8.—12

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235. Would not that be contrary to the law of the Companies Act of 1862 as it stands now, that no interest may be paid out of capital ? —No ; I think not at all. Tho Joint-Stock Companies Act does not say that no interest shall be paid out of capital; it says that people shall arrange their financial matters as they please ; but there is, as I said, a Table of Regulations in the Act, which companies may adopt if they please, or reject if they please. In that Table of Regulations is one that dividends and interest shall not be paid out of capital. That, no doubt, is a very wholesome general rule, and it is one that probably any good financier would generally adopt; but there may be cases in which it is desirable not to adopt that rule, and in such cases the companies are'at perfect liberty to do as they please—to adopt it or not. 236. The Chairman.] Then, in your opinion, there is nothing in the proposals, either of the Chairman of Ways and Means or of Lord Redesdale, contrary to the Companies Act or any other existing Act of Parliament ?—On the contrary, so far as they go, they go in the direction which has been carried much further by the Joint-Stock Companies Act. , 237. And they are more consistent with the Joint-Stock Companies Act than our Standing Order 167?— Yes. 238. Mr. Brand.] Do you see any objection to giving relief by granting permission to newundertakings to issue their capital at a discount to the public ?—No; I would give them the utmost possible liberty. 239. And do you think that that would be as efficacious a mode of relieving them, and more legitimate than by giving them leave to pay interest out of capital ?—I would give them both. I am not sufficiently experienced in the finance of companies to say which of the two modes would be the better. Ido not know whether the Committee have had before them a letter that struck me a good deal, written to the Board of Trade by Messrs. Capel, the great stockbrokers, who state that they have the very greatest difficulty in floating undertakings, in getting people to invest, where the investment is not to carry interest at once, but only to carry it from some future day. What people like is to put in their £1,000 and to get their £50 a year from it at once; and if they are not to have their £50 a year for four years they will not invest. That, coming from people of the experience of Messrs. Capel, is striking. 240. And yet that interest is, of course, only their own capital back again?—lt is only their own capital back again. 241. But, speaking of your suggestion to protect the public, they would be protected more efficiently by the plan that I have mentioned of issuing capital at a discount; because the intending subscriber would know that there was the loss of interest during construction, and that it was for that reason that the company had issued their capital at a discount ? —That may be so. I think the investor would be sufficiently protected in the other case also. 242. Your opinion is that they ought to be relieved in one way or the other?—Or both. 243. Mr. Shaio.'] Your notion, I understand, is that the investing public have a great taste to be deceived or to deceive themselves ?—That may be so, but I scarcely meant it. 244. That is the effect of your evidence, is it not ?—No, not quite that. 245. I think it is the effect of all our observation ?—lt may be so. 246. The Chairman^] You would allow them to deceive themselves if they did it with their eyes open ?—I think they are more likely in the end to be undeceived if they are allowed to act for themselves, and to find out what is the best for them, than if you try to guard them by safeguards of this sore, which can always be evaded. Let me put the case of a man who takes shares in a railway company of this sort, where the law is evaded by such arrangements as I have spoken of with a contractor. He has to pay a great deal more for his share in the undertaking, because the contractor does not do all this without a large profit to himself, and so he is so much the worse off; the undertaking produces so much less. 247. Mr. Shaw.] Do you not think those modifications suggested by the Chairman of Ways and Means are directly against the common law of the land?—No ; I do not. 248. They change the law, evidently ? —They change the Standing Order of the Houses of Parliament; they do not change the existing law. 249. The Standing Order of the House of Commons at present is in perfect accordance with the law as interpreted by the Master of the Rolls ?—But the law as interpreted by the Master of the Rolls is founded upon the clause which was passed in pursuance of the Standing Order of the House of Commons. Repeal the Standing Order of the House of Commons, and there would be no clause upon which the Master of the Rolls could adjudicate in the same way in future. 250. You do not think that it is the ordinary common law that is founded on the rules of honesty ? —The ordinary common law would very likely say that where there was no provision to the contrary in the articles of partnership, or the deed of settlement, there dividends are not to be paid out of capital; but there is nothing in the common law to prevent people from making an arrangement with one another that dividends shall be paid out of capital, and that is'precisely the state in which the alteration of the Standing Order would leave the law of Parliament. 251. You refer to the Companies Act, I suppose; you refer to Table A? — Yes; Table A, Rule 72. 252. Do you think that the exclusion of that rule would justify any board of directors in paying dividend out of capital ?—The exclusion of that rule, coupled with an article in their deed of settlement, stating that dividends were to be paid out of capital, would certainly do so; and such an article they have the fullest power to insert if they please. 253. But if that was stated in plain English, and the investor know it, do you think it would facilitate their getting capital; or that, in the case of any company putting that on the front, except they had unmistakable means afterwards in property or rates to pay this—if, in fact, it was a mere speculative company—it would not at once stop their getting it ?—Then it would prevent the public from being deceived, and answer all the purposes that this Standing Order is supposed to answer.