PART REDEMPTION DURING THE MORATORIUM PERIOD

HC Deb 21 June 1971 vol 819 cc1142-6

46A.—(1) Notwithstanding the provisions of paragraph (a) of subsection (1) of section 46 (Moratorium in relation to new securities and borrowing) of this Act, on the application in writing of a person whose name appears in the record as an original debenture holder for repayment in part under this section of the new securities held by him which have at the time of repayment fallen due for redemption and upon producing such evidence as the directors may require that—

1. (a) he was entitled in the income tax year immediately preceding the date of the application to relief under section 6 or section 7 of the Income and Corporation Taxes Act 1970; and
2. (b) on 12th February 1971 he was and has at all times since that date been the sole holder of the bonds which under section 38 (Conversion of capital) of this Act were converted into the new securities to which the application relates;

the Company shall pay to him in part redemption of the new securities so held one-half of the amount due on redemption or £500, whichever is the less:

Provided that—

1. (i) this section shall apply only to the new securities which fall due for redemption before the end of the moratorium period; and
2. (ii) the maximum amount payable by the Company under this section in respect of all the new securities held by the same original debenture holder shall not exceed £500.

(2)

1. (a) An application under subsection (1) of this section shall not be valid unless it is made—
1. (i) in the case of the new securities which have fallen due for redemption before the appointed day—within 90 days after the appointed day;
2. (ii) in the case of each of the eleven classes of the new securities which next fall due for redemption after the appointed day—within 90 days after the appointed day; and
3. (iii) in the case of each other class of the new securities—180 days before the redemption date specified in column (4) of Part I of Schedule 2 to this Act of the class to which the application relates;
2. (b) the Company shall give notice in writing to the holders of the new securities to which subsection (1) of this section applies drawing attention to the provisions of this section and the right, in the circumstances set out in the said subsection (1), to apply for part redemption of the new securities and the said notice shall be given—

1. (i) to the original debenture holders covered by sub-paragraphs (i) and (ii) of paragraph (a) of this subsection—within 7 days after the appointed day; and
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2. (ii) to the original debenture holders covered by sub-paragraph (iii) of the said paragraph (a)—not less than 270 days before the redemption date of the respective class set out in column (4) of Part I of the said Schedule 2.

(3) A holder of the new securities whose holding is reduced in part under subsection (1) of this section shall be entitled to interest due thereon in accordance with the terms of the holding, as varied by paragraph (b) of subsection (1) of the said section 46, in respect of the full amount of the holding up to the date of part redemption and thereafter on the balance of the holding not redeemed.

(4) In making an application under subsection (1) of this section the holder shall forward the certificate for the holding to the Company together with proof that paragraph (a) of subsection (1) of this section applies to him and as soon as practicable after the part redemption has been made the Company shall issue a new certificate for the balance of the holding remaining unredeemed.—[Mr. Temple.]

Brought up, and read the First time.

Mr. Temple

I beg to move, That the Clause be read a Second time.

The new Clause could not be inserted in the Bill in Committee, although the content of it was a direct recommendation of the—

Mr. Deputy Speaker (Miss Harvie Anderson)

Order. I think it would be for the convenience of the House if we were to consider with new Clause 1 Amendment No. 23, in Clause 47, page 27, line 36, at end insert: 'and shall take into account any part redemption of the new securities under section 46A (Part redemption during the moratorium period) of this Act'. and Amendment No. 24, in page 28, line 9, at end insert: 'and takes into account any part redemption of the new securities under the said section 46A'.

Mr. English

On a point of order, Mr. Deputy Speaker. If it would help to shorten proceedings, we all realise that this is consequential upon the Money Resolution.

Mr. Temple

I have something to say on behalf of the promoters about the new Clause. Its object is to help small income bondholders whose bonds mature before the scheme. I will not go into the details of the Clause, but it has been drawn strictly in accordance with the advice of the members of the Select Committee. I readily admit that the Clause is open to criticism, but it has been drawn for those reasons.

It may add complications to the ultimate scheme because it will be a factor which will have to be taken into account in drafting the reorganisation scheme of the capital. However, the promoters hope very much that the new Clause and what it seeks to do will be of material assistance to small bondholders. In that spirit I hope that the House will accept the new Clause.

