I move: "That the Bill be now read a Second Time." Co-operative societies registered under the Industrial and Provident Societies Act of 1893 are debarred from issuing debentures unless such debentures are registered as bills of sale. The issue of debentures under the Bills of Sale Acts is generally looked upon as tantamount to insolvency or to approaching liquidation, and the credit of the co-operative societies is immediately affected whenever they attempt to issue debentures under the Bills of Sale Acts. Consequently, societies whose share capital is insufficient are obliged to borrow mainly from joint stock banks such additional capital as they may require. Where the additional funds are borrowed from the society's bankers the banks almost invariably require a joint and several letter of guarantee to be entered into by certain of the society's members. From the point of view of the co-operative society the joint and several form of guarantee is open to serious objection. It deters more or less wealthy individuals from becoming members lest they should be asked to become guarantors, and it places upon the shoulders of a comparatively small number of public-spirited men a burden which should be borne by the entire body of members. Generally speaking, the guarantors are members of the society's committee of management and remain in office for an indefinite time whether well or ill-qualified for the position.
When a society is compelled to borrow capital for objects which are designed to benefit its members as a whole, it is quite unreasonable that a few individuals should be called upon to guarantee its repayment. The additional funds are needed by the community forming the society, and the responsibility should be borne equitably by the whole community and spread over them in just proportion. As the law stands, there is no such power inherent in any society. That power is urgently needed and can be granted by means of this very brief and, it is believed, non-controversial measure. It will give to co-operative societies the power to create, by debentures, a security charging all their assets — their premises and plant, their book-debts, their stocks in trade and their uncalled share capital. As the law stands, such a debenture would have to be registered as a bill of sale, and such a step would result in a collapse of whatever credit that society might have hitherto enjoyed. The effect of such a contingency need not be stressed, for everybody knows that the bill of sale places an immovable estoppel on the credit of the concern which is obliged to give it.
It is not proposed that power to issue debentures should be granted to all societies, but only to those which may be approved by the Minister for Agriculture. It is anticipated that the provisions of the Bill will very much facilitate the trading and business of agricultural co-operative societies, and will be welcomed by bodies such as the Agricultural Credit Corporation and banks.
The object of Section 6 of the Bill is to give co-operative agricultural societies legal power to obtain advances from the Agricultural Credit Corporation and other bodies on the security of the society's uncalled share capital. It is necessary, as is done in Section 7, to make this provision retrospective, as certain loans have been already given by the Agricultural Credit Corporation to some co-operative agricultural societies on the understanding that the uncalled capital would be regarded as security for the repayment of these loans.
The law relating to co-operative societies requires radical revision in several respects and it is intended, as soon as practicable, to introduce a comprehensive measure dealing with the situation as a whole. The present measure is intended simply as a means of meeting, in the meantime, a particular requirement for which there is urgent need. Most members who are interested in co-operation know that for a number of years a Bill has been drafted in the Department of Agriculture dealing with the whole question of co-operation. This Bill, however, is merely introduced to deal with an immediate problem and it is hoped that it will get an easy passage. It is necessary, in order that a number of societies may raise funds, to give them the means of doing so by giving as a guarantee for repayment the uncalled share capital, instead of having to give debentures under the Bills of Sale Acts.