HL Deb 31 October 1989 vol 512 cc202-5

7.27 p.m.

The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Skelmersdale) rose to move, That the draft order laid before t he House on 17th October be approved.

The noble Lord said: My Lords, with the leave of the House I shall speak also to the draft Insolvency (Northern Ireland) Order 1989. Both orders were laid before your Lordships' House on 17th October.

The Government's policy in this area, as in many others, is that company law should be the same in Northern Ireland as in Great Britain. That policy of parity in the area of corporate affairs is based on the principle that any inconsistency between the two jurisdictions of Great Britain and Northern Ireland would be damaging to the business and commercial life of the Province and thus detrimental to its economic development.

Your Lordships will therefore not be surprised to note that the draft insolvency order broadly mirrors the provisions of the Insolvency Act 1986 and that the draft companies order replicates the provisions of the Company Directors Disqualification Act 1986, which is, as your Lordships are aware, an integral part of insolvency law.

The opportunity has also been taken to use the companies order to amend the provisions in Northern Ireland company law relating to takeovers and insider dealing in the light of changes introduced in Great Britain by the Financial Services Act 1986. As Bills the two Acts occupied many days of your Lordships' time but I do not propose to go into detail on them now, although as usual I shall be delighted to answer any questions, whether of detail or more general, when I wind up.

Suffice it to say that the insolvency law will reduce the unnecessary involvement of the court and the insolvency service and enable the insolvency service to concentrate on its protective and investigative work. It will provide a statutory framework to encourage directors to take a close interest in the affairs of their companies and to take prompt action when financial difficulties loom. It will deter and penalise irresponsible behaviour and malpractice by those who manage company affairs. It will clarify the law on receivership and create a new insolvency mechanism known as company administration specifically designed to facilitate company rescue and reorganisation, thereby minimising unnecessary losses to creditors and the economy as a whole when insolvency occurs. It will also ensure that those who act as insolvency practitioners are fit to do so.

Finally, it will completely revise bankruptcy law which has operated without fundamental change in Northern Ireland for more than 130 years and bring the procedures into line with those in the field of corporate insolvency. In so doing, it takes account of the Deeds of Arrangement Act 1914. It seemed to my right honourable friend to be quite inappropriate for solicitors and co-directors to have to turn to two pieces of legislation covering insolvency. The Government are therefore taking the opportunity to include a slice of amalgamation and consolidation in this case.

A deed of arrangement is a simple procedure whereby a debtor may make a legally binding contract with his creditors by which he transfers his property to a trustee who will ensure that the property is used to meet the claims of the creditors without incurring the disabilities associated with bankruptcy. The new provisions are designed to provide a humane but efficient system for dealing with those who cannot pay their debts, with the emphasis on allowing the debtor the opportunity of continuing to make a living so as to provide for himself and his family and to make a contribution from future income towards the payment of his creditors.

As with corporate insolvency, the draft insolvency order provides for alternatives to bankruptcy. First, the order includes legislative provisions relating to deeds of arrangement. Those provisions are based on the Deeds of Arrangement Act and have been incorporated within the insolvency order to enable practitioners in Northern Ireland to have in one enactment all the relevant provisions relating to bankruptcy and alternatives to bankruptcy. Wherever possible, the procedures for dealing with bankruptcies will be similar to those used when winding up a company. For example, a bankruptcy petition will normally be based on an unsatisfied demand for payment of an outstanding debt rather than a formal court judgment and will be followed by a bankruptcy order, assuming that payment is not made.

Even before the order was laid, there was one noteworthy difference from the law in England and Wales. That will continue and is a procedure whereby the Law Society of Northern Ireland acting as attorney of a solicitor under an order of the court may petition for the bankruptcy of a solicitor even though the society does not allege or prove that the solicitor owes any debts to the society. There is no equivalent to that procedure in England and Wales unless the Law Society itself is a creditor.

In the course of this necessarily brief synopsis of the provisions of the legislation, I have drawn noble Lords' attention to two areas where the Northern Ireland legislation differs slightly from the Insolvency Act 1986. However, there is a third difference. The Insolvency Act provides for the continuation of the insolvency practitioners tribunal in Great Britain to investigate, if requested, cases where the competent authority has refused to grant or has withdrawn an authorisation to act as an insolvency practitioner and to report its opinion to the authority. It is anticipated that the need for such a tribunal in Northern Ireland would be minimal and an appeal against the decision by the department or other competent authority will be dealt with by judicial review.

I particularly direct noble Lords' attention to Article 16 of the companies order which is a unique provision for Northern Ireland and provides that a person disqualified under the Company Directors Disqualification Act in Great Britain is not, except with the leave of the court, able to act in Northern Ireland in any capacity in relation to that company. Perhaps I may pre-empt a point which I suspect will arise in the course of the debate. I accept that we are in advance of Great Britain in this matter, but I have no doubt that the reciprocal arrangements will be made there in due course.

The final broad area of difference between the legislation before the House and that which already exists in Great Britain relates to the existence of a separate scheme for the enforcement of judgments in Northern Ireland. That has required the omission of certain provisions of the 1986 Act and substantial amendments to the Judgments Enforcement (Northern Ireland) Order 1981 which are detailed in Schedule 9 of the insolvency order.

I could dilate upon this subject for many minutes, but I judge that it would be inappropriate at this late hour. However, I trust that there will be general agreement as to the need for the reform of the insolvency legislation in Northern Ireland and that noble Lords will recognise from the provisions that I have highlighted the parity nature of the orders. The Government believe that the range of measures put forward will ensure that the insolvency legislation in Northern Ireland is brought into line with the contemporary requirements of trade, industry and commerce as well as those of the community as a whole. I have great pleasure in commending the orders to the House. I beg to move.

Moved, That the draft order laid before the House on 17th October be approved.—(Lord Skelmersdale.)

Lord Prys-Davies

My Lords, we are grateful to the noble Lord, Lord Skelmersdale, for explaining the provisions of both orders, indicating the disparities that will remain between the jurisdiction in Northern Ireland and the jurisdiction in England and Wales and pointing out that the relevant part of the Companies Bill is still being discussed in another place. I have consulted my colleagues who have responsibility for this specialised branch of the law and on their advice and in the light of the advice and information given to the House by the Minister, I am pleased, on behalf of this side of the House, to welcome both orders.

On Question, Motion agreed to.