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Amendment of the Company Laws.

The Committee appointed by the Board of Trade "to "inquire what amendments are necessary in the Acts "relating to joint-stock companies" have recently presented their Report.

The earlier sittings of the Committee were presided over by the present Lord Chancellor, Lord Loreburn, then Sir Robert T. Reid, G.C.M.G., K.C., M.P., until his acceptance of his present office, when the Board of Trade appointed Mr. C. M. Warmington, K.C., Chairman in his place.

The Committee have reported on all the questions to which their attention was specially directed by the Board of Trade, and many other questions which were submitted to the Committee.

The recommendations of the Committee will have the immediate and careful consideration of the Board of Trade.

Consolidation of the Companies Acts.

In anticipation of the recommendation of the Committee to that effect in their Report, the Board of Trade have caused a Bill to be drafted consolidating the Companies Acts, 1862 to 1900, viz. :-The Companies Act, 1862; the Companies Seals Act, 1864; the Companies Act, 1867; the Joint Stock Companies Arrangement Act, 1870; the Companies Act, 1877; the Companies Act, 1879; the Companies Act, 1880; the Companies (Colonial Registers) Act, 1883; the Companies Act, 1886; the Companies (Memorandum of Association) Act, 1890; the Companies (Winding-up) Act, 1890; the Directors' Liability Act, 1890; the Companies (Winding-up) Act, 1893; the Companies Act, 1898; and the Companies Act, 1900.

Table A.

Under the 71st section of the Companies Act, 1862, the Board of Trade are empowered to make such alterations as they deem requisite in the model set of articles of association contained in the first schedule to that Act, and known as Table A. No alteration has ever been made in Table A, which has consequently been without revision for over forty years, and has now become out of date and little adapted to modern requirements.

The Board of Trade, desiring to avail themselves of the varied business experience of the members of the abovementioned Committee, invited them to consider in what way Table A ought to be amended.

The revised Table A, which forms the schedule to the Report of the Committee, was drafted on the instructions of the Board of Trade by Mr. R. J. Parker and Mr. A. C. Clauson, and after revision by the Committee has been finally approved by them.

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(1) That every company of the class under consideration which may hereafter begin to carry on business in the United Kingdom should be required to deposit in Court a substantial sum of not less than £10,000, which shall not be paid out until a fund is set apart and secured for the bondholders amounting to double the sum deposited.

(2) That every such company shall be required annually to prepare a Revenue Account and Balance Sheet similar to that prescribed by the Life Assurance Companies Act, 1870, and once at least in every five years to cause an investigation to be made into its financial position by an actuary.

(3) That any system under which bonds are wholly or partially paid off before maturity, or advances are made without interest, according to a scheme founded on chance or lot, should be prohibited by law.

The result of the Report of the Committee has been to check the growth of new bond investment companies, and some of the existing companies have voluntarily conformed to the recommendations of the Committee with regard to prohibiting the redemption of bonds before maturity according to schemes founded on chance or lot. Nevertheless, a Bill has been prepared carrying out the whole of the recommendations made by the Committee, and has been introduced into Parliament.

I have the honour to be,

Sir,

Your obedient servant,

H. LLEWELLYN SMITH.

Board of Trade,

July 1906.

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The decrease in the amount of nominal capital registered, which was continuous from the year 1896 to the year 1904, has during the past year taken an upward turn, the total being £108,655,043, as compared with £83,914,688 in 1904. The gain is, however, very small as compared with the great losses shown in the earlier years of the decade. The number of companies registered during the year 1905 also shows an increase, the total of 3,967 being the largest number registered in any year since the outbreak of the South African War.

TABLE of the COMPANIES Registered in ENGLAND and WALES during the Years 1896 to 1905,
classified according to the Amount of their Nominal Capital.

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COMPARATIVE FIGURES relating to COMPANIES issuing and not issuing a Prospectus during the years
1901, 1902, 1903, 1904, and 1905.

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distributed among all the classes. If, however, the first year included in the table be compared with the last, it will be clear that a great change has taken place during the past ten years in the character of the companies registered. Speaking generally, small companies have taken the place of large companies, and the growth in number of those with the smallest capital has been most marked. For instance, companies with a capital of between £1,000 and £5,000 have increased very much, the respective numbers being 782 for the year 1896 and 1,260 for the year 1905. On the other hand, a very marked decline is shown in the companies having a capital of between £100,000 and £200,000 and in those with a capital of between £200,000 and £300,000, the number of the former class registered in the year 1905 being 176, as against 562 registered in 1896, and in the latter class the number is only 49 for the year 1905, as compared with 190 for the year 1896.

During recent years the diminishing use of the prospectus has been from time to time pointed out in the Annual Report to the Board of Trade.

The most marked decrease took place in 1902, in which year the capital of companies issuing a prospectus fell from £48,676,500 to £26,753,544, and the percentage which the capital of such companies bore to the total capital fell from 35.41 to 18.14 per cent. The decrease continued through 1903 and 1904, the percentage of capital in the latter year being only 15.25 per cent., and the nominal capital of companies issuing a prospectus in that year being only £12,798,795. The figures for 1905 afford some indication that the tide is turning, the percentage of capital being 19.03 per cent., a higher percentage than that for any year since 1901.

