HC Deb 20 October 1981 vol 10 cc206-15
Mr. Eyre

I beg to move amendment No. 18, in page 45, leave out lines 22 to 42 and insert—

' —(1) Subject to the following provisions of this section and sections 41 and 42 of this Act, where a person is acquiring or is proposing to acquire any shares in a company it shall not be lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of that acquisition before or at the same time as the acquisition takes place. (1A) Subject to the following provisions of this section and sections 41 and 42 of this Act, where a person has acquired any shares in a company and any liability has been incurred (by that or any other person) for the purpose of that acquisition it shall not be lawful for the company or any of its subsidiaries to give any financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred. (2) Subsection (1) above shall not prohibit a company from giving any financial assistance for the purpose of any acquisition of shares in the company or its holding company if—

  1. the company's principal purpose in giving that assistance is not to give it for the purpose of any such acquisition or the giving of the assistance for that purpose is but an incidental part of some larger purpose of the company; and
  2. the assistance is given in good faith in the interests of the company.

(2A) Subsection (1A) above shall not prohibit a company from giving any financial assistance if—

  1. the company's principal purpose in giving the assistance is not to reduce or discharge any liability incurred by a person for the purpose of the acquisition of any shares in the company or its holding company or the reduction or discharge of any such liability but is an incidental part of some larger purpose of the company; and
  2. the assistance is given in good faith in the interests of the company.'.

Mr. Deputy Speaker

With this we may discuss Government amendments nos. 19, 21 to 32, 35, 41 and 162.

Mr. Eyre

Clause 40 is included in the Bill to repeal and replace section 54 of the 1948 Act, which prohibits financial assistance by a company for the purchase of or subscription for its shares or those of its holding company, if it has one. The basic purpose of the clause is to redefine that prohibition and to maintain existing exemptions while providing new exemptions.

The new exemptions are intended to take account of the effect of the decisions of the courts in two cases in 1979 and 1980—Belmont Finance Corporation v. Williams Furniture and Armour Hick Northern Ltd v. Whitehouse and others. They drew attention to the breadth of the section 54 prohibition and caused the financial community and its advisers to be concerned that it needed to be interpreted much more widely than had previously generally been thought.

Section 54 had long been criticised as being avoidable by the unscrupulous and an unnecessary inconvenience for the honest. The attention that has been drawn by the recent cases to the breadth of the clause has caused great concern because it is thought that it interferes unnecessarily with many legitimate commercial arrangements, particularly in the sphere of group finance after a new subisidiary has been acquired.

The problem can be illustrated by the case of an acquiring company with a debenture existing before an acquisition, which has as one of its terms that the assets of all subsidiaries of the acquiring firm will be charged to secure the debenture.

It is considered that the security thus provided by a newly acquired company may fall within the scope of the section 54 prohibition, although the security is purely a consequence of the acquisition and is not instrumental in bringing it about.

Mr. Clinton Davis

I do not ask the Minister to answer my question immediately, but when were the amendments tabled? That is important in relation to the measure of consultation that could have taken place.

Mr. Eyre

I shall have to inquire. I appreciate the importance of the hon. Gentleman's point. There has been considerable and intense concentration on this extremely complex aspect. I hope that I shall be able to assure the hon. Gentleman that much time has been allowed for consideration of what is now the final form of the amendments. My Department has consulted the interests concerned and co-operated with them with the aim of getting this complicated matter as correct as possible.

I shall provide more information in the hope that I can answer the hon. Gentleman's query in greater detail. A subsidiary company may provide funds to its parent, possibly some years after its acquisition, to effect a more efficient disposition of assets within the group or to improve its financial position. The provision of those funds may relieve the parent of indebtedness incurred for the purpose of acquiring the subsidiary, but, if the primary purpose of the subsidiary in providing funds is other than to provide such relief, it is considered that the arrangement should be allowed as a desirable commercial activity.

Intensive consultations have proceeded throughout the passage of the Bill to find a satisfactory form for provisions that will exempt activities and arrangements that are in the interests of an acquired company, its members and creditors and the group and its lenders but will not help an acquired whose sole purpose is to strip an acquired company of its assets to make good his expenditure in his acquisition.

I understand that it may take some time to answer the query raised by the hon. Member for Hackney, Central (Mr. Davis).

