HL Deb 23 October 1985 vol 467 cc1114-9

8A In subsection (3)(b) leave out ("acceptable") and insert ("such").

8B In subsection (3)(b), at end insert ("as shall be prescribed to the Secretary of State after consultation with the Committee and Council respectively established under subsection (3A) below").

8C* After subsection (3) insert the following new subsection— ("(3A) For the purpose of establishing and maintaining uniform standards of education and practical training and experience as required by section 3(3)(b) and section 5(2)(b) of this Part of the Act, there shall be established:—

  1. (a) a Committee to advise the Secretary of State with regard to such requirements, and
  2. (b) a general council of education for insolvency practitioners.
The membership of the said Committee and constitution and forms of the said council shall be such and in such manner as the Secretary of State may determine").

Lord Bruce of Donington

My Lords, I beg to move Amendments Nos. 8A, 8B and 8C, to which I shall speak together. The purpose of these amendments is to take steps to establish common standards. Your Lordships will be aware that under the terms of the Bill each of the recognised bodies, relevant bodies, whatever they may be, may decide to license those of their members who they consider meet the requirements enabling them to become insolvency practitioners and to be licensed as such. Matters of competence, matters of legal and accounting knowledge, matters of experience, will all be taken into account. However, they will be taken into account by different bodies with different standards.

If my noble friend Lord Mishcon will forgive me for saying so, I am second to no one in my admiration for the Law Society, which is a very venerable and indeed reputable body, well represented in your Lordships' House. However, I venture to say that its present concept of the technical knowledge requirements of an insolvency practitioner will probably differ, for perfectly good and proper reasons, from the requirements put forward by, for example, the Institute of Chartered Accountants in England and Wales. That is not to say that the Institute of Chartered Accountants in England and Wales is of necessity a good example; because their syllabus for the study of students struggling to get through their examinations contains very little guidance as to the knowledge of insolvency matters required. Again, the Association of Insolvency Practitioners may of course overlap with the other learned professions to which I refer, and indeed I know that in many instances they do so. There are many members of the Insolvency Practitioners' Association who are simultaneously chartered accountants, lawyers or whatever.

Then we have the position of the Department of Trade and Industry itself. How will the Department of Trade and Industry determine the technical requirements in terms of knowledge of the law, knowledge of accounting practice, and (if I may say so) knowledge of investigation processes which undoubtedly ought to be the characteristics of an insolvency practitioner?

There are bound to be some differences. This amendment is tabled in order that the Secretary of State may establish machinery, first of all, to determine uniform standards of education, practical training and experience as required. Once common standards have been established, this will powerfully aid the whole thrust and purpose of the Bill. It would be a pity if this part of the Bill, requiring quite properly the appointment of insolvency practitioners, were regarded with some doubt due to a suspicion that some insolvency practitioners were not sufficiently technically skilful or trained in order to accomplish this very responsible job. This is the sole purpose of this amendment.

I am sorry that the noble Earl, Lord Selkirk, is not in his place. He raised a point of very considerable importance which impinges on this. As at the end of 1984, there were 3,772 companies that had gone into members' voluntary liquidation. The noble Lord was kind enough to confirm that in each case in the future (and on the assumption that members' voluntary liquidations run to about 3,000 a year) these will automatically require the services of an insolvency practitioner, notwithstanding the fact that before there can be a members' voluntary liquidation, there has to be a declaration of insolvency; which, if made frivolously, I think would get the person swearing the declaration of insolvency into trouble.

However, the further point, and that to which this particular amendment is germane, is the fact that some members' voluntary liquidations are for the purposes of company reconstruction. I am quite certain that there are very many very competent, ethically qualified, experienced members of the Association of Insolvency Practitioners. On the other hand, many of those who are licensed directly by the Department of Trade and Industry as being capable of conducting an insolvency or liquidation are by no means capable of conducting the very sophisticated operation of a company reconstruction, which requires qualities of a totally different nature and, indeed, much more technical knowledge in different fields that is in the possession of an insolvency practitioner as such.

