HL Deb 12 March 1963 vol 247 cc691-704

2.38 p.m.

Order of the Day for the Second Reading read.

LORD CLITHEROE

My Lords, I rise to move that this Bill be read a second time. One of the greatest nuisances in life to-day is the excessive amount of paper work in most forms of business and administration. It causes a great deal of extra work and delay. I think we are all anxious to make this country more efficient, and this is something with which I feel sure noble Lords on all sides of the House will agree. This Bill, though perhaps not very exciting, is an effort in this direction, and I trust, therefore, it will be welcomed by the House. Many of your Lordships will at one time or another have had to spend quite a considerable amount of time, either on your own behalf or on behalf of charities or trusts, in executing transfers of stocks and shares and in being put to the inconvenience of having to find somebody to witness your signatures. The object of this Bill is to reduce some of these laborious tasks from which many of us suffer. Private individuals suffer considerably, and those who hold positions as directors of companies, and so on, frequently find themselves in the position of having to sign and witness hundred of these documents.

If this Bill is passed, when it comes into effect there will be three advantages: first, the person to whom the securities are transferred will not need to execute the instrument of transfer—that is to say, the buyer will not have to execute the instrument of transfer; secondly, it will not be necessary for the transferor to have his signature witnessed; and, thirdly, when securities are sold on the Stock Exchange, the transferor will need to execute only one instrument of transfer, even if the securities which he is selling are transferred to a large number of people. At the present time, if you transfer securities you may find there are a dozen or more people buying them, and you have to sign a separate document for each.

I need hardly say that this Bill is no brainchild of mine, and I shall say a word, if I may, about its history. In 1959 my noble friend Lord Ritchie of Dundee, who is Chairman of the London Stock Exchange, convened a committee to consider the general problem of the transfer of securities. This committee had as its members very distinguished representatives of the leading institutions in the City of London who are concerned with these matters. I should like to pay a special tribute here to Mr. Wareham, who is the secretary of the Share and Loan Department of the Stock Exchange and who was chairman of the advisory Committee which did a great deal of the work. That Committee, over which Lord Ritchie of Dundee presided and to whom we are all most indebted, published its Report in December, 1960; and this Bill, to which I am asking your Lordships to give a Second Reading, follows its principal recommendations in all important aspects. I think I am entirely justified in saying that not only is this Bill wholly in the public interest, but it also has the support of all those institutions which are best qualified to form an opinion about this matter.

A Bill on similar lines was introduced in another place by Mr. Graham Page, to whose work I should like to pay a tribute, but his Bill was withdrawn so that a Bill might be introduced in your Lordships' House, as it was thought that this would better assist the progress of such a Bill through Parliament. I am hoping very much that the noble Lord who is going to reply for the Government will give this Bill his blessing. I have told your Lordships of the simplifications which this Bill effects. These simplified requirements will apply to a very comprehensive list of securities which you will find set out in Clause 1 of the Bill. Partly paid securities, bearer securities and the securities of companies limited by guarantee are excluded because they are either not registered, and hence not transferable by instrument in writing, or they involve financial liability. It would clearly be dangerous if someone could transfer to another person partly paid shares to which a financial liability was attached without that person being aware of the fact.

This Bill prescribes two forms. It is hoped that the stock transfer form which your Lordships will see in the Schedule will largely supersede the current transfer form because it is designed to meet the new requirements, and it is clearly convenient to all who have to deal with the business of transfers if forms can be standardised. It is really nothing more than the equivalent of the present common form of transfer brought up to date and adapted to this Bill. The broker's transfer form appears in Schedule 2 to the Bill. It is a novel form for use in conjunction with the stock transfer where the securities are sold on the Stock Exchange and are transferred to more than one person. This is really the secret of the simplification and I believe it owes its origin to Mr. Bardo of the Bank of England, to whom I would pay tribute because it was a bright idea. In these cases the person selling securities will sign one form and the broker will prepare as many broker's transfer forms as there are purchasers.

Here may I anticipate a possible objection which some noble Lords may raise and tell the House that the sizes of the forms which are illustrated in this Schedule will be much larger than as they appear in the Schedule and therefore more appropriate to the task. It is also the intention that the broker's transfer form will be distinct from the transfer form by being of a different colour. So much for Clause 1. I will not deal in so much detail with subsequent clauses.

