Sitting of 11 August 1855

LIMITED LIABILITY BILL.
VISCOUNT PALMERSTON VISCOUNT PALMERSTON moved, that the Lords' Amendments to the Bill be taken into consideration.
On the first Amendment, fixing a minimum of twenty-five shareholders in Companies to be formed under the Act,
MR. W. WILLIAMSsaid, the Amendment, he considered, was fatal to one of the chief objects of the Bill, and hoped the House would not adopt it.
MR. J. G. PHILLIMOREsaid, he concurred in objecting to the Amendment as injuring the value of the measure, but thought it would be better to take the Bill n its present shape than run the risk of losing it by dissenting from the changes made in it.
MR. MALINSsaid, he regretted the insertion of the Amendment, the only effect of which would be pro tanto to favour the formation of bubble Companies. Ten persons possessing an adequate amount of substantial capital would not be able to unite in any undertaking, but they might do so by associating themselves with fifteen others, who might be men of straw, in order to make up the required number of twenty-five shareholders.
MR. APSLEY PELLATTsaid, he thought at one time that the effect of passing the Bill would have been to have called forth a large amount of dormant capital; but he feared that, if passed in its present shape, its effect would be decidedly the reverse of that which he had anticipated.
Amendment agreed to.
Amendment requiring that, in order to admit existing Companies to the privileges of limited liability, a certificate of solvency must be given by an auditor appointed by the Board of Trade, after a full examination of the accounts of the Company.
MR. WILKINSONsaid, he thought that there would be a great deal of difficulty connected with the issue of such certificates, as it would be impossible for the Board of Trade to appoint efficient auditors for examining the affairs of every Company.
MR. BRAMLEY-MOOREsaid, he considered that it would be perfectly impracticable to carry out the proposed plan. If the shareholders of a Company were disposed to be dishonest, they could be so in spite of all the diligence exercised by the auditor to prevent it. He, therefore, hoped the House would not assent to the Amendment.
VISCOUNT PALMERSTONsaid, it was his opinion that many of the Amendments introduced by the other House were very objectionable, and regretted that they had been inserted in the Bill. At the same time it was necessary to make some allowances for them. It had been found impossible

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to send up the Bill to the other House until a very late period, and that House, without being very unreasonable, had taken objection to discuss the Bill upon the ground of want of sufficient time. The objection, though raised, was, however, overruled, but there were still in the other House, as in that House, some sincere objections against some parts of the Bill. There was no disposition on the part of the Members of the Government in that House to give way unnecessarily to the Amendments which they thought objectionable. All matters of great difficulty, must, however, be carried by some amount of compromise of opinion; and, in his opinion, although some of the Amendments introduced were undesirable, it did not appear to him that any of them would essentially mar the operations of the Bill. If it should be found in practice that any of the Amendments did interfere with the operation of the principle of the Bill, it would be very easy in the next Session to bring in an amended Bill, and there would be no difficulty in removing any obstacle which might stand in the way of such legislation.
Mr. MALINSsaid, he thought that if the Members of the Government in the other House had been more firm, those Amendments, which would greatly impede the operations of the Bill, need not have been inserted.
MR. W. WILLIAMSsaid, he must again express his confident opinion that it would be much better to give up the Bill altogether than to agree to it in its present shape; for, if passed, it would produce nothing but the greatest disappointment throughout the country.
THE ATTORNEY GENERALsaid, he thought that it would be far better for the House to agree to the Bill in its present shape, than endanger it by refusing to agree to the Amendments. By passing the Bill they would have obtained the sanction of the Legislature to the great principle of limited liability in matters of partnership. He fully concurred in the opinions expressed with respect to the mischievous tendency of the Amendments introduced by the other House; but they had, however, obtained the great advantage of having the principle of limited liability in commercial transactions fully admitted. It was absolutely impossible, if the Bill were passed, that a long time should elapse, without reconsidering the whole subject.
SIR WILLIAM J0LLIFFEsaid, he thought that there was no necessity for passing the Bill for the purpose of obtaining the sanction of Parliament to its principle, inasmuch as the principle had been fully admitted by both Houses in the discussions which had taken place. It was far better that the Bill should be thrown out altogether than that the Legislature should pass a Bill which could not possibly work.
Amendment agreed to.
Amendment, making any Director who should declare a dividend, knowing the Company to be in a state of insolvency, liable for the whole debts of the Company to the extent of the dividend.
MR. BRAMLEY-MOOREsaid, that if any person was foolish enough to become a Director of a Company with limited liability, subject to such a condition, he would well deserve all that might befall him in the loss of his money. In fact, be did not believe that any person would be found sufficiently foolish to become a Director of such a Company.
MR. WILKINSONsaid, he did not consider that the Amendment would really do any harm; it merely declared in effect that the Directors should not declare a dividend when they knew the Company to be insolvent.
MR. MALINSsaid, he would admit that the words "knowing" the company to be insolvent removed much of the harm which would otherwise attend the Amendment; but even as it stood its effect would be to prevent many timid men from becoming connected with Companies of that nature, their proceedings would be hampered, and no possible good could result from the clause.
Amendment agreed to.
Amendment, Providing that any Company formed under the Act should be compelled to wind up its affairs after it had lost three parts of its capital
MR. BRAMLEY-MOOREsaid, he thought, that as they advanced in the Bill the Amendments introduced became worse. Nothing could be more absurd than such an Amendment, and he would suggest that the House ought not to agree to it.
MR. MALINSsaid, he deprecated the exceedingly narrow spirit upon Which the Bill appeared to have been discussed in the other House. Their Lordships appeared to have thought that all persons engaged in commercial transactions were either knaves or idiots—knaves who were

