Insolvency Bill [H.L.] (Hansard, 3 June 1986)

§ The Lord Chancellor (Lord Hailsham of Saint Marylebone)
My Lords, I rise to move that this Bill be now read a second time.
It may be for the convenience of the House, though I shall put the Questions separately, if I speak to both Consolidation Bills together. If your Lordships give the Bills a Second Reading, they will both be sent to the Joint Committee; but I have been advised that I should speak at slightly greater length on these two Bills than I normally do with consolidation measures.
Both Bills were introduced into this House on 13th May. They are linked in that they are the product of a single consolidation exercise, consisting principally of provisions taken from the Companies Act and the Insolvency Act that we passed last year. As your Lordships will recall, the Companies Act was the principal Act of the four Acts which resulted from the consolidation of all the enactments relating to companies from the Act of 1948 onwards. Parts 18 to 21 of the 1985 Act contain provisions about receivership and winding up.
The Insolvency Act 1985 contains the first major revision of the law of insolvency relating to both companies and individuals for over 70 years. Among other things, it introduced a new bankruptcy code and new procedures, first to enable companies and individuals in financial trouble more easily to make voluntary arrangements with their creditors; and, secondly, to 712 allow companies a better opportunity to trade out of their difficulties through the new concept of administration rather than going into liquidation. In addition, the Act introduces a number of new provisions in relation to receivership and winding up, involving in many instances the amendment or repeal of sections of the existing Companies Act: indeed, more than half of the two hundred sections dealing with those topics were affected in one of those ways.
Although, therefore, the Insolvency Act contains a comprehensive code for the insolvency of individuals, the same is not true of company insolvency. The relevant provisions are contained in two enactments, one of them heavily amended by the other, and, as your Lordships will appreciate, this is not helpful to the user, whether or not a practitioner in the field.
The same is true of provisions concerning disqualification from company management. The Insolvency Act introduces more important new provisions in this area, but several disqualification provisions remain in the Companies Act. An added difficulty is that not all the remaining provisions are concerned with disqualification as a result of involvement in insolvency. Disqualification can, for instance, flow from consistent failure to comply with obligations under the Companies Act concerning the submission of returns to the registrar, or be imposed as an additional punishment on conviction for an offence in relation to a company; in addition, there are provisions involving the disqualification of undischarged bankrupts.
As I have indicated to your Lordships previously, there is no ideal time for a consolidation. But in the case of these two Bills it may be that the timing could not be more appropriate. The greater part of the Insolvency Act 1985 is not yet in force and this consolidation will enable the bringing into force at the end of this year of two comprehensive enactments, dealing with insolvency, on the one hand, and disqualification from company management, on the other. A further advantage of this timing is that the large body of subordinate legislation which is necessary to supplement both these consolidating enactments can be brought into force, or, in the case of the disqualification provisions, re-enacted, at the same time as the consolidation, without the disruption and revision that would have been necessitated by a later consolidation.
The Insolvency Bill now before your Lordships thus contains a complete code for winding up, receiverships, administration orders and company voluntary arrangements, in addition to the comprehensive bankruptcy and voluntary arrangement provisions for individuals which derive from the Insolvency Act 1985. It also includes the provisions concerning qualified insolvency practitioners introduced by the Insolvency Act, and provisions concerning official receivers and the public administration of insolvency matters.
The Company Directors Disqualification Bill gathers together the provisions from the Companies Act and the Insolvency Act concerning disqualification from the management of companies.
My Lords, the two Bills which are the product of this consolidation exercise will make a major contribution 713 to the clarification of, and accessibility to, the law relating to insolvency and disqualification, and have been welcomed by practitioners. I commend both Bills to your Lordships. As I have said, they will go to the Joint Committee on Consolidation Bills if a Second Reading is given. I beg to move that the first of the two Bills standing in my name on the Order Paper be read a second time.

§ Lord Elwyn-Jones
My Lords, I am sure that the House will be grateful to the noble and learned Lord for introducing the proposed consolidation of these two Bills. Unhappily, insolvency has become a matter of considerable importance and increasingly so in recent years, if I may say so without being aggressively party political, so that it was time that the matter was looked at. Indeed, the Company Directors Disqualification Bill is of urgent importance, too.
What is of great interest in what the noble and learned Lord has said is, first of all, the element of urgency which has prompted the quick introduction of this consolidation measure. I make no complaints about that. But what I found interesting, putting it mildly, was the concept that subordinate legislation which was contemplated under one or other of these separate Bills would not take effect under the consolidated Bill when it becomes an Act. I do not know whether there are any precedents for this; if there are not, it is not a tragic matter but it is certainly a new development, I think, in our procedures. However, in so far as other matters are outstanding the appropriate consolidation committee of experts will be looking into them and it may well be that we shall hear a little more about this proposal in due course.

§ The Lord Chancellor
My Lords, I am grateful to the noble and learned Lord for what he has said. I do not think that what is proposed about subordinate legislation is altogether unprecedented. It is obviously convenient and slightly unusual, and probably this applies on a bigger scale than, at any rate, has been normally the case either in recent years or before. It is convenient because it enables one set of subordinate legislation to be used by reference to the consolidated legislation when it is passed rather than two sets, which would be both inconvenient and, if the consolidation is passed rapidly, unnecessary. I am grateful to the noble and learned Lord for drawing attention to this point.

Lord Bruce of Donington
My Lords, I venture to detain the House for a little longer since I was responsible for the Opposition on this subject at the time that the Insolvency Bill went through. I have only one substantial query to put to the noble and learned Lord, which is the fate of the existing consolidated Companies Act 1985, which is already on sale at a price of £19 and at least half of whose provisions now become obsolete. Is it the intention of the Government to do anything further about the Companies Act? The noble and learned Lord will appreciate that for those who write textbooks and those who have to refer to 714 them the numbering of the various sections of the various Acts becomes a matter of some importance.
I am quite sure that the noble and learned Lord, in particular so far as his own profession is concerned, and, as a by-product, mine also, might see fit to adopt a course of action which would result in the early re-amendment of the Companies Act 1985 so that it can be renumbered, particularly bearing in mind that there are clauses in the Companies Act that are put into the new insolvency consolidation, which tends to make matters a little complicated. I did not give the noble and learned Lord notice of this question but I know that with his usual felicity he already knows the answers.

§ The Lord Chancellor
My Lords, I do; just in time. If I may have the leave of the House there is no present intention to reconsolidate the Companies Act 1985. The procedure which has happened is the inevitable result of Acts which consolidate a very complicated piece of law and which require discussion; that is followed by a reconsolidation in order to make it convenient for practitioners to go through the ordinary consolidation procedure. I think that that is the position. At present I do not think it will be necessary to reconsolidate the Companies Act 1985. So far as it is necessary, it will be done under the present exercise.