Enterprise Bill

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Mr. Waterson: On the basis of the Minister's claim that he has examined some of the practicalities of the matter, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Waterson: I beg to move amendment No. 412, in page 243, line 34, leave out paragraph 22.

The Chairman: With this it will be convenient to consider amendment No. 413, in page 244, line 4, leave out 'under paragraph 20' and insert—

    '(a) under paragraph 12 by a person connected with the company within the meaning of section 249, or

    (b) under paragraph 20.'.

Mr. Waterson: Amendment No. 412 is a point of principle and amendment No. 413 is, as the Minister will have immediately spotted, of a technical nature.

Amendment No. 412 is an expression of the idea that in a rescue culture, there is much to be said for not limiting the remedies available to all stakeholders in any way. The board of a company might legitimately take the view that in certain circumstances the appropriate course is to take the company into administration. Serial protection-seekers will get into enough trouble without that provision.

On amendment No. 413, if clause 22 is allowed to stand, we should prevent directors from circumventing the clause by lending the company a nominal sum secured by fixed and floating charges over the whole of the assets and then appointing an administrator under paragraph 12.

Mr. Alexander: On amendment No. 412, the administration procedure, with its attendant moratorium on creditors enforcing their rights, provides important protection for companies that get into financial difficulties. It is only right that adequate safeguards should be put in place to prevent unscrupulous companies and directors from taking advantage of the moratorium procedure to the detriment of their creditors.

Paragraph 22 will prevent a company or its directors from appointing an administrator by the out-of-court route in the 12 months following the end of an unsuccessful CVA moratorium. The provision would ensure that companies and their directors could not abuse the procedure by making serial use of moratorium provisions in order to enjoy continued protection from their creditors. The amendment would remove that safeguard.

Of course, there may be very good reasons for putting a company into administration within 12 months of the ending of an unsuccessful attempt to put in place a CVA. If companies can be saved, we certainly want to encourage that to happen. In such cases, we think that it is right that the court should

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have the opportunity to scrutinise the application and decide whether or not it is appropriate to make an administration order.

I therefore ask the hon. Gentleman to withdraw the amendment.

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

Amendment, by leave, withdrawn.

Amendment made: No. 489, in page 245, line 13, leave out 'in the prescribed form'.—[Mr. Alexander.]

Mr. Waterson: I beg to move amendment No. 536, in page 247, line 25, at end insert

    'or stay any voluntary winding-up of the company'.

This is a technical amendment to ensure that paragraph 36 applies to compulsory and voluntary liquidations equally.

Mr. Djanogly: There is a basic point to be made. Why should a liquidator want to appoint an administrator? I should have thought that an administrator's job would have been done by that stage, or that the process would have moved on.

Mr. Alexander: My official brief is uncharacteristically robust on this point. It starts by saying that the amendment is ''not necessary.'' Perhaps I can add some clarity to that statement.

If the company is in liquidation, only the administrator will be able to apply to the court for it to be put into administration. If the court makes an administration order, it will be able to make consequential provisions to deal with the voluntary liquidation. On that basis, I ask the hon. Gentleman to withdraw the amendment.

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

Amendment, by leave, withdrawn.

Mr. Alexander: I beg to move amendment No. 490, in page 248, line 32, at end insert

    'to which the administrative receiver or receiver is entitled out of the assets of the company'.

The amendment will make the provisions in paragraph 39 consistent with the provisions in the Insolvency Act 1986, which deal with the remuneration of a receiver or administrative receiver who has been dismissed. Section 11(4)(b) of the 1986 Act makes it clear that the indemnity referred to is an indemnity to which the receiver or administrative receiver is entitled out of the assets of the company. Without the amendment, the reference to an indemnity in paragraph 39(4)(a) could be given a wider interpretation, which is not our intention. I therefore ask hon. Members to support the amendment.

Amendment agreed to.

Mr. Carmichael: I beg to move amendment No. 463, in page 249, line 33, at end add—

    '(9) A provision in any contract which purports to terminate the contract on the appointment of an administrator or the giving of notice of intention to appoint an administrator shall except—

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    (a) with the consent of the administrator; or

    (b) with the permission of the court, have no effect.'.