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anxious only to see how far they could impose upon the public, knaves who were unable to understand the nature of any contract into which they might enter. Why should a Company of twenty-five persons be compelled to wind up its affairs after it had lost three parts of its capital, when the same restrictions were not imposed upon private individuals. Many of the most flourishing concerns in the country had at one time or other lost even more than three-fourths of their capital, but when the depression which had led to that loss had ceased, the Companies returned to their wonted prosperity. In the case of undertakings connected with the coal and iron trade that was particularly the case, very large portions of the capital were frequently lost, but the Proprietor never thought of giving up while there was a prospect of ultimate success.
MR. J. FORSTERsaid, that every one of those clauses which had met with so many objections from both sides of the House, were precisely those to which he and several other hon. Members who had been charged with a desire to obstruct the Bill, had so strongly objected when it was first brought forward in that House.
VISCOUNT PALMERSTONsaid, that if the Bill were not passed during the present Session, they would have next year to go over the whole ground again, whereas, by passing the measure now, its principle would be definitively adopted; and all that would have to be done hereafter would be merely to pass such Amendments as were found to be necessary to give effect to the proper working out of the principles which had been adopted, if such should be required.
Amendment agreed to; as were the remaining Amendments.
The House adjourned at Four o'clock, till Tuesday next.

MINUTES.
PUBLIC BILLS.—3a Public Houses (Ireland); Public Health Act (1854) Continuance and Amendment; Diseases Prevention; Limited Liability.

CHARITABLE TRUSTS (1855) BILL.
Commons Amendments considered (according to Order).
THE LORD CHANCELLOR, in moving that their Lordships do agree to the Commons' Amendments on this Bill, said he could not do so without expressing his very great regret that many of the most, essential provisions of the Bill had been rejected by the other, House of Parliament, in its altered, not to say mutilated state, the Bill came very far short of the advantages which would have been derived from it had it passed in the shape in which it was sent down to the ether House. He felt, however, that at that period of the Session, the best thing they could do would be to take what they could get, and with that feeling he begged to move that the Commons' Amendments be agreed to.
Moved, to agree to the said. Amendments.
LORD CAMPBELLdeplored that the Bill had been mutilated in the other House, and though some service might be derived, from it, that service would be trifling indeed when compared to what would have resulted from it if it had passed in its original shape.
LORD LYTTELTONexpressed a hope, that early next Session the Government would endeavour to carry through Parliament the provisions that had been rejected in the other House.
EARL GRANVILLEpointed out a great hardship which would still be imposed upon the Commissioners. Those functionaries, who fulfilled those duties with great zeal, found, in nine cases out of ten, they were unable to be as useful as they might be, solely on account of their limited powers.
Motion agreed to.

