers of shares. Supposing it

791
is the secretary, and supposing the board of that company is managing that company quite contrary to his views and wishes; he is trapped and he can never get out and he has unlimited liability. I would he very grateful to the noble and learned Viscount if he would consider that, because I feel he realizes it is a material point.

PENICILLIN BILL. [H.L.]
6.48 p.m.
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(The Earl of Listowel.)
On Question, Motion agreed to.
House in Committee accordingly.
[The EARL OF DROGHEDA in the Chair.]
Clause I:
Control of sale and supply of substances to which this Act applies.
1.—(I) Subject to the provisions of this section, no person shall sell or otherwise supply any substance to which this Act applies or any preparation of which any such substance is an ingredient or part unless—
(a) he is a duly qualified medical practitioner, a registered dental practitioner or a registered veterinary surgeon, or a person acting in accordance with the directions of any such practitioner or surgeon, and the substance or preparation is sold or supplied for the purposes of treatment by or in accordance with the directions of that practitioner or surgeon; or
(2) The last foregoing subsection shall not apply to the sale or supply of any such substance or preparation—
(d) to any authority or person carrying on a hospital, clinic, nursing home or other institution providing medical, surgical, dental or veterinary treatment.
LORD MARLEY LORD MARLEY moved, at the end of subsection (2) (d), to insert:
"under the direction of a duly qualified medical practitioner, a registered dental practioner or a registered veterinary surgeon or a person acting in accordance with the directions of any such practitioner or surgeon; "
The noble Lord said: My noble friend the Earl of Listowel moved the Second Reading of this Bill in such a persuasive way that it seems a little odd that there appears to be a wide open gap in Clause paragraph (2) (d). It would be in-
792
teresting, I think, if the noble Earl would explain why this gap has been left. It looks as though it is a deliberate gap. It looks as though it may be because there are certain organizations which deal with the cure of animals belonging to poor persons— I do not know. An unqualified or unregistered person may buy and use—that is to say administer—penicillin, provided that he is linked with another unqualified person or a so-called nursing home, hospital, clinic or other institution. This has caused some anxiety among qualified medical officers, and among registered veterinary surgeons, and accordingly the Bill has been considered by the National Veterinary Medical Association of Great Britain and Ireland. They are very anxious that the Government should safeguard the position by removing the gap which exists in the Bill, which in fact opens up a break in the embankment, and which might have to be closed later on.
I have been approached by the National Veterinary Medical Association with a view to putting down an Amendment along the lines of that standing in my name. Furthermore, I may say that this matter has been considered by the Parliamentary and Scientific Committee which contains many members of both Houses and from all Parties, and they are definitely concerned with this gap in the Bill. I would like to call attention to the fact that in Clause 4 of the Bill the word "supply" includes "administer by way of treatment," and therefore in fact the unauthorized persons, that is to say the unqualified or unregistered persons, linked together under institutions such as nursing homes, dental or veterinary establishments, can buy and supply these substances and also use them for treatment. I hope therefore that if the Government feel they are unable to accept this very reasonable and simple Amendment, they will explain precisely why the gap has been left in the whole object for which the Bill was designed.
LORD BARNBY: It seems an eminently reasonable Amendment. It can hardly be considered controversial and, as your Lordships have heard, it has the support of the Parliamentary Scientific Committee. That Committee has a composition such that I think it would not go wrong in a recommendation of this character. As a member of that Committee I certainly support the Amendment

