This eighth clause was of course received with strong disfavour by the Irish and Scotch banks. It will be seen that it was aimed directly against them, for some of the Irish and nearly all the Scotch banks of issue had offices in London, while none of the English banks had offices in Ireland or Scotland. The effect of the clause, had it been passed, would have been to have driven the unlimited Scotch and Irish banks out of London, if they had taken advantage of the permissive powers of the bill.
This was an endeavour to do by a side wind that which was directly attempted to be done in 1875 by a bill introduced into the House of Commons by Mr. Goschen, at the instigation chiefly of some of the London and English provincial bankers. At that time the matter was very fully discussed, both in and out of Parliament, and a committee of the House of Commons was appointed to take evidence and consider and report on the subject.
This committee sat for a long period and took voluminous evidence, which was merely reported to the House, but with respect to which no recommendation was made; and the government thereupon declined to give any countenance to Mr. Goschen's scheme, and he did not proceed further with his bill.
It was, therefore, all the more to be regretted that the same government should have grafted on to the stem of its otherwise admirable bill, an excrescence which was entirely foreign to its principle and its scope. It is the function of government to look after the interests of the general public, and not, however innocently, to play into the hands of a small and interested class, as it assuredly would have done had it driven the Irish and Scotch banks out of London, and thereby reduced wholesome competition, and given a practical monopoly to the other London bankers.
Strong representations were made to the government with respect to the eighth clause, in memorials from the Irish and Scotch banks, and separately from the Royal Bank of Scotland, the latter pointing out that its position in London was secured by Act of Parliament, passed in 1873, with the full approval of the committee of the Association of English Country Bankers.
With the exception of this clause the bill was generally cordially approved of by the Irish and Scotch banks. And at a meeting of the London joint-stock banks the bill was carefully considered and discussed, and the views expressed were afterwards embodied in a letter to the Chancellor, which was presented to him by a deputation from their number. This letter expressed the general approval of the London banks of the measure, but suggested certain modifications relating to the common title of banks registering under the Act, to the form of balance-sheet, the audit, etc. Subsequently, on the invitation of the Chancellor, the London banks prepared a form of balance-sheet for incorporation in the bill, embracing all the salient points which it was considered expedient for the public to know.
From the time Sir Stafford Northcote introduced his bill in April, nothing further was done in the House of Commons respecting it until the 22nd of July, when it came on for second reading. Meanwhile, however, much discussion had taken place outside upon all its details. The Scotch and Irish banks were up in arms against the eighth clause. The limited banks naturally deprecated any legislation at all, as they were desirous to keep all the advantages arising out of limitation to themselves. The unlimited banks just as naturally approved in general terms of the objects of the bill. The public viewed the matter from their respective standpoints, and acted accordingly. The subject having thus been so fully ventilated outside, it was discussed in the House of Commons with great fulness and intelligence, and it was at length put into a shape which commanded general approval.
The Chancellor, in his speech on the second reading, admitted the force of the representations made to him by the Irish and Scotch banks, and withdrew the objectionable eighth clause altogether. It cannot be said, however, that this was done with a good grace, for, under the same influence apparently which inspired the eighth clause, he seemed to seek to attain the object of that clause in another way. He proposed to eliminate Ireland and Scotland from the operation of the bill, on the ground that the session was so far advanced as to leave no time to deal satisfactorily with so large a subject; and he promised a measure in the next session dealing with the banks of those two countries. This project was so strongly objected to by the Irish and Scotch members, who plainly intimated that they would not allow the bill so mutilated to pass, that the Chancellor was again forced to yield. Accordingly the discussion was proceeded with, on the understanding that the bill should apply to the whole kingdom; and, ultimately, the second reading was passed, and the bill committed pro forma.
A fortnight later the House went into committee on the amended bill.
It is needless to describe in detail the discussions which led to the alteration of the bill in many material points. Suffice it to say that the clause which proposed to enact that all banks registering under the Act should take the title of "reserved liability" was expunged, and in its place a simple provision was inserted, extending the scope of the Companies'Acts of 1862 to 1877, which require the affix of the word " limited " to the title of any company registering thereunder.
At this point, in consequence of the multiplicity of counsel, and the antagonistic interests involved, the hearings of the discussion seemed in danger of being lost; but, at the instance of Mr. Shaw, the member for Cork, who led the committee out of the difficulty into which they had got, the principle of reserve liability was retained. Mr. Shaw proposed that " An unlimited company may, by the resolution passed by the members, when assenting to registration as a limited company under the Companies' Acts, 1862 to 1879, and for the purpose of such registration, or otherwise, increase the nominal amount of its capital by increasing the nominal amount of each of its shares : Provided always that no part of such increased capital shall be capable of being called up, except in the event of, and for the purpose of, the company being wound up."