Amendment proposed, in page 43, line 18, at end, insert:
"(3) Where an application for an investigation under this Section with respect to particular shares or debentures of a company is made to the Board of Trade by members of the company, and the number of applicants or the amount of the shares held by them is not less than that required for an application for the appointment of an inspector under Section one hundred and thirty-five of the principal Act, the Board of Trade shall appoint an inspector to conduct the investigation, unless they are satisfied that the application is vexatious, and the inspector's appointment shall not exclude from the scope of his investigation any matter which the application seeks to have included therein, except in so far as the Board of Trade are satisfied that it is unreasonable for that matter to be investigated."—[Sir Stafford Cripps.]
Question again proposed, "That those words be there inserted."
When the Committee came to the end of its Business at 4 o'clock on Friday last, I had been speaking rather critically about the Government's new Amendment dealing with the question of nominee shareholders, I am sure the Committee is well aware of the fact that there is nothing illegal in my being on a share register, holding shares in the name of some undisclosed person. I first of all challenged that conception as being an honest and clean one for a public company. I feel that on the whole, the people who do hold shares as nominees are very likely to be doing it for some reason or motive which is not disclosed, and not disclosed for some purpose. I feel that we should tonight make the Government withdraw the new Subsection that has been moved.This proposal provides that if 10 per cent. of the shareholders ask the Board of Trade to have an inquiry into a certain nominee shareholding, then the Board of Trade will carry that out unless it is satisfied that the inquiry is a vexatious one. Anybody who has had any experience of big companies knows perfectly well that to organise 10 per cent. of the shareholders of any company is a very difficult thing to do, and as I was saying on Friday—I rather used it as a guess; I am not quite sure whether my facts are right, but I have been told on very good authority—only about 5 per cent. of the shares of that famous firm, Carreras—Black Cat cigarettes and so on—are owned by the Baron family and the rest are owned by lots of other people. Nevertheless, I am also told—I give this in good faith—that that 5 per cent. shareholding in the hands of the one family, is sufficient to keep control of the policy of that company. The Board of Trade talks about 10 per cent. of the shareholding getting together. I, first of all, submit to the Minister that it is almost an impossibility to organise 10 per cent. of the shareholders in any big company. Therefore, the offer the Government are making to meet the position in this case is one that will not satisfy me, and I do not think it will satisfy any of my hon. Friends. The Government were beaten in the Committee upstairs, not on this proposal but on the same general idea in relation to nominee shareholdings. A similar opinion exists today. I hope it is not a party matter. In the Standing Committee I think the Conservative Members voted for the Government not because the Government put forward any reason but presumably because they felt things might as well stay as they are. The allegation made by the President of the Board of Trade, and made also, I think, by the Lord Chancellor in another place and by my hon. Friend the Parliamentary Secretary to the Board of Trade, was that it was impossible to stop men who were determined to break the law in this respect because they would always get round it. We legislate a lot and we know that there are always people who are liable to try to break the law and who often succeed. Everybody has to make an Income Tax Return. In other words, he has to disclose to the Inland Revenue authorities every source of his income. We have had Income Tax law for about 100 years, and every year we find that the Chancellor comes along with proposals to close loopholes discovered in the course of earlier experience. 10.15 P.m. I, therefore, argue that it is no excuse to say that this is too difficult and that there will be people clever enough, wrong minded enough, and anti-social enough to get round provisions relating to nominee shareholdings. That is not a good reason for not legislating. To my mind that is really quite unjustifiable. I said on Friday last that we do not like people murdering one another in this country, and we have a law that any person who is found guilty of murdering somebody else is hanged. Nevertheless, that does not stop murders being committed. The penalty is a pretty severe one, as severe as any I can think of at the moment, but it does not seem to be a big deterrent to a person who is out to murder somebody else. Then there is a law that, if you find something in the street, you can be found guilty of stealing by finding. That seems impossible to enforce but, nevertheless, it is the law. I am suggesting that here we have the register of the company, a copy of which is supplied to the Registrar of Companies each year, and every person who has his name on that share register must surely know whether he owns those shares beneficially or not. I am certain that every hon. Member of this Committee knows perfectly well that either he owns the shares in his own name on the register or that he does not. He may be holding them as a trustee for somebody else; all the same, he has to disclose in whose interests he is holding those shares. I should impose a penalty of 10 years' imprisonment on any shareholder who did not disclose the names and interests of any beneficial holding for which he was a nominee. In fact I see no reason at all for having nominee shareholders. Suppose