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Exceptions From S 49

Volume 980: debated on Monday 3 March 1980

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

Amendment proposed: No. 403, in page 60, line 43, at end add—

'(1A) Subsection (1)(b) of that section shall not prohibit a relevant company ("the creditor") from making a quasi-loan to one of its directors or to a director of its holding company if—
  • (a) the quasi-loan contains a term requiring the director or a person on his behalf to reimburse the creditor his expenditure within two months of its being incurred; and
  • (b) the aggregate of the amount of that quasi-loan and of the amount outstanding under each relevant quasi-loan does not exceed £1,000.
  • For the purposes of this subsection, a quasi-loan is relevant if it was made to the director by virtue of this subsection by the creditor or by its subsidiary or, where the director is a director of the creditor's holding company, any other subsidiary of that company; and "amount outstanding" has the same meaning as in section 56(6) below.'.—[Mr. Parkinson.]

    No. 75, in page 61, leave out lines 3 and 4.

    No. 76, in page 61, leave out lines 5 to 15.

    Government amendments Nos. 280, 281, 282 and 283.

    No. 78, in page 61, leave out lines 35 to 38.

    No. 79, in page 61, line 39, leave out 'subsection (3)( c)' and insert 'subsection (2)( b), (3)( c) and (3)( d)'.

    No. 80, in page 62, line 13, leave out subsection (5).

    No. 373, in page 62, line 14, leave out from 'only' to first 'the' in line 19 and insert 'if'.

    Government amendments Nos. 284, 243 and 260.

    No. 84, in page 62, leave out lines 33 and 34.

    No. 85, in page 62, line 35, leave out subsection (6).

    There seems to be an unholy alliance to cut out speeches from the Back Benches and to skip through the amendments so that nobody knows what they are about. I wish to address the House on amendment No. 373, which seeks to amend the setting out of exceptions to clause 49 in connection with prohibiting certain loans to directors. The exception made to clause 50(5) is that certain loans, if they satisfy the conditions in clause 50(5)(a) and (b), are permitted if they are of a certain amount.

    The part of the clause which I wish to amend is that which affects banks when lending to their own directors. Under the Bill they will find it extremely difficult to prove what is their normal commercial terms or course of business. It is unnecessary to put restrictions on such loans. The definition of the ordinary course of a company's business is a matter for subjective judgment which may not be shared by a bank and the Department. Great uncertainty will arise. The clause imposes an unnecessary restriction tion on that type of loan. Such a loan cannot mislead anybody if it is made by the banks to their directors. It sets aside an executive director of a bank as a second-class individual who cannot obtain a loan in the same way as anybody else.

    The Government's amendments to the clause are technical and have been tabled in response to helpful comments made in Committee from both sides and by various bodies, including the Law Society.

    The effect of amendment No. 373 would be to remove the requirement that a loan or quasi-loan made by a money-lending company to its director should be in the ordinary course of that company's business. The Government view is that the condition that such a transaction should be in the ordinary course of a company's business provides an extra safeguard which will prevent companies from contemplating the making of transactions which are not part of their normal business activities. That was the reason behind the inclusion of the words. We think that they serve a useful purpose. I hope that in the circumstances my right hon. Friend the Member for Crosby (Sir G. Page) will not press his amendment.

    Amendment agreed to.

    Amendments made: No. 280, in page 61, line 10, leave out 'to' and insert 'in respect of'.

    No. 281, in page 61, line 11, leave out 'entered into than' and insert:

    'made than that or those which'.

    No. 282, in page 61, line 12, leave out 'for', and insert

    'to or in respect of'.

    No. 283, in page 61, line 13, leave out from 'person' to end of line 15 and insert

    'but unconnected with the company'.

    No. 284, in page 62, leave out lines 27 and 28 and insert

    but unconnected with the company;'

    No. 243, in page 62, line 30, leave out from 'not' to 'to' in line 31 and insert 'a recognised bank'.

    No. 260, in page 62, leave out lines 33 and 34 and insert—

    'In determining for the purposes of this subsection the aggregate of the relevant amounts, a company which a director does not control shall be deemed not to be connected with him.'.—[Mr. Newton.]