Enterprise Bill

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Mr. Carmichael: Amendment No. 467 would extend the period for the appointment of an administrator under paragraph 75, schedule 16 from three months to six months. The Law Society of Scotland and the Institute of Chartered Accountants of Scotland support the amendment. They have expressed concerns that three months is too short for administration to be completed. The Law Society in particular refers to the sale of assets such as heritable property, which may take substantially longer than the three months that the timeframe provides. I can think of several erstwhile colleagues who would have regarded a conveyancing transaction of three months as one that was conducted with indecent haste. They might find difficulty even with six months. The alternative is that the administrator will be required to obtain consent or leave from the court to remain in office, which may lead to further costs and the diminution of the return to the creditors. Given the length of time at issue, I can see no reason in principle why such unnecessary costs should not be avoided, if possible.

On amendments Nos. 468 and 469, administration may, for the best of reasons, occasionally take longer than three months to complete. On occasions, it may be virtually impossible to determine exactly how long it will take. It will be open to obtaining the consent of the creditors to extend the period of administration. Thereafter a return to court is required.

The purpose of the amendment is that the period of any such extension to be granted by the court might relate to a specific event, such as the sale of heritage or perhaps the conclusion of litigation proceedings. That

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would obviously put creditors in a much better position. There would also be substantial penalties to several creditors if the claims were left unresolved at the conclusion of an administration.

I offer the amendments as probing amendments, and I shall be interested to hear the Minister's views.

3.30 pm

Mr. Alexander: The hon. Member for Eastbourne seemed determined to cover all the bases, so I shall speak to amendments Nos. 423, 467, 517, 468, 469 and 518. The amendments seek to remove the automatic end of administration after a period of three months and to leave the administration procedure to continue indefinitely, as in amendment No. 423. Alternatively, they seek to extend the period to either six months, as in amendment No. 467, or 12 months, as in amendment No. 517, subject to a further extension that could be agreed by the court indefinitely, as in amendment No. 468, or by creditors' consent, either indefinitely, as in amendment No. 469, or by 12 months, as in amendment No. 518. We covered the ground in detail this morning in the context of earlier amendments. The same arguments clearly apply.

Amendment No. 424 seeks to provide that a creditors meeting can agree an extension to the administrator's term of office. The Bill already provides for 50 per cent. of the creditors, by value, to extend the administration, although I recognise that it may on occasion be difficult to meet that threshold without incurring disproportionate costs. That would be the case when, for example, there was a large number of creditors, or when one or more large creditors did not respond or could not be contacted.

Paragraph 56 allows for anything that needs to be done at a creditors meeting to be done by correspondence between the administrator and the creditors. I do not think that a formal obligation to hold a meeting is required, but if Opposition Members will not press the amendment, I will agree to reflect on the points raised and return to the matter, if necessary, on Report.

Finally, I want to touch on amendment No. 425. The Bill already requires an administrator to notify the court, the registrar of companies and the company's creditors when the administration is concluded.

Mr. Waterson: On a point of order, Mr. Beard. I do not think that we have got that far yet. [Hon. Members: ''Yes, we have.''] I assumed that amendment No. 425 was in its own group, so I did not speak to it. Do you want me to do so?

The Chairman: I would prefer to allow the Minister to continue his remarks.

Mr. Alexander: If it would be easier and more convenient for the amendment to be spoken to, and for me then to respond, I would be more than happy.

Mr. Waterson: I would be interested to hear the Minister respond to something that I had not said. I have a short point. The mistake was entirely mine, as I had failed to notice the plus sign between the amendments. I wonder why.

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The amendment is important, because practitioners and the CBI back it. Notice of cessation must be given to the appointer and the company, to enable them to take any action that they consider appropriate. That is my point in a nutshell.

Mr. Alexander: With spontaneity, I can say that we will resist amendment No. 425, which will come as no surprise. The Bill already requires an administrator to notify the court, the registrar of companies and the company's creditors when the administration is concluded. The administrator's duty is to the creditors of the company, and the Bill's proposals will reflect that. In cases when the administrator was appointed by the company or directors, normal working practice would require the administrator to notify those persons that the objective of the administration had been achieved. I therefore ask the hon. Gentleman not to press the amendment.

For clarity, I should say that we seek to resist amendments Nos. 423, 467, 517, 468, 469 and 518. I have given an undertaking to consider and, potentially, to address on Report amendment No. 424, but I resist amendment No. 425. 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. Waterson: I beg to move amendment No. 546, in page 263, line 14, after 'that', insert

    'the company has no secured creditors or that'.

The Chairman: With this it will be convenient to take amendment No. 547, in page 263, line 17, leave out 'has been or'.

Government amendment No. 497.

Amendment No. 548, in page 263, line 28, after 'copy', insert

    'to the person or persons who appointed him to the company and'.

Government amendment No. 498.