I want to find out who owns the shares in a certain company, am I to be told by the President of the Board of Trade or his officers that my request for an inquiry is a vexatious one? Have I to tell them why I want it? This is a serious national problem and I think this Committee should take it seriously. We do not know now whether American capital dominates and controls our national industries. How on earth can any hon. Member opposite or on this side of the Committee explain to me whether, if you find on a share register as supplied to Somerset House, the Guaranty Trust Company of New York, for instance, holding a certain number of shares, they are holding them for American shareholders which is my guess, and are merely their nominees? Everybody in this Committee would be concerned if we found one day perhaps that our armaments industry was owned and controlled by foreign capital. We had some suspicions in the war before this one, and in the last one, about the control that I.G. Farben and other international companies had. Some really shady evidence came to light in the early part of this war and, after the previous war, I seem to remember an inquiry being set up by M. Briand which showed that a certain place in France, where there was production of iron ore, was used by the Germans and French in keeping the war going and was never bombed by the other country when the one was in occupation. That was discovered by a senatorial inquiry in France after the previous war, about 1931. This is the kind of way in which foreign control of industries in this country can be hidden from everyone, from the Government, from other shareholders in the concern, from the workers in the concern, and from men and women who in the next war will lay down their lives because this kind of thing has been going on. There is a very much bigger risk than appears on the face of it. The Government's only answer is the difficulty of enforcing the law. I think the penalty should be 10 years' imprisonment. All these technical difficulties could be got over. I am not at all impressed, after reading last Friday's Debate, by the difficulties which the Government are trying to put up against abolishing nominee shareholders. I feel strongly about this. Here is a matter on which the Government should think again. They should realise that there is a good deal of feeling, especially on this side of the Committee, that they have come to a wrong decision in trying to leave things as they are. There was a very interesting article on the subject in the "New Statesman" by my hon. and gallant Friend the Member for North Portsmouth (Major Bruce) last Friday, which all hon. Members should read. I am sorry if hon. Members opposite have not read it; they should do so, as they will find it very interesting. I ask the Committee, particularly hon. Members on this side, to listen to the reasons given from the Front Bench why this thing cannot be done, and to see if they are satisfied. If not, I ask my hon. Friends to oppose the Government on this Amendment.
The hon. Member for Nuneaton (Mr. Bowles) is under the illusion that my right hon. and hon. Friends wish to preserve the impenetrable mysteries of some nominee shareholders. I can assure him that he is altogether wrong. There was a time when we really believed it was possible to fulfil the original recommendations of the Cohen Report, and were it not for the fact that it was proved to be impossible, we would very much have liked to pass an enforceable law to deal with the abuses of the nominee system. I dare say the hon. Member is right in saying that there are a number of foreigners who hold shares in British companies. Whether that is a bad thing or not is open to question. At the moment we do not seem to be bitterly resisting the importation of American capital into this country. If one is to pass a law, it must be a law which will enable the ordinary citizen to know where he is in relation to the five closely printed pages dealing with the question of nominees which appeared in the original Bill. I am not a lawyer. I do not know if the hon. Member, with his superior legal qualities, can really understand the meaning of those five printed pages, but I do not think that most Members of the Committee could possibly do so. We must remember that people would be subjected to very severe penalties, either by fine or imprisonment, for not fulfilling something beyond the capacity of anything other than a really well-fee'd Chancery "silk."The hon. Member has given us his point of view on the practicability of carrying out the recommendation of the Cohen Report. We also have the advantage of the Lord Chancellor's opinion. It must be remembered that the Lord Chancellor started out originally with the intention of finding a form of words which could give practical effect to the recommendations of the Cohen Committee, but he confessed in another place that having put a wet towel round his head, and spent a great deal of time on the problem, he could find no solution. He said it was impossible to draft such a law. Lord Simonds, who is certainly one of the greatest commercial lawyers, agreed with the Lord Chancellor, and the President of the Board of Trade, who is no mean commercial lawyer, agreed with both. I do not think I am incorrect when I say that most of the eminent practising accountants and commercial lawyers support the President of the Board of Trade and the Lord Chancellor. In their view it is utterly impossible to produce an enforceable law which will fulfil the recommendations of the Cohen Committee.
I do not find that tip-top K.C's are necessarily the best draftsman of Clauses of Bills. It is a very specialised job, and I do not think that my right hon. and learned Friend the President of the Board of Trade pretends to be a draftsman, any more than does the Lord Chancellor or Lord Simonds.
