The Sun.
London, England, 1856-02-02 00:00:00

COMPANIES.

Mr. LOWE, before moving that the Speaker should leave
the chair, should request his opinion upon a matter of order.
On the previous day notice was given by his right hon. friend
the member for Wells (Mr. Hayter), that he (Mr. Lowe)
should that day introduce two bills—one to amend the
law of partnership, and the other for the incorporation and
regulation of joint-stock companies and other associations .
By some accident, a portion of the notice had fallen out, so
that the bill for the amendment of the law of partnership was
omitted from the notice, although the words " Law of P art-
nership " appeared asthe title. He wished to know whether,
under such circumstances, it would be competent for him to
introduce both bills ?

The SPEAKER said that, as the error was not on the part
of the right hon. gentleman (Mr. Lowe), he would be entitled
to proceed with both bills. It was important that notices
should always be given in writing ; and in the present in-
stance that had been done,
On the motion of Mr. LOWE, the SPEAKER then left the
chair, and the house went into committee, Mr. FITQROY in
the chair,
Mr. LOWE.—It will be in the recollection of the house
that is the course of last session a bill was passed through
Parliament for the purpose of enabling joint.stock companies
to enjoy the principle of limited liability. ' At the time when
that measure was under consideration, it was stated that it
was founded on the laws already in existence for the regula-
tion of joint-stock companies, and it was also intimated that
it was not the intention of ber Majesty's Government to ask
next session for leave to bring in a bill to alter and amend
the enactments in question. The measure of last session was
a limited one, and on that account, if on no other, temporary
in its nature. The whole question has recently undergone a
thorough review by the Government, and I shall now pro-
ceed to state the results at which they have arrived. The
questions we have now to consider are these :—" first, how
shall the principle of limited liability bo extended to private
partnerships ?—secondly, in what respect may the laws to
which joint-stock companies are at present amenable be
amended and improved ? These are two great branches
of the same subject, and, that they may be dealt with in a
satisfactory manner, it will be necessary to introduce two
bills—the one relating to private partnerships, the other to
joint-stock companies.. I shall endeavour briefly to explain
the state of the case with regard to these two measures.
The law of private partnerships in England has been very
little interfered with by the Legislature; it has heretofore
been left very much as it stands in common law. T
great grievance complained of is not in the want of limited
liability, strictly so called—uot the want of a power in a part-
ner, known to the creditors, to contract with those creditors
that he shall not be liable to them beyond a certain sum ;
that is not the ground of grievance as regards private part-
nerships, but rather the converse of the proposition, namely,
that a dormant partner—a partner not risible to the credi-
tors and never known to them, who may have embarked a
certain amount of capital in a concern, should, on the failure
of the business, be made liable not merely in the pro-
portion of the capital so embarked, but to the extent of all
the property he possesses in the world, though the existence
of that property was unknown to the creditor, and though
it is in consequence property on the credit of which not one
farthing could have been advanced. (Hear, hear.) It now
becomes the duty of the Legislature to consider how it will
deal with this practical grievance. Another point , o which
it is necessary to direct attention is the state of the law with
regard to loans made for the purposes of private partner.
ships, The usury laws have been repealed, and though at
the time of their repeal it was not foreseen how that measure
could affect private partnerships, it is, nevertheless, very cer-
tain that it has altered very materially the position of persons
making advances to partners by way of loans guaranteed
upon a share of the profits. Mr. Baron Bramwell, who enjoys
a high reputation as a political economist, but whose au-
thority as a lawyer—I may say it without disparagement to
bim—is still higher,• gave in his evidence before the Mercan-
tile Law Commissioners an opinion which is well deserving
of our attentive consideration, That opinion is to the effect
that, as the law at present stands, it is competent for any
person to lend money to a private partnership, reserving
as a guarantee for repayment the right of demanding interest
at the rate of, it might be, 50 per cent., which was to be con-
sidered as a penalty ; the agreement being that the right to
such interest should notbe enforced in case the creditor should
be paid a rateable share of profits for his loan. This opinion
of Mr. Baron Bramwell coincides with one *delivered by Lord
Eldou, both those distinguished judges concurring in the
view that, as the lawat present stands, it is possible for a cre-
ditor to lend money to a private partnership, reserving to
himself a share of the profits by way of interest. It is
not the intention of the government to diminish the
powers and abilities which persons already enjoy in that
respect. We take the question as it stands, and desire
rather to enlarge and enable than to contract and to
restrict. It remains to be seen what is the proper manner
in which to deal with this question cf private partnerships.
One method would be to carry the present law of limited lia-
bility into these partnerships, and to say to any number of
persons, however small—even to one, and there could not
be a much smaller number than that—that he or they shall
be entitled to be formed into a corporation, and to enjoy, as
such, the privilege of limited liability. To that proposition I
am not disposal to accede, and for this reason, that it ap-
pears to me that there is something incompatible and incon-
sistent between the character of a man acting as a principal
in trade, and that of a person who is a corporator, and whose
liability, as such, is limited Seeing that there is no parti-
cular demand for .this extension of the law, and bearing in
mind that, even though it were adopted, it w erld be so
merely for the sake of a barren consistency and an idle uni-
formity, I do not think that it would be in any degree desire