The amendments reflect the outcome of the consultations. I am pleased to inform the House that they have the approval of those whom we consulted, including not only those who advise companies on the legality of the proposed arrangement, but—I think it may interest the hon. Member for Hackney, Central—Finance for Industry Limited, which shares the Government's concern to ensure that the obstacle to the management buy-out that section 54 presently represents should be removed. Our consultations on what probably has been the most difficult of all the provisions in the Bill have been detailed and time-consuming. The Government are grateful to those who have contributed.

The most important of the amendments to clause 40 is amendment No. 18. It comprises a more radical restatement of the basic prohibition against a company giving financial assistance and of the exemption for assistance when the primary purpose is not to give assistance for the purpose of the acquisition. The essential change from the provision in the Bill, which follows closely the words of section 54, is that the reference to "financial assistance" given in connection with acquisition has been dropped. The expression "in connection with" could be interpreted as referring only to financial assistance given after an acquisition, but it has given rise to great uncertainty of interpretation and has been a major element in spreading so wide the net created by the prohibition.

The amendment distinguishes between financial assistance given before or at the same time as an aquisition and that given after the event. Financial assistance given directly or indirectly for the purpose of an acquisition before or at the same time as the acquisition is prohibited in new subsection (1). Financial assistance given after the acquisition to relieve any persons of a liability incurred for the purpose of the acquisition is prohibited by subsection (1)(a). As the offence has now been divided into two, so the defence provided for a company that can show that financial assistance for the acquisition is not its principal purpose has been divided in subsections (2) and (2)(a) to apply respectively to financial assistance before or at the same time as acquisition and after acquisition.

The additional condition, that the assistance is given in good faith in the interests of the company, is retained. The resulting provisions deal with the uncertainties arising from both the Belmont Finance Corporation v. Williams Furniture and the Armour Hick Northern Ltd. v. Whitehouse and others decisions. They will be of considerable help to companies and their advisers and will promote legitimate commercial activity.

Amendment No. 26 introduces two new subsections into clause 40 that complement new subsections (1)(a) and (2)(a), which are concerned with financial assistance after the acquisition. Subsections (6)(a) and (6)(b) provide definitions respectively of incurring a liability for the purpose of an acquisition and reducing or discharging such a liability. Incurring a liability is defined to include any change in a person's financial position, and reducing or discharging the liability is defined as wholly or partly restoring his financial position". The amendments make clear that in deciding whether the financial assistance has been given after an acquisition, it is necessary to look at the overall financial position of any person involved. The use of the word "liability" is not confined to the normal strict legal meaning. Given the diversity of ways in which financial assistance might be given, it is considered that that broad definition is essential if the purpose of prohibition in the clause is not simply to be avoided.

Amendment No. 24 deals in the simplest possible terms with the diversity of ways in which financial assistance might arise. It provides a replacement definition of "financial assistance" for that already contained in subsection (6) of the clause, which our continuing consideration and comments of consultees has suggested is not entirely effective in fulfilling its purpose. The amendment provides a simpler formulation. "Financial assistance" is defined as arising by way of gift or guarantee, security or indemnity, release or waiver or a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when…any obligation of any other party to the agreement remains unfulfilled. That last provision ensures that financial assistance includes any sort of agreement that affords any form of credit. The exemption in paragraph (b) for an indemnity in respect of the indemnifier's own neglect or default is to permit a company to indemnify an underwriter of a new issue of the company's shares against neglect or default on the company's part associated with the new issue. That is a normal commercial practice that is unobjectionable and should be allowed to continue.

Amendment No. 25 amends existing paragraph (c) of the definition of "financial assistance" contained in subsection (6). It provides that any financial assistance taking a form other than those specified in amendment No. 24 that reduces the company's net assets to a material extent is financial assistance for the purpose of clause 40. The amendment provides for the case of a company that has no net assets and deems any other financial assistance given by such a company to be relevant for the purposes of the clause. It also makes it clear that the expression "net assets" in that subsection has the same meaning as it has for the purposes of the 1980 Act. That has the effect that the questions whether a company has net assets and whether they are reduced to a material extent must be determined by reference to actual value of assets and liabilities rather than book values.