Mr. Dell

Would the hon. Gentleman say a little more about the new Clause? The difficulty is that many people who do not understand the language in which it is couched, and, in particular, what "small income relief" is, might think this was a substantial concession to the interests of bondholders and would lead to some of them being paid out a substantial proportion of their money before the end of the moratorium. As I understand it, the new Clause is of virtually no significance and is likely to help very few people indeed. The hon. Gentleman owes it to the House to state the promoters' appreciation of the new Clause and what effect it will have. How many people will be involved? What sum of money is involved? Is the new Clause worth putting in the Bill?

The hon. Gentleman said that the promoters did not like it very much because it might complicate the scheme. What does it involve for those who lent money to the Board? Who are likely to benefit? Or are we putting the new Clause in for the sake of form, or to pretend that we are doing something?

11.15 p.m.

Mr. English

I did not intend to speak on the new Clause, and I shall not take long now, because I said most of what I wanted to say on the Money Resolution, but I must comment on the observation of the hon. Member for the City of Chester (Mr. Temple) that the Clause is drawn in accordance with the advice of the Committee. I thought I had made plain earlier that that means the advice of two members of the Committee—plus the casting vote of one of them—and that the other two members of the Committee wanted to go much further and do something far more substantial. As my right hon. Friend the Member for Birkenhead (Mr. Dell) pointed out, the Clause does not do much.

The main difficulty is that the Money Resolution restricts the nature of the Amendment which may be moved. The hon. Member for the City of Chester suggests that the promoters did not like this proposal. The promoters did not like anything on this point. They made a series of suggestions but said that they were not putting any of them forward. One, for example, was for a trust fund to be set up to deal with hard cases, but how trustees would have made their decisions was by no means clear. The promoters left it entirely to the Committee. Let us be clear on that.

Mr. Temple

I am afraid that I fell into the old trap. Having been encouraged to do so, I moved the Clause briefly, and now I am accused of not having explained it fully. I meant no discourtesy to the House. I took the matter shortly because it had been suggested from both sides that I move it crisply. I shall now give a rather fuller explanation and cover the points raised by the right hon. Member for Birkenhead (Mr. Dell) and his hon. Friend the Member for Nottingham, West (Mr. English).

Any partial repayment takes place only during the moratorium period, which is now a relatively short period. To a large extent, because it was thought that a Clause of this type would complicate the ultimate scheme, there was a degree of reluctance on the part of the promoters. Also, they were baffled about finding a form of words which would both be equitable and not go too far. They therefore relied on and followed the recommendations of the Committee. As the hon. Member for Nottingham, West said, the Clause follows the Money Resolution.

I come now to the points raised by the right hon. Gentleman. The Clause is designed to help those persons who receive small income relief under Section 6 or Section 7 of the Income Tax Act, 1970. Section 6 deals with small income relief for all persons irrespective of age, and, as I interpret it—not being a tax lawyer—it appears to restrict that relief to those with incomes of £450 or less. Section 7 relates to relief for persons over 65 with small incomes.

It is the intention of the Board to circulate bondholders and advise them of claims which they might make. To that extent, we hope very much to pick up all the small bondholders who might be in a position to put in claims to the Board for this immediate repayment, to a maximum of £500 and restricted to 50 per cent. of their holding.

The right hon. Gentleman asked whether the promoters had been able to make an estimate of the number of bondholders and of the amount of money in which the Board might be involved. No estimate whatever can be given of either of those factors. The incomes of recipients of interest are never known to a board. It is only when the Board has issued a circular that it will find out the position. I think I could hazard a guess that the number of bond holders concerned will not be very great. The Board will be concerned with only certain categories which should be redeemed during the moratorium period. I do not think that the amount of money will be very great either. This is purely guesswork on my part. The promoters are not in a position to form a judgment until such time as they have circulated the bond holders.

The scheme is open to criticism, but the promoters have introduced it with the best of good will to meet the point made to them by the Committee.

Question put and agreed to.

Clause read a Second time, and added to the Bill.