The Gazette 1979

GAZETTE

MARCH 1979

benefit, and not for the making of loans by the company where no scheme for such loans exists. Such an interpretation would cut down the effect of paragraph (c), making it almost nugatory. However, the construction of a statute cannot look to the desires of the subject, only to the intent of the legislature as evinced by the statute. Furthermore, upon a careful reading of subsections (b) and (c) there does not have to be an overlap or dissonance at all. Accepting that words should be possessed of their natural and ordinary meaning for the purpose of construction, save where the context otherwise demands, it is quite clear that the phrase "provision of money" does not admit of a loan of money, notwithstanding views to the contrary — provision means to give — of course if you lend money, you in fact give it, but there is a world of difference between giving and lending, although in certain respects the transaction may be very similar. In paragraph (b) the giving of money to trustees or to individuals, or groups of individuals is quite clearly envisaged. There is no question of the money being lent — the legislature would have said so — the money is provided for the purchase of shares in the company by employees. As to loans, they are dealt with in paragraph (c) and they are dealt with similarly save that directors of all types are excluded. There is no real difficulty in attempting to reconcile paragraphs (b) and (c), unless one wishes to benefit directors by way of loans without recourse to subsection (2). Subsection 13 (c) is also unambiguous in its treatment of loans while subsection 13 (b) even for the moment accepting that it might cover loans, is ambiguous when read together with paragraph (c). Paragraph (c) quite clearly is concerned with the making of loans to persons for themselves, and in the final analysis if there has to be a conflict with paragraph (b), then paragraph (c) must prevail as it is the general rule that the later enactment will override the earlier — but as sugoested above there is no need. Putting the relationship of paragraphs (b) and (c) aside, and accepting that paragraph (b) does not trespass upon the making of loans, it is of interest to investigate the effect of each of the provisos. For assistance to be allowable under paragraph (b) a scheme must first of all be in existence. A scheme simply enough is a plan involving the participation of employees or former employees in the assistance that is sought to be given. However, as suggested earlier, schemes might in time find themselves the subject of litigation, perhaps on the ground that the scheme is one that is not for the benefit of the employees as such, bst for the benefit of a select few. For example — a scheme benefiting all employees of 10 years service or more would perhaps be quite acceptabte but one benefiting a group of managers might well not be; the point being, that whilst on the face of it a scheme is simple and straight forward, it could cover a multitude of practices and designs, which m ght not be countenanced by the Court. Once however, a scheme is in operation for the purchase of shares, these shares are to be held by or for the benefit of employees. This is to say the shares may be held by the employees themselves, or for them by trustees. The company provides this money, and it is a moot point whether the Act, unlike the English Act, which is somewhat differently worded, allows the company to provide the money direct to the employees etc., or

employees or former employees of the company or of any subsidiary of the company including any person who is or was a director holding a salaried employment of office in the company or any subsidiary of the company". In short the provision by the company of money for the purchase or subscription of shares by or on behalf of the employees. "(c) the-making by a company of loans to persons, other than directors, bona fide in the employment of the company or any subsidiary of the company with a view to enabling those persons to purchase or subscribe for fully paid shares in the company or its holding company to be held by themselves as beneficial owners thereof", (authors italics). In short the making of loans to employees for the purpose or enabling them to acquire shares in the company. It must not of course be forgotten that the proviso extends to cover subsidiaries of the company and the employees of subsidiaries. There are two intriguing points about the provisos the first is that it could be argued that (c) is contained and dealt with in (b) in that a loan comes quite easily within the ambit of the term provision. The second perhaps goes some way to explain the difference in that as between these provisos there is a divergence in the treatment of directors. Paragraph (c) excludes directors with the result that even if they are holding a salaried employment, bona fide loans to them in this context are not authorised, whereas provios (b) specifically allows directors who are holding, or have held a salaried employment to participate in the schemes envisaged. In support of this view reference can be made to Palmer's Company Law, Volume 1, page 303 of the 22nd edition. The restriction contained in proviso (c) has caused problems to companies, and those who control them who wish to make loans to directors, in order for them to acquire shares in the company without recourse to the provisions of subsection (2) and has caused them and their legal advisers to seek, or attempt to seek ways around the subsection. One attempt has been to argue that this whole question is dealt with by proviso (b), and that so long as there is a valid scheme in operation, a provision of money by way of a loan to a director in accordance with the scheme, is a lawful loan. This is a spuriously attractive argument. In the first place the whole of Section 60 must be read together, and from just such a reading it will be seen that the purpose of the section is to prohibit a company giving any financial assistance for the purpose of or in connection with the purchase or subscription of shares in the Company. Subsection (13) admits of certain exceptions. As between those exceptions there appears to be something of an overlap and/or dissonance between the terms of (b) and (c)- As to the existence of a scheme or not, the first question must be "what is a scheme?" The answer to that question can only be answered by way of litigation in each particular case. The second question is "where does it appear in the Act that Section 60 (13) (c) is ro apply only where there is no scheme in force"? Subsectibn 13 paragraph (c) quite clearly has been enacted to m n e statutory provision for the making of loans by the company to persons for their

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