Amendment No. 27 provides that, for the purposes of subsection (5) only, the question whether net assets are reduced is to be determined by reference to book values. I emphasise that that is for the purpose of subsection (5) only. Subsection (5) restricts any assistance given by a public company under the exemptions in subsection (4) for general lending, which is part of the ordinary course of business, to provision of funds in accordance with an employee share scheme and for lending to employees, and to such assistance as does not reduce net assets or that is provided from distributable profits. In applying the less rigorous standard based on book values, as given in the company's accounting records, the amendment adopts the policy of the European Community's second directive on company law. That is justified in the case of the limited types of payment permitted under subsection (4) that are unlikely to give rise to abuse.

Amendments Nos. 19, 21, 28, 29, 31, 32 and 35 are consequential upon amendment No. 18. 6.30 pm

Amendment No. 22 applies to the definition of an employee share scheme that is contained in the 1980 Act in clause 40(4). The definition has been lost from subsection (7) as a consequence of amendment No. 27. The purpose of amendments Nos. 23 and 30 is to make clear that a company that has no net assets may not give financial assistance for the acquisition of its own shares by virtue of these provisions. A publicly owned company which has no net assets will have no distributable profits which it can use to give financial assistance. Our policy in permitting financial assistance in these cases is that it should always be found from distributable net assets to protect the interests of creditors.

Amendment No. 41 provides a replacement subsection (8) for clause 42. It provides definitions of the expressions "financial assistance" and "net assets" for the purposes of clause 41. The change is partly consequential upon changes made to earlier amendments to clause 40.

One change of policy has been made—namely, whether a company can be said to have net assets and, if so, to what extent. That is to be determined by reference to book value rather than the actual value of assets and liabilities. Clause 41 allows a private company to provide financial assistance if it has net assets. Most private companies are small. It is considered unnecessary for the protection of creditors to require that such companies have assets and liabilities valued before they can provide financial assistance. Reliance on book values provides an adequate basis for determining whether such companies may do so.

Amendment No. 162 deletes regulation 10 from table A of schedule 1 to the 1948 Act. The regulation provides an optional standard form of articles for public companies that largely duplicates the provisions of section 54 of the 1948 Act. Section 54 is repealed by clause 40. The deletion of regulation 10 is consequential.

We have sought by these amendments to clarify and simplify a long-standing provision of company law in a way which retains a necessary prohibition against undesirable activities while allowing reasonable scope for commercial development and flexibility.

I shall answer as speedily as I can the questions posed by the hon. Member for Hackney, Central. The equivalent of clause 40, with a limited new defence to clarify the position, was included in the Bill when it was introduced in another place. The clause was considerably criticised and on Report in another place the Government's spokesman said that the Government were open to persuasion on the appropriate way of dealing with these problems.

In response to that invitation, the Government received a considerable body of representations from a number of organisations and individuals. As a result, the Government introduced in Committee the special relief for private companies in clauses 41 and 42. The clauses were debated on 30 June. At the same time, we added to the list of exclusions in clause 43, an action that has been widely welcomed. I know that the hon. Gentleman and I have vivid memories of the detail of the discussion that took place in Committee.

The amendments before us, on which we held consultations during August and September with representatives of the Law Society, the banks, Finance for Industry Ltd. and those representing certain bodies concerned in management buy-outs, were tabled on 8 October. The purpose of the amendments is further to refine the basic principle of the clauses as tabled in Committee.

Representations were made that the clauses were not as clear as they might be. The hon. Member for Hackney, Central seems surprised. The hon. Gentleman will understand that we are dealing with a difficult matter. The problems have been notorious for many years. I am happy to assure him that those concerned are generally content with the amendments as tabled.

A most tremendous effort has been made to work with the bodies that I have mentioned, which have played such a helpful part in the negotiations. Those bodies include especially the Law Society, the Bar and representatives of financial bodies. Those representatives are generally content. I hope that the hon. Gentleman will be able to accept that as reassuring news.

Against the background of these complicated matters, he and I are both much dependent on the ability of expert advisers to grapple with the details. I believe that the result of these efforts is an improved Bill. We discussed at an earlier stage the principles that are involved and I know that they have found agreement with the hon. Gentleman. I hope that he will be able to approve all the efforts that have been made to get in correct form the ensuing detailed arrangements.

