§ Amendment made: In page 77, line 28, leave out "Mines."—[Captain Crookshank.]1557
§ 4.4 p.m.
§ This Amendment is intended to restore the power which was inherent in the Railway and Canal Commission under the Acts of 1926 and 1930. By Section 7, Sub-section (2) of the 1926 Act the Commission was given power, where it thought it not fair to do otherwise, to order that an undertaking which was being compulsorily amalgamated should be paid for in cash. We think it very desirable that it should be made clear that this power will exist in the future as it has been done in the past. Under the proposed terms of the Schedule each of the constituent companies has to be given shares or securities of the new company, "and not otherwise." One can well conceive a case where it is highly desirable that the power to order a cash expropriation should exist in the court, and power should exist to include such provision in the scheme laid down before them.
§ To take the most obvious example, one can conceive that the amalgamation might be desirable of a number of collieries one of which for some time past had been closed down. That colliery might possess leases of areas of coal which it was desirable should be worked by the collieries which were still in operation. In a case of that sort the owners of the closed down colliery would obviously not wish to take any part in the management of the combined undertaking, and the Railway and Canal Commission might easily come to the conclusion that they could not approve as fair and equitable a scheme which did not provide for the expropriation of that undertaking for a cash consideration. The Railway and Canal Commission would thereby be put in the position of having to reject the scheme. They would say, "This scheme is not fair and equitable unless a particular party is expropriated in cash." There might be parties to the proposed amalgamation willing to pay cash to obtain control in the amalgamation of that undertaking, and yet here by the words of the Schedule the drafters of the scheme, that is to say the Coal Commission, are expressly prohibited from including in 1558 their scheme a provision for cash expropriation. The Amendment will in fact make the task of the Coal Commission easier and not more difficult, and it seems to me to be a desirable Amendment.
§ 4.9 p.m.
§ Sir Hugh Seely
I have on the Paper an Amendment designed to deal with a similar point. I would support what has been said by the Mover of this Amendment, because it is not difficult to see that if you are going to have compulsory amalgamation the question of buying out may become a very serious one. The point of fairness is one on which the scheme is bound very much to depend if it is to be a success. One can well imagine, as in Wales, a case like that of the amalgamated anthracite collieries. It is quite possible to have a small company working now and making a profit. It may be just an ordinary 5 per cent. profit, but at any rate the company is paying a dividend and its shares may stand at £1. If it is to be amalgamated into a bigger concern, which seems quite reasonable from an amalgamation point of view, what will be handed over will be shares standing at to-day's quotation, say 4s. 9d., which do not pay and have no prospect of paying a dividend. If you say to that man, "I am going to give you five shares in the new company for every one in the old, and therefore you will be in the same position." He will not be in the same position. He would merely be in the position of being in the industry and not making any dividend at all and without the chance of making one. Merely giving a man shares in something which is not paying is not a proper and fair way to proceed.
§ 4.11 p.m.
§ Captain Crookshank
This proposal cuts across the plan which is inherent in the Seventh Schedule. What the Bill provides is that in the scheme put up by the Coal Commission consideration shall be given to each of the constituent companies in securities of the new company, "and not otherwise." The Amendment would alter that and allow consideration to be given partly in cash or partly in shares. One of the difficulties which are very obvious is that it would clearly be wrong that any transferor company should be forced out of the industry as a result of amalgamation proposals. This might very well occur if there were a provision that the 1559 company should be paid out in cash. It might, for example, be a company that did not want to be amalgamated at all, but if there was to be an amalgamation they would prefer to continue rather than to be bought out altogether. On the other hand if a provision of this kind were put in, it might be that a company would prefer to be bought out, and if it had a right to demand certain cash considerations that might cripple the whole of the new scheme.