Clause 2 generally relates the new arrangement to provisions in articles of association and Statutes, and so on. Provisions which conflict with the new system are overridden by this clause. Where clarification is needed as to the rights of registrars, the stamping of brokers forms, the determination of the dates when transfers are duly lodged and so on, this clause provides it. Clause 3 gives to the Treasury—and I think it is quite right that we should do this—the power to vary the transfer forms with the object of providing against changed circumstances in the future. For example, mechanisation might make some changes necessary in the shape or size of the form or some of its particulars, and the clause giving the Treasury this power is designed to facilitate such changes without the Bill having to be amended. It does not alter any of the principles of the Bill in any respect.

Clause 4 has various definitions. I do not think any of them require any special comment from me. The clause gives the Treasury power to recognise stock exchanges for the purpose of the Bill. That is something which should not present any difficulty. Under the Prevention of Fraud (Investments) Act there is already a list of stock exchanges which are recognised by some order of the Board of Trade. I do not think this will provide any problem. Clause 5 applies to Northern Ireland, which has its own company law and other legislation regulating transfer of securities. The Bill does not therefore apply to Northern Ireland, but there is nothing to prevent the Northern Ireland Parliament from themselves legislating about this matter and I very much hope that they will.

To sum up, a person who wishes to buy shares through a stock exchange in future will not need to sign a stock transfer nor to have it witnessed as at present. If he sells his holding, whether to one or more persons, a single stock transfer form need only be signed in order to divest himself of his holding. Under the new procedure the stockbroker will normally send him a stock transfer form shortly after he has made a sale and, perhaps in the same envelope, the contract note. He will sign this and return it to his broker with the relevant certificate, if the broker has not already got it, and that will be the end of the job as far as he is concerned. This new system will be no more liable to fraudulent abuse than is the present system. I am confident that it will improve the efficiency and will certainly add to the speed of the operations. I beg to move that the Bill be read a second time.

Moved, That the Bill be now read 2a—(Lord Clitheroe.)

2.49 p.m.

VISCOUNT ADDISON

My Lords, as a partner in a firm of City stockbrokers I have an obvious personal interest in the Bill which must be declared and which your Lordships will quite rightly bear in mind in listening to what I have to say. The Bill is designed largely, or so it seems to me, to assist in providing a means of oiling the wheels of the machinery of my profession. Your Lordships might well ask, who am I to look closely at a gift horse? But I have looked very closely at the Bill and, so far as I am capable of understanding Parliamentary drafting, I think I fully understand it.

At the noble Lord, Lord Clitheroe, has just explained to us, the Bill seeks to render it unnecessary for a transferee to sign a transfer deed on the purchase of Stock Exchange securities, except in certain cases. It is evident, therefore, that if the Bill passes through your Lordships' House and becomes law, much time will be saved in the preparation and passage of documents to and fro between client and broker. The Bill would also render it unnecessary, as the noble Lord has explained, for a transferor to have his signature attested. I think that the assumption is, by and large, that it is all right to transfer stocks and shares into a person's name; it is necessary for a holder to sign a transfer only when they are going to be transferred away from him. That seems to me to be good sense.

There are certain exceptions, which the noble Lord mentioned. I notice that London registered Commonwealth Government stocks, which pass free of stamp duty normally into and out of market names, are excluded, and I am not quite clear as to the reason for this. Perhaps the noble Lord, Lord Clitheroe, could make this clear when he comes to reply.

The Bill applies only to fully paid securities, the reason being clearly that, if partly paid stocks and shares were to be included, it might be possible to render a transferee liable for the uncalled portion of capital without his knowledge. When I first went into the City many years ago there used to be several companies, particularly shipping and banking companies, with partly paid shares, but few remain to-day whose shares pass in this form. In those days, there used to be one company, a Canadian Trust Company, I believe, where the capital consisted of £20 shares, £5 paid, and where the market price had gone into reverse and you had paid something to get rid of the stock. I suppose that if you had been particularly hard pressed you could have bought yourself a few and taken the money, but, of course, you ran the risk of having the balance of £15 a share being called up. This illustrates the point that the noble Lord made as to the necessity for excluding partly paid stocks and shares. I cannot remember what happened to that company in the end, but I believe it was taken over by another trust company.

The Bill as a whole would relieve much pressure upon that hard-pressed, loyal and uncomplaining fraternity, the stockbroker's clerk, and it would provide more time to clear the necessary documents to enable settlement to be made promptly on the fortnightly settlement dates. It occurred to me that it might be possible to take the idea even further and perhaps incorporate the transfer deed with the present contract note, so as to save the need for the preparation of the transfer to go out to the seller on the day he disposes of the stock, for if it is going to become the custom to forward the transfer and contract note under the same cover, it will mean that, in smaller firms on a busy day, when the staff was fully occupied on the preparation of contract notes, they would be involved additionally in the preparation of transfers, though this would have the effect of saving time later on.

