In 1938 there was an Act passed by the Oireachtas to make certain provisions regarding the conduct of industrial and life assurance business here. Under that Act two companies were established: The Industrial and Life Assurance Amalgamation Company, Limited, and the Irish Assurance Company, Limited. The first of these companies—the amalgamation company—was set up for the purpose of taking over the business of various Irish and British assurance companies then in existence which had agreed to transfer their assets and liabilities to the amalgamation company. There were five British and four Irish companies concerned in the amalgamation. The Industrial and Life Assurance Amalgamation Company, Limited, had an authorised share capital of £200,000, 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, thus giving him complete control of the company.
When the amalgamation was carried out, the companies that transferred their business to the amalgamation company were not given any cash consideration for the transfer but were awarded, each of them, a share in the equity of the company, the proportionate share of each participating party being determined, in accordance with the agreement that they had made, on the basis of their ascertained premium income and the degree of solvency of their funds. In accordance with the provisions of the 1938 Act, the Minister for Finance had to make good any deficiency in the funds of the participating Irish companies. When that deficiency was ascertained, the Minister subscribed to the funds of the amal gamation company the prescribed amount and received, in return for his contribution, 191,051 of the A shares of the company. In addition to the terminating company, there was also established, as I have said, the Irish Assurance Company, a public limited liability company set up for the purpose of taking a transfer of the staffs of the participating companies and the goodwill of any new business of the amalgamation company. That company's authorised capital is £200,000, divided into 200,000 ordinary shares of £1 each, all of which were issued and taken up, as arranged, by the amalgamation company. The position, therefore, is that there are two companies in existence, following the implementation of the provisions of the Act of 1938—the amalgamation company, which is controlled by the Minister for Finance by reason of his holding of the voting shares, and the Irish Assurance Company which is, in turn, controlled by the amalgamation company.
It was arranged that the amalgamation company should confine itself to taking over the business then existing of the participating companies and working off that business as a closed fund, after which it was contemplated that the company would be liquidated and its surplus assets divided amongst its shareholders in proportion to their share holdings, the shareholders being, as I have indicated, the nine participating companies, each holding shares determined in accordance with the agreement to which they were parties, and the Minister for Finance. As the position worked out, the result of the arrangement would be that, when the amalgamation company was liquidated, the majority of the share holdings in the Irish Assurance Company would be in the hands of the British participating offices which at present own 72 per cent of the shares of the amalgamation company, the remaining share holdings being as to 9.4 per cent. by the participating Irish companies and 18.6 per cent. by the Minister for Finance. That position has been under consideration for some time. It was, of course, foreseen when the Act of 1938 was being passed that, eventually, the situation would arise with which we are now proceeding to deal.
It was always felt to be undesirable that the majority share holdings of the largest Irish industrial life office should be in external ownership. For the purpose of resolving that position, it was decided that an effort should be made to acquire the shares in the amalgamation company owned by the British participating offices. Negotiations were undertaken with the representatives of these offices and have been carried on for a number of years past. They have now resulted in a provisional agreement under the terms of which the British participating offices will sell their 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 the Minister for Finance has at present control of the two companies— directly over the amalgamation company by reason of his existing holding of the voting shares and, indirectly, over the Irish Assurance Company through its control by the amalgamation company. That control by the Minister for Finance would have disappeared on the liquidation of the amalgamation company but it will be permanently secured through his purchase of the British participating offices' shares in the amalgamation company.
This Bill is required for the purpose of carrying the provisional agreement into effect and to provide for the issue from the Exchequer of the agreed amount for the purchase of the British shares, £110,697 12s. 0d. I have mentioned that the distribution of shares in the amalgamation company amongst the participating offices was designed to achieve a proper assessment of the relative value of the business transferred by each office to the amalgamation company, the number of shares which each participating company got in the amalgamation company being determined in accordance with agreed rules to that end. It may be asked why these shares were given the nominal value of 2/- each. I have said that no cash consideration was paid and that the only compensation which the participating companies got in the amalgamation company by reason of the transfer of their business to it was shares in that company. Any nominal value could have been put upon those shares. The sole purpose of those shares was to determine the relative proportions of the equity of the new company which should pass into the ownership of each of the participating companies. It was of no importance what nominal value was placed upon the shares from the point of view of determining the compensation to be given to each of the participating companies. It was, however, considered to be of importance that these shares should have a low nominal value, because, by keeping the nominal value low, the goodwill item in the amalgamation company's balance sheet would be kept at a low figure also, and could, in course of time, be more easily eliminated. The actual value of the shares would be determined not by the nominal figure put upon them but by the value of the assets of the amalgamation company and it was considered that, in the course of time, this company, working a closed fund, would gradually get rid of its liabilities and finally reach a stage at which it would have assets only, at which stage the company was to be liquidated and its assets distributed amongst the participating concerns. It was contemplated then that, eventually, the actual value of those shares might rise to as high as 15/- each. When negotiations were taking place with the British offices for the purchase of their shares, the British offices put upon the shares a much higher value than the price at which it was, ultimately, agreed to purchase them. The agreement to transfer the ownership of those shares for a payment of 3/- per share was reached only after protracted negotiations. I am satisfied that the price is a reasonable one and that the agreement for the purchase of the shares at that price should be implemented.
I have said that, when the Act of 1938 was being considered by the Dáil, it was assumed that, when the amalgamation company had worked off all its business and had been liquidated, the control of the Irish Assurance Company, Limited, the company which is now doing new business, would fall into the hands of the shareholders of the amalgamation company, and that the interest of the Minister for Finance in the company would be limited to the extent of his share holding, namely about 18 per cent. of the total shares. This position, although foreseen, was not regarded as a happy one because when the position of the Irish companies participating in the amalgamation was determined it was found that the amount of money which the Minister for Finance had to transfer to the new company in order to make up the deficiency in the funds of the Irish offices was very substantial. In fact, the amount was £1,053,707.
Since the Irish Assurance Company was established, that is to say, the permanent company which is doing new business, it has made substantial progress and in the normal course of events it is bound to be an important business concern in this country. As the company developed its business and increased its activities the fact that the British companies through their share holding would have control of this company became a matter for consideration. As long as the Irish Assurance Company remained under the existing control of the amalgamation company, control remained in the hands of the Minister for Finance but when the stage was reached when the amalgamation company was liquidated control would pass from his hands to the British offices to the extent of 72 per cent. This being the position there was obviously reluctance and hesitancy about terminating the amalgamation company. The position was that control of the companies remained here so long as the amalgamation company remained but when it was terminated control passed into the hands of the British offices. It is considered that there are substantial advantages to be secured by bringing the amalgamation company to an end now and by combining the business of the amalgamation company with the business of the Irish Assurance Company and the completion of this agreement which will protect the position as to ownership will facilitate this step. I do not want to be understood as saying that it has been decided to take this step immediately. When it is desired to take it there need not be any hesitation about it by reason of any fact affecting ownership of the amalgamation company. The Bill, therefore, provides that the main company doing industrial and life insurance business here will remain at all times in Irish ownership, and since the agreement with the British offices for the transfer of their shares has been completed with complete goodwill on both sides there is no solid reason why this Bill should not be enacted. It will of course create a situation in which in future the Minister for Finance, instead of being a minority shareholder, will be a majority shareholder. But he will not be the sole shareholder because the Irish offices participating in the original amalgamation will have share holding interest in it.