793
and I hope the noble Earl will see his way to accept it.
THE POSTMASTER-GENERAL (THE EARL OF LISTOWEL): I have listened with great sympathy to what the noble Lords have said, and I think we all agree that the object they want to achieve is to prevent nursing homes or veterinary institution; run by "quacks" from obtaining penicillin for use in connexion with treatments given to their patients. But I think if noble Lords will look more closely at Clause i they will see that they are already safeguarded by subsection (I) (a), because under this subsection it becomes an offence for anyone who is not a qualified medical practitioner, registered dental practitioner, or registered veterinary surgeon, or person acting in accordance with their directions, to administer penicillin. Clause i (2) (d), to which the noble Lord, Lord Marley, is referring in his Amendment, turns only on supply to, and not supply by, a hospital, nursing home, or similar institution. Now, only these institutions, under this paragraph, can obtain freely a supply of penicillin. They cannot supply or administer it to their patients, except in accordance with subsection (i) (a) of the clause which I have just quoted. In other words, in theory a nursing home or veterinary institution of doubtful reputation might be able to hold a supply of penicillin, but under this paragraph they could not lawfully use it for treatment on their" patients, except in accordance with the directions of a qualified practitioner.
I hope your Lordships will agree that this is sufficient safeguard against the abuses to which reference has been made. Another difficulty arising out of the noble Lord's Amendment is that it would make it very difficult for bona fide nursing homes, hospitals and institutions to obtain penicillin, which is something very far from what the noble Lord desires to bring about. In these circumstances, I hope that the noble Lord will, on further consideration, withdraw his Amendment.
LORD MARLEY: I would not say that it makes it more difficult for bona fide nursing homes with qualified medical practitioners to obtain penicillin. I cannot see why the Amendment should not be accepted.
THE EARL OF LISTOWEL: The reason is that it adds a lot of red tape to the
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procedure which would be entailed each time one of these institutions wanted permission to obtain a supply of penicillin. Under the Bill they have only to prove that they are a nursing home, hospital, or whatever it may be. Under the Amendment they would also have to prove the sort of treatment which they gave, and this would clearly be subjecting them to a very great deal of red tape. This would waste their time and involve them in expense which I think is clearly undesirable.
LORD MARLEY: I need hardly say that is one of the most extraordinary statements that I have heard for a long time. The Bill before your Lordships' House enables unqualified and unregistered people to buy such penicillin as they want, but contains rather doubtful powers to preclude them from using it. Why not tighten up the Bill so that they cannot obtain it, rather than allow large quantities of penicillin to get into the hands of entirely unqualified and unregistered persons in the hope, presumably, that they are only buying it to put on the shelf, and that they will never use it? It seems to me so illogical and so unacceptable in an otherwise reasonable Bill, and I fail completely to understand it. I cannot see that there is anything in the red tape argument. After all, there is red tape in a qualified medical practitioner having to sign some form of document before he can get penicillin. If this is red tape, I suppose it is red tape to have to stick a stamp on a letter, in order that the Postmaster-General will pass it through the post. So far as I am concerned, it seems very unsatisfactory, and I hope that there will be an opportunity for my noble friend to think this over again before a later stage, so that on that occasion there may be an opportunity to tighten up this gap which now exists.
Amendment, by leave, withdrawn.
Clause I agreed to.
Remaining clauses agreed to.
House resumed.
Bill reported without Amendment.

STOCKS OF WOOL TOPS.
7.0 p.m.
LORD BARNBY asked His Majesty's Government, if, following reply given on December 4, 1946, they are now able to

