PART II REORGANISATION OF THE INDUSTRY

Finances of successor companies

80 Conversion of certain loans etc. to the Scottish companies.

(1)

The Secretary of State may by order extinguish all or any of the liabilities of a successor company in Scotland in respect of the principal of such relevant loans as may be specified in the order; and the assets of the National Loans Fund shall accordingly be reduced by amounts corresponding to any liabilities so extinguished.

(2)

Where the Secretary of State has made an order under subsection (1) above and he considers it appropriate to do so, he may from time to time give a direction under this subsection to the company whose liabilities are extinguished by the order, or to a company or companies wholly owning the company whose liabilities are so extinguished; and a company to which such a direction is given shall, as a consequence of the making of the order, issue such securities of the company as may be specified or described in the direction—

(a)

to the Treasury or the Secretary of State;

(b)

to any person entitled to require the issue of the securities following their initial allotment to the Treasury or the Secretary of State; or

(c)

if it is the company whose liabilities are extinguished by the order, to a company or companies wholly owning that company.

(3)

For the purposes of any statutory accounts of a company to whom securities are issued by virtue of subsection (2)(c) above, the value at the time of its issue of any such security shall be taken—

(a)

in the case of a share, to have been equal to its nominal value; and

(b)

in the case of debenture, to have equal to the principal sum payable under the debenture,

and such nominal value or principal sum shall be taken in those accounts to be accumulated realised profits.

(4)

In subsection (3) above “statutory accounts of a company” means any accounts prepared by the company for the purpose of any provision of the M1Companies Act 1985 (including group accounts).

(5)

The Secretary of State shall not—

(a)

make an order under subsection (1) above extinguishing the liability of any company; or

(b)

give a direction under subsection (2) above for the issue of securities,

except at a time when the company whose liability is extinguished by the order or, as the case may be, the company which is directed to issue securities is wholly owned by the Crown; and he shall not give a direction under paragraph (c) of the said subsection (2) except at a time when the company or companies to whom the securities are to be issued is, or are, so owned.

(6)

Except as may be agreed between the Secretary of State and a company which is directed to issue debentures in pursuance of this section—

(a)

the aggregate of the principal sums payable under the debentures to which the direction relates shall be equal to the aggregate of the sums the liability to repay which is extinguished by the order; and

(b)

the terms as to the payment of the principal sums payable on the debentures to which the direction relates, and as to the payment of interest thereon, shall be the same as the corresponding terms of the loans specified in the order.

(7)

For the purposes of subsection (6) above any express or implied terms of a loan shall be disregarded in so far as they relate to the early discharge of liabilities to make repayments of principal and payments of interest.

(8)

Subsections (3) to (6) of section 71 above shall apply for the purposes of this section as they apply for the purposes of that section.

(9)

In this section “relevent loan”, in relation to a successor company in Scotland, means—

(a)

any loan made, or deemed to have been made, by the Secretary of State or from the National Loans Fund the liability to repay which vests in that company by virtue of section 67(4) above;

(b)

any loan made to that company by the Secretary of State under section 78 above; and

(c)

any sums payable under debentures issued as a consequence of the making of an order under this section.

(10)

In this section and section 81 below “successor company in Scotland” means a company nominated for the purposes of section 67(1) above.