Enterprise Bill

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Mr. Waterson: On the basis of the Minister's assurances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 497, in page 263, line 28, leave out 'send a copy' and insert—

    '(a) file a copy of the notice with the court, and

    (b) send a copy of the notice'.

No. 498, in page 263, line 30, leave out '(4)' and insert '(3)'.

No. 499, in page 264, line 4, leave out 'send a copy' and insert—

    '(a) file a copy of the notice with the court, and

Column Number: 596

    (b) send a copy of the notice'.—[Mr. Alexander.]

Mr. Waterson: I beg to move amendment No. 551, in page 265, leave out lines 36 and 37 and insert—

    '(2) The creditors' committee shall be entitled to appear on any application made in reliance on sub-paragraph (1)(b) to (d).'.

The Chairman: With this it will be convenient to consider amendment No. 427, in page 265, line 37, at end insert—

    'or where the creditors committee fails to apply under sub-paragraph (1)(a) within seven days following the event specified in paragraph 89'.

Mr. Waterson: Amendment No. 551 would make the role of the creditors committee clearer. This is needed in case a creditors committee cannot make a decision quickly because, for example, its members are widely scattered or it is deadlocked on some issue. The ability to appear on the applications should still give sufficient protection to the committee.

Amendment No. 427 is designed to preserve the ability of the company directors and creditors to act should the creditors committee fail to do so. Creditors committees have not historically been separately represented under our law and committees will be unused to acting independently. The CBI takes the view that there is a real risk that a committee, even when empanelled, might not take the initiative. That could lead to the affairs of a company drifting dangerously. I commend both of the amendments, which are of a fairly technical nature, to the Committee.

Mr. Alexander: Amendments Nos. 427 and 551 are of a technical nature and deal with situations in which there is a creditors committee and an administrator dies, resigns, is removed from office by the court or ceases to be qualified to act as an administrator. Conservative Members appear to be concerned that the committee might not make an application to the court to appoint a replacement administrator. However, as a creditors committee is appointed to represent the interests of all creditors, it is difficult to imagine that such a committee would fail to appoint a replacement administrator if the previous administrator were unable to continue. Our intention is that paragraph 94(b) should provide for the court to replace an administrator on the application of the creditors committee, company, directors, creditors or a joint administrator who remains in office. That would, of course, include any instance where a creditors committee did not appear to be taking the necessary steps to replace an administrator.

I accept, however, that the drafting of the paragraph may not be clear enough, and parliamentary counsel has been asked to reconsider it and to prepare any necessary Government amendment. In the circumstances, I agree to further reflect on the matters that have been raised.

I should clarify that the paragraph that I mentioned largely replicates the effect of section 13(3) of the Insolvency Act 1986 on the replacement of an administrator, but, in the circumstances, I shall further reflect on the matter. In the meantime, I ask the hon. Gentleman not to press the amendment.

Column Number: 597

3.45 pm

Mr. Waterson: I am grateful to the Minister for taking the trouble to explain his thinking on the amendments. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 500, in page 267, line 3, leave out 'dies, because he vacates office or' and insert

    'vacates office by reason of resignation, death or otherwise, because he'.

No. 501, in page 267, line 16, leave out 'dies, because he vacates office or' and insert

    'vacates office by reason of resignation, death or otherwise, because he'.—[Mr. Alexander.]

Mr. Alexander: I beg to move amendment No. 502, in page 267, line 38, leave out 'be disregarded in determining whether a contract is adopted' and insert

    'not be taken to amount or contribute to the adoption of a contract,'.

The Chairman: With this we may discuss the following: Government amendments Nos. 503 and 504.

Amendment No. 552, in page 268, leave out line 6.

Government amendment No. 505.

Mr. Alexander: Amendment No. 502 clarifies paragraph 98(5)(a) to make it consistent with the provisions in section 19(6) of the Insolvency Act 1986. The intention behind that section is to provide that the administrator will not be taken to have adopted contracts of employment as a result of anything done or not done within the first 14 days of his or her appointment.

Paragraph 98(5)(a) is intended to replicate that provision, but it has been suggested that it is too broad as currently drafted. It states that no account shall be taken of the administrator's actions in the first 14 days in determining whether a contract is adopted. That could be taken to mean that actions specifically taken by the administrator to terminate contracts of employment would not have effect. That is not our intention.

