HC Deb 19 October 1981 vol 10 cc70-1 'The following section shall be inserted after section 43 of the 1980 Act— "43A. Where a company makes a distribution of or including any non-cash asset and any part of the amount at which that asset is stated in the accounts relevant for the purposes of that distribution in accordance with section 43 of this Act represents an unrealised profit shall be treated as a realised profit—

  1. for the purpose of determining the lawfulness of that distribution in accordance with this Part of this Act (whether before or after it takes place); and
  2. for the purpose of the application of paragraphs 12(a) and 34(4)(b) of Schedule 8 to the 1948 Act (only realised profits to be included in or transferred to the profit and loss account) in relation to anything done with a view to or in connection with making that distribution.". '.—[Mr. Peter Rees.]

Brought up, and read the First time.

Mr. Peter Rees

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

It was appreciated that the demerger provisions that were introduced in the Finance Bill 1980 might not operate quite as they were intended to if there were not a slight relaxation of the rules on the distribution of unrealised profits. It is often an aspect of such demergers that real property, or alternatively shares in other companies of the same group, may be passed out in the course of a demerger. The purpose of the clause is to provide that where a company distributes an asset in kind which contains an element of unrealised profit the amount of that profit shall be treated as though it were a realised profit, thereby meeting the provisions in section 39 of the Companies Act 1980, or at least not contravening it.

I venture to reflect that this is a measure of common sense and I hope that on that basis it will commmend itself to the House.

Mr. Clinton Davis

May I take this opportunity to congratulate the Minister on his transfer, or is it elevation, to the Department of Trade?

The Secretary of State for Trade (Mr. John Biffen)

It is an elevation.

Mr. Davis

I am given that assurance by the Secretary of State, but such an assurance is always slightly dubious when it comes from that quarter. However, I am sure that it is an elevation. I wish the hon. and learned Gentleman well in the job that he will perform. He is an old friend. I look forward to crossing swords with him on many occasions, but not on this clause. I thought that he moved it brilliantly.

Question put and agreed to.

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

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