DEPARTMENTAL MINUTE FROM THE DEPARTMENT FORBUSINESS, ENERGY & INDUSTRIAL STRATEGY: NOTIFICATION OF INDEMNITIES FOR THE POSTAL SERVICES HOLDING COMPANY LIMITED
It is normal practice, when a government department proposes to undertake a contingent liability in excess of £300,000 for which there is no specific statutory authority, for the Minister concerned to present a departmental Minute to parliament giving particulars of the liability created and explaining the circumstances; and to refrain from incurring the liability until fourteen parliamentary sitting days after the issue of the Minute, except in cases of special urgency.
The Government intends to put the Postal Services Holding Company Limited into voluntary liquidationon 30 March 2017. This company, previously known as Royal Mail Holdings plc, is wholly owned by Government.
The Government has decided that, following the disposal of all of the Royal Mail shares held by the company, there is no longer a need to retain the company. The voluntary liquidation will save the tax payer money by removing the company’s running costs of around £120,000 per annum.
Until September 2013, the company was the holding company for the Royal Mail group of companies. However, prior to the Royal Mail Initial Public Offering (IPO) in 2013, the company was transformed with its main purpose being to hold and dispose of the Government’s shares in Royal Mail. A new Board was appointed at that time comprising unremunerated public servants.
Now that the company has disposed of all of its Royal Mail shares, there is no need to retain it and, by placing the company into liquidation, running costs of around £120,000 per annum will be saved for the tax payer.
The Directors of the company (all unremunerated, public or civil servants) are required to issue a Declaration of Solvency prior to the company’s liquidation.
The expectation is that all the company’s identified and existing liabilities will be met prior to liquidation, apart from minimal expenses which will be incurred during the liquidation process. Since 2013, the company’s principal activity has been the disposal of Royal Mail shares overseen by the current Board of Directors. It has also held the Government’s shareholding in Post Office Limited (POL). No liabilities have been identified other than current fees for company secretariat services, audit, legal advice and financial (primarily tax) advice. These liabilities will be paid before the liquidation and the company will retain some funds to meet liquidation expenses e.g. advertising costs, final tax work and distributions. The shares held by the company in POL will be transferred to direct ownership by the Secretary of State for BEIS and this transfer will have no impact on POL’s operations.
There remains, however, a small risk that some as yet unidentified liabilities could emerge. For example, relating to the period when the company, as Royal Mail Holdings plc, was the holding company for the Royal Mail group. To give the Directors comfort that such liabilities could be met, and enable them to sign the Declaration of Insolvency, my Department intends to grant an indemnity to the Postal Services Holding Company Limited.
The personal indemnities given to company Directors by my Department at the time of the IPO will not cover them for criminal sanctions when declaring solvency, nor do they provide any comfort on the solvency position of the company. The indemnity will only cover liabilities lawfully incurred (so would not cover anything as a result of fraud or other criminal activity).
The granting of an indemnity is effectively neutral to BEIS because if the company were not placed into liquidation and a liability emerged, the company would look to work with the Department, as sole shareholder, to address that liability.
The indemnity will be uncapped for a period of 6 years and will be issued prior to the liquidation. The 6 year period is standard in commercial situations and correlates with the fact that any party making a claim on the company (once liquidated) can only ask for it to be restored to the register up to 6 years following its dissolution.
The Government intends to place the company into liquidation on 30 March 2017 as this fits with the company’s financial year end and will reduce the amount of work needed to progress the liquidation. The liquidation process will then proceed and be completed during 2017/18.
If the liability is called, provision for any payment will be sought through the normal Supply procedure.
The Treasury has approved the proposal in principle. If, during the period of fourteen parliamentary sitting days beginning on the date on which this Minute was laid before parliament, a member signifies an objection by giving notice of a Parliamentary Question or by otherwise raising the matter in Parliament, final approval to proceed with incurring the liability will be withheld pending an examination of the objection.
The Rt Hon Greg Clark MP