Insolvency Bill (Hansard, 28 October 1985)

HC Deb 28 October 1985 vol 84 cc675-81 675

Lords amendments to certain Commons amendments and Lords consequential amendments considered.

The Lords have agreed to the amendment made by the Commons:

After clause 2, insert the following new clause—

Reference to Tribunal:

—(1) A person on whom a notice is served under section [Notices] (2) above may within twenty-eight days after the date of service give written notice to the relevant authority requiring the case to be referred to the Tribunal referred to in subsection (6) below.

(2) Where a requirement is made in accordance with subsection (1) above, then, unless the relevant authority within the period there mentioned—

(a) decides to grant the application or, as the case may be, decides not to withdraw the authorisation; and

(b) gives written notice of that fact to the person by whom the requirement was made,

it shall refer the case to the Tribunal.

(3) On a reference under this section the Tribunal shall—

(a) investigate the case; and

(b) make a report to the relevant authority stating what would in their opinion be the appropriate decision in the matter and the reasons for that opinion;

and it shall be the duty of the relevant authority to decide the matter accordingly.

(4) The Tribunal shall send a copy of the report to the applicant or, as the case may be, the holder of the authorisation; and the relevant authority shall serve him with a written notice of the decision made by it in accordance with the report.

(5) The relevant authority may, if it thinks fit, publish the report of the Tribunal.

(6) For the purposes of this section there shall be a tribunal—

(a) which shall be known as the Insolvency Practitioners Tribunal (in this Part referred to as "the Tribunal"); and

(b) in relation to which the provisions of the Schedule 1 to this Act shall apply.'

§ Lords amendment: No. 1, in line 2, leave out from beginning to "give" in line 4 and insert— . —(1) Where a person is served with a notice under section (Notices) (2) above, he may—

(a) at any time within twenty-eight days after the date of the service of the notice; or
(b) at any time after the making by him of any representations in accordance with section (Right to make Representations) above, and before the end of the period of twenty-eight days after the date of the service on him of a notice by the relevant authority that the relevant authority does not propose to alter its decision in consequence of the representations,"

3.57 pm

§ The Under-Secretary of State for Trade and Industry (Mr. Michael Howard)
I beg to move, That this House doth agree with the Lords in the said amendment.

§ Mr. Speaker
With this it will be convenient to take Lords amendments Nos. 2 to 5 and 74.

§ Mr. Howard
Lords amendments Nos 1 to 5 inclusive give effect to an undertaking which was given to the right hon. Member for Glasgow, Govan (Mr. Millan) when the Bill was considered on Report. They provide that, where the relevant authority has given notice that it intends to refuse or revoke an authorisation to act as an insolvency practitioner and the person concerned within 14 days 676 makes written representations to the relevant authority as to why it should not, the time limits on the period in which that person may require the case to be referred to the insolvency practitioners tribunal shall not begin to run until he has been made aware that his written representations have been rejected.
Lords amendment No. 74 ensures that members of the tribunal are subject to equivalent parliamentary disqualification in Northern Ireland as in Great Britain.

§ Mr. Bryan Gould (Dagenham)
I welcome the Under-Secretary of State to the deliberations of this small and select group which has lived with the Bill for a long time. The group is becoming smaller and more select by the minute.
The Under-Secretary of State arrives at a rather late stage. We have spent a great deal of time on this measure. It has been something of a marathon, and I think that we can offer the hon. and learned Gentleman nothing more than a gentle canter down the finishing straight. He arrives at a moment when he can perhaps make his own small contribution to what might well become an achievement to be recorded in the "Guinness Book of Records-. I believe that the number of amendments tabled to the Bill throughout its stages in both Houses is likely to exceed 1,200. The Under-Secretary of State will move even more 677 amendments today and thereby add his name to that record-breaking achievement. I am not sure that the hon. and learned Gentleman would wish to be associated with that sort of achievement.
Despite the scale of the deliberations and the amendments which have been tabled and passed, I believe that many hon. Members and people outside the House would regard the measure as still being seriously deficient. Although I would certainly claim that in many respects it is a better measure than when it first appeared, nevertheless I agree with those, such as the National Consumer Council, the CBI and the Institute of Directors, who have all characterised the Bill as a missed opportunity and one that on present form is unlikely to recur for perhaps another 100 years unless perhaps a Government of a different persuasion were to see the need to introduce further reforms.
I thank the Under-Secretary of State for the way in which his officials have marshalled the material. It has been done in an extremely helpful and useful way, and I am sure that hon. Members would wish to express their appreciation to the hon. and learned Gentleman and his officials. We could well have wished that the matters that are being brought back to us from another place were of more substance and dealt with some of the remaining pressing concerns about the framework and shape of the Bill. Unfortunately, that is not the case. The matters with which we must deal this afternoon are essentially drafting and technical in almost every case, and so they will not detain us for long. I do not believe that this first group of amendments will detain us long either.
I welcome the fact that the Government have met the undertaking that they gave to my right hon. Friend the Member for Glasgow, Govan (Mr. Millan). The Opposition are pleased with this group of amendments.

