TRUSTEES (AMENDMENT) BILL

Order for Second Reading read.

3.26 p.m.

The Minister for Law and National Development (Mr E. W. Barker): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

As the law now stands, trust funds may only be invested in what is known as authorised investments, which are listed in section 4 of the Trustees Act, 1967. There is, amongst other things, specific prohibition on the investment of trust funds in the form of loans to a company, unless that company is an approved company which satisfies three conditions, namely:

(a) its ordinary share capital is not less than S$5 million;

(b) it has paid a dividend at the rate of not less than 5 per cent per annum for each of the last three years prior to the time of the investment; and

(c) the total amount of the borrowings of the approved company from all sources does not exceed two-thirds of the amount for the time being secured to the approved company from its borrowers.

It follows, therefore, that in order to qualify as such, a company must have been in existence as a Singapore incorporated company for not less than three years prior to the time of the investment, assuming, of course, that it has straightaway paid a dividend of not less than 5 per centum for the very first year of its incorporation. Indeed a company which has reconstructed itself for the sole reason of seeking to qualify as an approved company, or a new company which has taken over another company qualified as an approved company, may be caught by reason of the exclusionary provisions. In order, therefore, to accommodate such companies which may heretofore have been properly enjoying the status of trustee investment companies and have been excluded merely because of the technical requirements of section 3 of the Act in respect of the status of an approved company, the proviso in section 4 (2) (b) has been introduced. The Government recognises the need for the prohibition at present contained in section 4 (2) (b) , the object of which provision is, of course, to ensure that such a company is a going concern and has made profits sufficient enough to allow it to declare a reasonable rate of return. This general rule is thus preserved, but the proviso accords a flexibility which was missing and which was not envisaged in the Act of 1967. It may be said, therefore, that the present amendment proposed in the Bill merely removes the technical impediments in the way of former reconstructed companies but leaves untouched the safeguards contained in the Act of 1967. Companies which have been amalgamated or been subject to reconstruction but which are essentially the same as their former selves, as it were, will not be thus unfairly prejudiced.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Barker].

Bill considered in Committee.

[Mr Speaker in the Chair]

3.32 p.m.

Clause 1 ordered to stand part of the Bill.

Clause 2 -

Mr Barker: Mr Speaker, Sir, I beg to move,

In page 1, to leave out lines 12 to 18 inclusive and insert -

" Provided that where an approved company is or has been reconstructed and amalgamates with a company or has taken over the whole of the business and the assets of a company, which has satisfied the conditions of this paragraph, the said conditions shall be deemed to have been complied with by the approved company, unless it fails to pay a dividend at the rate of not less than five per centum in respect of its first full financial year of operations or in respect of any of its subsequent financial years; and".

Sir, the amendment as now proposed is to remove any doubt whatsoever that a company which has been reconstructed and amalgamates with another, which other company has heretofore enjoyed the status of an approved company, or has taken over the whole of the business and assets of a company which on its own has attained the status of an approved company, would after such reconstruction and amalgamation, or taking-over or merger, be deemed to have satisfied the principal conditions of this paragraph. The presumption regarding such a company shall not operate if this new company fails to pay a dividend at the rate of not less than five per cent in respect of its full financial year of operations or indeed in respect of any of its subsequent years. It has been thought necessary to introduce this further amendment in order to ensure the viability of such a company so long as it wishes to continue receiving trust monies as investments.

Amendment agreed to.

Clause 2, as amended, ordered to stand part of the Bill.

Bill reported with an amendment; read a Third time and passed.