The revival of the use of the prospectus is made more clear by the figures below, which have been supplied by the Secretary of the Stock Exchange Committee with regard to the companies with and without a prospectus respectively, which have come before the Committee for special settlement during each period of six months for the past six years. In the second half of the year 1900, with which the table begins and which was the period immediately before the Companies Act, 1900, came into operation, companies with a prospectus were more than twice as numerous as those without a prospectus. In the first half of 1904 the converse was the case, the companies without a prospectus being more than twice as numerous as those with a prospectus. The figures for the first six months of the current year show a return to almost exactly the same proportions which obtained in the second half of 1900, the percentage of companies without a prospectus being 30 for the first six months of the current year, and 31 per cent. for the second half of the year 1900.

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The figures in the last column of this table seem to show that some cause or combination of causes came into existence about the beginning of 1901 which put a check on the issue of prospectuses and that these causes have now, at least temporarily, died away. The reason for the diminution in the number of prospectuses has been much discussed during the past few years, and has been commonly attributed to the operation of the 10th section of the Companies Act, 1900. This section imposed stringent regulations on the contents of prospectuses in order that full disclosure of all material facts should be made for the benefit of intending investors, and there is no doubt but that this section had the effect of making business men hesitate to allow their names to appear on prospectuses. But the provisions of the Companies Act, 1900, cannot have been the sole reason why promoters preferred for some years to launch new ventures without the aid of a prospectus, for the provisions of the Act of 1900 have not been altered in any way, and yet the proportion of companies now being issued with a prospectus seems to be practically identical with the proportion which was exist

ing during the period immediately before the Act of 1900

came into operation.

It is therefore necessary to find some other cause for the decrease in number of prospectuses other than the Act of 1900, and probably the most powerful cause may be found in the scarcity of money for investment and for new ventures during the past four years, owing to the increase of national and local expenditure and to the heavy loans raised in 1901 and 1902 for war purposes. The scarcity of money for investment which undoubtedly existed naturally increased the risk of the promoter endeavouring to launch a new venture, and consequently he was inclined to adopt a course which caused him the least outlay in the event of failure. By "introducing" the shares of a company on the Stock Exchange, and selling them there, he avoided the

certain cost of circulating the prospectus and of advertisement, though doubtless he was not free from expenses in other directions.

Registration of Companies Abroad. Though it is impossible to obtain any comparative figures on the subject, it may be stated as a fact that many companies secking their capital in England are effecting registration outside. This is especially the case with companies formed to carry out some enterprise in one of the Colonies. Such companies now frequently register themselves under the laws of the Colony in which they are going to carry on their business. At first sight it would seem difficult to take exception to such a course, but the practice is not without serious disadvantage to the English investor. Each of the Colonies has different laws relating to joint-stock companies, and though in some Colonies the company laws closely follow those of this country, in others they afford less protection to the investor.

All Colonial companies registered with limited liability use the word "limited" at the end of the name, as in this country, and it is not possible to distinguish a company registered, say, in Rhodesia and under Rhodesian company law from one registered in England. The Report of the Company Law Amendment Committee suggests on this point that a company using the word "limited" should, in any prospectus inviting subscriptions in the United Kingdom, state the company's place of origin, and should, when carrying on business in the United Kingdom, be compelled to put up its name with the place of its origin on its business premises.

Guernsey Companies.

The practice of registering companies in the island of Guernsey, which began in the year 1902, appears to be on the wane. The figures which have been supplied by His Majesty's Greffier for Guernsey showed a heavy decline in the registrations of 1904 as compared with those of the preceding year. A still more marked decline is showed for the year 1905 as compared with 1904, and the figures for the first six months of the current year show a reduction to a negligible quantity.

The figures relating to registrations in Guernsey are as follows:

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be wound up compulsorily during the year 1905 was, as stated above, 89, of which 56 were ordered to be wound up in the High Court, and the remaining 33 in the Palatine and various County Courts. A complete list of these companies appears in Table VIII. attached to this Report.

The average duration of life of these companies was 4.72 years; one of the companies had existed for 55 years, two for 22 years, while 13 had been registered less than one year before the winding-up.

A few of the companies ordered by the Court to be wound up have been selected below, and some details given of the result of the inquiries made by the Official Receivers as helping to throw some light on the working of the Companies Acts at present in force.

In many respects, and certainly so far as the number of persons interested is concerned, the most important failure of the year is that of Nelson & Company, Lim., which was registered in 1901, with a nominal capital of £101,000, its object being to acquire and continue the business of a tea dealer then being carried on by Rasmus Jensen, at Louth and elsewhere, under the style of Nelson & Co. About three years previously Jensen had launched a scheme by which he offered pensions of 10s. and 5s. a week to such of his customers who should become widows after having bought from him for a certain period half-pound or quarter-pound of tea every week at a price considerably above the market price. This attempt to combine a system of insurance with the sale of an article of general consumption rapidly achieved Jensen's primary object, which was to increase the sales of his tea and thus increase his profits. This object appears to have outweighed any serious considerations as to the soundness or otherwise of the scheme, and since the benefits offered were characterised by a liberality out of all reasonable proportion to the excess price placed upon the tea, the scheme attracted the notice of a large section of the public-principally of the poorer class-who were thereby induced to become regular customers. In 1901 the Board of Trade succeeded in securing the deposit of £20,000 in compliance with the Life Assurance Companies Act, 1870. The present company was formed immediately after the deposit of £20,000 was made, and although it was pretended that the life assurance part of Jensen's business was excluded from the business taken over by the company, there was no such exclusion in fact. The insurance scheme inaugurated by Jensen was continued by the company, with the addition of an important clause in the contract between the company and its customers, the terms of which were printed on cards supplied to each customer. This clause was to the effect that the pensions of ros. and 5s. per week were to be paid rateably out of 75 per cent. of the net profits on tea, and all further liability on the part of the company was

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