Mr. Clinton Davis

I do not want to discuss the principles underlying the changes in the law which the Minister has enunciated and with which he dealt more specifically earlier in our considerations. However, I am deeply disturbed at the way in which the House is being asked to deal with what is admittedly complex legislation.

The Minister says that he is simplifying formulae and clarifying and simplifying the Bill. I suppose that everything has to be regarded relatively. If he thinks that at the end of the day we shall emerge with a simple formula, I cannot share his opinion, to put it at its most polite. If our considerations on Report were followed by considerations on super Report and by further considerations on super, super Report, I expect that more changes would be made as we went along.

I wish that I had the same confidence as the Minister has displayed. He has suggested that he has now found the magic formula. This is the Government's third attempt. I remind the Minister that he said in Committee on 30 June: In the light of the representations received, the Government have decided upon a radical revision of section 54 rather than the simple clarification which we sought initially. As regards private companies, we have tabled amendments in the spirit of the approach of the Jenkins committee, to permit a company to assist the acquisition of its own shares subject to proper safeguards for creditors and minority shareholders. This is the purpose of new clauses 11 and 12. The Minister continued to talk about the consultations that had taken place. He commented on how everybody at that stage appeared to be satisfied. The same sort of representatives had been consulted then. The Minister provided the Committee with a powerful peroration. He said: We all realise the importance of the measures and I am grateful for the contributions made by hon. Members. The Minister is unfailingly polite to all hon. Members. In fact, the contributions had been limited. If we had had a full-scale debate, the Minister's plaudits would have been more deserving. He was kind to us even when we were failing in our duties. He added: I believe that the Government's proposals meet the needs. They have, after all, followed the most tremendous and worthy efforts in consultations to get the proposals right and take account of good points. The proposals are now in an acceptable form, which I commend to the Committee."—[Official Report, Standing Committee A, 30 June 1981; c. 296–317.] The Minister said the same today. What worries me is whether the Government can be right. Exactly the same people said that they were right before, and then they had second thoughts. It would be wrong for me to complain. I do not complain that people should have second thoughts in matters as complex as this one. However, I am not satisfied that the second thoughts are necessarily right in matters as complex as this.

I am sure that the way in which Parliament is permitted to scrutinise this form of legislative proposal is hopelessly and utterly inadequate. That proposition could not be more demonstrably true than in this instance. In effect, Parliament has been effectively cut out of the process of properly considering these proposals. We could not have considered the proposals which were laid before the Committee as they were laid at a late stage. The Minister will be the first to concede that. He generously conceded it when we dealt with the matter in Committee. Now we know that, following those detailed consultations, the new proposals were laid on 8 October.

One of the most important features of proper scrutiny of legislation is that the Opposition and Government Back Benchers should be involved. Perhaps we have a contribution to make. However, the reality is that when professional bodies and other bodies such as those which have been involved in the consultation have been up to their eyes in trying to get the situation right with departmental officials, there is no time for that broader consultation to take place. That is grossly unsatisfactory.

I have made that plea in Committee and on the Floor of the House on a number of occasions. I thought it right to seize this opportunity because the example of the inadequacies of our procedures was so clear that I could make that complaint again. I cannot plead not guilty to the same charge. When in a Minister's position and undertaking complex legislation, and when relying heavily on professional expertise, one cannot avoid those concerned saying that they are dissatisfied with the proposals, although they had vetted them before, and that they are therefore now advancing a different proposition. One must listen favourably to them.

Mr. Nicholas Baker

Will the hon. Member accept that the commercial company world is changing fast—for example, in management buy-outs? That is happening on an increasing scale. I understand why the representations that were made recently about how section 54 might affect such transactions would be different from the representations that were made only six months ago.

Mr. Davis

I dare say that the hon. Member is right. That demonstrates more forcibly the inadequacies of procedures so antiquated that they cannot possibly deal with the challenges of legislative requirements which are imposed upon us. I do not believe that the Select Committee procedure that is currently employed is the right way to deal with this matter. We should employ the statutory instrument formula more readily. We discussed that formula yesterday. Although the statutory instrument cannot be amended in its present form, subsequently it can be changed much more easily.

If this proposal is all wrong and found to be totally impracticable, what shall we do? The poor Minister has to persuade his colleagues to give him more time. If the situation becomes demonstrably wrong, he must persuade his colleagues to give him more time for another Companies Bill to deal with that situation. What happens then? We have another major Companies Bill because he cannot stop that happening.

