HC Deb 19 October 1981 vol 10 cc82-4

(1) Subject to the following provisions of this section, where a company is being or has been wound up voluntarily and—

  1. the winding up is or was a creditors' winding up; and
  2. a statutory declaration which satisfies the requirements of subsection (2) below is delivered to the registrar of companies;

from the date on which that declaration is so delivered referred to below in this section as the conversion date) the winding up shall be treated for all purposes of the 1948 Act as if it were or (in the case of one already concluded before that date) as if it had been a members' voluntary winding up and (in the case of any such winding up, whether concluded before or still in progress at that date) as if it had been a members' voluntary winding up at all times since its commencement.

(2) A statutory declaration made for the purposes of this section must be made by the directors of the company or, in the case of a company having more than two directors, by the majority of the directors, and must state—

  1. that a statutory declaration complying with the requirements of subsections (1) and (2)(b) of section 283 of the 1948 Act (statutory declaration of solvency in case of proposal to wind up voluntarily) was made by the directors (or by the majority of the directors) of the company in accordance with subsection (1) of that section within the five weeks immediately preceding the date of the passing of the resolution for winding up the company (as required by subsection (2)(a) of that section);
  2. that it was properly addressed to the registrar of companies, pre-paid and posted on a date within the period beginning with 7th April 1981 and ending with 1st August 1981; and
  3. that a letter so addressed and posted would in the ordinary course of post have been delivered to the registrar of companies before the date of the passing of the resolution for winding up the company.

(3) For the purposes of sections 283(3) and 288 of the 1948 Act (consequences of actual or prospective failure to pay debts in full within the period stated by the directors in the declaration of solvency) the period specified in the declaration under section 283 of that Act in the case of a winding up to which subsection (1) above applies shall be taken to have been twelve months from the commencement of the winding up unless the contrary is shown. (4) Nothing in this section shall affect the validity of anything validly done in a winding up to which subsection (1) above applies before the conversion date.'.—[Mr. Eyre.]

Brought up, and read the First time.

Mr. Eyre

I beg to move, That the clause be read a Second time.

As with the previous new clause, the purpose of this clause is to permit some alleviation of the particular difficulties experienced by a number of companies as a result of the recent Civil Service pay dispute. I hope that the House will bear with me while I explain that, under current legislation, section 283 of the Companies Act 1948 provides that before a voluntary liquidation may be carried on as a members' voluntary winding up the directors must make a statutory declaration of solvency to the effect that they have carried out a full inquiry into the company's affairs and have formed the opinion that the company will be able to discharge its debts fully within a period not exceeding 12 months from the commencement of the winding up.

The Act further provides, in section 283(2), that the declaration shall not be effective unless it is made within the five weeks immediately preceding the date of the passing of the resolution for winding up the company and is delivered to the Registrar of Companies for registration before that date.

If the declaration of solvency is not made and delivered within these time limits, section 283(4) provides that the liquidation must be carried on as a creditors' voluntary winding up. Although the provisions of section 283 of the 1948 Act are to be amended by clause 96 in order to provide more flexibility concerning the delivery of the declaration of solvency, that clause will apply only to liquidations commenced after the appointed day.

The purpose of the clause, therefore, is to enable companies that proposed to be wound up by members' voluntary liquidation but were affected by delayed deliveries of post during industrial action between April and August this year to be so wound up and to validate actions taken on the basis that they were members' voluntary liquidations, provided that the directors deliver to the Registrar of Companies a statutory declaration that they fulfilled all the requirements of section 283 of the 1948 Act except delivery within the prescribed period.

A creditors' voluntary winding-up is much more onerous administratively and more costly for a company than a members' voluntary winding-up. It involves the calling of meetings of creditors and advertising in the London or Edinburgh Gazettes and local newspapers. In circumstances where companies have gone through all the proper procedures to achieve a members' voluntary winding up, and have failed to comply with the strict requirements of the Act only because of delayed deliveries of post caused by the industrial action to which I have referred, it would clearly be desirable that they should avoid this inconvenience and expense. Although only a few companies are affected, I hope that the House will support this proposal.

Mr. Trotter

I ought to declare an interest. I am the liquidator for some of the companies involved. I welcome the new clause, because there has been considerable difficulty for those companies that were unfortunate enough to fall foul of this administrative problem.

The companies with which I am involved are subsidiaries of a public company. Owing to a restructuring of the group, they are no longer needed as trading entities. The management decided that they could sensibly be put into liquidation and removed from the scene. There is no question of insolvency but, for the reason outlined by my hon. Friend, the declaration of solvency was not acted upon in these cases, and without the passing of the new clause they are technically to be treated as insolvent. That would not only give rise to delay and cost, but could lead to the stigma of insolvency. Those who see these things in the London Gazette might say "Ah, those companies are insolvent". Some people might know the parent company, and an unfortunate impression might be given as a result of circumstances beyond the control of myself as liquidator, the companies themselves or the management of the parent company.

I am sure that there are many such cases throughout the country. I drew my hon. Friend's attention to my situation, and I put on record my thanks to him for the way in which he has been able to find a solution to the problem.

What steps can be taken to publish as widely as possible and as soon as possible in the accounting press the effect of the clause? Many other accountants may be going through the laborious and costly procedure with their liquidators of converting their companies into insolvent companies. Perhaps there could be a press release from the Department so that unnecessary delays and costs are not incurred by other liquidators.

Mr. Eyre

I thank my hon. Friend the Member for Tynemouth (Mr. Trotter) for his remarks. I appreciate the fact that he alerted my office to the difficulties and gave us an opportunity to prepare some measure of alleviation.

My hon. Friend asks me to take all steps possible to publish the good news. The registrar will be writing to all the companies concerned, which I hope will be most helpful. We are also always grateful to the press, and particularly to City journalists who write on such matters. It is important to get over to people that the measure is available to ease them out of a particularly difficult situation. We shall appreciate any coverage resulting from my hon. Friend's intervention.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

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