§ Mr. RobathanTo ask the President of the Board of Trade if he will make a statement on company rescues following the recent consultation on company voluntary arrangements. [3079]
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§ Mr. OppenheimThe recent company voluntary arrangements consultation revealed continued support for the introduction of a short moratorium that is binding on all creditors. I therefore intend to introduce legislation to effect a scheme broadly as described in consultative document when parliamentary time allows, although usage will be restricted to small companies as defined in section 247 of the Companies Act 1985. However, I am still reflecting on what was said regarding the requirement to give five days' notice of the intention to appoint an administrative receiver. I have yet to decide whether it is necessary to have a mandatory provision, or whether, in response to the invitation I have issued to the British Bankers Association, the banks can come up with a binding code of practice which obviates that need.
Recent rescues of financially troubled companies, where, by agreement, debt is converted into equity, have proved very successful. However, it is evident that many are not aware of the rescue potential of debt equity swaps or how they work. I intend approaching those involved early next year to see how they think awareness and usage, in appropriate cases, can be increased.
I also propose at the same time to seek the views of banks, business and advisers on whether it is feasible to devise a mechanism whereby an administrative receiver, appointed following notice of an administration petition, can be replaced by an administrator in cases where it is clear that a floating charge holder's security can be shown not to be at risk. If this was possible, it would give the ordinary creditors the opportunity of some say in any rescue without prejudicing the secured creditors.
Legislation might provide a tool to achieve a rescue, but it cannot achieve a rescue of itself. The responsibility for that lies squarely on the shoulders of directors and their advisers. Remedial action should be taken earlier rather than later and this is the key to saving more companies. I therefore intend to discuss with business, banks and advisers what they can do to ensure that all those involved are aware of what must be done and when.
I am making arrangements for copies of the responses to the recent public consultation on CVAs to be placed in the library of my Department.