able to decide the question by such a method as this. Nor
would it be advisable to adopt the law of commandik as it
is at present practised in France. It is not suited to our
habits, and its introduction would be tantamount to the
enactment of a new law of partnership. If we can remodel
the old law in such a manner as to adapt it to our wants and
usages, and to infuse into it the liberal principles of our
modern commercial system, we shall by so doing adopt a far
more judicious course than if we were to sweep away the
whole fabric and erect a new one in its place. (Hear.) Nei-
thershoald I wish to deal with partnerships merely by way of
legalising loans or making them the subject of special legisla.
tion. It is not any business of ours to favour one particuAr
method of dealing in preference to another. It is rather our
duty to act with strict impartiality as regards them all, and to
leave to every man in the community the option of deciding
for himself what is the best system on which to conduct his
affairs. I cannot but think that,-if we were to facilitate loans
to partnerships, wi hout at the same time giving to dormant
partners the power of limiting their liability, we should be
giving an undue preponderance to the loan system—(hear,
hear, hear)—and encouraging men to carry on their business
rather by means of temporary advances than by embark-
ing capital in the concern, and that thus we should be
throwing the weight of the Government into the wrong scale.
Into the question of whether it be or be not an improvident
practice to carry on business by means of loans I do not now
propose to enter, but I cannot think that it would be at
all advisable to facilitate the contract of loans unless you at
the same time provide that the advance of money or capital
on contract to share profit or loss shall not be held to make
the lender liable as a partner. (Hear.) In the present state
of the law the whole evil complained of as regards private
partnership resolves itself into this: that a dormant partner,
unknown te the creditor at the time of the contracting of the
debt. is made responsible to his last shilling or acre for a debt
for which he was not known at the time to be liable—(hear)
—and that property of his, on the strength of which not one
farthing had been advanced, is confiscated to satisfy the
claim of a person who when the transaction occurred knew
nothing of its existence, (Hear.) In reprobating this state
of things, I only echo the opinion of some of the most dis-
tinguished jurists, and among others of that eminent judge,
Mr. Justice Story, who concurs with other great legal autho-
rities in deploring the doctrine laid down in the case of
6' Waugh v. Carver." The bill which I now solicit the per-
mission of the house to lay upon the table will overrule the
judgment pronounced in that well known case—(hear)--and
proposes to provide that " the advance of capital or money
to be used in any trade or undertaking, not being the trade
of a banker, upon a contract with the person carrying on
such trade or. undertaking that the person making such
advance shall receive a share of the profits or shall bear a
share of the loss of the trade or undertaking, shall not of
itself render the person making such advance liable to
third parties as a partner in such trade or undertaking."
(Hear, hear.) By this means a man who bas embarked
a certain sum of money in a concern may become a dor-
mant partner for, certain purposes without .:involving
himself in the general liabilities of partnership. In fact.
with all that is most beneficial in the French commandite
project you will also have the advantages of a loan system,
conducted not in a eircuito
and intelligible manner ; andtes or ambiguous but in a direct
it will be practicable for any
partnership to raise money by way loan without making
the lender or the dormant partnerliable of
beyond the amount
of the money he may have advanced,We take things as
we find them, and while we propose
arore noseett
o regulate the liabilities
of lenders and borrowers, we
Wisdom or be understood as
propriety of
instances where it would beThere
p any
ronouncing nion as
either lending oropi borrowing to the
highly
an establishment by means of loans, and on the
etherere h
it ie quite possible that there may be cases where a p
increase of capital would be more injurious to a business tuleiat
a temporary advance. These are questions with Welsh we
have no concern. It is for us to allow men to conduct their
affairs on such principles as they shall themselves approve.
It is for us to observe an impartial demeanour, leaving to
every trader the option of determining on what system he
play think fit to manage his affairs, (Hear.) The bill also
contains a
clause providing that the remuneration of servants
or agents by a share of the profits shall not make them
partners. Bankers are omitted out of deference to the course
which has constituted them an excep-
of previous legislation,
l rule applicable to other companies. This
tion to the genera
omission is also made becausere
wemeilol not wish
of limited ishtoencumber a
question of this kind, /Oakh is one liability
with questions relating
to the banking
owni tradn te,eprtrlcyao,eannod
other kindred matters; although, for my
reason why bankers should not be treated
Having
nowhe samdisepomaaand-
ner as any other class of partners.
of all that I think it necessary to gay regarding. the
smaller bill, I next approach the subject of the
larger measure ; and hare I must beg that the honse
will
bear with use, because, although I shall endeavour to con_
dense my obsetvations as much as possible, yet the question
is 6141 Very complex in its nature that I cannot hope to render
myself intelligible to the committee without trespassing on
its attention for some little time, Now, the state of the law
relating to joint.stock companies is somewhat peculiar. It
seems to have been the misfortune of these bodies te be
sl ways legislated for by persons in a state of great excite-
ment. The first law of this kind, calla I the Bubble Act, was
/ussed during the first paroxysm produced by the bursting of
the memorable South Sea biibble, in the reign of George I.
Shakespere says—
" The earth has bubbles as the water has,
"And these aro of them
And so our legislators set to work to exode them ; and for
100 years the law of this country render d the formation of
joint.stock companies illegal, and a punishable offence. This
ja.•eliatelY relevant, but be-
I mention not because .t is
eau, the light which it throws 04 this matter dicta act as