One can see now how relevant it is that there should be common standards and that steps should be taken by the Minister to ensure that there are common standards. If members' voluntary liquidations are to be brought within the Bill, then quite clearly the competence and the technical knowledge of an insolvency practitioner dealing with reconstruction will require to be far greater than that required in the narrow field of liquidation as such. That is a problem. Incidentally, it is one of the problems which I had in mind in the opening remarks that I was able to make to your Lordships this afternoon with a view to further time being given to the consideration of problems of this kind.

I am hopeful that the noble Lord, who, I am quite sure, will inform us that he is going to rely on the voluntary collaboration between the various bodies recognised by the Department of Trade (notwithstanding his and the Government's preference for some kind of woolly, amorphous and time-consuming collaboration) will see fit to accept these amendments and will take the necessary steps to put them into operation. I beg to move.

Lord Lucas of Chilworth

My Lords, I am most grateful to the noble Lord, Lord Bruce of Donington, for explaining the purport of his three amendments and the worries that perhaps lie behind the setting down of them. I have to say here—and I do this with great sincerity—that throughout the last ten or eleven months I have come very much to admire the tenacity with which the noble Lord opposite applies himself to this Bill, and have come very much to hold in high regard his not inconsiderable experience in this field, which noble Lords will recognise is not shared by me. However, I think that perhaps on this occasion he has perhaps got this one a little wrong, and I shall invite your Lordships to reject his invitation to accept these three amendments.

I think that many noble Lords will be aware of the consultations which have been taking place over these past ten or eleven months, since early this year, when officials in the insolvency service of my department circulated a discussion document on education, training and experience. They received submissions from a very large number of interested organisations. Formal meetings were undertaken with representatives of the accountancy bodies and also with the Law Society, and perhaps less formal meetings with other bodies.

Certainly, the consultations which we have had have revealed a very large measure of agreement as to what will be required of a practitioner licensed by a recognised body. From the material that we have so far collected we are quite confident that when the criteria are published for the applicant who will be applying to the Secretary of State they will be seen to be fair and to strike the proper balance between the two roots. Those are specifically the steps that have so far been taken and which will continue.

Your Lordships will also know that the major legal and accountancy bodies are justifiably proud of their achievements in raising the standards of education, training and, indeed, if I may say so, the ethics of their members. I am quite confident that the same dedication will be applied to the training of the insolvency practitioners of the future. We must bear in mind that many practitioners will automatically, to an extent, be granted licences by virtue of their past performance.

In any event the Secretary of State will monitor the progress of the recognised bodies and will be able to ensure that the standards are maintained and that all practitioner applicants have the necessary training and previous experience. The noble Lord is quite right: we are not generally in favour of setting up yet another body which to an extent might very well be in competition with those recognised bodies in the accountancy profession, the legal profession and so on. We really think that it is those bodies that should rightfully have the role that the Bill prescribes.

Lord Bruce of Donington

My Lords, to pursue that point a little further, may I ask the noble Lord a question as to whether he considered the fusion of the joint interests of the four Inns of Court (which operated quite separately at one time, with each qualified to be a recognised body) into one organisation was or was not a desirable thing? This involves exactly the same principle. This is exactly why one body was established to incorporate the interests of the four Inns of Court—and that happened a long time ago.

Lord Benson

My Lords, I wonder whether the noble Lord, Lord Bruce of Donington, would be willing not to press this amendment with the determination which he so gallantly shows in this House. This Bill has had a long and difficult period of months of birth pangs, and throughout that period the four chartered accountancy bodies and the Insolvency Practitioners' Association have been working hard together to settle, as prospective licensing authorities, what their responsibilities should be. They work in close contact with each other and, as the noble Lord, Lord Lucas, has said, with the Department of Trade and Industry.

Not only that, but they have already reached agreement among themselves on the general lines of experience and expertise which will be necessary and the education that will be required. In those circumstances, I suggest that it is hardly necessary to introduce a new layer of bureaucracy and yet another quango when, in fact, the work is already being done voluntarily and with great enthusiasm and a determination to do the job well.

