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Lord Fraser of Carmyllie: My Lords, perhaps I may resort to the rather tired device of addressing the Minister before he sits down. We would want to reflect on his extremely helpful statement. Having pursued at earlier stages of the Bill interest in ensuring that the international competitiveness of the United Kingdom should be maintained, what the noble Lord said was encouraging.

The noble Lord may be encouraged to know that, having heard what he said, I may not return to some of the earlier issues in the Bill.

Lord Bach: My Lords, by phrasing it in that way, the noble and learned Lord allows me to rise to my feet to thank him very much.

18 Apr 2000 : Column 661

Lord Kingsland moved, as an amendment to Amendment No. 128, Amendment No. 128A:


    Line 39, at end insert--


("(10) "Competition" includes competition between authorised persons, or particular classes of authorised persons, and the competitive position of the United Kingdom").

The noble Lord said: My Lords, in moving the amendment, I thank the Minister for his remarks. I too have had the benefit of my noble and learned friend's views. Perhaps the wise course would be for me to wait until I have read Hansard, reflect on what the Minister has said, and consider whether or not it is right to reintroduce the amendment at Third Reading.

In those circumstances, I confine my comments to the new clause, after Clause 93, introduced by the Government. I have only a technical point to make. The amendment introduces the same competition scrutiny for the rules of the authority as a competent authority--in other words, in its role as a listing authority--as is imposed by Chapter III of Part X on the authority as regulator, although it does not go into the detail of who will be the person responsible for keeping the rules and practices under review.

In two places the amendment refers to "a significant adverse effect" rather than "significantly adverse effect". I am sure this is a mistake. The difference is that with the phrase "significantly adverse effect" the adversity must be significant. However, in the (if I may so say) incorrect phrase, "significant adverse effect", the effect must be significant.

It is plainly a drafting point, but one of significance. It is for that reason that I draw it to the attention of the Minister. I beg to move.

Lord Bach: My Lords, significantly, the noble Lord may have a significant point! I should like carefully to consider it as he will consider carefully what to do with his amendments.

Lord Kingsland: My Lords, I am obliged to the Minister. In those circumstances, I beg leave to withdraw the amendment.

Amendment No. 128A, as an amendment to Amendment No. 128, by leave withdrawn.

On Question, Amendment No. 128 agreed to.

Clause 94 [Obligations of issuers of listed securities]:

Lord McIntosh of Haringey moved Amendment 129:


    Page 43, line 37, after first ("the") insert ("competent").

On Question, amendment agreed to.

Clause 101 [Interpretation of this Part]:

Lord McIntosh of Haringey moved Amendment No. 130:


    Page 47, leave out lines 17 and 18.

On Question, amendment agreed to.

18 Apr 2000 : Column 662

Clause 103 [Insurance business transfer schemes]:

Lord Kingsland moved Amendment No. 130A:


    Page 49, line 29, at end insert--

("CASE 5

Where the scheme provides expressly that the provisions of this Part shall not apply to the scheme.").

The noble Lord said: My Lords, Amendments Nos. 130A and 131A are probing amendments. Part VII deals with the control of business transfers involving transfers of insurance and deposit taking.

We welcome those provisions, which were included at the later stages of the Bill's progress in another place. However the provisions of Clause 102 state that,


    "No insurance business transfer scheme or banking business transfer scheme is to have effect unless an order has been made in relation to it under section 109(1)".

Such an order is an order for the court.

However, in Clauses 103(2) and 104(2), it is clear that an insurance business transfer scheme and a banking business transfer scheme can involve the transfer of only a part of the business. Is it intended that every business transfer involving the transfer of part of a business, no matter how small, must require the approval of the court before it becomes effective? In the case of the transfer of a very small business it may be possible to get consent to a scheme from all the policyholders and deposit holders involved. Is it still necessary to obtain court approval in such cases?

The clauses are beneficial, in that in the case of transfers of substantial businesses, it will not be necessary to obtain the consent of all policyholders and deposit holders. But should the provisions be compulsory in all cases? I beg to move.

9 p.m.