Amendment No. 426, in page 263, line 34, leave out '98' and insert '84(1)(c)'.

Amendment No. 550, in page 263, leave out lines 36 to 39 and insert


    (c) the administrator becomes the liquidator of the company and continues in office unless and until another person is appointed liquidator by the creditors at a meeting held in the prescribed manner and within the prescribed period.'.

Government amendment No. 499.

Mr. Waterson: Amendment No. 546 is short in compass and intends simply to avoid pointless theoretical debate.

On amendment No. 547, there is no point in a creditors' voluntary liquidation unless some distribution is to be made to unsecured creditors. The amendment also brings the position in England and Wales into line with that for Scotland, in paragraph 82(2)(b).

Amendment No. 548 is a technical amendment.

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Mr. Djanogly: There is another reason why shareholders may want a voluntary arrangement. For many, the aura that surrounds bankruptcy is unfavourable, so even if the company does not have significant assets or anything to make a distribution with, people may fund the company so that it can be wound up on a voluntary rather than a compulsory basis.

Mr. Waterson: I am grateful to my hon. Friend, who speaks from experience; professional experience, of course. I do not want unwittingly to smear him, even if privilege applies to everything that I say.

On amendment No. 548, notice of the conversion to a liquidation must be given to the appointer to enable him to take any action that he considers appropriate to protect his interest. For that matter, the company also needs to be notified that it is now in liquidation. One would have thought that that would have been painfully obvious.

Amendment No. 426 is a technical amendment, tabled again with the support of the CBI. Section 98 relates to the first creditors' meeting for the creditors' voluntary liquidation, not to the winding-up resolution governed by section 84.

Finally, I turn to amendment No. 550, which is also a technical amendment. As things stand, sub-paragraph (6) can be interpreted as meaning that the administrator does not become liquidator until it is known that the creditors are not going to appoint someone else. The amendment would avoid that problem, mirroring the existing section 136(3) of the Insolvency Act 1986, under which the official receiver automatically becomes liquidator of a company in compulsory liquidation unless and until someone else is appointed.

Mr. Alexander: I shall speak first to amendment No. 546.

One condition for moving from administration for creditors' voluntary liquidation is that

    ''each secured creditor . . . has received a payment in respect of his debt and is not likely to receive any significant further payment in that respect''.

It stands to reason that the condition would automatically be satisfied if the company did not have any secured creditors, so the amendment is unnecessary and I ask him to withdraw it.

I turn next to amendment No. 547. The primary purpose of moving a company from administration to creditors' voluntary liquidation, notwithstanding the observations of the hon. Member for Huntingdon, is to enable the administrator to make a distribution to unsecured creditors. Therefore, the only relevant condition in relation to unsecured creditors is whether the administrator will make a distribution to them in the future. I agree with the hon. Members that the reference to distribution already having been made appears inappropriate in this context, but I would like the opportunity to consider further how to deal with it. Therefore, I ask the hon. Gentleman to withdraw the amendment on the basis that I shall return to it later.

Amendments Nos. 497 and 499 would provide that if an administrator wants to move a company from

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administration and into creditors' voluntary liquidation or dissolution, he or she will have to file a copy of the notice given to the registrar of companies with the court. That will complete the court records for the administration that will have been opened when the procedure began.

Amendment No. 498 simply corrects a reference to a sub-paragraph number in paragraph 82(5). I ask hon. Members to note that the reference to sub-paragraph (4) should be to sub-paragraph (3). I therefore ask the Committee to support amendments Nos. 497, 498 and 499.

Turning to amendment No. 548, the Bill already requires an administrator to notify the court, the Registrar of Companies and the company's creditors when the administration is concluded. The administrator's duty is to the creditors of the company and the Bill's proposals will reflect this. In cases where the administrator was appointed by the company or directors, normal working practice would require that the administrator should notify those persons that the objective of the administration has been achieved. I therefore ask the hon. Gentleman not to press the amendment.

Amendment No. 426 seeks to amend a reference to the Insolvency Act 1986 that concerns the date on which a company enters creditors voluntary liquidation. Paragraph 82 allows for a company to be wound up as if a resolution for voluntary winding-up under section 98 were passed. However, section 98 relates to the first creditors meeting in a creditors voluntary liquidation. Section 84(1)(c) specifically deals with the company passing the resolution to place the company into creditors voluntary liquidation. I therefore agree to consider this amendment.

Having considered the alternative wording proposed in amendment No. 550, I cannot see that it makes any material difference to the meaning of the provision. Both the existing provision and the proposed amendment provide the creditors of the company with the opportunity to nominate someone other than the administrator to serve as the liquidator; and both provide that if this is not done, the administrator will become the liquidator. Given that there appears to be no material difference between the effect of the provision at present and as amended, the amendment is unnecessary. I therefore ask Conservative Members not to press the amendment.

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