795
state if it is their intention to arrange publication forthwith for the benefit of the Industry as a whole, the monthly stock of wool tops, and how soon they expect to be able to supplement this with similar figures on top production and consumption?
The noble Lord said: My Lords, this question reverts to a reply given to a question put in this House on December 4 last year, which at that time, while indefinite, gave hope that early action might be expected. I must ask the indulgence of your Lordships if, in putting this question, I give a little explanation to show you what lies behind it. The noble Lord who was good enough to deal with the question which I put earlier this afternoon, quite unintentionally, I am sure, gave a reply which showed that information had not been supplied to him by the Department concerned which would have enabled him to give a full and satisfactory reply. The information for which the question asked must have been available to the Department, I think. If the reverse were the case it would suggest that a commercial organization which is responsible to the Board of Trade in this matter is not carrying out its duties in a way which, in the commercial sense, is usual. That would be disquieting. But I feel certain that that is not the case, and, in the circumstances, I hope that the noble Lord will convey my remarks to the President of the Board of Trade and, that he will, perhaps, urge him to give an early reply or to make some authoritative statement with regard to the matter. It is a matter which is of vital importance to a very large number of people in the Dominions as well as in this country.
In raising this matter, I wish to emphasize that factual guidance as regards stocks is now essential. This reply to which I have referred might give rise to disquieting feelings. The worsted industry, which makes so substantial a contribution to our exports, is dependent on supplies of these tops, without which the spinning and manufacturing of cloth cannot proceed. Uncertainty at any time is disadvantageous. Under present conditions, ignorance as to present stocks is an added cause of perplexity and doubt. There is reason to believe that these figures are within the knowledge of the Board of Trade. In any case, if some
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records have recently lapsed, figures on production and consumption plus exports should present no difficulty in the way of the rapid preparation of the essential figures. Anticipating the reply I may get, and in view of the answer given me last time, I feel sure that the noble Lord will not hesitate to press that these should be prepared.
Before I put my question, I feel compelled to make a reference to the general wool situation, to explain the additional matter on which I am asking for information, and to which I have already drawn the attention of the Board of Trade. The situation arising internally out of Board of Trade control regulations seems to me to be chaotic. In saying that, I am not actuated by any objection, in principle, to controls. I believe that, at the present moment, some degree of regulation is both essential and timely. But the point I wish to make is that bureaucratic methods work too slowly in an industry geared largely for exports yet reacting swiftly and sensitively to movements in raw material markets open to world operations. The present practice, whereby export prices, applied to fully or semi-manufactured products, are recommended to bear the cost of heavy subsidy to the utility programme at home is, in effect, driving up world wool prices (and this is a point which I wish particularly to stress) against the utility programme, to the disadvantage of the domestic consumer. It means that United Kingdom wool users are being held in a strait-jacket of Governmental regulation on prices. They have had to stand by and let necessary wool supplies pass on auction to other countries—wool supplies which should have been secured to supply future clothing requirements of the United Kingdom population, at prices substantially less than the higher price now being paid. Now, large production has been lost by the stoppage, and this has contributed very much to the need of these figures being published. It seems to me to be essential that if this industry is to avoid the very serious situation to which I have drawn attention, there shall be allocated to wool-combing, which is a process steam-using section of industry, allocations of coal, for a period at least, which will cover their requirements. And let that action be swift, otherwise lost production may soon be perilous to the succeeding sections of the industry,

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dependent on wool tops, which will be brought to a partial standstill. That in turn will affect the garment industry in which a large labour force is employed.
I would presume, with your Lordships' permission, to give one additional note of warning, and that is with regard to Canada. So far as Canada is concerned encouragement has been given for her industry to be geared largely to supplies of semi-manufactured materials from this country for clothing her population. At the present moment we have placed a complete embargo on exports of semi-manufactures to Canada. The result of this, may well be that Canada's machinery will be brought into a dangerous position, if not to a standstill, with a very adverse effect on employment. I submit that in view of the extremely generous treatment which Canada has extended to us in the matter of food supplies it would be dangerous to disregard this matter.
It is of vital importance, I suggest, to keep the wool-combing section of the industry employed, and so to prevent further deterioration of the position. That is the feeling which has stimulated me to put clown this question. To summarize, urge that there should be early action to publish the statistics of stocks of wool tops, and as soon as possible, also, of production and consumption. I hope that the noble Lord will be able to assure me that that is going to be done. In addition I would ask that he should convey to my right honourable friend the President of the Board of Trade the recommendations that there should be an early recasting or the utility price structure and that there should be an allocation forthwith, for a period at least, of coal supplies to this small section of the wool textile industry. With that explanation, I beg to put the question standing in my name.
LORD CHORLEY: My Lords, I am afraid that the noble Lord will be a little bit disappointed because there are no recent figures of wool stocks. They are not available. My right honourable friend the President of the Board of Trade hopes shortly to bring up to date the figures which were published in the Board of Trade Journal on May 18, 1946, showing the production and consumption. The noble Lord has raised a number of points with regard to the correlation of home prices of wool crops as used in the utility trade and the prices for export
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products, and in regard to the position as between this country and Canada. I can assure the noble Lord that these matters are very well known to my right honourable friend and they are under constant consideration. That, I am afraid, is as far as I can go, but I will bring to the attention of my right honourable friend the observations which have been made on the subjects of these figures, and in due course the figures relating to the production consumption will be published.