Lord McIntosh of Haringey: My Lords, perhaps I may respond by speaking briefly to government Amendment No. 131 in this group. It addresses a minor technical point. In its current form, Clause 103 refers to a body incorporated "in any part of the United Kingdom". It is more usual to refer to a body incorporated "in the United Kingdom". The amendment tidies the drafting.

As regards Amendments Nos. 130A and 131A, Part VII of the Bill would enable a person carrying on deposit-taking or insurance business to transfer that business to another entity with the sanction of the court. This is broadly equivalent to the arrangements for long-term insurance companies under the Insurance Companies Act 1982. In the past, different arrangements applied in other cases. General insurance business transfers could be approved by the Secretary of State; now the Treasury. Banking transfers required a Private Bill procedure. We have therefore taken this opportunity to rationalise the arrangements so that similar procedures apply in all these cases.

To a degree, the transfers of business arrangements are facilitative. Without these provisions, it would nearly always be impossible for a bank or insurance company to transfer its business to another firm. But

18 Apr 2000 : Column 663

that is not the only purpose that these provision serve. Part of the reason for introducing them is to provide that a proper regulatory scrutiny may be applied to transfers of business. Perhaps I may illustrate the potential difficulty.

If a company wanted to transfer its business, it could do so in a way whereby insufficient assets were transferred to meet the liabilities of the business being transferred. That could happen, for example, where a company was taking over a failing firm and seeking to combine the businesses. That could have the effect of jeopardising the solvency of the firm to which the business is transferred and could thereby threaten the interests of the policyholders from both companies.

A transfer of business could also be used as a device for a company to restructure its group so as to place all the liabilities in one subsidiary while retaining the assets in another, from which they could be siphoned off, leaving the remainder of the group and the policyholders insolvent. The noble Lord, Lord Kingsland, seemed to believe that that was a shocking allegation. However, I can assure him that it happened on occasions at Lloyds. Those might be extreme cases, but they illustrate the kinds of risk that we need to guard against. Therefore, the provisions of this part are intended to ensure that any transfer proposals affecting insurance or deposit-taking business are subject to proper scrutiny.

They will be subject to certain conditions being met. The conditions will include proper independent analysis of the financial standing of the firms concerned to ensure that the customers of the firms are not exposed to undue risks. The provisions give the authority a proper role in scrutinising the scheme and advising the court of its likely effect, and give any person likely to be affected by the scheme the opportunity to make his views known to the court. It will then be for the court to decide whether the transfer may take place, and whether any conditions should be imposed.

The Treasury has heard arguments that certain types of transfer should be excluded. The noble Lord, Lord Kingsland, referred to minor transfers. Clearly, there will be a question where minor transfers are involved whether the transfer is of a business as opposed to a contract, asset or liability. That would need to be considered on a case-by-case basis. The position is no different from that under the Insurance Companies Act 1982. It has never caused any problems in practice during the past 18 years, although I realise that out of context my reply might seem vague.

There are difficulties even in excluding certain kinds of transfer. For example, if a life insurer were to offer a small cash incentive to its policyholders to agree to the transfer, most would probably accept without having any understanding of the significance of what they had signed up to. Another case might be where only a small part of the business was to be transferred. But that itself raises question as to the extent of the assets that need to be transferred to ensure that both parts of the business remain viable.

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If there were a case for making exemptions, in our view it would need to be made by or under the Bill and certainly not, as Amendments Nos. 130A and 131A would have it, be a matter of discretion for the transferee and transferor firms.

However, we have concluded that it would be wrong to provide for exemptions of that kind over and above those set out in Clauses 103 and 104. The risks are too great. While it has been argued that in some cases court scrutiny is not necessary and would be burdensome, the Government believe that that can easily be tested under the procedure set out in Part VII. If a transfer is simple, raises no prudential concerns and has the support of the customers and creditors of the firms involved, there is no reason why the court process should be protracted.

However, I would like to draw attention to one point which has come to light in the past few days. That involves a possible exemption for transfers which are subject to approval procedures in overseas jurisdictions; for example, where two firms are incorporated in Australia and the merger or transfer of business would be approved in accordance with Australian law. That is something we are looking at and will come back to at Third Reading if necessary.

On the basis of what I have said, I urge the noble Lord, Lord Kingsland, not to press the amendments.


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