CO885-(15-16) — Page 679

PUBLIC RECORD OFFICE

Reference :-

C.O.885

16 PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO

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The following communication has also been received by the Treasury from Messrs. Herbert Smith & Company :-

MY LORDS,

13th August, 1914.

We have been consulted by a large number of Companies as to the course which they ought to adopt with regard to the passing of transfers of shares both into and out of the names of persons who, from the description in the transfers, or in the register of members, would appear to be German or Austrian subjects. In many instances transfers dated before the issue of the Proclamation of the 5th August, out of the names of alien enemy share- holders into the names of British subjects or alien friends, have been lodged with our clients. These, we have little doubt, are the outcome of trans- actions entered into before the outbreak of war, and upon this hypothesis the registration of such transfers would merely give to the transferees the full title to the shares which they had purchased and paid for, and could in no way be benefiting the alien enemy who had transferred them. Of course, if the transfer had been effected merely for the purpose of enabling the transferee to receive the dividends and account for them to the alien enemy transferor, it might be otherwise. It would appear, however, that the transfers are the result of ordinary Stock Exchange transactions entered into before the war, and it would seem to the Companies to be a great injustice to the British or friendly alien transferees that they should be debarred from getting a complete title to the shares which they had purchased and paid for.

The second class of cases comprises transfers from British subjects or friendly aliens into the names of persons who appear from the description in the transfers to be alien enemies. Some of the Companies have several thousands of names on their registers, and it would cause great incon- venience to these Companies to allow the shares to remain in the names of the transferors, who had parted with all interest in them, but who, prior to the registration of transfers, must be regarded as the holders and entitled to receive the dividends. The course which the Companies would like to adopt would be to place the names of the transferees on the register, but to withhold from them the certificates, and, of course, decline to allow them to receive dividends, or vote or exercise any rights as shareholders during the continuance of existing conditions.

We may mention that in some cases the transfers are into or out of the names of some of the foreign banks to whom a limited licence to carry on business has been granted by His Majesty's Government.

The Companies are most anxious to do nothing which can be regarded as being in conflict with the spirit of the Proclamation, but, at the same time, they desire to cause as little trouble and inconvenience as possible, and they have asked us to request an expression of the views of the Treasury as to the course which they ought to adopt in the two cases above mentioned, both as regards transfers dated before the outbreak of hostilities, and as regards later transfers, which, in the event of the re-opening of the Stock Exchange, or the settlement of outstanding transactions, will doubtless be presented for registration.

We shall be much obliged if the Treasury will favour us with an expres- sion of their views as to the course which it is considered the Companies ought to adopt in the circumstances indicated above, and if it is thought that the Companies should pass the transfers, what enquiries should be made, or steps taken, before they proceed to do so.

We need not dwell upon the desirability in the present circumstances of doing everything to minimise the dislocation of business which the state of war must necessarily entail, and the adoption by the Companies from the outset of a uniform practice which has the approval of the Government, and can be made known to the Stock Exchange, will materially help in this direction.

We are, &c.,

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Upon which the Treasury asked the advice of the Treasury Solicitor, which is contained in the following Minute dated 18th August :-

MR. BLACKETT,

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(1) I THINK it should be pointed out that alien enemies who are resident in this country, or in allied or neutral countries, should, for all the purposes to which this letter relates, be treated in the same way as British subjects. Any question that may arise can only be as to alien enemies resident in hostile countries.

(2) As regards the last class of alien enemies, I think that both transfers from them into the names of others and transfers from others into their names should be registered if the actual sale in pursuance of which the transfer is lodged took place before the outbreak of war, that is, 11 p.m. on August 4th, or, in the case of Austria, 12 p.m. on August 12th. It would probably be impossible for the Company to enquire in every case at what date the contract took place. They might, perhaps, be advised, as a practical measure, to register all transfers lodged before a certain date to be fixed with reference to the probability that the contracts must have been made before the outbreak of war.

(3) As regards the position of alien enemies resident in a hostile country who are registered as shareholders, payment of dividends to them is not, in my opinion, prohibited by the Proclamation, and is, therefore, expressly authorised by it; their right to sue is suspended by the war, but will revive on peace being made; payment of such dividends is not entering into any new contract or obligation, but is merely giving effect to rights accruing under an existing contract or obligation. Similarly with regard to the delivery of certificates and the right of such shareholders to vote; apart from any special provisions in the constitution of the Company, I do not see why they have not this right, but I think that it is, perhaps, hardly for the Government to advise the Company on this matter. It is not likely that any alien enemies will be able to exercise this right except those who are resident in this country under licence from the Crown.

A. H. D.

The Treasury Solicitor has been furnished, through the Committee on Trading with the Enemy, with copies of the subjoined extracts of correspondence between the Attorney-General and the Secretary of the English Company:-

$282

SIR,

Letter from Secretary of an English Company to Attorney-General.

August 18th, 1914

I AM instructed to ask for direction in the following circumstances, in view of the fact that this country is at war with Germany :-

This Company is about to pay a dividend. We have on our books a number of shareholders with German names and German addresses; we have again shareholders whose names appear to be German, but who have English addresses, or from whom we have instructions to pay banks in England. What is the Company's position with regard to these shareholders? Are we to hold back their dividends on the ground that they are alien enemies, or should the amounts be paid? Do you discriminate between those who have German addresses and those who give English addresses or instructions to pay English banks or German banks who have London offices?

Reply of the Attorney-General.

I HAVE your letter of August 14th. It seems to me that you should not transmit dividends to shareholders who have a German or Austrian address; shareholders with English addresses, whether their names are English or foreign, should be paid. English people who are residing in Germany should, for this purpose, be treated in the same way as Germans residing in Germany. Of course, the dividends still belong to them, but they are not payable while the war lasts, and ought not to be paid; presumably you will pay the amounts into a bank in trust for such of your shareholders as are alien enemies in this sense. I think this is the right rule to follow, even

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