CHARGES TAKEN BY PUBLIC COMPANIES ON OWN SHARES (Hansard, 27 February 1980)

§ Mr. Parkinson
I beg to move amendment No. 54, in page 46, line 40, leave out "taken by" and insert "of".

Mr. Deputy Speaker
With this it will be convenient to take Government amendment No. 55 and amendment No. 365, in page 47, line 11, at end insert— (e) in the case of a company acting as a trustee, any lien or equitable charge which it acquires over its own shares, in its capacity as such trustee".

§ Mr. Parkinson
As you can see, Mr. Deputy Speaker, I am having great difficulty in containing myself as we tear through this exciting part of the Bill. In the Department we describe clauses such as clause 38 as "Page country". It is an area into which Ministers venture rarely and where my right hon. Friend the Member for Crosby (Sir G. Page) romps around with absolute confidence and serenity.
1520 The amendments, as one might guess, are technical amendments to clause 38 (2)(b), and seek to broaden its scope somewhat. Clause 38 implements the directive requirement and provides that liens or other charges taken by a public company over its own shares, whether taken expressly or otherwise, shall be void unless permitted by subsection (2). Subsection (2)(b) is one of the exceptions and operates for what may broadly be called financial institutions. It refers to a charge taken by the company on its own shares, whether fully paid or not, as security for the purposes of a transaction entered into by the company in the ordinary course of its business. The problem is that certain liens arise in the course of dealings and it is hard to say that they are taken by the company as security for the purposes of a transaction, but, rather, they tend to arise in connection with such transactions.
Therefore, as drafted, it might be held that as such they did not come within clause 38(2)(b). To ensure that they are protected the amendment would change the relevant phrase to: a charge of the company on its own shares, whether fully paid or not, which arises in connection with a transaction entered into by the company in the ordinary course of its business. With your permission, Mr. Deputy Speaker, I should like to comment on the amendment which is shortly to be moved by my right hon. Friend the Member for Crosby. I hope that the House will forgive me if I refer regularly to my notes on this technical amendment. The amendment raises the question of the lien which a trustee company may have over a trust property, where the trust property includes shares in the trustee company. Whether this would be prohibited by clause 38 depends on a number of circumstances. The prohibition in clause 38(1) bites only on public companies.
Many trustee companies are wholly owned subsidiaries of other companies. Where the trustee company has a lien over the shares in its parent, that is not affected by clause 38. In the unusual case where the trustee company is a public company and has a lien over its own shares because it is a trustee, the validity of the lien will depend upon whether it comes within clause 38(2)(b). I understand that certain banks carry on 1521 their trustee business in their own name as a department of the bank rather than as a subsidiary. In that case, they seem to come within the defence in subsection (2)(b). If their ordinary business is not such as to bring them within subsection (2)(b), the lien would be void unless it came within subsection (2) (c) or (d). However, I am advised that a specific defence for trustees' lien would not be within the directive. I therefore hope that my right hon. Friend will not press the amendment.

§ Sir Graham Page
I am grateful to my hon. Friend for amendments Nos. 54 and 55. They cover what I have tried to achieve in amendment No. 365, which states: in the case of a company acting as a trustee, any lien or equitable charge which it acquires over its own shares in its capacity as such trustee". I was convinced that amendments Nos. 54 and 55 achieved that which I had tried to achieve in amendment No. 365. I thought that they had achieved the same end neatly, and by using only a few words, but my hon. Friend has now sown doubt in my mind. I understand from his comments about my amendment that he does not like it. He seemed to be saying that his amendment did not cover it. However, I think that he has satisfied my aims. I shall therefore be satisfied with amendments Nos. 54 and 55.

§ Mr. Clinton Davis
I was troubled by the initial remarks of the right hon. Member for Crosby (Sir G. Page). Rarely have the people of Hackney, Central felt so strongly about anything. They are delighted that the Government have responded by improving this Bill in such a meaningful and direct way. We in Hackney, Central are therefore delighted. I can now call the demonstration off.