I do not know whether I have made this clear, but I have no doubt that the noble Lord, Lord Clitheroe, will understand my point. I foresee also that very much postage would be saved. Further time would also be saved for the operation of the certification processes in the Government's Share and Loan Department and I think that this would be very welcome to them. They would get their documents earlier, because it would be unnecessary for brokers to await the recovery of transfer deeds signed by purchasers, who are sometimes inclined to be a little dilatory in returning them, thus delaying the process of settlement. In conclusion, I should like to congratulate the noble Lord, Lord Clitheroe, and all those people who have been associated with him in the preparation of a Bill which, I think, should receive universal support. I have tried to regard it in an unprejudiced way. I hope very much that your Lordships will grant the Bill a Second Reading.

2.55 p.m.

LORD RITCHIE OF DUNDEE

My Lords, I am sure there is very little which needs to be added to the admirable speech in which the noble Lord, Lord Clitheroe, has moved the Second Reading of this Bill, but, having regard to the background to the Bill—there is a reference in the Explanatory Memorandum to the Committee of City and other Institutions which issued a report in 1960—I came to the conclusion that it might seem a little odd if I were here in your Lordships' House and remained silent. I will be extremely brief and take up only a few moments of your Lordships' time.

I should like, with your Lordships' permission, to take the opportunity of thanking my colleagues in the Committee to which reference has been made. Apart from the Stock Exchange representatives, we had with us representatives of the Bank of England, the Acceptance Houses' Committee, the Chartered Institute of Secretaries, the Committee of London Clearing Bankers and the Issuing Houses' Association. We also had much help from a number of other bodies—the Association of Investment Trusts, the British Insurance Association, the Institute of Chartered Accountants in England and Wales and the companion Institute in Scotland, the nominee companies of London clearing banks, a number of stockbrokers and stock jobbers and also a number of registrars of United Kingdom and overseas securities. Finally, we received invaluable assistance from the Law Society and the Law Society in Scotland.

I should apologise to your Lordships for taking up your time by citing such a long list of authorities, but I do so, partly in order to express appreciation of the co-operation and help that was given, and partly, and perhaps more importantly, to indicate to your Lordships the very wide and—may I say?—very eminent support which exists for the recommendations which are embodied in this Bill.

In my Foreword to our Report of December, 1960, I made reference to the willingness of all parties to forgo possible advantages and to undertake additional responsibilities and work. In this connection, I think it might well be that greater responsibility and perhaps more work may fall upon company registrars. Therefore, I should like to tender one word of advice, or perhaps more accurately to put forward a plea, which, if adopted, will reduce to some extent the work which falls upon registrars.

In the first place, your Lordships will no doubt be aware that until recent years almost all companies made a charge of half-a-crown on the registration of a transfer. This practice of charging a new shareholder half-a-crown to get his name registered in the company's books has always seemed to me to be rather odd. Surely it must be a waste of time and surely it cannot be worth collecting. The City Committee, in fact, recommended that these fees should be abolished at the time of the introduction of any new transfer system. Of late years many companies have taken the necessary simple step, in most cases merely by a board room resolution, to abolish these registration fees. I commend the idea and express the hope that before long all companies will have taken this step. Though apparently only a small matter, it is one which will make a very considerable contribution to the saving of time and the reducing of work.

In the second place, registrars would be saved a large amount of unnecessary work if more care and attention were given to the preparation of transfers. Legibility, at least, should not be a very difficult aim to achieve. Here I think that some of your Lordships may be thinking that it is up to us to clean up our own stable. That would be fair comment. But it should not be forgotten that quite a large number of transfers are prepared and written other than in Stock Exchange offices.

Finally, before I sit down, may I just pay credit where it is due? As always in matters of this kind, it is the people behind the scenes who have done the real work, and I should like to pay a warm tribute to our Advisory Committee, under the chairmanship of Mr. W. S. Wareham, whose name has already been generously mentioned by the noble Lord, Lord Clitheroe. The many hours of patient work of that Committee over the last three years are, I hope, rewarded by the Bill which is before your Lordships' House to-day. I should like also to congratulate the noble Lord, Lord Clitheroe, on the way in which he has moved this Bill, and I warmly commend it to your Lordships' House.