§ Captain Crookshank
I am much obliged for that statement. I am, of course, considering the two Amendments on the Paper. The general idea is the same in each. If there was an inherent right to have cash paid out, the difficulties might be such that it would be impossible to proceed with the scheme at all; it might wreck the resources which were necessary in order that the scheme might be carried out. The hon. Baronet quoted some case which he has in mind and in which, unless cash were paid, it would not be fair to the transferee company. If that is so, of course, the safeguard must be found to lie in what the court can do when a scheme is put up to it. The Court can either confirm it or throw it out. They can only accept it on the terms laid down in paragraph 2 of the Schedule, that is to say, provided they are satisfied that it is calculated to avoid financial injury to any of the constituent companies and to enable the undertaking of the transferee company to be efficiently carried on. In the case of any particular scheme going before the Railway and Canal Commission, if they come to the conclusion on the facts that, unless cash was paid in a particular case, it would be unfair in the manner that the hon. Baronet suggests, clearly they must reject the scheme. Therefore, the matter lies with the court. The Court has to be satisfied that the scheme is fair and equitable and is calculated to enable the undertaking to be efficiently carried on. That is the final and, as it seems to me, by far the best safeguard, rather than putting in at this stage some words with regard to the possibility of paying cash.
§ 4.17 p.m.
§ Mr. Wise
Would it not assist amalgamation if the Coal Commission had this power? At the moment they are in the unfortunate situation that, if they produce a scheme which the Railway and Canal Commission decides is inequitable unless cash is paid to one or more companies, they have no power to proceed any further with the scheme, because they have no right to pay cash. That seems to me to be a serious difficulty which would hamper the purpose of the Bill. I cannot see that it would be particularly difficult or crippling that they should have to find the cash, because one would assume that the Railway and Canal Commission, being an impartial body, would only insist on the payment of cash in a certain very small number of instances, and it would be perfectly possible by the ordinary means of finance for the new amalgamated concern to raise the money with which to pay any of its constituent members. It seems to me that the rejection of this Amendment may seriously cripple the Commission in the exercise of their powers.
§ 4.19 p.m.
§ Sir Irving Albery
Is there any other way in which this matter could be dealt with? Is there anything in the Bill that would prevent a larger company that is taking over a smaller company from entering into a subsidiary agreement that, after the shares were allotted, they would purchase the shares in question at a specified price? Would that be permissible under the Bill, or is there anything to prevent the making of an agreement of that kind? If such an agreement could be made, it seems to me that it could be taken into consideration by the Railway and Canal Commission in deciding whether the transaction was equitable or not.
§ Captain Crookshank
What happens after the amalgamation has taken place would be another matter. I do not think there would be anything to prevent such an arrangement, but I should like to look into the point.
§ Sir I. Albery
It would not take place after the amalgamation, but, supposing that the smaller company was resisting the transaction on the ground that it was an unfair transaction, if they had an 1561 undertaking to purchase at a specified price the shares allotted to them, presumably it would no longer be unfair.
§ Amendment negatived.
§ 4.21 p.m.
§ Mr. Peake
I beg to move, in page 78, line 7, to leave out "make provision for the determination of," and to insert "specify."
I have also an Amendment in line 13, after "may," to insertmodify the amount or the form of the payments specified in the scheme and may,which is consequential upon the present Amendment.
Paragraph 2 of the Seventh Schedule lays down the matters which have to be considered when an amalgamation scheme comes before the Railway and Canal Commission. The Railway and Canal Commission have to be satisfied, inter alia, that the terms of the scheme are fair and equitable to all persons affected by it, and the question with which they are here concerned is whether the shares in the new company are distributed in fair proportions between the constituent concerns. Paragraph (1, b) of the Schedule reads:The scheme shall determine the classes of securities of the transferee company which are to be given to the transferor companies in respect of the different classes of property transferred to it, and shall make provision for the determination of the amount of the consideration to be given to each of the transferor companies out of those securities, in so far as it is not determined by the terms of the scheme, being finally determined upon principles specified therein, by arbitration or otherwise, after the scheme has come into operation.We think it is going to be extremely difficult for parties to argue before the Railway and Canal Commission as to whether their shares in the proposed new concern are fair and equitable, if they do not know what those shares are going to be—if, that is to say, the scheme provides for the final settlement of the shares being carried out, as is proposed in this paragraph, by arbitration after the scheme has come into operation. The whole procedure before the Railway and Canal Commission is directed to examining the question whether the shares of the constituent concerns are fair and equitable, and, if a provision is included whereby the final shares may not be determined at all at the time when the matter comes 1562 before the Court, it is going to be extremely difficult for counsel or anyone else to argue that the shares are fair and reasonable.