LIMITED LIABILITY BILL.
Order of the Day for the Third Reading read.
LORD STANLEY OF ALDERLEY LORD STANLEY OF ALDERLEY moved, That the Bill be now read 3a.
LORD LYTTELTONsaid, he would take that opportunity of making his final protest against the hurried manner in which this Bill had been passed through its preceding stages. It was impossible there ever could be a case to which the Standing Order, fixing a day beyond which no Bills would be read a second time, applied, if this were not that case. The question was a new one; it had never been before their Lordships, and it was one of great importance, involved in much complication. There were differences of opinion upon it, and it peculiarly required the most unmeasured consideration. Having been a Member of that House for seventeen years, he could only say he never knew an instance in which their Lordships had been treated with so much indignity—first, in the Government forcing on the Bill at all; and next, in refusing to refer it to the consideration of a Committee upstairs.
THE MARQUESS OF LANSDOWNEsaid, he was anxious to take that opportunity of stating that, although he had been distinctly and uniformly, from its first conception, in favour of the principle of the Bill, and although he was in favour of the Bill as it then stood, amended and improved by many of the alterations that had been made in its progress through that House, he did not share in the very sanguine expectations that were entertained, with regard at least to its immediate operation; but he had not the least doubt that the ultimate effects of it would be beneficial. Looking at the measure, and considering the proneness there was in this country, beyond any other in the world, to seek wealth and to expect to obtain it by following untrodden paths, merely because they were untrodden, he believed that great expectations of deriving profit by the operations of the Bill were entertained by many ill-informed parties. But experience would be acquired on the subject, and after it was acquired there was no doubt the operation of the Bill would be beneficial. The Bill was one that rested, and legitimately rested, upon the principle of free trade. By that principle there was established, and would, he hoped, be maintained, in this country the doctrine that any two parties had a right to make a contract in the way most beneficial to themselves; and if one
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person chose to enter into that contract exposing the whole of his fortune, and if another person chose to enter into the contract exposing only a limited part of his fortune, the one had as good a right to do so as the other, provided care was taken hat the parties with whom they contracted were aware of the conditions on which he contract was made. It was necessary that the other parties with whom they contracted, whether it was an individual or a public Company, should be made duly sensible of the nature of the risk they ran; and it was the peculiar duty of Parliament in passing an enactment of this nature to provide that such should be the case:—he trusted, therefore, that the securities introduced into the Bill would be sufficient to enable every person to know precisely the nature of the contract he entered into when le undertook to supply this new Company with anything it wanted, and that they would likewise be sufficient to provide the means by which every person taking part in the Company would know exactly the amount he risked. There would probably be failures at the commencement from the too sanguine expectations which were raised. In one respect, he thought there would be a great social improvement effected by this Bill; one of the evils of the commercial and social intercourse in this country being that the credit which was so useful in large transactions, and without which men could not carry out those transactions, was carried down to minor transactions, thereby producing a number of disappointments and losses. He should be extremely glad, if the persons who became connected with the Companies established under the Bill did so with their eyes open, and that they would receive that immediate payment which he sincerely wished was more generally required in this country in all transactions, and which he hoped the Bill would serve to introduce. Upon these considerations, he was of opinion the Bill was one in which the Government had a right to introduce a Motion for suspending the Order, For introducing which he always thought their Lordships were much indebted to his noble Friend (Lord Redesdale). He was glad of the opportunity of saying, nothing would have induced him to Vote for the suspension of the Order in this case had he not thought, perhaps erroneously and differing from others, that it was a case of urgency. It was within his own knowledge that many of the most useful and legitimate undertakings, to