I am not making any claim for the Lord Chancellor or for Lord Simonds as a draftsman and I would certainly not have the hardihood to make such a statement in respect of the President of the Board of Trade. I dare say that in their day, possibly, all these eminent lawyers have differed from the draftsmen of Measures passed in this House. I am now speaking of their reputation as commercial lawyers, and I am also touching on the coincidence that most of the accountancy profession, and lawyers who deal with commercial matters, and all reputable business men, equally agree with the President of the Board of Trade. Sometimes the President may feel that he is misunderstood by what are called business tycoons, but I can assure him that on this occasion, they are bound to be in melancholy agreement with his view that it is impossible to do what the hon. Member for Nuneaton wants us to do. So I say to the hon. Member, in no party spirit—as he rightly says there is no party matter here—perhaps he will forgive us for disagreeing with him on this occasion.10.30 p.m. Another practical point upon which I should like to touch is that, apart from the burden which the nominee Clauses which have been struck out of the original Bill, would have laid upon many of our innocent fellow citizens, who know nothing of company law, heavy burdens would also have been laid upon important sections of the community if the Government had not had such wise second thoughts. I ask the hon. Gentleman to consider the real responsibility, the impossible responsibility that would have rested upon thousands of trustees; who are gentleman who perform a most ungrateful task. Unlike lawyers and accoun- tants, they are not remunerated. There are many circumstances arising in which trustees might have put themselves in a position in which they might have received heavy punishment for quite unconscious breaches of the law, if the original Clauses had remained in the Bill. There is another point I wish to put to the Committee. Today most businesses are understaffed. We are constantly being told by the Minister that it is impossible to get staff, that it is impossible to get typists, and that even Government Departments have to ration themselves in this matter. What would be the effect of the Bill on thousands of office staffs today? It has been said that it is possible to go to Bush House and place before the Registrar a list of shareholders. With that I quite agree, but there are thousands of companies, with lists of shareholders running into 10,000 or 20,000. I know of one company which has over 200,000 shareholders. Just think of the burden on the hard-working officials and staff of the Board of Trade who would have to discover whether one of these shareholders had broken the law.
I should like to see the onus placed on the shareholder and not on the secretary of the company. I was a trustee and I believe that I still am.
Is the hon. Gentleman suggesting that the Board of Trade officials should make no attempt to enforce the law? If we leave it to any citizen of the country to do what should be done, with Government Departments making no attempt to fulfil the law, what state shall we be in? The President of the Board of Trade has offered, I submit, the best practicable working solution to this problem. It is not perfect, but I am sure that he and his officials will really take these powers with the intention of working them, and on this occasion I ask the Committee to support the right hon. Gentleman. I can see no alternative and in my humble way I honestly believe these powers will be thoroughly effective in carrying out what I am sure are the wishes of the House.
Those hon. Members who were present at the Debate on Friday last will presume that I was not at one with the hon. Member for Nuneaton (Mr. Bowles). This is not the case. I join with him in that if this proposal could be implemented every hon. Member would want to see it in the Bill Unfortunately, Clause 69 was inserted during the Committee stage upstairs, when I was away ill. When this Bill goes on the Statute Book, the obligation will then be upon the Board of Trade to enforce it, and all the arguments in the Committee stage by the hon. Member did not deal with whether it would be possible to enforce this particular Clause. I should have liked to hear from my hon. Friend the Member for Nuneaton how he proposed to see that this should be effected.
All right. I went to Somerset House last week to inspect the names of shareholders in a company. There is no secret about it; it was the Equity Trust Company of New York. I am perfectly certain they are holding shares on behalf of somebody else. Under the procedure I should report to the Director of Public Prosecutions that these people have not disclosed the shares held as nominees and I should lay information.
No one is denying that the situation is complicated. Since the inception of the principle of limited liability as a workable basis for collaborative investment it has been established that industrial expansion must by its very nature, lead to a complex system of inter-financial relationships. These have grown up over many years and what my hon. Friends must realise is that it is not easy to sort them out, but it does not mean necessarily that where it is difficult to ascertain without investigation the actual beneficial owners of an undertaking that there is something shady in the administration of the affairs of that company.I propose to give some further practical examples as to the inoperative nature of Clause 69. I will not take up time by dilating upon the difficulties of implementing it which were mentioned by the President of the Board of Trade on Friday. Take the example of a woman whose husband dies leaving her £1,000. She may wish to make an investment of that £1,000, and if I were asked to advise her I would refer her to a reputable investment trust to make that investment on her behalf. She may be quite incapable of deciding herself the best investment to make in her own interests. Another example is that of companies which run pension funds. Very often one finds that 5 per cent. is deducted from the wages of every worker, and the company adds a further 5 per cent. to the fund. Usually there are two trustees chosen from among the employers and two from the workers. The money is invested by the trustees in a number of companies. There may be 10,000 workers in this company's fund. The trustees may invest that sum of money in one hundred different companies. If hon. Members look at Clause 69 it will be seen that there is provision for inclusion in the register of members of the names and addresses of all persons who are beneficial owners in any or all of the shares set down in the name of the registered owner. That means that there would have to be a million insertions in the registers of these companies in which the trustees had invested in order to implement this Clause, as every worker would be a beneficial owner of part of the trustees. No one will suggest that this is a practical proposition.