We see no practical difficulty in the scheme actually specifying the amount of the consideration to be given to each of the transferor companies; we cannot see why that should not be specified in the scheme at the time when it comes before the Court. Of course, when you enter into an amalgamation, there are certain outstanding items which it is very difficult to assess precisely at an earlier date; matters like the amount of stock, the amounts owing to or by creditors or debtors, and things of that kind, are very difficult to assess precisely; but it could easily be provided in the scheme that each constituent concern should bring in, either by way of surplus of debtors over creditors, or liquid cash, stocks of coal and so on, a given total round sum, and that round sum could be made up of any of the various items I have described. From a purely accountancy point of view I am assured that there is no practical difficulty in the scheme actually specifying the amount of property to be brought into the combined undertaking and the amount of the actual consideration to be given in shares or otherwise. It is for these reasons that I desire to leave out the reference of the question to arbitration after the scheme has been confirmed by the Court.
§ 4.25 p.m.
§ The President of the Board of Trade (Mr. Oliver Stanley)
This point is one which was made a good deal of in the propaganda of the Mining Association, and it has been treated by them, though it certainly has not been so treated by my hon. Friend in moving the Amendment, and could not be so treated by anyone who has studied the purpose of the Bill, on the basis that under this Measure it would be possible for a man to be deprived of his property before he had any notice of what he was to get for it. My hon. Friend has dealt perfectly clearly with what, after all, is nothing more or less than a bit of machinery. Under paragraph (1, b) the scheme has either to give the actual details of the consideration which the transferor company is to receive, or to lay down the principles upon which that consideration is to be finally determined; and, therefore, of course, there must be a fair degree of 1563 certainty in the scheme as it comes before the Railway and Canal Commission. The safeguard of the transferor company against being deprived of its property without knowing what it is to get for it is the Railway and Canal Commission, who have to be satisfied that the scheme is fair and equitable to that particular company and is calculated to avoid financial injury to it. In order to perform that duty, the Railway and Canal Commission must have before them sufficient data for the purpose, and, if the scheme is so wide that they are unable to form an opinion as to whether the transferor company is being fairly treated, it is their obvious duty to reject the scheme.
The scheme laid before the Railway and Canal Commission must in the nature of the case be a scheme for amalgamation at a future date, and, therefore, there must be certain details which, at the time of its submission to the Railway and Canal Commission, cannot be accurately known. My hon. Friend has referred to the question of the amount of stock. The stock will vary from day to day, and the amount which will actually be taken over at the time of the amalgamation may differ materially from the amount which was there at the time when the scheme was submitted. Therefore there must, as a matter of ordinary common sense, be some provision for dealing with variations of that kind.
My hon. Friend made the alternative suggestion that in the scheme should be included a statement of the amount of stock that would be taken over, or the amount of cash provided; but, as far as I can see, there would be no sanction for that; it could not be enforced. If the scheme stated that so much stock was to be available, or that so much cash was to be provided, and if that amount of stock was not handed over, or the cash was less than was laid down, I do not see by what means the Coal Commission could enforce the original scheme. I can assure my hon. Friend that there is no intention whatsoever of trying to get a scheme through in an inchoate form, and thereby prejudicing the rights of individual companies. Even if there were such an intention, the Railway and Canal Commission have ample power to defeat it. The common-sense argument, with which I am sure everyone will agree, is 1564 that, when you are submitting a scheme for an amalgamation at a future date, you must have some sliding scale for determining, by fixed principles laid down in the scheme, elements which may vary between the date of the submission of the scheme and the date on which the amalgamation actually takes place.
§ 4.30 p.m.