§ Mr. Howard
I thank the hon. Member for Dagenham (Mr. Gould) for his welcome, which I very much appreciate, and for his kind remarks about the way in which departmental officials had marshalled the information. I am particularly pleased to see with us this afternoon my hon. Friend the Member for Edinburgh, Central (Mr. Fletcher) who is entitled to the credit for this legislation and who undertook the considerable work of piloting the Bill through the House.
The hon. Member for Dagenham referred to the number of amendments that have been tabled. I suggest that they show more than anything else the Government's readiness to listen to the suggestions on how it could be improved that have been made during the passage of the Bill. The Bill has been improved.

§ Mr. Gould
I entirely accept that the Government have listened to some effect. Many of us would make the point, however, that it is a pity that they did not listen a little earlier when they might well have published a draft Bill that could have avoided many of the difficulties that we subsequently encountered.

§ Mr. Howard
I am sure that the hon. Gentleman would not like the door to shut on consultation at any stage. It is right, especially with a measure of this type, that consultation should be a continuing process. Of course it has not proved possible to satisfy everyone, but such a measure involves a delicate balance of interests and, 678 inevitably, some people will be disappointed at the outcome. I commend the amendments to the House as striking the right balance.

§ Question put and agreed to.

§ Subsequent Lords amendments agreed to.

§ The Lords have agreed to the amendment made by the Commons: After Clause 10 insert the following new clause:—

§ Restriction on use of company names:

§ '(1) This section applies to a person where a company ("the relevant company") has gone into insolvent liquidation and he was a director or shadow director of the company at any time in the period of twelve months ending with the day before it went into liquidation; and for the purposes of this section a name is a prohibited name in relation to such a person if—

(a) it is a name by which the relevant company was known at any time in the said period; or
(b) it is a name which is so similar to a name falling within paragraph (a) above as to suggest an association with the relevant company.

§ (2) Except with the leave of the court a person to whom this section applies shall not at any time in the period of five years beginning with the day on which the relevant company went into liquidation—

(a) be a director of any other company that is known by a prohibited name; or
(b) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company; or
(c) in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on (otherwise than by a company) under a prohibited name.

§ (3) If a person acts in contravention of this section he shall, in respect of each offence, be liable—

(a) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or to both;
(b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.

§ (4) In subsection (2) above "the court" means any court having jurisdiction to wind up companies; and on an application for leave under that subsection, the Secretary of State or the official receiver may appear and call the attention of the court to any matters which seem to him to be relevant.

§ (5) References in this section, in relation to any time, to a name by which a company is known are references to the name of the company at that time or to any name under which the company carries on business at that time.

§ (6) For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.

§ (7) In this section "company" includes a company which may be wound up under Part XXI of the 1985 Act.'

§ Lords amendment:No. 6, line 13, after "court" insert or in such circumstances as may be prescribed

§ Mr. Howard
I beg to move, That this House cloth agree with the Lords in the said amendment.
The new clause was introduced into the Bill in this House but reservations were expressed by my hon. Friend. the Member for Richmond and Barnes (Mr. Hanley) and by practitioners that the provisions could adversely affect the sale of businesses or parts of businesses as going concerns by administrative receivers, administrators and liquidators. The amendment meets that criticism by allowing exemption from the provisions in certain circumstances, which will be prescribed in the rules. Such circumstances will be formulated following discussions in due course with practitioners but will concern sales by administrative receivers, administrators and liquidators who will be under a duty to obtain certain undertakings from the purchasers which will ensure that those subsequently dealing with the new company are 679 adequately informed about the circumstances in which it is using the relevant name and are not misled. I commend the amendment to the House.

§ Mr. Gould
I am content to accept the amendment. It goes some way towards meeting the proper concern expressed in Committee about the difficulties that the preexisting conditions might well have posed to administrators and others. I observe only that this is yet one further example of detailed provisions being siphoned off into the rules, which we have yet to see. I understand why that has been done on this occasion, but it has been a notable and perhaps unfortunate feature of the Bill that so much of what we need to know about the changes to be made to insolvency law has been left as a matter for regulation.

§ Mr. Jeremy Hanley (Richmond and Barnes)
I very much agree with the latter comments of the hon. Member for Dagenham, (Mr. Gould). I also warmly welcome my hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) to the Front Bench; and I pay warm tribute to the previous Minister, my hon. Friend the Member for Edinburgh, Central (Mr. Fletcher). My hon. Friend the Member for Edinburgh, Central had just as much trouble as we did in trying to absorb the 450 amendments tabled in Standing Committee and the 250 amendments tabled on Report and he deserves as much credit as anyone for the exhaustive way in which we have dealt with the Bill. There is no doubt that he will have a willing place in any firm of insolvency practitioners, because there are probably few people who know as much as he does about the subject, although he did not know much to start with.
I am grateful to my hon. and learned Friend the present Under-Secretary of State for what he has said about this amendment. Concern was expressed by practitioners that the requirement that court leave was to be obtained could inhibit sales of businesses by insolvency practitioners. After all, the name was often the only valuable asset which was left. Court leave would have not only inhibited the sale of the name but limited the money available for creditors.
Practitoners welcome the amendment which provides that court leave will not be needed in circumstances to be prescribed. This at least opens the door and allows the name to be sold when it is considered safe. My hon. and learned Friend the Under-Secretary of State said that these circumstances would include sales by insolvency practitioners, provided certain undertakings were given by purchasers. The nature of these undertakings will require careful consideration. I hope that adequate time will be given for this and the very large number of other matters to be dealt with by the rules to be considered by practitioners. I beg my hon. and learned Friend to give practitioners sufficient time to consider these rules. Members of Parliament may be given two days' notice of many complicated amendments; practitioners need much more time. I suggest that there should be three or four months' discussion to ensure that the rules are workable when they eventually become law.

