Enterprise Bill

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Mr. Waterson: I beg to move amendment No. 407, in page 240, line 32, at end insert—

    '(9A) An administration application shall give the name of the person the applicant proposes to be appointed administrator and shall be accompanied by a statement by that person—

    (a) that he consents to act if appointed;

    (b) that in his opinion the purpose of administration is reasonably likely to be achieved; and

    (c) giving such other information and opinions as may be prescribed;

    and for the purposes of a statement under this sub-paragraph, that person may rely on information supplied by the directors of the company (unless he has reason to doubt its accuracy).'.

This is very much a technical amendment. It would prevent administrators from being appointed in cases that they know nothing about, and is consistent with similar provisions for out-of-court appointments. One problem with debating the present provisions is that detailed rules will be produced at some time and will be the practitioners' bible, and they may deal with the issue. Will the Minister therefore tell us whether any draft rules are floating around and, if so, what the time scale is for producing them?

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Mr. Djanogly: Why is the wording in the amendment not included here, given that it is included in, I think, paragraph 16, on non-court appointments?

Mr. Alexander: The amendment would require applications for administration that are made through the court to be accompanied by the proposed administrator's consent to act, and a statement from the proposed administrator that, in his or her opinion, the purpose of administration was reasonably likely to be achieved.

I can confirm that the rules will deal with the information to be provided with court applications for administration, as is presently the case. In particular, the revised rules will include a requirement that court applications be accompanied by the proposed administrator's consent to act.

We also intend to take forward the existing requirement in rule 2.4(5) that the applicant must state that, to the best of his or her knowledge and belief, the proposed administrator is qualified to act as an insolvency practitioner in relation to the company.

I can confirm that no rules are available at this stage, but I assure the Committee that there will be consultation on that point later in the year. On that basis, I ask the hon. Member for Eastbourne to withdraw the amendment.

Mr. Waterson: It was helpful of the Minister to give that indication, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Waterson: I beg to move amendment No. 408, in page 241, leave out lines 11 and 12.

Paragraph 11(1) confers on the court the widest possible discretion to make whatever order is appropriate in a particular case. It is, however, not appropriate in what purports to be a rescue-based system to provide the court with the discretion to order liquidation without warning and purely unilaterally on a petition that is geared to achieving the statutory purpose of administration. The practical consequences of exercising the power envisaged in paragraph 11(1) would be far-reaching and, on that basis, the wording should be significantly narrowed—hence the amendment.

10.45 am

Mr. Alexander: The intention behind the amendment is to remove the power of the court to treat an application for administration as a petition for winding up the company. That power would be used only in circumstances in which the court believed it inappropriate for the company to go into administration, and that the best solution would be for it to be wound up. Allowing the court to make a winding-up order in such cases would save the time and expense of presenting a one-year petition. I ask the hon. Member for Eastbourne to withdraw the amendment.

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Mr. Waterson: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Alexander: I beg to move amendment No. 582, in page 241, line 31, leave out 'or'.

The Chairman: With this it will be convenient to take Government amendments Nos. 487 and 583.

Mr. Alexander: The amendments are technical, and solely ensure that paragraph 12(2) reflects what happens in practice. Sub-paragraph (2) sets out what makes a floating charge a qualifying floating charge, which enables the holder to appoint an administrator by the out-of-court route. It has been put to us that the documentation that creates the charge does not often specifically refer to the appointment of an administrative receiver. Instead, it simply refers to the appointment of a receiver. When that person is appointed, if he or she falls within the definitions given in, respectively for England and Wales and for Scotland, sections 29(2) and 251(b) of the Insolvency Act 1986, he or she is an administrative receiver.

Amendments Nos. 487 and 583 will ensure that paragraph 12(2) of schedule 16 to the Bill, which relates to the out-of-court appointment of an administrator by a floating charge-holder, reflects that. Amendment No. 582 is a technical amendment to remove the ''or'' from the end of sub-paragraph (2)(b). That is necessary because amendment No. 583 adds an additional provision, sub-paragraph (2)(d), so the ''or'' will move from the end of sub-paragraph (2)(b) to after sub-paragraph (2)(c).

