DISTRIBUTIONS OF INVESTMENT COMPANIES (Hansard, 15 April 1980)

§ Mr. Eyre
I beg to move, That this House doth not insist on its amendment and doth agree with the Lords in their amendment proposed in lieu.
On Report, the Government introduced a number of amendments to clause 41 providing for a new and simplified administrative scheme giving a greater flexibility of dividend regime to investment trust companies.
The Association of Investment Trust Companies considered the scheme to be a welcome improvement but was concerned that the deletion of the reference to "land and other assets" in subsection 41(7), thereby restricting an investment company's investments to securities only, could prove unduly onerous. This is because investment companies may have some direct investments in assets other than securities, and, furthermore, at the time of a falling stock market, an investment company may quite reasonably decide to keep a fair proportion of its assets in liquid form.
The amendment introduced by the Government and agreed in another place meets this concern by adding the word "mainly" to the words "in securities". It is consistent with the requirements of the second directive, the Association of Investment Trusts agrees that it meets its point, and I recommend to the House that it be accepted.

§ Mr. Clinton Davis (Hackney, Central)
I beg to move, as an amendment to the Lords amendment, at the end to add that is to say, over fifty per cent.". This is my sole, massive contribution to this evening's entertainment. The phrase "mainly in securities" is imprecise and there is no reason why it should not be clarified. I do not think that matters were improved by the explanation, so-called, given by the Government spokesman, the noble Viscount Trenchard, in another place. He said: The point is that the usual investment in this area is in securities. However, we did not want it to be exclusive to them. Therefore, we used the term 'mainly' which, though short, is fairly clear. 1164 That is a curious way of putting it. After all, one expects some degree of precision in a Companies Bill and it is not enough for it to be "fairly clear". If it is fairly clear, one might also say that it is fairly obscure. There is no reason why this should not be completely clear. I do not see why there should be an invitation to litigation to clarify these matters, and I do not accept the further argument that the noble Lord introduced that he needed flexibility. Indeed, the argument that was advanced by him was absurd. No doubt it will be adopted by the Minister, in which case it will be doubly absurd.
Our amendment gives a sufficient degree of flexibility but it also clarifies the position. It says what the noble Lord went on to say he meant. He said: I believe that 'mainly' means over 50 per cent. in securities for sure."—[Official Report, House of Lords, 27 March 1980: Vol. 407, c. 1014] If that is so, why not say it? That is the question I pose to the Minister. I am offering him the flexibility that he wants and I am also offering a degree of precision which, at the moment, the amendment that was carried in another place lacks.

§ Mr. Eyre
The Opposition's amendment is, I am sure, a genuine attempt to clarify the amendment made in another place, the effect of which I have already explained. However, I must ask the House not to accept it on the ground that it is unnecessary. Let me briefly explain why I make that assertion.
The purpose of the clause as amended is to require investment companies to invest at least half of their funds in securities. I am advised that the expression "mainly in securities" achieves this purpose and that no additional words are necessary. The adverb "mainly" is used elsewhere in the law relating to companies without qualification. For example, in section 18(6) of the 1967 Act there is a reference to a person who works wholly or mainly outside the United Kingdom. Parliament felt no need to expand on the meaning of the word then and there is no need to do so now. Therefore, I cannot recommend the Opposition's amendment to the House.
As I have said, Lords amendment No. 6 achieves what the Government wish to achieve, namely, to ensure that at 1165 least half of the funds of an investment company are invested in securities. It seems clear from the Opposition's amendment that they do not dissent from this policy, which has been welcomed by the companies affected.
It may help the hon. Gentleman if I remind him that in the case of Fawcett Properties Limited v Buckinghamshire County Council, reported in 1961 Appeal Cases at page 636, Lord Morton expressed the view that "mainly" meant "more than half." Therefore, I hope that the hon. Gentleman and his supporters will agree to withdraw their amendment.

§ Mr. Clinton Davis
This amendment has been supported by the national executive committee of the Labour Party, and it is of profound significance. I am very impressed by the judgment of Lord Morton. I must concede that the Minister has made the point better than it was made in another place. If the point had been made with such clarity, we need not have had this debate. I recommend that the Minister goes to the other place as quickly as possible.