Amendment No. 502 will make it clear that the administrator is not to be taken to have adopted a contract of employment by reason of anything done or not done within 14 days of his or her appointment, which is the case at present.

Amendments Nos. 503 to 505 are simply technical amendments, which change the terms ''leave'' and ''an entitlement'' to ''holiday'' in paragraph 98(6) to make it consistent with the existing provision in section 19(9) of the Insolvency Act 1986, which the paragraph replicates. I therefore ask hon. Members to support the amendments.

On amendment No. 552, paragraph 98(6) defines what constitutes ''wages or salary'' for the purpose of determining liabilities arising out of certain contracts of employment. It replaces section 19(9) of the Insolvency Act 1986, and is intended to have the same effect. We are aware that the scope of the phrase

    ''a sum payable in lieu of an entitlement''

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is more ambiguous than the existing provision, and I have tabled an amendment to ensure that the paragraph is consistent with the provision that it replaces. I therefore ask the hon. Gentleman not to press the amendment.

Mr. Waterson: I am happy not to press the amendment in my name.

Amendment agreed to.

Amendments made: No. 503, in page 268, line 1, leave out 'leave' and insert 'holiday'.

No. 504, in page 268, line 3, leave out 'leave' and insert 'holiday'.

No. 505, in page 268, line 6, leave out 'an entitlement' and insert 'holiday'.—[ Mr. Alexander.]

Mr. Alexander: I beg to move amendment No. 584, in page 271, line 31, after 'make', insert

    ', in or towards the satisfaction of the debt secured by the floating charge,'.

The Chairman: With this it will be convenient to discuss Government amendments Nos. 585 and 586.

Mr. Alexander: Amendments Nos. 584 and 586 deal with the order of priority of payments. The law of receivership in Scotland has developed separately from its English and Welsh counterparts, and the order of priority of payments that an administrative receiver can make to creditors is set out in primary legislation. The purpose of the amendments is to ensure that the current situation is replicated by incorporating into the primary legislation the fact that any payments that an administrator makes to a floating charge holder in Scotland must be consistent with the order of priorities for such payments and in respect of the relevant floating charge.

Amendment no. 585 simply corrects an incorrect reference in paragraph 113(2). The reference to section 176 should be to 176A. I ask the Committee to support the amendments.

Amendment agreed to.

Amendments made: No. 585, in page 271, line 36, leave out '176(2)(a)' and insert '176A(2)(a)'.

No. 586, in page 271, line 42, at end insert—

    '114 In Scotland, the administrator in making any payment in accordance with paragraph 113 shall make such payment subject to the rights of any of the following categories of persons (which rights shall, except to the extent provided in any instrument, have the following order of priority)—

    (a) the holder of any fixed security which is over property subject to the floating charge and which ranks prior to, or pari passu with, the floating charge,

    (b) creditors in respect of all liabilities and expenses incurred by or on behalf of the administrator,

    (c) the administrator in respect of his liabilities, expenses and remuneration and any indemnity to which he is entitled out of the property of the company,

    (d) the preferential creditors entitled to payment in accordance with paragraph 65,

    (e) the holder of the floating charge in accordance with the priority of that charge in relation to any other floating charge which has attached, and

    (f) the holder of a fixed security, other than one referred to in sub-sub paragraph (a), which is over property subject to the floating charge.'.—[Mr. Alexander.]

Column Number: 599

Schedule 16, as amended, agreed to.

Schedule 17

Administration:

minor and consequential amendments

Mr. Alexander: I beg to move amendment No. 565, in page 272, line 6, at end insert—

    'Companies Act 1985 (c. 6)

    1A The Companies Act 1985 shall be amended as follows

    1B In section 225 (alteration of accounting reference date)—

    (a) in subsection (4) for ''an administration order is in force'' substitute ''the company is in administration'', and

    (b) in subsection (6) for ''An accounting reference period may not in any case, unless an administration order is in force'' substitute ''A company's accounting reference period may not in any case, unless the company is in administration''.

    1C In section 425(1) (power of company to compromise) for ''an administration order being in force in relation to a company'' substitute ''in administration''

    1D In section 427A(3) (mergers and divisions of public companies) for ''an administration order being in force in relation to the company'' substitute ''where the company is in administration''.'

 
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