I hope that that is entirely clear.

The Chairman: I enjoyed that enormously. Mr. Waterson, do you wish to speak to the amendments?

Mr. Waterson indicated dissent.

The Chairman: Very sensible.

Amendment agreed to.

Amendments made: No. 487, in page 241, line 32, leave out

    'appoint an administrative receiver of the company' and insert 'make an appointment which would be the appointment of an administrative receiver within the meaning given by section 29(2)'.

No. 583, in page 241, line 33, after sub-sub-paragraph (c) insert

    (d) purports to empower the holder of a floating charge in Scotland to appoint a receiver who on appointment would be an administrative receiver.'.—[Mr. Alexander.]

Dr. Cable: I beg to move amendment No. 578, in page 242, line 2, at beginning insert—

    'Unless the consent of the holder of any prior floating charge has been given,'.

The Chairman: With this we may discuss the following amendments: No. 531, in page 242, line 3, leave out 'two' and insert 'five'.

No. 409, in page 242, line 4, at end insert

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    'or the holder of such a charge has consented to the appointment in writing'.

No. 410, in page 242, line 18, after 'appointed', insert

    'on a winding-up petition presented by a creditor'.

Dr. Cable: I want to say a little about amendment No. 578, which is one of many technical amendments moved from the Opposition Benches. I need not repeat on every occasion that they are technical, but merely suggest from where the ideas for them came. The idea for the amendment came partly from industrialists, as represented through the CBI, partly from the financing community, which has pooled its thoughts through the Finance and Leasing Association and is in the business of providing liquidity to companies and partly from lawyers north and south of the border. There is some consensus from those different bodies as to how the Bill can be improved.

The amendment relates, as do those in the next group, to the crisis point when a company is going into administration. The practitioners stress that there is a frantic period in which hours or minutes can be crucial, let alone days and weeks. Often, confidence collapses and creditors scramble for their assets, so it is important that the orderly process of administration starts as quickly as possible.

The amendment makes the point that, in many cases, the secured creditors are already in consultation and have agreed a way forward. If there were consensus among the creditors, it would be possible to save the two days provided for in the schedule by moving straight into administration. That seems a sensible and practical way to achieve what the Government want, which is to get an administration process operating quickly and smoothly. I would be surprised if the Minister found that difficult to accept.

Mr. Waterson: I very much endorse what the hon. Member for Twickenham said. In a sense, we are not masters of our own fate because we have been bombarded with amendments—many of which are highly technical—from practitioners, such as consumer credit organisations, lending institutions, the City of London Law Society, which has taken a particular interest in the matter, various accountants and insolvency practitioners. I find this part of the Bill a little like doing one's final examinations in something that one is never going to make use of again. The nearest I ever came to that was failing my conveyancing paper as a law student. I am pleased to say that I eventually passed it, but I have never had to carry out a conveyance and would never wish to, although it seems infinitely preferable to practising in insolvency.

Like amendment No. 578, tabled by the Liberal Democrats, our amendments are partly to do with timing. Amendment No. 531 speaks for itself; it will have to, because I cannot find the briefing on it. It seems eminently sensible and will, no doubt, make everyone's life much easier.

Amendment No. 409 is also to do with timing. Its purpose is to ensure that no delay should occur in urgent cases when all the competing secured creditors

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agree with the proposed measures. That chimes with the Liberal Democrat amendment. A raft of amendments, relating to various parts of the Bill, are designed to unclog the procedures, where there is some element of consensus and—as is almost always the case in administrations—an element of urgency to save the business, goodwill and jobs.

Amendment No. 410 has a slightly different purpose. The provisions would permit a secured creditor whose loan is in default to proceed quickly and cheaply to appoint an administrator, but it is the view of the CBI that that would be wrong in principle. Where a provisional liquidator has been appointed on a creditor's winding-up petition, it is fair to require the secured creditor to apply to the court for the appointment of an administrator. However, it would be wrong in principle to require that in cases where the provisional liquidator was appointed on the company's petition.

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