The noble Lord, Lord Bruce of Donington. made a point which I think ought to be considered. He asked how the Department of Trade and Industry will be able to exercise its functions when it does not have the expertise. I think that is a perfectly fair point to make. But, in fact, what they will have to do from the point of view of common sense and ordinary dealing is to take guidance from the four chartered bodies, the Insolvency Practitioners' Association and any other bodies who are licensed through their experience and their knowledge. Using that, they will apply the recommendations which they make. In those conditions, I very much hope that this House will not feel that it is necessary to introduce this rather ponderous piece of administration.

Lord Lucas of Chilworth

My Lords, since the noble Lord, Lord Bruce, asked a specific question. I feel bound to respond by underlining what the noble Lord, Lord Benson, has so adequately said, which is really what I wanted to say in response. There is one particular point which was mentioned by the noble Lord, Lord Benson. He asked how I felt the Department of Trade and Industry's service was going to be able to cope with this, and whether we in fact had the expertise. I assure your Lordships that in the insolvency service we have a considerable amount of expertise in these matters. I am equally sure that that decision will take on board any experience, any advice and any guidance which is given by the recognised bodies arising out of these consultations.

Lord Bruce of Donington

My Lords, the House should know that since these matters have been under consideration I have been in close consultation with the noble Lord, Lord Lucas of Chilworth, and his department. We have sought to co-operate together in these matters, and I had already undertaken that I would not press this amendment. My main reason for raising the matter this afternoon was precisely to elicit the responses I have had from the noble Lord and, in particular, the information so kindly provided to us by the distinguished accountant, the noble Lord, Lord Benson.

One matter, if I may venture to suggest it, has not yet been dealt with, and, if I may say so with respect, it is the point I raised about the competency of insolvency practitioners as such to act in company reconstructions. The noble Lord, Lord Benson, will recall, since he has participated in the debate, that this question of members' voluntary liquidations and the competency of insolvency practitioners to act therein was one of the misgivings of the Institute of Chartered Accountants of England and Wales, which they were kind enough to communicate to me officially. Perhaps the noble Lord might give some response to that.

Lord Lucas of Chilworth

My Lords, I do not really think that I can make further comment. I think that in fact I really have covered everything that can be said in answer to these amendments.

Lord Bruce of Donington

My Lords, I am sorry; I must apologise to the noble Lord. Perhaps I did not make myself quite clear, and I will seek to do so now without detaining the House for too long. I have already undertaken to expedite the position as much as possible. I pointed out in the course of my remarks that the Bill required insolvency practitioners to act even in members' voluntary liquidations, and I pointed out that many members' liquidations were in fact in implementation of reconstructions, in respect of which insolvency practitioners per se were not necessarily technically trained.

I wondered whether the noble Lord would comment on the necessity for possibly making some additional arrangements. That is why I raised the question of further and more detailed consideration being given to the Bill regarding the necessity for having insolvency practitioners as such in cases of quite bona fide company reconstructions, which are a very complicated technical matter needing skills far outside the scope of a normally qualified insolvency practitioner. Could the noble Lord give that some consideration?

Lord Lucas of Chilworth

My Lords, I do not think I can add anything new. I can repeat that we are confidently anticipating that the consultations which have been going on and which will give rise to the criteria for the licensing of a practitioner will take into account that very point. Of course I recognise that in the case of a bona fide reconstruction (and in parenthesis I would ask: when do we determine that the reconstruction is bona fide?) there are people practising now as insolvency practitioners who have skills which are better utilised in other areas. I do not foresee any difficulty. I accept that there may well have to be considerable adjustments by a number of individuals, but I do feel, however, that they will be of sufficient competency to accommodate that new responsibility which the noble Lord foresees.

4.45 p.m.

Lord Bruce of Donington

My Lords, I am very much obliged to the noble Lord, and I will not pursue the matter further. I am quite sure the professions will be interested in the text of the noble Lord's reply to the question I addressed to him. With the leave of the House, I beg leave to withdraw the amendments.

Amendments to the amendment, by leave, withdrawn.

On Question, Motion agreed to.