Skip to main content

New Clause—(Associated Companies)

Volume 530: debated on Tuesday 13 July 1954

The text on this page has been created from Hansard archive content, it may contain typographical errors.

(1) Notwithstanding anything in Part I of this Act, no person shall be entitled to a payment under section six, eight, nine, eleven or twelve of this Act by virtue of a disposition between companies which at the time of the disposition were associated companies.

(2) Where a company is the holder of a claim holding, then, for the purpose of ascertaining whether or not that company is entitled to a payment in respect of the holding under Part I or Part V of this Act, any act or event which occurred in relation to another company which at the time of that act or event was, or after that time but before the twenty-sixth day of February, nineteen hundred and fifty-four, became, associated with the company which holds the claim holding shall be treated as having occurred in relation to the company which holds the claim holding, and an interest in land held by any other company for the time being associated with the company which holds the claim holding shall be treated as being held by the company which holds the claim holding,

(3) For the purposes of this section, a company shall be treated as associated with another company if, and only if, within the meaning of section one hundred and fifty-four of the Companies Act, 1948, one of those companies is a subsidiary of the other, or both those companies are subsidiaries of the same holding company.—[ Mr. H. Macmillan.]

Brought up, and read the First time.

I beg to move, "That the Clause be read a Second time."

The principle underlying this new Clause is that for the purposes of entitlement to a payment under Part I a group of associated companies should be treated as one person. There are two aspects of the Clause, one might call it the swings and the roundabouts, and they are dealt with in subsections (1) and (2) respectively.

On the one hand, on the negative side, no payment shall be made by virtue of a transaction between two associated companies; since the property remains within the group there is no real loss. On the other hand, a right to a payment should not be lost merely because the claim holding is held by one member of a group of companies rather than another.

This matter has been drawn to our attention by the acquisition of the Welwyn Garden City Estate from Welwyn Garden City, Limited, which will be recalled by the hon. Member for Wellingborough (Mr. Lindgren). That estate was acquired from the Welwyn Garden City, Limited, on terms leaving the company with a very large claim on the £300 million fund. Since the acquisition removed the main—indeed, the only—purpose of the Garden City company, it went into voluntary liquidation and the claim was assigned for substantially less than its face value to a wholly owned subsidiary. The operating company went into liquidation and transferred the claim to the other company, but at considerably less than face value.

As the Bill stands, the result would have been that this purely artificial transaction—not "artificial" in the bad sense—would have had the result of limiting the payment made in respect of the claim to the consideration nominally given for it. That seems to us to be wrong. For the purpose of this Clause, whether it works in one direction or another, companies are to be treated as associated if one is a subsidiary of the other or both are subsidiaries of the same holding company. These terms have the same meaning as in Section 154 of the Companies Act, 1948.

We feel this Clause is a distinct improvement to the Bill. I have to declare an interest—not a financial interest, as I have never had one in the Garden City company, but an interest in that development. I am glad that the Minister has paid attention to the point which was put to him.

I do not in the least quarrel with what my hon. Friend the Member for Wellingborough (Mr. Lindgren) has said. I recognise his deep human interest in Welwyn Garden City. But I wish to ask about the limitations of this new Clause. The principle behind the Bill was that where there had been an assignment for less than the value of the claim the assignees were not to get the profit of their speculation if they speculated on getting more out of the claim than was originally paid. Broadly speaking, that seems an extremely wise and statesmanlike provision.

As I understand, this new Clause seeks to meet the problem of the wholly owned subsidiary company. Is that the only exception to the broad, general principle in the Bill? What is the position, for example, of a family transaction? I seem to remember a discussion on this in Committee. Where a man assigns his claim to his son with the idea that the son will in future inherit the property he may con sider that it would be so much better if he assigns at less than its true value. Morally, that case seems to be one to which we should be as sympathetic as the case of the subsidiary company. Would there be a feeling of injustice between the two cases?

I am nervous about this new Clause. I know that the Minister accepts it, but if we lay down an extraordinarily simple and sensible provision that one may only get the value of what one pays for the claim—less than the full value of the claim—that is an essential justice which everybody accepts. Once we begin making exceptions to it people begin thinking about possible exceptions, and the line, instead of being clear, becomes somewhat obscure. Before we agree to the Clause, it would be helpful if the Minister gave us some advice as to whether there are comparable cases which have not been considered or any other comparable cases which have been considered.

5.0 p.m.

The point which has been raised about inter-family transactions is not covered by the Clause, which deals with associated companies and nothing else. There are parts of the Bill, and Amendments which come later, in which the question of the separation of land and claim is dealt with. I can say with perfect truth that this point was brought to our attention very much in connection with this particular case.

It would have been a strange result if the pioneers of planning in Welwyn Garden City—I think everyone will agree that they have done a fine piece of work—had by what was purely a rearrangement among themselves—it was not a question of a man getting what he paid, the consideration was merely an inter-company arrangement—been wholly or largely deprived of the claim they had. The general principle remains that there must be a genuine purchase, not a speculative purchase, but this was a genuine arrangement for convenience between associated companies.

The point about father and son does not arise on this Clause. It may be raised, and, I think, is raised by an Amendment at a later stage. I hope that the Committee will feel that the Clause does justice. I do not know of any other case. The new Clause was made necessary by the facts of this case, which I am sure would appeal to any Minister, whatever his political complexion.

Question put, and agreed to.

Clause read a Second time, and added to the Bill.

Bill reported, with Amendments; as amended (in the Standing Committee and on Recommittal), considered.