§ [SECOND READING.]
§ Order of the day for the Second Reading read.
§ LORD AVEBURY
My Lords, I have introduced this Bill at the request of 1366 the Associated Chambers of Commerce. It proposes to introduce the system of limited partnership which is known in the United States and on the Continent as commandite and gives general satisfaction. Indeed, I have on more than one occasion heard the late Lord Over-stone and my father regret very much that this system was not introduced here before that of limited liability. It would have led up to the other, and no doubt have saved the country heavy losses and much suffering,
The Bill is not new to your Lordships, for it was carried through this House some years ago by the late Lord Bramwell, who was not only a great lawyer but a high commercial authority. The fact that he thought so highly of it as to have carried it through the House will no doubt go far to commend it to your Lordships. It has also been read a second time in the House of Commons, and been through the ordeal of a Select Committee. That it is not now the law of the land is solely due to the congestion of business in the other House.
Under the Bill a limited partnership must contain one or more "general partners," who are to be jointly liable for all debts and obligations incurred by the firm in the usual course of the business. But the "limited partners" are not to be liable for the firm's debts and obligations beyond the specific amount contributed by them as capital at the time of entering the partnership. While a limited partner thus has his responsibility considerably contracted, he is not entrusted with much power. He may from time to time inspect the books of the firm and examine into the state and prospects of the business, and "he may advise with his partners thereon." But he is not authorised to bind the firm or to interfere or take an active part in the management of the business. Should he do anything in this way, he would at once be deemed a general partner.
The consent of the limited partners or a majority of them, if they are more than two, is, however, made necessary for the introduction of a new general partner into the firm, or for a change in the firm's name or in the nature of 1367 the business carried on. It is only the general partners who will be liable to be made bankrupt in respect of the partnership's dealings. But on a general partner becoming bankrupt a limited partner will not be able to recover any portion of the capital contributed by him to the firm, or any interest or profit thereon, until the claims of the creditors of the firm have been satisfied. In all respects that are not expressly excluded by the Bill, the law as to ordinary partnerships is to apply. Before a limited partnership commences business its registration is required, the matters to be registered including the term for which the parnership is entered into, and the sum contributed by each limited partner, and whether this is paid in cash or how otherwise. The register, which is to be kept by the Registrar of Joint Stock Companies, is to be open for inspection on the payment of a small fee; as also are the registers to be kept by County Court Registrars of all abstracts of "statements," which are to be sent by the chief registrar to the County Court within whose jurisdiction a business is situate.
My noble friend Lord Aldenham, whom I consulted in the matter, had intended to be present to support the Motion for the Second Reading of this Bill, but he is unfortunately kept away by family bereavement, which I am sure we all regret. My noble friend by my side was a Member of the House of Commons Committee appointed to consider the Limited Companies Acts. He speaks, I need hardly say, with the very highest authority on all matters of a commercial character, and I hope he will give your Lordships the benefit of his experience. The Bill, as I have said, has the unanimous support of the Associated Chambers of Commerce, and is regarded as of such importance by the commercial community generally, that I trust your Lordships will agree to the Second Reading.
§ Moved, "That the Bill be now read 2a."—(Lord Avebury.)
§ LORD FABER
My Lords, I should like to say a few words in support of the Motion which my noble friend has just 1368 moved. I had the privilege of serving on the Special Committee appointed by the late Government to consider the Limited Companies Acts. That Committee has not issued its Report up to the present, but I think there is no breach of confidence in saying that though that Committee did not specially look into the matter of limited partnership, yet m the course of their inquiry they had before them a mass of evidence from Germany, France, and America, all of which was favourable to limited partnership.
I think I shall be able to show your Lordships that in certain cases, at any rate, limited partnerships are very useful. For instance, I will take the case of an ordinary company being, for some reason or other, owing to a death or the desire of one partner to go out, in want of capital. That company knows of a certain man who would like to go into partnership if his liability was ascertained, but who would not enter if he stood to lose all he had. He would go in if under a system of limited partnership he would be liable only for say £10,000, £20,000, £50,000, or whatever the sum might be in respect of which he was registered. Therefore both the firm and the incoming partner would be benefited by reason of this limited partnership, for the company would get the partner they desired to have, and the partner would get good interest from the company without running the risk of being ruined. It may be said that we already have limited companies; why do we want limited partnership? There is this difference between the two. Limited partnerships, if this Bill is passed, will consist of one or two gentlemen whose liability is limited in the way I have indicated, whereas the liability of the other partners in the concern will be unlimited, and all they have will be at stake. The liability of every one in a limited company is limited, and if bad times come it is possible for them to lose their shares and run away, so that when the poor creditors turn up for their money there is nobody with souls to curse or bodies to kick. If the Bill is passed there will be three kinds of companies—an unlimited company, which is the best kind of all where creditors are concerned; a limited 1369 partnership, which is the next best thing, as the general partners will be responsible to the extent of the whole of their property; and limited companies, in which the liability is limited all round. Both the Chambers of Commerce and the commercial community generally are in favour of limited partnerships, and I trust your Lordships will see fit to give the Bill a Second Reading.
§ On Question, Bill read 2a, and committed to a Committee of the whole House on Thursday next.
§ Naval Prize Bill [H.L.]; Prize Courts Bill [H.L.]; Judicature Bill [H.L.]; House in Committee (according to Order); Bills reported without amendment: Standing Committee negatived; and Bills to be read 3a on Monday next.