On the question of superannuation, and the investment of companies' pension funds, no reputable firm invests in anything other than Government stock.
I am sorry, but I cannot accept that. Most reputable organisations, including Co-operative societies, make investments in ordinary commercial stocks.
May. I inform the hon. Member that there is no such thing as a Co-operative society which invests its superannuation fund in anything but Government stock.
I do not want to go into details——
I must say that I have investigated the position, and the hon. Member will find that I am quite right.
You are not.
I shall leave that point and deal with another. I believe the hon. Member will agree that many investments are made by banks as nominees. People have not always the time to arrange their own investments. It is quite a common thing for a person having money he wishes to invest to ring up a bank and to ask the manager to purchase shares. On his behalf the shares are purchased, through the bank's nominee company, and the customer's account is debited. There is nothing wrong with that at all. I am sure the hon. Member for Nuneaton (Mr. Bowles) will agree with that. Would he say that in every case of that kind it should be necessary for the bank to register who are the beneficent holders of the shares?
The customer could have the shares transferred to him direct.
I maintain that it is better to have no legislation at all than to have half-baked legislation—[Interruption.] I want to assure those of my hon. Friends who hold the view that beneficial ownership should be disclosed that I am with them 100 per cent. in their desire. But destructive criticism will get us nowhere. What we need is' a practical proposal as to how it can be effected, and that has not been forthcoming. In the absence of any such proposal, the Clause must be deleted from the Bill and we must rely upon the other safeguards which remain.
The hon. Member has made a good working class speech. I have never heard anything in my life like some of the arguments put forward tonight. We have a law against forgery. Every man in this House can write, but that does not mean that because people can write we have a policeman waiting to see why they are writing, that they do not commit forgery. If anyone commits forgery, if it is a cheque, the bank reports the matter to the police and the police take steps to bring the offender to court. A man who has his house burgled brings the matter to the attention of the police and the police go after the burglar. But what is suggested in some directions is tantamount to saying that you are going to make the police go round the whole country to see if there are any burglars.The hon. Member says that it is an offence to have a nominee shareholder hiding real shareholders. Either it is an offence, or it is not an offence. If it is an offence, say it is an offence, and say that it is punishable by this, that or the other thing. It is not for the President of the Board of Trade to go examining all this evidence. But the hon. Member says that if someone connected with the company, or interested in it, makes an inquiry and is convinced that an offence has been committed, he will report it to the President of the Board of Trade. What the Members of this Committee have to face is the one question—is this something that is undesirable, is it an offence? All right; put in the Act that it is an offence and that anyone who commits it will be punished accordingly. Leave it to those who are interested in a particular business to watch out, and if they find anyone committing a particular offence, be it a bank, in connection with a forgery, or a man at whose house there has been a burglary, let it be reported to the Director of Public Prosecutions or the Board of Trade—[Interruption.] It is a responsible business from the Tory point of view but it is not a responsible business from the working man's point of view, and we will protect the workers.
I hope that we are going to discuss this matter calmly and certainly without prejudice. The question seems to me to be: what is the practical issue here? It is that if the system of nominees has resulted in dishonesty or malpractices, and you can find a remedy for it, then it is right that it should be done away with, or at all events, carefully restricted. If, on the other hand, it is of such a nature that you cannot effectively remedy what is said to be objectionable, and you are only going to inflict upon honest staffs an unjustifiable burden and give the companies staffs, especially under present difficulties, a prodigous amount of work, then I do not think the proposal of my hon. Friend the Member for Nuneaton (Mr. Bowles) should be adopted. I was very interested in what my hon. Friend (Mr. Bowles) said about the American company he was quoting. His complaint, as I understood it, was that you might have a body of American investors or financiers who come to this country to start or invest in a business. I want to ask him this question: does he disagree with Americans doing that, assuming there is no improper motive? Or does he object to American capital coming into this country at all to be invested in companies or otherwise? If he says there is anything wrong about such a procedure, will he tell us what it is? If the hon. Member had come to this House and made a disclosure that that particular American company he mentioned had been indulging in fraudulent practices or had wrongful, motives, or that there was a likelihood of a suspicion or objection arising against the company or its proceedings, that would be an entirely different matter. He has not done so.
