« PreviousContinue »
of capital and the character of the shareholders on which the credit of a company must depend, until it has obtained a stable position in the mercantile world; the mere number of the shareholders will have the least weight with any wise and prudent man. Upon what ground of justice or policy can it be maintained that six good and honest men should be excluded from an advantage which is open to seven persons, of whatever character or reputation ? or, in fact, that there should be any condition whatever as to number, when all other conditions for the purpose of security are dispensed with ?
Another fundamental error in the framing of this Bill is, that while allowing companies not carrying on a trade or business having gain for its object, to be incorporated under its provisions, those provisions are really applicable only to companies carrying on a trade or business having such gain for its object. The registration of the nominal capital and of the shares into which it is divided, the articles of association contained in the table marked B, and the form of balance-sheet referred to in such table, and various other provisions, have reference only to trading companies, and cannot in any reasonable manner be made to apply to clubs, charities, literary institutions, and a variety of associations having intellectual or social objects in view. Now, it is of the greatest importance that such associations should be able to incorporate themselves, and to enjoy the benefit of limited liability ; and every well-wisher to the social advancement of the community must regret that the Bill has been so framed as virtually to exclude them from its operation.
Another great error in the Bill is the nature of the penalties which it proposes. With the exception of the penalty in the latter part of clause 30, the Bill imposes on the funds of the company penalties which ought to be paid by the delinquent individual. Now this the Committee consider as essentially
Defaults will, of course, most generally be made by companies under the least provident management; and, in the event of insolvency, the consequence will be that the penalties will be found to have been levied on the funds belonging to the creditors. It is impossible, therefore, to imagine a system of penalties more likely to encourage recklessness in those who have the direction of companies. If the worst should come to the worst, only the innocent would have to suffer.
The Committee would also observe that there are some provisions in the Bill with regard to matters not peculiar to corporations, and which, if enacted at all, ought to apply to every subject of the realm, such as those entitling companies formed under the Act to use form of conveyance, mortgage, &c., which are to have a legal effect, which they would not have if used by individuals. These are in every respect objectionable. Whether right or wrong in themselves, the Committee do not now take upon themselves to decide; but it is impolitic and unjust to offer to the new incorporations supposed privileges denied to their individual rivals in trade. Moreover, those privileges could not have been granted by charter, and this Act is nothing but a general substitute for an indefinite number of particular charters. Further, the basis of this Act is the common right of every subject, or set of subjects, to have that which is given to any subject or set of subjects; and to give peculiar privileges of the kind under consideration to companies, which are not given to individuals, is in defiance of that very basis itself. Lastly, it is the insertion of provisions of this kind which makes the consolidation and entire classification of the Statute Law a work of such extreme difficulty; and the Committee therefore feel bound to protest against a style of legislation, of which the tendency is to impede so desirable a consummation.
It appears also to the Committee that on the principle of common right, which, as already stated, forms the basis of this Bill, incorporation by letters patent under the 1st Vict. c. 73, should henceforth cease, as it is inconceivable that under the facilities for incorporation which the present Bill affords, any charter could be granted under that Act with fairness to the rest of the community. In order that the public may be aware that they are dealing with a company, the Committee recommend that no company should be registered under the name of any individual or firm.
The power given to the Board of Trade to order examination of the affairs of the company, would be more appropriately intrusted to some other authority; and the right to apply for such examination should not be confined to the shareholders of joint-stock companies, but should be extended to the members, or sharers in the profits, of all partnerships.
The Committee would recommend that the 16th clause should be amended, so as to require that any person or persons having the conduct of a company carrying on trade or business having gain for its object, should cause true and proper books to be kept, which should at all times show the holders of shares in the company, the amount of calls made on each share, the total amount of calls that have been received, and the total amount of calls unpaid. Such continuous registration would be much more satisfactory than an annual list, as proposed by the Bill.
