§ 179A Clause 41 Page 50, line 15, leave out (" in securities, land or other assets ") and insert (" mainly in securities ")1013
§ 5.24 p.m.
§ Lord LYELL
My Lords, I beg to move that this House doth disagree with the Commons in their Amendment No. 179 but propose Amendment No. 179A in lieu thereof. The Association of Investment Trust Companies has expressed the view that the new and simplified administrative scheme introduced by the amendments to Clause 41 in another place is an improvement to the existing provisions of the clause, but very recently these companies have expressed concern that by deletion of the reference to"land or other assets"in Clause 41(7) the restriction of an investment company's investments to securities only could prove to be unduly onerous to that company.
Investment trust companies can have a small proportion of direct investments in assets other than securities and, far more important, at the time of a falling stock market an investment trust company may quite reasonably decide to keep a fair proportion of its investments in liquid form. By the introduction of the word "mainly", this amendment will give investment companies additional and necessary flexibility in the investments which they may wish to hold. We believe that this is consistent with the provisions of the Second Directive, and the Association of Investment Trust Companies has stated that it meets their concern. My Lords, I beg to move Amendment No. 179A.
§ Moved, That this House doth disagree with the Commons in their Amendment No. 179 but propose Amendment No. 179A in lieu thereof.—(Lord Lyell.)
§ Lord WEDDERBURN of CHARLTON
My Lords, I listened attentively to the Minister and tried to follow the course of his discussion on this matter, which is perhaps the most important point which has been put before your Lordships' House so far in respect of the amendments from another place. The 1978 Bill included in the definition companies in respect of which the assets were in securities, land or other property. However, this was changed in Amendment No. 179, as the noble Lord the Minister has suggested, and now it is to be changed again. The new definition is to be "companies whose assets are mainly in securities." That definition may well suit the Association of Investment Trust Companies, 1014 as the noble Lord has said; but surely it behoves someone to point out that it is one of those phrases in respect of which barristers' antennae will quiver in the expectation of large fees.
The Government have introduced at this very late stage a very important redefinition of "investment companies". It is going to matter a very great deal, in respect of distributions, which is an investment company and which is not. Therefore, I am wondering what thought the Government have given to the question of certainty. It seems to me—I shall make this point on later amendments that I and my noble friends wish to advance—that one of the functions of the legislature and, one would suppose, especially of a revising Chamber (and we have shown how good we are at revising by the speed at which we have advanced through the amendments this afternoon) is to try, so far as possible, to avoid litigation by going for certainty, where that is possible.
Without myself trying to redraft, because I do not have access to the admirable advisers of the noble Viscount, I should have thought that one could have landed upon a phrase better than the phrase "mainly in securities". That seems to me to be something which is bound to end up in the courts. I cannot think that a better phrase could not have been found. I wonder whether the Minister could take us, if his advice so tends, a little further into the Government's thinking on the effect of this phrase.
§ Viscount TRENCHARD
My Lords, I do not think we can take the House very much further. We did consider other phrases. The point is that the usual investment in this area is in securities. However, we did not want it to be exclusive to them. Therefore, we used the term "mainly" which, though short, is fairly clear. I believe that "mainly" means over 50 per cent. in securities, for sure. It is necessary to give to investment companies a good deal of flexibility.
§ Lord LYELL
My Lords, may I, by leave, try to reply to the noble Lord, Lord Jacques? I hope we have allowed 1015 for some flexibility, but it would be foolish just to nominate one particular figure. I think flexibility is better.
§ On Question, Motion agreed to.