Let me develop the point. Suppose there was some ground for suspicion or some reason to inquire into the position of that particular company. It seems to me that the Amendment which the President of the Board of Trade is submitting is the very machinery that is designed to cover and will cover that case precisely. All that would have to be done would be this. You would have to go to the Board of Trade and say: I have some reasonable ground for saying that there is, or I suspect on good grounds that there is, a state of affairs going on in connection with this particular company or their shareholdings which is not right and which should be investigated. Thereupon, the Board- of Trade has the fullest possible powers to, and indeed must, inquire into that matter. So that at all events, as far as that case goes, there is nothing to be gained by the disclosure of nominees. Assuming, however, a case where there is nothing wrong, then there is no reason why some trustee or some other person should not be holding the shares as a nominee without what is called the "beneficial owner" being disclosed.
If my hon. and learned Friend will allow me, my point is this: I am suspicious that the Scotch whisky distillers in this country are controlled by Americans. I have tried to find out the details but I have not been able to; but they are the people who have control, and if they can persuade the Government what is the price at which Scotch whisky, which is a staple export, can only be sold in the United States, then I want to know exactly what the American holding is.
My hon. Friend does not improve his case by that point at all; he is not adding anything of substance to it. All you have to do to ascertain if there are Americans concerned is to investigate the matter, and the Presi- dent of the Board of Trade has full power in this Amendment to do that. I say to my hon. Friend that this question of nominees does not carry his point any further at all. I always thought that the reason for wanting a disclosure of nominees was that the co-adventurer in a business concern should know who his associates in the business were, or who was controlling the company. It has been shown by the most expert and experienced evidence that that is just where you get defeated if you are in fact dealing with dishonest persons who do not intend to be revealed because of some wrongful motive. That is obviously not wanted in the case of the ordinary trustee who is perfectly honest and who is acting on behalf of some estate. There is no point in having the information there. The mere fact that the Board of Trade might get to know who the fortunate beneficiary is does not matter one iota. That is not the sort of thing that is wanted at all.
Will the hon. and learned Member allow me?
No, I will not. It has been found time and time again, that where one is dealing with these decent straightforward people one gets all the information that is wanted. The matters being complained of are really being exaggerated out of all proportion with the facts. Out of no more than 72,456 holdings only 6 per cent. were shown to be unidentified. And that does not mean even that that proportion consists entirely of persons with wrongful motives for not wanting disclosure. That is important in connection with this provision to abolish the nominee system. I repeat, the whole of the shareholding in this particular respect, with the exception of this 6 per cent., under the present arrangement, was completely identified. Therefore, in my submission this matter has been greatly exaggerated.The only question is whether in this portion of about 6 per cent there are cases which ought to be dealt with by means of the proposed disclosure. It has been proved over and over again by eminent accountants and people greatly experienced in company work, that this is a thing which cannot be dealt with, because the people you want to track always find some means of evading the disclosure. If that is the case, what will be the result? There will only be a disclosure in the case of honest people. There are 180,000 companies in this country, and there are thousands upon thousands of shareholding people. Are we going to impose upon these people the useless task of making these disclosures, and upon the companies the prodigious task of dealing with the register under those changed circumstances? If that is proposed I would ask again, what benefit is obtained from it? There is merely going to be information about honest people which will be of no practical use whatever. There is a further point which I should like to put to my right hon. and learned Friend the President of the Board of Trade. It looks as if it is suggested that the Amendment only enables an inquiry to be made if 10 per cent. of the shareholding or 200 of the shareholders ask for such an inquiry. The Board of Trade can agree to it then, provided it is not vexatious. I want to ask if that is so what has the proportion of capital or members to do with that? If it is vexatious, then the application ought not to be allowed, and if it is not vexatious, the question of the shareholders' strength supporting the application ought to have nothing to do with the matter at all. It seems to me if that is the rule, then as my hon. Friend the Member for Nuneaton pointed out in connection with the firm of Carreras, there might be a proportion of the shareholding which does not amount to 10 per cent., where although there may be very solid reasons for asking the Board of Trade to make an inquiry, they are prevented from so doing merely because they cannot muster the number of persons or shares required. There is one final point. The hon. Member says he wants to know who are the beneficial owners of these shares—but would he give us a definition of "beneficial owners"? Does he mean that it must be, for instance, what the Bill of Sales Act calls the "true owner"—which he knows is the term used in the case of a bill of sale? What precisely does the term "beneficial owner" mean in this context? A mortgagee or trustee may be a "beneficial owner," and yet that would not satisfy my hon. Friend at all, because the very man that he wants to get at may use that very device in order to prevent the required information being given. He has given the House no explanation of this important point. As I have said, this is a matter which ought not to be looked at with prejudice. I can understand Members on this side having the feeling that there are certain dishonest directors who have taken advantage of "inside" knowledge. That may be so in certain cases, but there is very much more in this matter than that.
