§ Mr. Rankin
asked the President of the Board of Trade what are the arrangements which have been made by his Department in connection with the Government investment in Fairfield, Glasgow, Limited.
§ Mr. Jay
The Fairfield Shipbuilding and Engineering Co. Ltd., to which interim financial assistance had been made available in accordance with the statement made by the Chancellor of the Exchequer on 4th November, 1965, transferred its shipbuilding undertaking (together with the movable assets, work in progress and shipbuilding contracts) early in January to a new subsidiary, Fairfields (Glasgow) Ltd. It is this company which was acquired on 7th January by the new financial partnership between the Government and certain private interests to which the First Secretary of State for Economic Affairs referred in his statement on 22nd December. The Fairfield Shipbuilding and Engineering Co. Ltd. retained its other assets including the shares of Fairfield Rowan Ltd.
The capital of Fairfields (Glasgow) Ltd. is £2 million, consisting of one million £1 ordinary shares and £1 million 7 per cent. unsecured Loan Stock, 1975. The Board of Trade have acquired one half of the ordinary shares and have subscribed the whole of the Loan Stock. The other half of the issued share capital has been acquired by the private participants.
If the company issues ordinary share capital in excess of the £1 million already issued, the Board of Trade will be entitled to acquire one half of the new issue. So long as it is Government policy to retain a 50 per cent. holding in the company, the Board of Trade would wish to exercise this option. No ordinary share in the Company may be disposed of to outside interests unless it has first been offered to the other shareholders at the price offered by an intending purchaser and has not been taken up by them.
The company has an option to redeem the Unsecured Loan Stock in whole or in part, at par, at any time before 1st April, 1966. In the event of any new issue of ordinary shares for cash, the Board of Trade may require the company to redeem at par Unsecured Loan Stock 47W equivalent in amount to the new share capital issued, to the extent that the Stock is still outstanding. Moreover, so long as there is Stock outstanding, total borrowing by the company may not exceed twice the issued share capital and consolidated reserves.
If the company, at any time prior to 31st December, 1975, is unable to obtain adequate working capital from ordinary market sources at reasonable rates of interest and on reasonable terms and conditions, the Board of Trade will advance sums in aggregate not exceeding £500,000 at any one time outstanding on terms to be agreed with the company. The Board of Trade will have the right to have such advances secured on the assets of the company.
The Governments shareholding entitles the Board of Trade to nominate one director on the board of Fairfields (Glasgow) Ltd. The other shareholders are entitled to nominate three directors. Additional directors are to be appointed by the board of directors and will hold office in accordance with the Articles of Association. The present chairman is Mr. Iain Stewart. The appointment of subsequent Chairmen will be by the board of directors, subject to the prior approval of the President of the Board of Trade. The day to day management of the company is vested in the board of directors who may appoint any one of its number to be managing director. The first managing director is Mr. Oliver Blanford. I have nominated Mr. Derek Palmar to be the Government director.
No Resolution of the board of directors will be valid on any of the following matters unless there is a unanimous vote of all the directors:
Any of these matters may at the request of any of the nominated directors be 48W referred for settlement by a General Meeting of the Company.
- (i) any increase or issue of share or loan capital or the granting of options in respect thereof;
- (ii) any payment of dividends;
- (iii) the disposal of the undertaking of the company or any substantial part thereof;
- (iv) the acquisition of any asset or the undertaking of any obligation involving capital expenditure exceeding £500,000.
The new management will have full responsibility for the day to day operation of the company and will be expected to operate the shipyard as a normal commercial enterprise. No special provision has been made for the submission of accounts and the company will in this respect be subject in the normal way to the provisions of the Companies Act.