Enterprise Bill

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The Chairman: With this it will be convenient to discuss Government amendments Nos. 566, 567, 506 and 568 to 573.

Mr. Alexander: Amendments Nos. 565 to 573 add various new paragraphs to schedule 17, which makes some of the amendments consequent upon the changes to the administration procedure contained in the Bill. The amendments are the result of further necessary changes coming to our attention.

Amendment No. 506 corrects a cross-referencing error in paragraph 21 of Schedule 17. The Committee will be aware that the Secretary of State has the power to amend schedule 17 if further amendments are found to be necessary once the Bill has obtained Royal Assent.

I therefore ask hon. Members to support the amendments.

Amendment agreed to.

Amendments made: No. 566, in page 272, line 8, at end insert—

    '2A In section 1 (proposal for company voluntary arrangement)—

    (a) in subsection (1) for ''(other than one for which an administration order is in force, or which is being wound up)'' substitute ''(other than one which is in administration or being wound up)'', and

    (b) in subsection (3) for paragraph (a) substitute—

    ''(a) where the company is in administration, by the administrator,''.

    2B In section 5(3) (approval of company voluntary arrangement)—

    (a) for ''an administration order is in force'' substitute ''is in administration'', and

    (b) for ''discharge the administration order'' substitute ''provide for the appointment of the administrator to cease to have effect''.

    2C In section 6(2)(c) (challenge of decision in relation to company voluntary arrangement) for ''an administration order is in force'' substitute ''is in administration''.'

No. 567, in page 272, line 23, at end insert—

Column Number: 600

    '5A In section 140 (appointment by court of liquidator following administration or voluntary arrangement) for subsection (1) substitute—

    ''(1) Where a winding-up order is made immediately upon the appointment of an administrator ceasing to have effect, the court may appoint as liquidator of the company the person whose appointment as administrator has ceased to have effect.'' '.—[Mr. Alexander.]

Mr. Djanogly: I beg to move amendment No. 553, in page 272, line 23, at end insert—

    '5A In section 129 after subsection (1) add—

    ''(1A) If the court makes an order under paragraph 11(1)(e) of Schedule B1 that the company be wound up, the winding up of the company is deemed to commence at the time of the order.''.'.

This is a technical amendment suggested by PricewaterhouseCoopers. Section 127 of the Insolvency Act 1986 makes any disposition of a company's property after the commencement of its compulsory liquidation void unless the court orders otherwise. Under section 129(2), a compulsory liquidation, except one following a voluntary liquidation, is deemed to start when a petition is presented. That can make it impossible for a company to continue to trade once a winding-up petition has been presented, because any further transactions are valid when they are entered into, but will become invalid if a winding-up order is eventually made on the petition. Courts are sometimes asked to make validation orders under section 127, to allow the company to continue trading normally. Paragraph 11(1) of Schedule B1 will allow the court to make one of any number of orders when hearing an administration application. It could even treat the administration application as a winding-up petition and make a winding-up order. That could lead to administration applications also making it possible for a company to continue trading because of the risk that the court would decide to treat the application as a winding-up petition, with transactions after the presentation of the application then becoming invalid under section 127.

The suggested amendment attempts to avoid that result by changing the deemed commencement date to be the date of the winding-up order, thus ensuring that any transaction after the presentation of the administration application will continue to be valid even if the court makes a winding-up order instead.

Mr. Alexander: I can assure the hon. Gentleman that his rousing rendition of the amendment has not been in vain. The amendment makes provision in the Insolvency Act 1986 that allows for the commencement of winding up—if a winding-up order is made following the hearing of an application for an administration order—to be the making of the order. I thank the hon. Member for Huntingdon for drawing the Committee's attention to the issue and would ask him to withdraw the amendment on the understanding that we shall consider it and hope to return to it on Report.

Mr. Djanogly: On the understanding that the Minister will review the issue, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Column Number: 601

Amendment made: No. 506, in page 275, line 27, leave out '82(4)(b)' and insert '82(5)(b)'.—[Mr. Alexander.]