The hon. Member said a little while ago that he had one final point. Can he tell us how many subsections that final point has?
My submission, therefore, is that the enormous amount of work that this would involve is far beyond any advantage that could possibly be from it.
This Amendment puts many Members on this side in a rather unfortunate position. On its own merits, the first Amendment on the Paper is a perfectly good one which I myself am prepared to support. It does strengthen the powers of inspection in a way that many of us on both sides of the Committee agree with, therefore, there is little between us on that. But we are discussing with this Amendment the whole question of Clause 69. Here again I am bound to disappoint some of my Friends by saying immediately that I do not think that Clause 69 is either a basis for, or a satisfactory way of dealing with, the whole question of nominee shareholders.If I had my way, I would prefer to see Clauses 57 to 62 of the original Bill retained—however unworkable they may have seemed. It is common ground on both sides of the Committee that if a satisfactory method could be devised which was enforceable in law whereby nominee shareholders could be required to disclose their interests, then there would be little difficulty in the matter. The issue which rests between us is the question of practicability. I want to demonstrate how far both sides of the Committee have got together. In the original Cohen Committee Report there were set out in the recommendations some fair definition of what, in fact, were beneficial ownerships. The right hon. and learned Gentleman the President of the Board of Trade, in the Debate on Friday, and to some extent in the Committee upstairs, gave several other instances which tended to vitiate the effect of the draft clauses as set out in the Cohen Report, and I have no doubt that the Lord Chancellor thought of some more. The Cohen Committee, in its report, gave a definition of beneficial ownership, and recommendations were set out in Clause 58 in the original Bill. Given a little ingenuity by the President of the Board of Trade and his legal advisers, I do not think it would have been impossible to provide a definition of what constituted a beneficial owner. The difficulty lay entirely in the question of enforceability. So far, these principles have been agreed. It has been agreed on both sides that if you can define beneficial ownership, beneficial ownerships should be registered in the register of members by means of a separate subdivision. It is also agreed on both sides that such information, if the registration of it were practicable, would be reproduced in the Joint Stock Companies' Registries in London and Edinburgh. What did both sides agree when they decided that this course, at any rate was practicable? The first thing they decided was that this beneficial ownership, if it could be satisfactorily defined, should be available to the general public. But that does not mean—and no one in the Committee would imagine it—that everyone of the population of 49 millions in this country would immediately be swarming round the registers of the joint stock companies in London and Edinburgh. In effect and practice, the information would be available to those pepole who want to inquire at the registries. That would include the shareholders and directors of the company and of other companies. It would possibly include the trade union leaders who want to find out the affairs of companies in which they are interested. They would include a certain number of other people who need information for purposes of research, and also the curious persons who might be described by the right hon. Gentleman the Member for Bournemouth (Mr. Bracken) as professional agitators. All this is on the assumption that the matter is capable of definition by the President of the Board of Trade, and his advisers, or any other legal adviser of the Government or right hon. Gentlemen opposite. What have we agreed? We have agreed on a fundamental violation of the privacy of the individual because what we are saying is that where beneficial ownership does in fact occur, then these various interested parties shall be entitled to this information. I suggest we have probably gone the wrong way about it by too slavish an imitation of the recommendations of the Cohen Report. The right hon. Gentleman the Member for Bournemouth is quite correct when he says that the bulk of the legal profession and the bulk of the profession to which I belong have already agreed that the specific recommendations on the Cohen Report are impracticable. Has it occurred to the President of the Board of Trade that there is another solution to this problem outside the recommendation of the Cohen Report? This is the solution I desire to present to the Committee for its consideration. It is quite clear that if this Committee were disposed to agree in principle to the scheme I outline, it may be possible to benefit that body of legal opinion and public opinion which is concerned. I should have thought it possible—and it would not have violated the sacred conception of privacy—if every registered holder of a share or shares were required on the rendering to him by an interested party of a request in a proper form, which could be drawn up by the President of the Board of Trade—to disclose to that individual whether he was a beneficial owner or not, and if he were not, then who the beneficial owner was in fact, and that the form itself should contain a definition as to what a beneficial owner consisted of; and a time limit should be given for the rendition of that information. The person requiring the information should pay a fee of, say 10s., to the person from whom he requires it, to avoid purely vexatious and frivolous applications. This seems to me to be a way in which this can be done. After all, the people who get information are the people who want information. They are the very people who would normally look it up in the files at Somerset House. The sole question which arises, therefore, is whether or not it is possible to find a definition of "beneficial ownership." If it is not possible to develop a definition here in this Committee—I do not think this should defeat the ingenuity of the President of the Board of Trade—for it would be quite impossible otherwise for my right hon. and learned Friend to impose the provisions of Clause 46 of the Bill, because before he can enforce them he has to make up his mind departmentally what "beneficial ownership" consists of and the particular or undesirable things which he wishes to exclude. If he can do this, I say it is capable of being reduced to writing, and if it is capable of being reduced to writing it is capable of being printed on the back of a form in such a way that any person requiring the disclosure and the individual whose shares may be held beneficially or otherwise would both be satisfied—all parties would be satisfied.