Therefore, we are living in an Alice-in-Wonderland world when dealing with company or patent legislation—anything that is complex, and most of which is non-contentious. The Minister should try to persuade his colleagues to see that in this area of the law we are able to deal with changing circumstances much more rapidly and effectively than our present formulae permit us to do. I think that I carry the few hon. Members in the House with me on that. 6.45 pm

I only wish that the Minister's confidence in the present situation would be realised. I genuinely believe that change is necessary and that the Minister is trying to get this matter right. I wish to correct one possible misunderstanding. I acquit his officials of any blame in this respect. I do not believe that it would be right to charge them with any lack of diligence. I know them well enough, although the individuals have changed since I was in the Department. That Department has always gone to great lengths to consult. The officials are not without criticism. No one is. However, they do their job with care and skill, particularly when one realises that most of them are not lawyers. They have to grapple with those horrendous problems with no legal background.

However, other Members of Parliament need to be involved in the process. Coupled with the suggestions which I have made previously, there is no reason in the world why interested Members from all parties with an interest in a technical subject in which political overtones are not involved should not be called in by the Minister and told at an early stage that their co-operation is desired. I believe that this Minister would welcome that approach, but perhaps the mores to which we are accustomed will not permit him to do that. We must break down those reserves. That is never truer than in this range of company legislation.

In the Bill we will come across more and more second, third and even fourth thoughts. I am prepared to understand why that happens. The Minister is right to think again about propositions which have been shown by those who are expert to be likely to founder. Of course, he is right to be flexible. That is being realistic. However, I hope that he will think again about the procedural follies in which we are engaged. They are almost pantomimes when we consider such Bills when, because we are given such short notice to consider the matters in detail, we are caught out of our depth. That is wholly wrong. However, having said that, I do not object to the propositions which the Minister has put forward.

Mr. Neville Trotter (Tynemouth)

The hon. Member for Hackney, Central (Mr. Davis) made some interesting points in his philosophising about the way in which the House considers a Bill of this magnitude and complexity. I suppose that it is because of the lack of briefings that so many hon. Members are absent tonight. One might have thought that there would be general interest in such a Bill. Obviously, there is not. Perhaps it is significant that it is being debated in the week of an important by-election. No doubt many hon. Members are in Croydon tonight.

One wonders whether the time scale of the annual parliamentary procedure is appropriate for a Bill of this nature and magnitude. There must always be the problem of a Bill failing completely if it does not complete its passage through the House within a year. Does a Bill of such a technical nature really need to be subjected to the usual cut-off procedure at the end of the parliamentary Session? Could it not be allowed to go on into the next Session? There would then be more time at each stage for the necessary consultation.

I cannot help reflecting on whether it is necessary in this modern age to have the detailed discussion of every technical amendment on the Floor of the House in this way, and whether it might not be better to have amendments tabled, with the right of hon. Members to select those that they wish to debate. It puts a very heavy burden on the Minister to have to go through every one of the technical amendments in detail when obviously most of them are not controversial. I was involved in one discussion on amendments in Committee. It was, in fact, a colleague in my own firm—a man of great eminence in his field—who pointed out that the wording that had been incorporated initially would produce some practical and serious problems that could prevent the clause from having the desired effect. The amendments before the House tonight will, I think, deal satisfactorily with his objection. But in general the concept of supporting and enabling management buy-outs is one on which the Government are to be congratulated. Finance for Industry Limited was very concerned that company and tax law are making it almost impossible for management buy-outs—which would save companies and provide a secure future for them—to take place.

There were two prongs of attack on the problem. In so far as one was involved in trying to obtain amendments at the Treasury end of the Government, one met with no success whatever. There were tax situations on which liabilities arose that were in no way reflecting real events. They were completely artificial tax liabilities that were arising in the attempts that were being made to get round the existing company law that prevented management buyouts. I know that Finance for Industry Limited was as pleased as I was that my hon. Friend was able to solve this problem by means of the clause that we are debating tonight. I should like to record my appreciation, and that of my profession, for the ready way in which he has enabled this problem to be overcome. It is one of the most beneficial clauses in the whole of the Bill.