3.1 p.m.

LORD TERRINGTON

My Lords, in rising to support this Bill, I should immediately declare my interest as a member of the London Stock Exchange, and also as a member of the Wider Share Ownership Council. Speaking first as a stockbroker, I should also like to express the view that the provisions of this Bill will prove most advantageous to investors, both large and small. I entirely agree that under the present system there is a great deal of correspondence and delay which is irksome to the Stock Exchange and to investors alike. The proposed new system should prove a considerable timesaver, and from practical experience I would say that we shall now be able to give the investing public a much-improved service in a number of directions. For this reason, I am sure that the Bill is most welcome to the City of London and to investors throughout the country.

With your Lordships' permission, I should like to say a few additional words as a member of the Wider Share Ownership Council. I think it is probably fair to say that for many years the ordinary man in the street has felt that investment in Stock Exchange securities was difficult and involved endless complications. I am glad to say that generally this attitude is gradually changing, and the number of individual holders of stocks and shares has steadily increased in the last fifteen years. But compared with the United States, where I spend a certain amount of time each year, we have hardly begun to spread the ownership of industrial shares; and I do not myself believe that this is entirely due to the greater individual wealth in America. Clearly, my Lords, education has a great part to play in this whole question of wider share ownership, but simplification of procedure in the buying of shares is equally important. For this reason, I welcome this Bill as a member of the Wider Share Ownership Council as much as I do as a member of the Stock Exchange.

Before concluding my remarks, I would express the hope that perhaps this Bill is only a prelude to other steps which could be taken to encourage the small investor. I have already said that complication of procedure is a deterrent; but that is by no means the only one. Costs which are inflated by a 2 per cent. stamp duty must rank as an equal deterrent to the small man who is contemplating his first purchase of industrial shares as part of his overall savings plan. Indeed, it is my belief that many small investors justifiably view this stamp duty as being in the nature of a fine or penalty for doing something which they are being encouraged to do. I hope I may be forgiven for raising this point during a discussion on the Stock Transfer Bill, but I believe it is an important one; and as a supporter of the Bill, on the grounds that it will help the smaller investor, I felt that it could be said. For the general well being of the community, and as part of the plan to develop a property-owning democracy, I submit that ownership of industrial shares has a very definite part to play. In commending this admirable Bill to your Lordships' House, may I also express the hope that Her Majesty's Government will consider encouraging the small investor still further by the early abolition of the 2 per cent. stamp duty on stock transfers.

3.5 p.m.

LORD DENHAM

My Lords, on behalf of Her Majesty's Government I should like to say that we welcome the initiative of my noble friend Lord Clitheroe in bring forward this Bill. We fully support its objects and are in general agreement with the terms in which it is drawn. The reform which it hopes to bring about is one which commands a wide support, and we hope that the House will agree to give the Bill a Second Reading.

It would be less than courteous of me if I did not also pay tribute to the part played by my noble friend Lord Ritchie of Dundee, upon whose initiative the City Committee was set up in 1959, to consider generally the problem of the transfer of securities. As the Explanatory Memorandum to the Bill says, its provisions follow broadly the recommendations made by that Committee. I am sure that this Bill, if enacted, will substantially ease the burdens of those who are engaged in the business of transferring securities. It will also prove of great benefit to investors. Given the large scale on which transactions in securities take place, it is important that the procedures should not be unnecessarily encumbered by obsolete or obsolescent requirements. The Bill will, I believe, make our financial machinery more efficient, and it seems to me most appropriate that my noble friend should have introduced it in National Productivity Year.

The subject is one of some legal intricacy, and if the House gives the Bill a Second Reading, there will no doubt be some detail to which we shall need to give careful examination when it goes to Committee. There is one matter which I as the Government spokesman, should now mention. In a radical reform such as the Bill will bring about in the procedure for transferring securities it is natural that questions of stamp duty should have to be considered. Clause 2 (3) of the Bill contains minor provisions on this subject. It provides, for example, that where shares are transferred by means of brokers' transfers in conjunction with a stock transfer the brokers' transfers are to bear the stamp. There is, however a further provision on stamp duty which the new system will necessitate. In the case of a transaction passing through a Stock Exchange under the new system the stock transfer or brokers' transfers will be passed to the buying broker before the name of the purchaser has been inserted. It will be for the buying broker to insert the name of his client and get the transfer registered with the company. In the absence of any provision to the contrary a purchaser might be inclined, particularly if he were contemplating a quick sale, to retain the transfer without having his name inserted aria to pass it on to a fresh purchaser when he in turn came to sell the shares. By this means he might hope to avoid paying stamp duty on the purchase by him.

