§ 'As respects debentures which, under the terms of issue, must be repaid within less than one year of the date of issue—
- (a) section 79(2) of the Companies Act 1985 (offer of debentures of oversea company deemed not to be an offer to the public if made to professional investor) shall apply for the purposes of Chapter I of Part III of that Act as well as for those of Chapter II of that Part; and
- (b) section 371(2) of the Companies Act (Northern Ireland) 1960 (corresponding provisions for Northern Ireland) shall apply for the purposes of Part If of that Act as well as for those of Part XI.'. —[Mr. Howard.]
§ Brought up, and read the First time.
§ Mr. Deputy Speaker
With this it will be convenient to take Government admendments Nos. 270 and 277.
§ Mr. Howard
The amendments may appear rather technical but could have significant advantages for United Kingdom companies.
The new clause will give United Kingdom companies the same freedom to issue sterling commercial paper as foreign companies currently enjoy under section 79(2) of the Companies Act 1985 and the corresponding Northern Ireland provision, and will facilitate the development of a new United Kingdom financial market in sterling commercial paper.
SCP is a form of short-term negotiable debt which companies can issue as an alternative to bank borrowing. There is a flourishing market in the USA in the equivalent dollar. The development of a United Kingdom instruments market will give companies greater financial flexibility and be a welcome addition to the array of services provided by the City. My right hon. Friend the Chancellor of the Exchequer announced on 29 April that the Banking Act 1979 obstacles to issuing SCP would be relaxed, and that this amendment would be brought forward to extend the benefit of section 79(2) of the Companies Act to United Kingdom companies.
SCP will be issued in minimum denominations of £500,000, and the market will effectively be limited to professionals. The requirement to issue a prospectus is thus inappropriate and unnecessary. Section 79(2) of the Companies Act already exempts offers to professionals by foreign companies but gives no comparable relief to 524 United Kingdom issuers. The new clause will rectify this anomaly and place United Kingdom issuers on the same footing.
§ Mr. Bryan Gould (Dagenham)
I found the Minister's explanation interesting. We shall certainly watch with interest the development of the market for commercial paper. Will the Minister say a word about the rather unusual timing arrangements that are effected by amendments Nos. 270 and 277?
§ Mr. Howard
It is intended that these provisions should take affect immediately the legislation is on the statute book. We do not wish any delay if the new market is established and that is the reason behind the amendments to which the hon. Gentleman referred.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.