Mr. Eyre

I have a good deal of sympathy with the views expressed by the hon. Member for Hackney Central (Mr. Davis) on the need for the involvement of Back Benchers, both Government and Opposition, in the preparation of legislation. The hon. Gentleman knows—and was kind enough to say in his speech—that there are specially difficult factors in this area of company law, and that those difficulties, in the case that we are now discussing, have been greatly intensified by limitations of time. They have also been made more difficult by virtue of the fact that the House has been in recess while much of the slogging work has had to be done and the refinements developed.

The hon. Gentleman will have noted that the amendments in question were tabled on 8 October, but we both understand that at about that time of year there are other demands upon the time of hon. Members who are involved in these complicated matters. Within all this complexity, I accept that more time would have been most desirable, but I much appreciate the hon. Gentleman's entirely justified tribute to the efforts of officials in my Department. Like myself, they have been doing everything they can, under pressure, to get this legislation as right as possible.

I should also like to express my appreciation to my hon. Friend the Member for Tynemouth (Mr. Trotter) for his kind remarks. He emphasised the need for the great expertise that has to be developed in so many areas of the subject for a person to be able to offer an informed opinion on a current problem or to get anywhere near solving it. We all appreciate that and are humiliated by the complexity of the considerations involved.

My hon. Friend the Member for Dorset, North (Mr. Baker), in an intervention, made an important practical point when he emphasised the rapidity with which change takes place in commercial law. The pressure that then develops for something to be done in the legislative field is enormous and difficult to resist.

Taking account of all these factors, I shall bear very much in mind the procedural points made by the hon. Member for Hackney, Central, and I am grateful to him for the way in which he has accepted the amendments.

Amendment agreed to.

Amendment made: No. 19, in page 46, line 1, leave out 'Subsection (1)' and insert 'Subsections (1) and (1A)'.—[Mr. Eyre.]

Mr. Eyre

I beg to move amendment No. 20, in page 46, line 3, leave out 'paid or' and insert 'made or any distribution'.

The purpose of the amendment is to clarify the drafting of paragraph (a) of subsection (3) of clause 40.

Amendment agreed to.

Amendments made: No. 21, in page 46, line 20, leave out 'Subsection (1)' and insert 'Subsections (1) and (1A)'.

No. 22, in page 46, line 25, after 'scheme', insert

'within the meaning of section 87(1) of the 1980 Act)'.

No. 23, in page 46, line 34, leave out 'company's net assets' and insert

'company has net assets which'.

No. 24, in page 46, leave out from beginning of line 39 to end of line 5 on page 47 and insert—

  1. 'financial assistance given by way of gift;
  2. financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of the indemnifier's own neglect or default, or by way of release or waiver;
(ba) financial assistance given by way of a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when in accordance with the agreement any obligation of any other party to the agreement remains unfulfilled or by way of the novation of or the assignment of any rights arising under any loan or such other agreement; or'.

No. 25, in page 47, line 6, leave out from 'company' to end of line 7 and insert

'the net assets of which are thereby reduced to a material extent or which has no net assets. In this subsection "net assets" has the same meaning as it has for the purposes of the 1980 Act.'.

No. 26, in page 47, line 7, at end insert—

  1. 'Any reference in this section to a person incurring any liability shall be read as including a reference to his changing his financial position by making any agreement or arrangement (whether enforceable or unenforceable and whether made on his own account or with any other person) or by any other means.
  2. Any reference in this section to a company giving financial assistance for the purpose of reducing or discharging any liability incurred by any person for the purpose of the acquisition of any shares shall be read as including a reference to the company giving financial assistance for the purpose of wholly or partly restoring his financial position to what it was before the acquisition took place.'.

No. 27, in page 47, leave out lines 8 to 10 and insert—

'(7) For the purposes of subsection (5) above—
  1. "net assets", in relation to the giving of financial assistance by any company, means the amount by which the aggregate amount of the company's assets exceeds the aggregate amount of its liabilities taking the amount of both assets and liabilities to be as stated in the company's accounting records immediately before the financial assistance is given; and
  2. "liabilities" includes any amount retained as reasonably necessary for the purpose of providing for any liability or loss which is either likely to be incurred, or certain to be incurred but uncertain as to amount or as to the date on which it will arise;'.—[Mr. Eyre.]
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