§ Mr. Peake
The scheme apparently lays down the property and liabilities to be transferred. It seems difficult to lay down, with any accuracy, the property and liabilities concerned, and to specify what property, such as stock, cash, and so forth, are to be transferred. But, if the scheme is able to lay down, in terms, the property and liabilities to be transferred, it seems to me that it should also lay down the precise shares which are to be allocated in return.
§ Amendment negatived.
In page 78, line 43, leave out "Mines.
In page 79, line 12, leave out "Mines."—[Mr. Stanley.]
§ Mr. Peake
I beg to move, in page 79, line 17, after "are," to insert "in their opinion."
The Committee will see that the terms and conditions that are fair and equitable are included in the sub-paragraph which refers to schemes submitted to the Board of Trade by the Coal Commission, and the only object of the Amendment is to make it clear that it is the opinion of the Railway and Canal Commission, and not the opinion of the Coal Commission.
§ 4.33 p.m.
§ Mr. Stanley
I confess that I do not see what this Amendment, if carried, would add to the sub-paragraph. If the hon. Gentleman reads it, he will see that it already contains the words "as they consider necessary," and that surely means "as they consider necessary, in their opinion."
§ Sir S. Cripps
The right hon. Gentleman does not understand the Amendment, because he does not understand the mentality of the people who moved it. They do not consider things in their own opinion, but in the opinion of the Mining Association.
§ Amendment, by leave, withdrawn.
§ 4.35 p.m.
§ Mr. Peake
I beg to move, in page 79, line 19, after "calculated," to insert "(i)."
This and the next Amendment—in page 79, line 20, after "and," to insert "(ii)"—are simply to clarify the terms of this paragraph. The Committee will see, in the sub-paragraph, that the Commission shall confirm a schemeif they are satisfied that it conforms to the enactments relating thereto and … the amalgamation or absorption affected by the scheme will be carried out upon such terms and conditions as aforesaid.If one refers back to the preceding subparagraph, one sees that the words qualifying "terms and conditions" are:fair and equitable to all persons affected by the scheme, and are calculated to avoid financial injury to any of the constituent companies and to enable the undertaking of the transferee company to be efficiently carried on.The proposed interpolation of the figures "(i)" and "(ii)" would, in our opinion, make it clear that the words following the word "calculated" are part of the terms and conditions referred to in sub-paragraph (c), and it is simply in order to make it clear that there are three conditions to be fulfilled before the Commission can approve a scheme that these Amendments are moved.
§ Mr. Stanley
I have looked into this point, and I am satisfied that, without this Amendment, it is perfectly plain that each of these is a condition about which the Railway and Canal Commission have to be satisfied before approving a scheme.
§ Amendment, by leave, withdrawn.
§ I move this Amendment in order to make it clear beyond doubt what the Minister of Mines said earlier this afternoon, that the Railway and Canal Commission have power to throw a scheme out altogether if they are not satisfied as to the terms and conditions laid down. The subparagraph imposes upon them a duty in 1566 positive terms when it says that they shall approve a scheme if they are satisfied. The preceding sub-paragraph gives them power to modify a scheme, and, although I am not a lawyer, it seems to me that these two sub-paragraphs impose a duty on the Commission to keep on modifying a scheme until they satisfy themselves that it is in accordance with the conditions, and that there is a strong bias in favour of them confirming a scheme if there is any doubt. I think the onus ought to be in the other direction, and the scheme should be thrown out unless the Commission are satisfied that these three conditions are fulfilled.
§ 4.39 p.m.
§ Mr. Stanley
Here, again, I am advised that there can be no doubt as to the power of the Commission to reject a scheme if they are not satisfied that the three conditions are fulfilled. I should have thought, though I speak subject to correction from anyone more learned in the law, that the terms of paragraph 3 are sufficient to assure that. But if you take them in conjunction with Section 7 of the Act of 1926, which, as the hon. Gentleman will be aware, stands unrepealed, and to which both this Schedule and the Act of 1930 are related, it becomes perfectly plain, I think, that the Commission have the power and duty to reject a scheme if they are not satisfied.
§ Amendment, by leave, withdrawn.
§ Schedule, as amended, agreed to.