HL Deb 23 July 1986 vol 479 cc364-6

WINDING UP AND ADMINISTRATION ORDERS

Power to petition for winding up orders.

  1. (1) On a petition presented by the Secretary of State by virtue of this section, the court having jurisdiction under the Insolvency Act 1986 may wind up an authorised person or appointed representative to whom this subsection applies if—
    1. (a) the person is unable to pay his debts within the meaning of section 123 or, as the case may be, section 221 of that Act; or
    2. (b) the court is of the opinion that it is just and equitable that the person should be wound up.
  2. (2) Subsection (1) above applies to any authorised person (including a person whose authorisation has been suspended) or appointed representative who is—
    1. (a) a company within the meaning of section 735 of the Companies Act 1985;
    2. (b) an unregistered company within the meaning of section 220 of the Insolvency Act 1986;
    3. (c) an overseas company within the meaning of section 744 of the Companies Act 1985; or
    4. (d) a partnership.
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  3. (3) For the purposes of a petition under subsection (1) above a person who defaults in an obligation to pay any sum due and payable under any investment shall be deemed to be unable to pay his debts.
  4. (4) An agreement shall be regarded as an investment agreement for the purposes of subsection (1) above if the making or performance of it by either party constitutes an activity which falls within any paragraph in Part II of Schedule 1 to this Act (or would do so if Parts III and IV of that Schedule were disregarded).
  5. (5) Where a petition is presented under subsection (1) above for the winding up of a partnership on the ground mentioned in paragraph (b) of subsection (1) above, the court shall have jurisdiction and the Insolvency Act 1986 shall have effect as if the partnership were an unregistered company within the meaning of section 220 of that Act.
  6. (6) The Secretary of State shall not present a petition under subsection (1) above for the winding up of any person who is an authorised person by virtue of membership of a recognized self-regulating organisatiion or certification by a recognized professional body and is subject to the rules of the organization or body in the carrying on of all investment business carried on by him, unless that organisation or body has consented to his doing so.").

The noble Lord said: In moving Amendment No. 184, it might be for the convenience of the Committee if I speak also, as briefly as I can, to Amendments Nos. 248 and 259. The new clause enables the Secretary of State or the designated agency to petition the court for the winding up of an authorised person which is a company or partnership. The court may wind up the authorised person if it cannot pay its debts or if the court considers that it is just and equitable to do so. This power is based on a similar provision in the Banking Act.

The Companies Act has long conferred a power on the Secretary of State to petition for the winding-up of a company, and experience has shown how useful such a power can be, and it seems right to give a similar power to the Secretary of State and designated agency in the financial services sector.

Such a power would not be used lightly. But there may be occasions when information about a business, perhaps uncovered in the course of an investigation, reveals so sorry a state of affairs—perhaps involving fraud or other unlawful conduct—that the winding-up of the business provides the speediest and most effective means of preventing further abuse and ensuring as fair a disposal of the available assets as is possible in the circumstances. The involvement of the court in judging whether the petition is warranted ensures that such a power cannot be misused. I commend the provision to the Committee, and I beg to move.

Lord Williams of Elvel

We shall have to look at this because it raises some important issues, but I do not want at this stage to discuss them. We shall not oppose the amendments. We shall look at it and come back on Report if we feel it necessary.

On Question, amendment agreed to.

Lord Lucas of Chilworth moved Amendment No. 185: Insert the following new clause—

("Power to petition for administration orders.

.A petition may be presented under section 9 of the Insolvency Act 1986 (applications for administration orders) in relation to a company to which section 8 of that Act applies which is an authorised person (including a person whose authorisation has been suspended) or an appointed representative—

  1. (a) in the case of an authorised person who is an authorized person by virtue of membership of a recognised self-regulating organisation or certification by a recognized professional body, by that organisation or body; and
  2. (b) in the case of an appointed representative or an authorized person who is not authorised as mentioned in paragraph (a) above or is so authorised but is not subject to the rules of the organisation or body in question in carrying on of all investment business carried on by him, by the Secretary of State.").

The noble Lord said: Amendment No. 185 inserts a new clause relative to the power to petition for administration orders. This provision enables a regulator, be it an agency, SRO, or RPB, to petition a court for appointment of an administrator under the Insolvency Act to take over the affairs of an authorised business which is a company. At present, such a petition may be presented only by a creditor or by the company or its directors. The court will have to be satisfied that the criteria set out in the Insolvency Act for the appointment of an administrator are fulfilled before it grants such an application. So it would be the court that would have to judge whether the company is, or is likely to become, unable to pay its debts; that the appointment of an administrator will lead to the survival of the company as a going concern; that it will lead to a more advantageous realisation of assets or that other of the criteria in Section 27 of the Insolvency Act will be satisfied.

The administrator will be subject to the provisions of the Insolvency Act in the course of his adminis-tration. This adjustment to the existing provisions of insolvency law acknowledges that regulators will often be well placed from their knowledge of the business and through the information obtained in the course of monitoring its compliance with their rules. They will be well placed to judge when a business is becoming insolvent and when a change of management will have a particularly remedial effect.

The appointment of an administrator will give a company a breathing space in which solutions to its problems may be found. This may often be in the interests of both its creditors and its investors. We believe that this is a useful power that should on occasion help to rehabilitate investment businesses that have run into difficulties. I commend this amendment to the Committee, and I beg to move.

On Question, amendment agreed to.

Lord Brabazon of Tara

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

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