British Aerospace (Hansard, 17 December 1980)

§ Mr. Adam Butler

After consulting British Aerospace I have made an order under section 1(2) of the British Aerospace Act 1980 nominating British Aerospace Limited as the successor company for the purpose of section 1 of that Act; and after consulting Britsh Aerospace and the Treasury I have made an order under section 14(1) of the British Aerospace Act which provides that 1 January 1981 is to be the appointed day for the purposes of that Act. On 1 January 1981 therefore all the property, rights, liabilities and obligations of British Aerospace will vest in British Aerospace Limited in accordance with the British Aerospace Act. Immediately thereafter the company will apply to be re-registered as a public company under the Companies Act 1980 and its name will be changed to British Aerospace Public Limited Company.

The Government intend to offer for sale at the earliest appropriate opportunity about half the shares in the company.

All the existing members of British Aerospace have been appointed as directors of British Aerospace Limited. Immediately before the offer for sale, I intend to appoint two of the non-executive directors, Mr. K. M. Bevins and 179W Mr. K. Durham, as Government directors of the company. While the company remains wholly owned by the Government, the Secretary of State will continue to exercise the same measure of control over investment and borrowing as has been applicable to the corporation. A memorandum of understanding which provides the basis on which such controls will he operated will be agreed between British Aerospace Limited and its directors and the Secretary of State before vesting and will be laid before the House.

I have made the following arrangements concerning the future capital and reserves of the company. With the consent of the Treasury, I have given a direction under section 3 of the British Aerospace Act that the company shall, as a consequence of the vesting, issue shares to the Secretary of State to bring its total issued share capital to £40 million in nominal value. Further shares will be issued before or at the time of the offer for sale. Under section 15 of the Aircraft and Shipbuilding Industries Act 1977, I intend, with the approval of the Treasury, to determine the amount of the corporation's commencing capital as £158.75 million, which is equal to the amount of the compensation paid to the former owners of the companies which vested in British Aerospace under the 1977 Act. Under section 2 of the British Aerospace Act the corporation's liability in respect of its commencing capital, and in respect of its public dividend capital of £110 million, will be extinguished immediately before the appointed day.

I intend, with the approval of the Treasury, to specify that £128.72 million of the commencing capital should be treated as public dividend capital. No dividend will be payable on this capital in respect of past years, and I do not anticipate that the amount of the corporation's dividend for 1980 will be increased as a result of this additional capital. The interest liability until 31 December 1980 on the debt element of the commencing capital from 29 April 1977 at 10 per cent per annum has been met by a lump sum payment of £10 million by the corporation. I am satisfied that this limited remuneration of commencing capital will produce the best outcome overall for both the Government and British Aerospace Limited. British Aerospace has fully serviced both the public dividend capital and the loans it has received from the Government in previous years. In respect of the years to 1980, the Government have received £14.2 million in interest and dividend. In addition, British Aerospace will be proposing a dividend for 1980 and paying interest on existing loans.

When shares are offered for sale, the following special arrangements will be made for employees to acquire shares. All eligible employees, including all United Kingdom employees with one year's service, will be offered, free of cost and at the Government's expense, shares of approximately £50 in value at the offer price, provided they agree to vest them in the trustees of the British Aerospace Employee Share Ownership Scheme for at least two years. In addition, there will he a matching offer of a limited number of shares under which all eligible employees who purchase shares and vest them in the trustees will receive an equal number of shares free. All the free shares will attract the tax benefits laid down by the Finance Act 1978, as amended by the Finance Act 1980, if they remain vested in the trustees for longer than four years. Details will be circulated to employees. These special arrangements will be in addition to the usual 180W preferential consideration that will he given to applications received from all employees to purcuhase shares at the offer price.