COMPANIES BILL. [H.L.]

HL Deb 25 March 1947 vol 146 cc716-82

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 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—

1. (a) engaged in a whole-time capacity in war service; or
2. (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 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 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 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."

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 i^t 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 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 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 moved, after subsection (3), to insert: (4) A provision requiring or authorizing a thing to be done by or to a director and the 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 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- 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 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 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 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 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 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 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—

1. (a) this section shall have effect subject to any alterations of the company's articles made after the beginning thereof; and
2. (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 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

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

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

1. "(a) to anything done by a company which is for the time being an exempt private company; or
2. (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 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—

1. (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
2. (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 moved, after subsection (2) to insert: (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 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 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- 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 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 moved, after subsection (I), to insert: (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 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—

1. (a) to be or to have been interested in those shares or debentures; or
2. (b) to act or to have acted in relation to those shares or debentures on behalf of someone interested therein;

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- 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—

1. (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
2. (b) no voting rights shall be exercisable in respect of those shares;
3. (c) no further shares shall be issued in right of those shares or in pursuance of any offer made to the holder thereof;
4. (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—

1. (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
2. (b) votes in respect of any such shares, whether as holder or proxy, or appoints a proxy to vote in respect thereof; or
3. (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 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) 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 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 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 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 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 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

1. (a) the contract for its purchase or acquisition was entered into in the ordinary course of the company's business; or
2. (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 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—

1. (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
2. (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 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 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—

1. (a) it is proposed to offer any shares in or debentures of a company to the public by a prospectus issued generally; and
2. (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—

1. (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
2. (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 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 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 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—

1. (a) an instrument of transfer shall be deemed to be certificated if it hears the words 'certificate lodged' or words to the like effect;
2. (b) the certification of an instrument of transfer shall be deemed to be made by a company if-
1. (i) the person issuing the instrument is a person authorized to issue certified instruments of transfer on the company's behalf; and
2. (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;
3. (c) a certification shall be deemed to be signed by any person if—
1. (i) it purports to be authenticated by his signature or initials (whether handwritten or not); and
2. (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 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 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 moved, at the end of subsection (3), to insert: in writing off—

1. (a) the preliminary expenses of the company;
2. (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 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 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 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 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 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—

1. (a) to all trustees of the deed, present and future; or
2. (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 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 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 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 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 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—

1. (a) on the dissolution of a company; or
2. (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 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 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 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 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 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 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 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 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 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—

1. (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
2. (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, 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 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 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 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 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 moved, after the second Schedule, to insert