I move that the Bill be now read a Second Time. Deputies who are familiar with the provisions of the Insurance (Amendment) Act, 1938, will recall that after the passage of that Act two new companies were established for the purpose of dealing with industrial and life assurance. The first of these companies, which during the discussions on the 1938 Act, we, for convenience sake, called the terminating company, is entitled the Industrial and Life Assurance Amalgamation Company, Limited. That amalgamation company was set up for the purpose of taking over the business of the various participating companies which had entered into agreements for the transfer of their business to the new company. Four Irish companies and five British companies agreed to the necessary transfer. The authorised share capital of the amalgamation company is £200,010 divided into 2,000,000 ordinary A shares of 2/- each and 100 B shares of 2/- each. The 100 B shares alone carry voting rights and are held by the Minister for Finance, giving him control of the company.
The companies which transferred their business to the amalgamation company were not paid any cash in consideration of the transfer but instead were allotted A shares in the amalgamation company, the number of shares in each case being determined by the measure of the particular company's premium income and the degree of solvency of its funds. Under the provisions of the Insurance Act of 1938 the Minister for Finance was required to make good any deficiency in the assets of the Irish companies concerned with the amalgamation and in consideration of his doing so, he was allotted in addition to the B shares, which carry voting rights and control of the company, a total of 191,051 2/- shares in the terminating company.
In addition to the terminating company the Act of 1938 also established another public limited liability company which is called the Irish Assurance Company, Limited, and which was incorporated as a permanent company for the purpose of taking a transfer of staffs and the goodwill of any new business of the amalgamating companies. The authorised capital of the Irish Assurance Company, Limited, is £200,000 divided into 200,000 ordinary shares of £1 each, all of which has been issued and taken up as arranged by the terminating company. It was arranged, as contemplated in 1938, that the terminating company should confine itself to the taking over of the business then existing of each of the amalgamating companies and to the working off of that business as a closed fund after which it was contemplated that the terminating company should be liquidated and the surplus assets divided amongst its shareholders in proportion to their shareholding. The result of that arrangement would be that when liquidation had taken place, the majority of the shareholding in the Irish Assurance Company would be in the hands of the British participating offices since the shareholding in the terminating company worked out on the following basis: 9.4 per cent. of the shares are held by the participating Irish companies, 72 per cent. by the participating English companies, and 18.6 per cent. by the Minister for Finance.
For some years past, I have had under consideration the position which would arise when the terminating company had ceased to exist and the majority of the shares in the Irish Assurance Company, Limited, would pass to external ownership. It was felt that while that position had been foreseen when the Act of 1938 was passed, it was undesirable that the majority shareholding in the largest permanent Irish life office should be in external ownership. To solve this difficulty it was decided that an effort should be made to acquire the shares in the terminating company owned by the British participating offices. Negotiations have been carried on over the past few years and a provisional agreement has already been arrived at under the terms of which the British participating offices have agreed to sell 737,984 shares to the Minister for Finance at a price of 3/- per share involving a total payment of £110,697 12s. 0d.
I have pointed out that under the present constitution of the amalgamation company control is exercised by the Minister for Finance by reason of his holding of the B shares. He also controls, therefore, the Irish Assurance Company, Limited, because all the shares of the Irish Assurance Company, Limited, are held by the terminating company. That control, however, would have disappeared on the liquidation of the terminating company but it will be permanently secured through the purchase of the shareholding of the British participating offices.
To carry the provisional agreement into effect and to provide for an issue from the Exchequer amounting to £110,697 12s. 0d. to pay for the shares at 3/- each, this Bill is necessary. The House will, no doubt, wish to know how the purchase price of 3/- per share has been arrived at. The nominal value of the shares is, as I have said, 2/- each. I would, however, remind Deputies of the statement which I made when the Insurance Act of 1938 was under consideration by the House. I explained then that these 2/- shares were merely tokens by which the equity in the terminating company could be distributed amongst the nine companies involved in the amalgamation. Almost any value could have been placed upon the shares in so far as the sole purpose of their creation was to divide the equity upon an agreed basis between the various companies participating but it was considered desirable to fix a low nominal value, 2/- per share, so as to keep the goodwill figure at a low level in order that that intangible asset might in time be eliminated from the Company's balance sheet. It was considered then, and I was advised by those who were arranging the amalgamation, that in time the value of these 2/- shares might be expected to reach a substantial figure and a figure as high as 15/- per share had been estimated by some of those concerned. However, I wish to emphasise the fact that the nominal value of 2/- had no special significance and the issue of shares was merely a system of measuring the value of the assets and goodwill of the businesses transferred.
When negotiations were taking place recently with the British offices for the purchase of their shares in the terminating company, these offices put a value substantially above 3/- each on their shares and it was only after protracted negotiations that the figure of 3/- per share was arrived at. I am satisfied that the price is a reasonable one and I so recommend it to the Dáil.