I have been speaking so far of Stock Exchange transactions. The same thing might also happen in the case of trans- actions outside a Stock Exchange although there one might expect that the name of the purchaser would normally be inserted in the transfer before it was signed by the transferor. In order to protect the Revenue, therefore, the Government would propose to introduce a provision, most probably by way of Amendment in another place to the Bill now before your Lordships, to the effect that a transferee or his agent who receives a blank transfer must insert the name of the transferee before he allows it to go out of his possession. The precise details of the provision have not yet been worked out, but I can say now that it will apply only to transfers giving effect to sales or gifts, so that the practice under which blank transfers are sometimes used at present when shares are held by nominees or charges as security for a loan will not be adversely affected. In conclusion, I repeat the hope that your Lordships will give a sympathetic reception to this Bill the general principles of which I believe will commend themselves to the House.

3.9 p.m.

LORD CLITHEROE

My Lords, I should like to thank your Lorships for the reception which you have given to this small though, I think, useful Bill. I am grateful to the noble Lord, Lord Denham, for telling us that this Bill has the support of Her Majesty's Government, and I fully understand the point he made in his speech about the necessity to safeguard the Revenue—that is, of course, unless Her Majesty's Government accept the advice which the noble Lord, Lord Terrington, has offered to them, in which case there will be no revenue to safeguard. I do not see any practical objection to the Amendment which the noble Lord, Lord Denham, has suggested, and no doubt at a later stage such an Amendment can be inserted into the Bill.

EARL ALEXANDER OF HILLSBOROUGH

My Lords, could the noble Lord tell us what sort of cost to the Treasury it would mean if the Bill were not amended?

LORD CLITHEROE

My Lords, I think the cost to the Treasury, if the Bill were not amended, would probably be quite small in practice. The cost to the Treasury would be great only if the stamp duty were abolished altogether, which is what the noble Lord was hoping for. Everybody is quite entitled to hope. The noble Viscount, Lord Addison, who was also good enough to welcome the Bill, said, very wisely, that there were further simplifications in this matter which might be possible. That is quite true, and possibly at some later date we may get some more simplifications. But this is as far as we were able to go with general agreement, and therefore I hope the House will be content to let us proceed with such reforms as I have proposed.

This Bill has also been described by the noble Lord, Lord Denham, as a radical reform, and I am sure that Members on both sides of the House will be surprised to see me producing a Bill to promote a radical reform. I am grateful to the noble Viscount, Lord Addison, for what he said. He raised the point whether this Bill could be extended to overseas companies which had their registers here. The position is that Parliament in the United Kingrom cannot legislate for overseas companies, but there is nothing in our law to prevent overseas companies from altering their Articles of Association in such a way as to permit the adoption of this revised procedure. I hope that all overseas companies concerned will find it possible to do so, and to take advantage of this procedure. I am grateful to the noble Lord, Lord Ritchie of Dundee, for what he said. I am particularly grateful to him for telling the House the various associations who deal with these matters, who have given so much help in this connection.

LORD SHEPHERD

My Lords, before the Question is put, may I ask a question of the noble Lord or the Government? I think the noble Lord said that if the Bill were passed as it now stands, we should possibly be relieving some people of paying stamp duty. I understand that stamp duty arises from the Finance Act, the Budget. Therefore, should we be right, in the position in which we in this House are, in passing a Bill that affects the Finance Act and the Budget? I wonder whether we should not be more correct if we were to ask the Government to see that the Amendment they propose was presented to the House before we gave the Bill its Third Reading.

LORD CLITHEROE

My Lords, so far as I am concerned, I shall be very pleased to accept the Amendment in this House.

LORD DENHAM

My Lords, I will certainly look into what the noble Lord, Lord Shepherd, has said and, if I may, give an answer to that particular point later.

THE EARL OF SWINTON

My Lords, is not the position strictly this? Although we cannot deal with finance, yet frequently in this House clauses are introduced—the Government themselves have introduced them—or Amendments are moved. They are put into italics, because they are in a sense privilege Amendments which have to be agreed by the other place. But it is not out of Order for us to do it.

On Question, Bill read 2a, and committed to a Committee of the Whole House.

Back to