SMALL SAVINGS
7.12 p.m.
LORD HAWKE LORD HAWKE asked His Majesty's Government what is the target for small savings for 1946–47, and up to date what has been the figure of net savings achieved, excluding accrued interest? The noble Lord said: My Lords, your Lordships' appetite is never very great for figures, particularly at ten minutes past seven, and I do not propose to produce any. One of the foundations of the greatness of our country was thrift, and I believe that every political Party is united in that we must endeavour to inculcate thrift among the only people who have the wherewithal to exercise thrift in these days. My purpose in putting down this question was twofold: First of all, to discuss what had been the achievements of the National Savings Campaign in the financial year just about to close; secondly, to make a suggestion with regard to the next financial year. Unfortunately, I cannot see the figures which the noble Lord is going to give before commenting on them, but the Press has come to the rescue.
In the course of the last day or two I have seen figures purporting to represent the figures of the Savings Campaign up to date. From these it seems clear that the target given to the Savings Campaign has now been achieved, but I submit that such a victory is a purely Pyrrhic victory, because the target took no account of withdrawals or encashments, and these withdrawals have been extremely heavy. There is no record of what the figure of encashment might have been expected by the Chancellor of the Exchequer, but I have little hesitation in suggesting that the figure which has resulted is a bigger one than he expected, and that the National Savings Movement achievement is, as I have said, a purely

799
Pyrrhic victory. For the financial year just about to commence I do earnestly suggest to His Majesty's Government that some method should be found of setting a realistic target, and one which takes into account the incomings as well as the outgoings. I fully appreciate the administrative difficulties. If you are to have competition between one village and the next it is extremely difficult to take account of withdrawals. I absolutely appreciate all those points, but I do submit that the British public are being fooled if it is led to believe that the Savings Campaign has reached its target when, in fact, half of what has been put in has been taken out again. I beg to ask the question standing in my name.
LORD AMMON: My Lords, I hope the noble Lord will be pleased with my answer, so far as the amount that has been saved is concerned. I think that perhaps he might even be agreeably surprised that the amount of encashment and withdrawals are not as much as he expected. At the National Savings rally in the Albert Hall on April 2, 1946, the National Savings Movement undertook, in response to the Chancellor's challenge, to raise £520,000,000 in small savings in the financial year 1946–47. For this purpose, small savings consist of purchases of National Savings Certificates and Defence Bonds, and increases in the balances of depositors in the Post Office and Trustee Savings Banks. On March 13 Sir Harold Mackintosh, the Chairman of the National Savings Committee, reported to the Chancellor that the target of £520,000,000 had been reached, and that the Movement expected to raise a total of £550,000,000 by the end of the financial year.
Particulars of both purchases and withdrawals of small savings, with separate figures of accrued interest, have been published quarterly by the National Savings Committee in the course of the year. The Committee's statement of gross and net savings, for the nine months to December 31, was issued early in January; a copy of this statement, which involves tables of figures, is being sent to the noble Lord and will appear in the OFFICIAL REPORT later. The figures for the complete year will be published by the Committee at the end of March.

CONSOLIDATED FUND (No. 1) BILL.
Brought from the Commons, read Ia.
CERTIFICATES FROM EXAMINERS.
THE LORD CHANCELLOR acquainted the House, That the Clerk of the Parliaments had laid upon the Table the Certificate from the Examiners that no further Standing Orders are applicable to the following Bill:
COTTON INDUSTRY WAR MEMORIAL TRUST.
The same was ordered to lie on the Table.

SUNDAY ENTERTAINMENTS ACT, 1932.
Orders made by the Secretary of State for the Home Department extending Section I of the Act to the

City of Sheffield;

County Borough of Halifax;

Urban District of Church Stretton;

Rural District of Hambledon:
Laid before the House (pursuant to Act) for affirmative Resolution, and ordered to lie on the Table.
Supreme Court of Judicature (Consolidation) Act, 1925—Rules of the Supreme Court (No. 2) 1947, dated 18th March, 1947, made by the Lord Chancellor: Laid before the House (pursuant to Act).