§ Mr. Denzil Davies
I beg to move amendment no. 99, in page 49, line 27, at end insert'but after paragraph (b) there shall be inserted "and(c) where a company has shares or securities of any class giving powers of voting limited to either or both of the following—
the reference in the preceding provisions of this sub-paragraph to all questions affecting the company as a whole shall be read as a reference to all such questions except any in relation to which those powers are capable of being exercised.".'
- (i) the question of winding up the company;
- (ii) any question primarily affecting shares or securities of that class,
§ Mr. Deputy Speaker (Mr. Oscar Murton)
With this we may take Government amendments nos. 100, 101 and 102.
§ Mr. Davies
Amendments nos. 99 and 100 go together, as do amendments nos. 101 and 102. Amendment no. 99 is designed to meet a criticism levelled at the clause in Committee and to allow shares with certain limited voting rights to be ignored in deciding whether other shares give a person voting control of a company. Amendment no. 100 is a technical amendment which corrects a minor omission. Amendment no. 99 meets the 1836 point. We discussed the matter in Committee, when the right hon. Member for Crosby (Mr. Page) and other hon. Members raised the question of the definition of voting rights. The amendment fulfils an undertaking that I gave at that time.
Amendments nos. 101 and 102 follow on from amendment no. 99 and deal with the same point in relation to transfers to employee trusts. This follows from the undertaking that is met by amendment no. 99 in relation to control. Amendments nos. 101 and 102 are designed to make a corresponding adjustment to the nature of the trustees' control of a company for the purpose of the exemption for transfers to employee trusts by individuals. Both pairs of amendments meet the same point. The second two are designed to deal with the point in relation to transfers to employee trusts.
§ Mr. Graham Page
I thank the Minister for dealing with the point which I raised in Committee. On this occasion I have no complaints about the drafting—though perhaps my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) has some complaint about the draftsmanship. I could find none because I was so overcome with gratitude to the Minister for carrying out the assurance that he gave in Committee in dealing with the point I raised.
§ Mr. Peter Rees
There is not often a divergence of view between myself and my right hon. Friend the Member for Crosby (Mr. Page) and I hope that there will not be many more such occasions in future. Perhaps the divergence is not on the draftsmanship but on the substance of the amendments.
I raised this matter in Committee. I know that the Minister's heart is in the right place and I congratulate him on having taken on board, to a degree, the point I put to him, which relates not only to business assets relief but to the payment of CTT by instalments and the relief for transfers to employee trusts.
My hon. Friends and I readily conceded in Committee that the definition of control of a company, which is crucial if these various reliefs are to apply, had been a little too laxly drawn and that there were various situations—I shall not say "schemes" because that has slightly unattractive overtones, particularly after our debate last night—where relief was 1837 conceded and where, on a fair consideration of the debates of the House, it probably should not have been conceded.
The Government, wishing to tighten the conditions that had to be satisfied, went for overkill and we pointed out that there were many situations where, in commercial truth, a person had control of a company but, by the definition adopted in clauses 54 and 55, would not be regarded as having control because he needed not only to hold more than half the ordinary shares in a company but to have powers of voting on all questions affecting the company.
The Minister of State has eliminated cases where other shareholders might have a blocking right in regard to the winding-up of a company or on questions primarily affecting shares or security of a special class. That is the primary, but not the only, point that was put to the Minister of State. For example, the holders of preference shares often have the right to vote when there is a resolution to wind up a company or when their preference dividends are in arrears. Those cases have been met by the amendments, and we are grateful for that.
However, I do not think that those who advise the Minister of State—I assume that the amendments have not sprung entirely from his own fertile mind—have thought this through with sufficient care. They will be aware that, for example, sometimes there are separate classes of shares that carry the right to appoint or remove directors. That situation would be covered by the amendments because that would be a question primarily affecting shares and securities of that class.
Equally, however, these rights are sometimes defined merely by reference to numbered shares. They are treated not as separate classes—A shares, B shares, C shares and so on—but on the basis that shares 1 to 100 have the right to appoint and remove directors and so on. That situation is not covered by the amendments, although on any fair view the existence of those rights would not prevent the holder of 51 per cent. of the ordinary shares having control of the company.
Let me give the House another example. Institutions or the Industrial and Commercial Finance Corporation take a share of a company when they inject capital 1838 into it and they have the right to prevent alterations of the articles of association. That is quite fair and there is no hint of tax avoidance. It is done to protect their position when they invest in a company that is in a slightly precarious situation Those circumstances would not be covered by the amendments.
I shall not ask my right hon. and hon. Friends—it might be a slightly idle exercise to do so at this moment, and the right hon. Gentleman might be slightly pressed to muster support in his defence—to vote against the amendment. The group of amendments goes some way to meet the points which we raised in Standing Committee and which the right hon. Gentleman, with his usual open mind, has recognised to have validity.
We shall support the amendment, but, in view of the two examples that I have given him, we ask that the right hon. Gentleman—I have no doubt that those who advise him, if they were to ask around in the business community, especially the institutions and the ICFC, would be able to multiply the instances and perhaps refine them—recogniss that perhaps the amendment has not gone all the way to meet the substantial arguments that we advanced.
Should the right hon. Gentleman be commending another Finance Bill to the House in the reasonably near future, we hope that he will move further amendments to meet our arguments. I am sure he will recognise that they have a certain validity.
§ Mr. Denzil Davies
I hope that I can give the hon. and learned Gentleman that assurance. In my next Finance Bill next year I shall ensure that the clause is amended to meet his point.
§ Amendment agreed to.
§ Amendment made: No. 100, in page 49, line 32, after '3(7)', insert or 4(b) or (bb)'.—[Mr. Denzil Davies.]