§ Mr. Howard
I confirm that it is our intention to consult practitioners before we finally draw up the rules I would not wish to be held to a time limit, but it is our 680 intention to give them every opportunity to comment and to consider the rules in their final form before they come into force.

§ Question put and agreed to.

§ Commons amendment: Insert new clause—Challenge of decisions '— (1) Subject to the provisions of this section, an application to the court may be made by any of the persons specified in subsection (2) below, on one or both of the following grounds, namely—

(a) that a composition or scheme approved at the meetings summoned under section (Summoning of meetings) above unfairly prejudices the interests of a creditor, member or contributory of the company;
(b) that there has been some material irregularity at or in relation to either of the meetings.

§ (2) The persons who shall be entitled to make an application under this section shall be—

(a) a person entitled, in accordance with the rules, to vote at either of the meetings;
(b) the nominee or any person who has replaced him under section (Report by nominee who is not liquidator or administrator) (3) or (Decisions of meetings) (2) above; and
(c) if the company is being wound up or an administration order is in force in relation to the company, the liquidator or administrator of the company.

§ (3) An application under this section shall not be made after the end of the period of twenty-eight days beginning with the first day on which each of the reports required by section (Decisions of meetings) (6) above has been made to the court.

§ (4) Where on an application under this section the court is satisfied as to either of the grounds mentioned in subsection (1) above, it may do one or both of the following, namely—

(a) revoke or suspend the approvals given by the meetings or, in a case falling within subsection (1)(b) above, any approval given by the meeting in question;
(b) give a direction to any person for the summoning of further meetings to consider any revised proposal the person who made the original proposal may make or, in a case falling within subsection (1)(b) above, a further company or, as the case may be, creditors' meeting to reconsider the original proposal.

§ (5) Where at any time after giving a direction under subsection (4)(b) above for the summoning of meetings to consider a revised proposal the court is satisfied that the person who made the original proposal does not intend to submit a revised proposal, the court shall revoke the direction and revoke or suspend any approval given at the previous meetings.

§ (6) In any case where the court, on an application made under this section with respect to any meeting, gives a direction under subsection (4)(b) above or revokes or suspends an approval under subsection (4)(a) or (5) above, the court may give such supplemental directions as it thinks fit and, in particular, directions with respect to things done since the meeting under any composition or scheme approved by the meetings.

§ (7) Except in pursuance of the preceding provisions of this section, an approval given at a meeting summoned under section (Summoning of meetings) above shall not be invalidated by any irregularity at or in relation to the meeting.'

§ Lords amendment: No. 7, in subsection (6), at end leave out "meetings" and insert "meeting".

§ Mr. Howard
I beg to move, That this House doth agree with the Lords in the said amendment.

§ Mr. Speaker
With this it will be convenient to take amendments Nos. 8 to 11.

§ Mr. Howard
This group of amendments relates to the voluntary arrangement procedure for companies. Amendments Nos. 8 and 9 will enable the court in appropriate cases at the time it makes a winding up order to appoint as liquidator of a company either the official receiver or a person who has previously been acting as the supervisor of a voluntary arrangement in relation to that company. Similar provisions were incorporated into the 681 Bill at an earlier stage where bankruptcy follows an individual voluntary arrangement and where a compulsory liquidation follows the appointment of an administrator.
Amendments Nos. 9A and 10A ensure that persons bound by a voluntary arrangement are given prompt notice when the supervisor considers his task is complete and also that they shall receive a full report on the administration of the scheme of composition. Such persons may of course challenge the acts of a supervisor before the court.
When framing the rules which will flow from the enabling provisions, it is our intention not only to provide that notice supported by relevant information is given within 28 days of a supervisor completing his work, but for a penalty to be imposed for non-compliance.
Amendment No. 11 repeals section 601 of the Companies Act 1985. That section, which provided a means of effecting a binding arrangement with creditors within a voluntary winding up, has been little used and is made redundant by the new more flexible company voluntary arrangement procedure now contained in chapter 1A of part II of the Bill. Consequential thereon is amendment No. 10 which substitutes reference to a corporate voluntary arrangement for reference to a binding arrangement under section 601 in relation to provisions governing the giving of financial assistance under section 153(3) of the principal Act.
Amendment No. 7 corrects a drafting error.
I commend acceptance of the amendments to the House.

§ Question put and agreed to.

§ Subsequent Lords amendments agreed to.