Sir Thomas Moore.
I rose on a point of Order.
I have already called upon Sir Thomas Moore.
On a point of Order. I was in the process of performing a normal, customary act in this House of giving way to another hon. Member. Do I understand that I am now debarred from going further?
I must apologise to the hon. and gallant Member. I thought he had finished his speech. The hon. Member may continue.
Am I to understand from the hon. and gallant Member that if I am the registered owner of shares and one thousand people write to me to disclose beneficial ownership, that I would be legally bound to do so?
Provided the hon. Member had been paid ten shillings a time by each of the thousand, and if they did that, I think he would find the proceeds of sufficient dimension to compensate him for his trouble. I am putting forward this suggestion in no spirit of frivolity. It might be that in my rather quick rate of diction and probably the legal complexities of my remarks, I may not have carried all hon. Members with me. But the point is quite seriously made and I trust that each hon. Member will consider it as a means of elucidating the problem, because, I readily admit that Clause 69 is not a good Clause, and I would not like as an accountant to be held partly responsible for putting it on the Statute Book. The onus still lies on the Government to take every step to solve this nominee problem, and I do submit to those who sit on these Benches and the legal luminaries that they ought to examine the method I have outlined with a view to seeing whether or not it is possible to do anything about it in another place.
Now peace has been restored on the opposite side of the Committee, I hope the Committee will bear with me for a few minutes at so hot and late an hour while I refer to an incident which took place in Committee, and which was really the beginning of all this bother. At the same time, I will put forward an argument which I hope will destroy the dislike of certain members for nominee shareholding. Some days ago the hon. Member for South Cardiff (Mr. Callaghan) was good enough to give me the advice or warning that he was going to raise the subject in Committee of a company with which I am associated, and also in a slightly dramatic and slightly sensational way he referred to a mysterious lady. I was not on the Committee and his advice or warning was not very helpful. Further, he did not advise me why he was choosing "World's Press News"—although it is attracting attention for other reasons—and the companies with which I was associated, to make these analytical studies at Somerset House.It really does not matter very much because there is nothing to be ashamed of, or anything to be concealed; but as certain newspapers have since taken up his remarks and made some unwise and unjustified comments on them, I feel that in ordinary justice to myself and my colleagues I should make these few words of explanation. It is just like a pebble thrown into a pond. It always makes ripples. Therefore the insinuations inferred by the hon. Gentleman may well leave doubts in the minds of Members which I think I should remove. I thought you were poised on the ball of your foot Mr. Deputy-Chairman, and I was wondering what Rule I had disregarded.
I am wondering how far what the hon. and gallant Gentle- man is saying has relation to the Amendment.
The Amendment describes how the nominee shareholder is to be done away with. The hon. Member for South Cardiff introduced this Amendment in Committee, which has now been reversed by the President of the Board of Trade. That is my point, and I will proceed to demonstrate that the basis on which the hon. Member for South Cardiff made his charges is without foundation. The company referred to, the "World's Press News," has 1,700-odd shares, one-fifth of which are held by the directors and four-fifths held by another company which the hon. Member mentioned in the course of this investigation—the Weymouth Press, brought into existence to publish certain journals irrespective of the "World's Press News." The Weymouth Press which was referred to and was the basis of this charge, is entirely owned by Hatchards Associated Industries with which this charge is now definitely associated. The hon. Member stated that certain people, including a mysterious lady held certain shares.
The hon. Member is now making a detailed account of the history of this affair; I understand he was arguing on the Amendment, and he should now come down to his argument.
I am trying to make it clear that the hon. Member for South Cardiff stated there was a mysterious lady who was a nominee shareholder who received an issue of £50,000 worth of shares which was decided at a board meeting in June. That is the basis of this charge. Who is this mysterious woman whose name no one could find out?