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some of which he would subscribe himself if it were not for the law of unlimited liability, were kept in a state of suspended animation for want of a measure of this sort, at a time, too, when there was the greater necessity of calling into action all possible resources and encouraging every possible extension of employment. It was upon that ground he had voted for the suspension of the Order, and he should deeply regret if the consequence should be to affect that Order in general, or to induce his noble Friend to withhold his constant watchfulness upon its due observance.
LORD REDESDALEsaid, he must thank the noble Marquess for the speech he had made, for he had most distinctly laid down that it was the urgency, and not the importance, of a measure which should exempt it from the operation of the Order. His (Lord Redesdale's) objection still remained to the Bill, and he was convinced that it was an extremely imperfect measure. His opposition throughout was not directed to the principle of the Bill, but he desired to improve it and render it a working measure. He had done all he could to improve the Bill, and many things their Lordships had done tended to improve it. He thought it materially improved, so far as it applied limited liability to existing Companies upon their giving proof of solvency. There could be no objection to give to such Companies the limited liability provided by this Bill; but that was not the case with regard to many Companies that would be formed by this Bill. Many Companies would be got up by persons who would derive profit by starting Companies, and getting a certain amount of deposits, out of which they would obtain payment for their own labour. Such Companies would not arrive at maturity—there would be a good deal of plunder of the smallest capitalists—and the question was, how far it would be expedient to require that a Company should be fully registered for a couple of years, and then subject to audit, before they could take advantage of the limited liability. By doing that the public would have some assurance as to the mode in which they would conduct themselves in future.
LORD CAMPBELLhad no difficulty in voting that the Bill be read a third time, and that it do pass. He regretted that their Lordships had not had more time for the consideration of the Bill, but he had been, and was still, of opinion that a case
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of urgency had been made out for the suspension of the Standing Order. He was afraid that great disappointment would arise from the operation of the Bill as it stood. There were very few trades to which the principle of Joint-stock Companies could be successfully applied; but, on the other hand, he thought there was no great danger of indiscreet credit being given to Companies of limited liability.
LORD MONTEAGLEtrusted that the gentry, clergy, and friends of the working classes would advise them against inconsiderately entering into speculations arising under this Bill.
EARL GRANVILLEexpressed his regret that a charge of showing disrespect to the House should have been made against him by his noble Friend (Lord Lyttelton). The urgency of the case had been acknowledged by the noble and learned Lord behind him (Lord Campbell), and by his noble Friend the Marquess of Lansdowne, whose authority on a question affecting the dignity of the House could not be diminished by the fact of his being connected with the Government. He (Earl Granville) was glad that this had been acknowledged, because he would be most unwilling to be deemed wanting in respect to their Lordships' House. He very much doubted if the Bill would be improved had they a longer time to consider it, for all the Amendments proposed were restrictions on the principle of the Bill, and he thought that the Bill would go forth with a greater chance of success if these Amendments had not been introduced. Observations were made with regard to the speculative feeling it would create, and people might be foolish enough to be deceived by groundless expectations; but the principle of the Bill was, on the one hand, to limit the expenditure, while in the nature of things it was likely to limit the profits. They had no right to consider that in passing this Bill they had discovered anything new. Under the common law any; two persons under a special contract could limit their liability, and all they proposed was, that a general measure should supersede the necessity for special contracts.
LORD DENMANhoped that this Bill would be the forerunner of a more general system of free trade in the application of capital to mercantile engagements, and that it would lead to the adoption of the American system of commandite and commanditaire. In the meantime the present

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Bill would, he had no doubt, confer a benefit upon the community.
After a few words from Viscount St. VINCENT,
Motion agreed to.
Bill read 3a accordingly, with the Amendments.
LORD STANLEY OF ALDERLEY, although he still entertained an opinion that it would be a matter of extreme difficulty to interfere in the auditing of Companies' accounts, yet, in deference to what appeared to be the general feeling of their Lordships, proposed to add a clause to the effect that, in the event of any Company, formed under this Bill, obtaining limited liability, and being subject to the Joint-stock Companies' Act, if one auditor only be employed to audit the accounts, that he should be nominated subject to the approval of the Board of Trade. If two or more auditors were appointed, one of them must be appointed by the Board of Trade, and in the event of no auditor being appointed by the Company, then the Board of Trade to have the power to appoint one, as it now had under the Joint-stock Companies' Act.
Clause agreed to, and added to the Bill.
LORD MONTEAGLEproposed a clause, to the effect that nothing in this Bill should exempt Companies formed under it from being subject to the provisions of any future Act for the better regulation of Joint-stock Companies.
Lords CAMPBELL and STANLEY of ALDERLEYopposed the clause as unnecessary and mischievous.
Clause (by leave of the House) withdrawn.
THE LORD CHANCELLORproposed, after Clause 15, to add a clause expressly rendering Companies formed under this Bill subject to the provisions of the Joint-stock Companies Winding-up Act.
Clause agreed to, and added to the Bill.
Bill passed, and sent to the Commons.
House adjourned to Monday next.