HL Deb 23 October 1985 vol 467 cc1141-3

204 Clause 79 page 61, line 31, at end insert— '(3) Section [Supplies by utilities: Part II] below shall apply where a composition or scheme approved by meetings summoned under section [Summoning of meetings] above has taken effect as it applies where a company goes into liquidation as if references in that section to the office holder were references to the supervisor of the composition or scheme.'.

232 Clause 91, page 73, line 23, after 'includes', insert 'the approval of a composition or scheme under Chapter IA of this Part.'.

379 Clause 191, page 152, line 15, leave out from 'transaction' to end of line 20 and insert—

  1. '(b) in a case where a person who is, or is capable of being, prejudiced by the transaction is bound by a composition or scheme approved under Chapter IA of Part II or Chapter I of Part III of this Act, by the supervisor of the composition or scheme or by any person who (whether or not so bound) is, or is capable of being, so prejudiced; or
  2. (c) in any other case, by a person who is, or is capable of being, so prejudiced;
and an application made under any of the preceding paragraphs in relation to a transaction shall be treated as made on behalf of every person who is, or is capable of being, prejudiced by the transaction.'.

391 Clause 195, page 157, line 5, after 'under' insert 'Chapter IA of Part II or'.

401 Clause 209, page 164, line 14, after 'under', insert 'Chapter IA of Part II or'.

428 Schedule 4, page 172, line 47, at end insert— 'Registration of voluntary arrangements 4A. Provision for the registration of compositions or schemes approved under Chapter IA of Part II of this Act, including provision for the keeping and inspection of a register.'.

437 Page 174, line 37, after 'company', insert 'or by the supervisor of a composition or scheme approved under Chapter IA of Part II of this Act'.

438 Page 174, line 42, after 'company', insert 'or by the supervisor of such a composition or scheme'.

499 Schedule 7, page 186, line 34, at end insert 'and at the end there shall be inserted the words "or of a composition or scheme proposed for the purposes of Chapter IA of Part II of the Insolvency Act 1985 being approved under that Chapter".'.

500 Page 187, line 20, after 'under', insert 'Chapter IA of Part II or'.

515 Page 192, line 37, at end insert 'and at the end there shall be inserted the words "or a composition of scheme proposed for the purposes of Chapter IA of Part II of the Insolvency Act 1985 is approved under that Chapter".'.

516 Page 193, line 5, after 'under' insert 'Chapter IA of Part II or'.

517 Page 193, line 24, at end insert 'and at the end there shall be inserted the words "or a composition or scheme proposed for the purposes of Chapter IA of Part II of the Insolvency Act 1985 is approved under that Chapter".'.

The principal Amendments Nos. 40 to 46 will form a new Chapter II in Part II of the Bill. They introduce a new voluntary procedure for companies in financial difficulties. The need for such a system was recognised particularly to assist an administrator in his efforts to rehabilitate a company and arose from our consultations with practitioners on these particular provisions. There is, however, a wider application. The Cork Committee, the review committee, recommended that a simple but binding procedure should be available to enable companies to come to terms with creditors, the existing provisions for schemes under Section 425 of the Companies Act 1985, for example, being very expensive and realistically appropriate only to major reconstructions.

A corporate voluntary arrangement may therefore be set into motion by the directors of a company and the court in those circumstances will have no role in approving arrangements as in Section 425 but will be available to settle disputes. These clauses are an adaptation of the voluntary arrangements procedure for individuals which are to be found in Part III of the Bill.

The directors can initiate this procedure by approaching an insolvency practitioner with a proposal that they wish to put to creditors and shareholders. If the practitioner considers their suggestion to be workable, he will so report to the court and he will call meetings of creditors and members. If the creditors and members voting in single groups in each case then accept the proposal or a modification thereof by a majority of 75 per cent. of those attending and voting, the arrangement will be binding on all notified creditors and on the company. The need for class meetings and formal consideration by the court is avoided, although any person bound by the scheme who considers that he has been unfairly prejudiced may, of course, apply to the court for relief.

We believe that voluntary arrangements will be of considerable assistance to small otherwise viable companies which have suffered an exceptional calamity such as a strike or a large single bad debt and whose resultant financial difficulties can be overcome given time. When an arrangement is in force it will continue to be supervised by an independent licensed insolvency practitioner and the clauses to which this refers, supported by the rules, will contain a number of safeguards for creditors.

A voluntary arrangement may also become part of a formal liquidation process and in appropriate cases where a company can be rehabilitated, may bring a stay of such proceedings. The system is therefore more flexible than the provisions currently available to a voluntary liquidator under Section 601 of the Companies Act 1985. That section has found little application because of the high voting requirement of an approving majority of three-quarters of all creditors and its inability to save a company from complete liquidation. I am therefore asking this House by Amendment No. 46C to authorise the repeal of Section 601 which is made redundant by these new provisions.

The remaining amendments, together with the other amendments to Commons amendments, are, I assure the House, technical and consequential to this Bill and to other Acts required to give effect to the new procedure. I commend the acceptance of this series of amendments to your Lordships.

Moved, That this House do agree with the Commons in their Amendments Nos. 40 to 42.—(Lord Lucas of Chilworth.)

On Question, Motion agreed to.