I have not heard about this mysterious lady. Will the hon. and gallant Member state what this has to do with the Amendment under discussion?
If the Committee will bear with me for one or two more sentences, I think I can clear up the mystery. It was decided at a board meeting of this company—it may be amusing for Members opposite, but the mysterious lady——
The mysterious lady is waiting for you outside.
I must remind the hon. and gallant Member that he may argue for or against the Amendment, but he may not give an elaborate history of what happened on an occasion of which we have no power to judge.
I do not think you have given me the opportunity to set out——
I rather think I have given the hon. and gallant Member too much opportunity.
Although this matter seems to have aroused vast hilarity on the other side of the Committee, it does affect the character I have tried to build up over many years past. The hon. Member charges me and those associated with me of being guilty of conduct which may appear gravely suspicious to the world outside. The mere fact that it was referred to by two national newspapers in rather derogatory terms, surely means that I have the right to defend myself against improper allegations. I was only going to say, and I want to finish my remarks on my original point, that when this issue was raised there were many applications for these shares, but the names of those taking them up were not readily available at the time.
I have been very lenient to the hon. and gallant Member, and I cannot understand whether he is supporting or opposing the Clause.
I am supporting the Government, but I am also pointing out that these particular shares were put into the name of a nominee until the names and addresses of the shareholders could be given. What other process could have been adopted? As soon as the names and addresses were known, they were published and the normal allocation took place. So much for nominee shareholders which the President of the Board of Trade said on Friday is an essential thing in any business. There is no dishonesty; there is no danger to the public at large; and I personally cannot see in what way that one transaction transgressed any rules of honesty, honour, or public behaviour. Although it has not been easy to make this explanation, I do hope that I have cleared the minds of those here as well as of people outside who might have formed a false impression of the transaction, and I think that in so doing I have given one more argument for retaining the nominee shareholder.
I hope the Committee will feel that it has now had ample time in which to discuss this matter and that we can come to an agreement. There appears to be apprehension as to what we are trying to do, but nobody has suggested, except the hon. Member for West Fyfe (Mr. Gallacher), that it should be a crime for shares to be held in the name of a nominee. In fact, such a procedure may well be a legal necessity and not a mere convenience.
I did not say that it was a crime to hold shares in this way, but I said it was a crime not to divulge to whom shares were allotted and for whom the shares were held. People who did that should be punished.
It is not a crime and never has been to hold shares and not disclose a name. In the vast majority of cases where the ownership is on the one hand and the beneficiary interest on the other, it is quite unnecessary to make any disclosure. It does not interest anybody to know who gets the benefit of dividends which are paid, but this device can be used for disreputable purposes and it is against this small number of cases that we desire to take whatever action is possible. My hon. Friend the Member for North Portsmouth (Major Bruce) has suggested that by a little more ingenuity we might have devised a Clause which, in effect, would get the person we desire to catch without undue labour to everybody else.I can assure the hon. Member that ever since this Bill was first introduced into another place, indeed before that, we used all the ingenuity we possess, and my advisers have done the same, in order to find a method of doing that very thing; because I am as keen as he is that we should be able, in the necessary cases, to find out who the beneficial owner's are. He may note that in Clause 46 we do not introduce the words "beneficial owner." In fact we avoided them. We have power to investigate the ownership of a company for the purpose of determining the persons who are, or have been, interested in the failure, real or apparent, of the company. That includes no such awkward definition as "beneficial owner." It was because of the awkwardness of the definition that we had to use the wider form of words, and we believe that that definition, if faithfully carried through, is the right method. The Board of Trade can act itself, or this can be carried through if complaint is made to the Board of Trade. It was felt by some hon. Members that the Clause would not be as active as they would like to see it in this matter, and therefore I put on the Order Paper the Amendment we are now discussing, whereby, in the event of a reasonably small body of shareholders in any company desiring to get this investigation carried out, they could move that the Board of Trade should do so, and, providing that it was not obviously a vexatious movement, the Board of Trade would be compelled to investigate. The Board would have no option in these cases. That would seem to me to fill any possible gap there was. I suggest that in this Amendment we are doing the best we can in order to see that nominee shareholding is not used in future as a cloak for undesirable practices.
Amendment agreed to.
Further Amendment made: In page 43, line 46, leave out "unless they think fit," and insert:
"or with a complete copy thereof if they are of opinion that there is good reason for not divulging the contents of the report or of parts thereof, but shall cause to be kept by the registrar a copy of any such report or, as the case may be, the parts of any such report, as respects which they are not of that opinion."—[Sir S. Cripps.]