COMMONS AMENDMENTS (Hansard, 23 July 1973)

§ THE EARL or LIMERICK

My Lords, I beg to move that this House doth agree with the Commons in their Amendment No. 3, and with the leave of the House, we can also take Nos. 4 and 5. The first and third of these Amendments (that is, Nos. 3 and 5) add spouses and children to the list of "associates" in subsection (5); that is to say, the persons whose shareholdings are to be aggregated with those of the person with whom they are connected in order to establish whether that person effectively controls one-third or more of the voting power in an insurance company. The addition of a member of a partnership to the list of associated persons (Amendment No. 4) was suggested by the industry in the course of our discussions with them leading to the revision of Clause 10, where the definition of a "controller" in this clause is applied. Partnerships are common inter alia in insurance broking.

The removal of the employer of the person from the definition of an "associate", also by Amendment No. 4, may require a slightly fuller explanation. The purpose of subsection (5) is to identify various categories of persons who may be regarded in general as being financially dependent upon or otherwise likely to be compliant with the wishes of another person. Such associates, as the subsection calls them, may appear as nominally independent holders of shares on the register of an insurance company, whereas the practical reality probably is that they will invariably vote as directed by a prin- 1560 cipal, who may thus control one third or more of the voting power, although personally holding less.

The Amendment removes from the list of associates an employer of a person who holds shares, while retaining an employee. This is more consistent with the idea underlying the provision, that of economic dependence. It may happen that a company or a person who effectively controls an insurance company will avoid holding directly a one-third interest by putting part of it in the name of a trusted employee. It is considerably less likely that an employee will be able to influence the attitude of his employer when both hold shares in the same company, a fact of which neither may even be aware. As the subsection stands, an employee who held a fraction of one per cent. of shares in a particular company would become a controller of it if his employer held 33 per cent. It would clearly be wrong, and probably impracticable, to treat him as such for the purposes of the clause and of the later clauses where these definitions are applied. What we want to ensure in this clause is that a major shareholder should not escape being identified as controlling an insurance company by distributing some part of his shareholding to stooges, among whom may be his employees in some other company. But we do not want to put the boot on the other foot and make the employee with a modest shareholding a controller because his employer holds a substantial holding. It might be 99 per cent. in the employer's name and one per cent. in the employee's; if we leave in the reference to employer that would make the employee a controller and subject him to all the vetting which that involved. I beg to move that this House doth agree with the Commons in their Amendments Nos. 3, 4 and 5.