This is another amendment from the awfully clever chaps from the Drumsheugh gardens in Edinburgh. The amendment would ensure that a contract could not be used to frustrate the aims of the Bill. A creditor may in some circumstances seek to secure his or her rights by a provision in a contract purporting to terminate the contract on the appointment of an administrator or the notice of intention to appoint an administrator. That contractual provision could defeat the effect of a moratorium and have an adverse impact on the administration. The purpose of the amendment is to ensure that the contract cannot be used to frustrate the Bill.

Mr. Djanogly: I find this amendment strange. Almost every contract contains a basic provision that if a company becomes insolvent—including being put into administration—the contracting party can pull out of it. The amendment would create a one-way street in which whoever provides a service must continue to provide it without being paid. That is extremely unfair to anyone who provides a service to an insolvent company. If that route were taken, the moratorium should work both ways; while the contract is in limbo, as well as the company not having to pay, the service should not have to be provided during the moratorium. I do not suggest that as the best way forward in any event.

Mr. Alexander: This is a rare instance in which I find myself more in favour of the argument offered by the hon. Member for Huntingdon than that offered by the hon. Member for Orkney and Shetland.

The hon. Member for Orkney and Shetland said that the amendment was inspired by the Law Society of Scotland. A keystone of jurisprudence north and south of the border is freedom of contract and that is the fundamental difficulty with the amendment. I realise that the hon. Gentleman is trying to improve the prospects of company rescue by locking in suppliers, but in practice the amendment would have the opposite effect. If those entering into contracts knew that the terms could be overridden, they might be less likely to enter into or continue a contract if they became aware that the company was in financial difficulty. Consistent with the spirit of the Bill, I ask the hon. Gentleman to withdraw the amendment.

Mr. Carmichael: If the Minister and the hon. Member for Huntingdon both believe that I am wrong, I am probably right. Notwithstanding that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Waterson: I beg to move amendment No. 537, in page 250, leave out lines 32 and 33.

This is another short amendment that seeks to bring paragraph 43 into line with the current requirements for administration and other corporate insolvency procedures. Accountants involved in insolvency believe that there is no justification for wider rules in administration than in other procedures.

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Mr. Alexander: I have some sympathy with the hon. Gentleman's argument and am happy to consider it. The intention in paragraph 43(3) is to replicate the existing requirements in section 12 of the Insolvency Act 1986, which deals with notification of the appointment of an administrator. However, as the hon. Gentleman noted, the wording is slightly different and I am grateful to him for pointing that out.

I should like the opportunity to consider the implications further before deciding whether the present wording should be amended. I ask the hon. Gentleman to withdraw the amendment and I undertake to consider the matter.

Mr. Waterson: On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Waterson: I beg to move amendment No. 414, in page 250, line 39, after '(a)', insert

    'Unless appointed by the company'.

The Chairman: With this it will be convenient to take amendment No. 415, in page 250, leave out line 42.

Mr. Waterson: First, there is no point in requiring an administrator to notify a company when he has been appointed by the company, under clause 21.

Secondly, under amendment No. 415, details of creditors normally need to be assembled from a variety of sources. There is not usually

    ''a list of the company's creditors''

to be obtained. The amendment would necessitate a small additional amendment to page 251, line 1 adding ''of the company'' after ''creditor''. The purpose of the amendment is to make the process more workable.

Mr. Field: Perhaps the Minister will elucidate the reasons for the proposal because, clearly, we need to be certain about the moment at which administration begins.

In so far as there will be a company-appointed administrator, I appreciate the comments by my hon. Friend the Member for Eastbourne that it seems perverse that there should be a burden on them. I suspect that the argument is that that would protect their position because they would have control over putting out a formal notification. I should be interested to receive some practical guidance from the Minister on why such a burden will be put in place and whether it would not be easier to put the obligation on a company to trigger the public notification that administration has begun.

11.15 am

 
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