Limited Liability Partnerships (Hansard, 19 June 2000)

§ Mr. Mitchell
To ask the Secretary of State for Trade and Industry what consultations he has had with PricewaterhouseCooper and Ernst & Young about the legislation they prepared for limited liability partnerships in Jersey; and what parts of that legislation he has incorporated in the Limited Liability Partnerships Bill[Lords].[125426]

§ Dr. Howells
There have been no such consultations; and, while we are aware of the Jersey legislation on limited liability partnerships, this has not provided a model for the Limited Liability Partnerships Bill.

§ Mr. Mitchell
To ask the Secretary of State for Trade and Industry if bankrupts under restriction orders as proposed in his White Paper on bankruptcy will be able to become partners in limited liability partnerships.[126038]

§ Dr. Howells
Under the proposals referred to, the restrictions currently imposed on bankrupts will apply for the duration of the restriction order. As a consequence those subject to restriction orders will not be able to act in the management of a limited company or as a member of a limited liability partnership.

§ Mr. Mitchell
To ask the Secretary of State for Trade and Industry by what means persons reported to the Insolvency Agency by insolvency practitioners as unfit will be prevented from participating in limited liability partnerships.[126046]

§ Dr. Howells
Section 7(3) of the Company Directors Disqualification Act 1986 requires insolvency practitioners to report unfit conduct by directors to the Secretary of State. That requirement will exist where insolvency practitioners find misconduct by members of limited liability partnerships.

§ Mr. Mitchell
To ask the Secretary of State for Trade and Industry if the assets of an insolvent business will be eligible for re-use by its former management trading on the basis of a limited liability partnership.[126037]

§ Dr. Howells
Provided an insolvent business enters formal insolvency proceedings, then those assets will fall within the estate of the insolvent business, subject to any security held by creditors over those assets. The office holder has a duty to realise those assets in such a way that returns to creditors are maximised. If the failure of the68W business is not the directors' fault, there was no misconduct and they pay the best possible price for the assets, then they should not be prevented from running a successor business utilising those assets.
Where assets have been transferred with the intention of putting them out of reach of its creditors then the "claw-back" provisions currently found in the Insolvency Act 1986 will apply.

§ Mr. Mitchell
To ask the Secretary of State for Trade and Industry by what means he will prevent individuals under the individual voluntary arrangements as envisaged in his White Paper "Bankruptcy: A Fresh Start", from being allowed to become partners in limited liability partnerships.[126039]

§ Dr. Howells
Undischarged bankrupts are disqualified from acting in the management of a limited company by virtue of section 11 of the Company Directors Disqualification Act 1986. It is intended that this disqualification be extended to include acting as a member of a limited liability partnership.
The majority of persons subject to individual voluntary arrangements (IVAs) are not bankrupt and are not therefore subject to this restriction.
The proposals in the White Paper to which the question refers are for the automatic annulment of the bankruptcy on the agreement to the IVA proposal by the creditors. This would then leave the member in the same position as if the bankruptcy order had not been made and they would therefore not be precluded from acting as a member of a limited liability partnership. However, it is likely that there would be a requirement for measures to deal with anyone failing to stick to the terms of his/her IVA. This might include the reinstatement of the bankruptcy order against them.

§ Mr. Mitchell
To ask the Secretary of State for Trade and Industry if Company Voluntary Arrangements as provided for in his Insolvency Bill will apply to limited liability partnerships; and what measures he proposes to stop companies operating under a Company Voluntary Arrangements transferring to limited liability partnership status.[126041]

§ Dr. Howells
The Insolvency Bill does not specifically refer to limited liability partnerships. However, limited liability partnerships will be able to enter company voluntary arrangements (CVAs).
A company that is subject to a CVA is subject to a court procedure. It is likely that the conversion to a limited liability partnership would require the revocation of the CVA prior to any conversion. In considering this application the court would consider whether the aims of the CVA were best served by the company being able to convert.