The provisions regarding winding up form, in the opinion of this Committee, one of the greatest errors in the Bill; and the amendments introduced in committee are very little calculated to render them less objectionable. The Committee have to report with reference to the 58th clause, which limits the jurisdiction of the District Courts of Bankruptcy to cases with a registered nominal capital not exceeding 5,0001., and in which the registered office is situated more than twenty miles from the General Post-office, that they consider there is no principle in the limitation either of capital or distance. That of distance to twenty miles seems founded on a mistake, for at present the London Commissioners have jurisdiction within a radius of 100 miles from London; so that if the 58th clause stands in its present form, all companies whose registered office is beyond twenty miles and within 100 miles, and whose capital does not exceed 5,0001., must have their affairs administered by the Court of Bankruptcy in London, supposing the London Court to come within the term “District Court;" whilst the affairs of those companies whose registered office is within twenty miles must be administered in the Court of Chancery, however small the amount of capital. The Committee are strongly of opinion that every partnership in any trade or business, having gain for its object, should be subject to the Bankrupt Laws, and that the creditors of such partnership are entitled to have its affairs administered in a Court of Bankruptcy. The Committee cannot recognise any real distinction in this respect between trading companies constituted under the present Bill and any other trading partnerships; and if such companies are formed on the principle of limited liability, it is equally the right of the creditors as of the debtors that the affairs of the company, in cases of insolvency, should be administered by a tribunal acquainted with commercial details. The Committee therefore think it indispensable that the Law and Practice of Bankruptcy should be applied to such cases. It appears to them impossible to understand how in any other manner various questions, such as reputed ownership, preferential payments, and improvident contraction of debts which must arise, can be dealt with. And they consider, in addition, that the publicity given in this country to proceedings in the Court of Bankruptcy is a great protection to creditors, and an inducement to commercial morality.
The Committee suggest the insertion of clauses to effectuate the object above stated, and to give creditors the opportunity of compelling bankruptcy in case of nonpayment of demands upon the company,
and also to enable the company, or a reasonable proportion of the shareholders, to make the company bankrupt in certain events. The Committee refer to the 7 & 8 Vict. c. 111, in which the Legislature has already sanctioned the administration in bankruptcy of the affairs of a commercial or trading company incorporated by charter or Act of Parliament; some of the clauses of which might be usefully applied to the proposed companies. They would propose the adoption of section 2 of that statute, which provides
“That the bankruptcy of any such company or body in its corporate capacity, as the case may be, shall not be construed to be the bankruptcy of any member of such com
pany or body in his individual capacity." This will preserve the principle of limited liability, and will also absolve the shareholders from any stigma or annoyance which may attach to the bankruptcy of an individual. The Committee, however, think that in cases in which it shall appear that any shareholder of a company shall have committed any mercantile offence in connection with the affairs of the company, which in ordinary cases would render him liable to the penal sections of
VOL. I. NO. I.
the Bankrupt Laws, such shareholder should in all respects be dealt with as an ordinary bankrupt, and that he should lose the protection of limited liability, and his estate be divisible amongst the creditors of the company, if the assets be insufficient to satisfy them, or if sufficient, amongst the shareholders; and the Committee think that the Court of Bankruptcy should have power to direct an issue to try whether any individual share. holder has committed such an offence.
Entertaining these views, the Committee strongly recommend the exclusion from the present Bill of all provisions relating to the winding up of companies otherwise than by bankruptcy. It appears to them that, if the existing Winding-up Acts are inadequate and unsatisfactory, the question ought to be separately considered, and treated as a branch of Chancery procedure applicable to companies in certain circumstances. The Committee, in making these suggestions, are anxious to remove every objection which may be reasonably urged against the constitution of the proposed companies, and to afford the utmost protection to the trading community; and the suggestions now offered are founded upon the opinions of mercantile men of high standing, as well as of some of the leading members of the legal profession.
IV. REPORT OF THE STATUTE Law COMMITTEE ON Mr. Bel
LENDEN KER'S LETTER TO LORD BROUGHAM. If any evidence were wanting to establish the practicability and expediency of our plan for publishing a revised and authorized edition of the Public General Acts now in force, and to prove the justice of our comments on the conduct of Mr. Bellenden Ker, as Statute Law Commissioner, it would be amply furnished by the letter which that gentleman has addressed to Lord Brougham, and which has been referred by the Society to this Committee. As our former Report contained grave charges of incapacity against Mr. Ker, it was obviously an object of great importance for him to expose any inaccuracy in our facts, or any sophistry in our reasoning; and we may therefore reasonably assume that, in attempting to answer us,