Mr. Djanogly: I beg to move amendment No. 554, in page 275, line 27, at end insert—

    '22 (1) For section 387(1)(a) substitute—

    ''(a) if—

    (i) the winding up is by the court and the winding-up order was made on the termination of an administration, or

    (ii) the company was placed into creditors' voluntary liquidation under paragraph 82 of Schedule B1,

    the relevant date is the date on which the company entered into administration.''.'.

This technical amendment is to ensure that the relevant date for calculating the preferential claims does not change if the company moves directly from administration to liquidation. The existing legislation achieves that for compulsory liquidations but not for creditors of voluntary liquidations. That has caused problems in cases in which a creditor's voluntary liquidation would be the most beneficial way of winding up the company's affairs, but would be unfair to preferential creditors because it changed the relevant date. The courts have found innovative ways around the difficulty, but it would be better to include—

Mr. McWalter: Could the hon. Gentleman go a little more slowly please?

Mr. Djanogly: I shall do my best, having neared the end. It is our intention to ensure that the necessary provision should be included in the Bill.

Mr. Alexander: The hon. Gentleman is on something of a roll this afternoon. The amendment intends to amend section 387 of the Insolvency Act 1986 so that a provision is included that sets the relevant date for the calculation of preferential claims if a company has been in administration and the administrator then puts the company into voluntary liquidation under paragraph 82 in order to make a distribution to unsecured creditors. I thank the hon. Member for Huntingdon once again for raising an important issue and reassure him that we shall consider the points that he has raised and return to it on Report. I would ask him to withdraw the amendment on that understanding.

Mr. Djanogly: Being on something of a roll, I think that I should stick to the script. In any event, I am grateful to the Minister for his assurance that he will consider the matter and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4 pm

Amendments made: No. 568, in page 275, line 32, at end insert—

    '22A In section 424(1)(a) (application for order in relation to transaction defrauding creditor) for ''in relation to which an administration order is in force'' substitute ''is in administration''.'

No. 569, in page 275, line 33, leave out paragraph 23 and insert—

Column Number: 602

    '23 (1) Schedule A1 (moratorium where directors propose voluntary arrangement) shall be amended as follows.

    (2) In paragraph 4(1) (exclusion from eligibility for moratorium)—

    (a) for paragraph (a) substitute—

    ''(a) the company is in administration,'', and

    (b) after paragraph (f) (and before the word ''or'') insert—

    ''(fa) an administrator appointed under paragraph 20 of Schedule B1 has held office in the period of 12 months ending with the date of filing,''.

    (3) In paragraph 12(1) (effect of moratorium on creditor) for paragraph (d) substitute—

    ''(d) no administration application may be made in respect of the company,

    (da) no administrator of the company may be appointed under paragraph 12 or 20 of Schedule B1,''.

    (4) In paragraph 40 (challenge of directors' actions during moratorium) for sub-paragraph (7) substitute—

    ''(7) Sub-paragraph (8) applies where—

    (a) the appointment of an administrator has effect in relation to the company and the appointment took effect before the moratorium came into force, or

    (b) the company is being wound up in pursuance of a petition presented before the moratorium came into force.

    (8) No application for an order under this paragraph may be made by a creditor or member of the company; but such an application may be made instead by the administrator or (as the case may be) the liquidator.'' '.

No. 570, in page 275, line 38, at end insert—

    '23A(1) Schedule 8 (scope of insolvency rules) shall be amended as follows.

    (2) In paragraph 10 (provision as to committees) for ''section 26, 49, 68, 101, 141 or 142 of this Act'' substitute ''section 49, 68, 101, 141 or 142 of, or paragraph 55 of Schedule B1 to, this Act''.'

    (3) In paragraph 29 (general provision) for ''section 22, 47, 66, 131, 143(2) or 235 of this Act'' substitute ''section 47, 66, 131, 143(2) or 235 of, or paragraph 45 of Schedule B1 to, this Act''.'.

No. 571, in page 277, line 11, at end insert—

    'Company Directors Disqualification Act 1986 (c. 46)

    24A The Company Directors Disqualification Act 1986 shall be amended as follows

    24B In section 6 (duty of court to disqualify unfit director of insolvent company)—

    (a) for subsection (2)(b) substitute—

    ''(b) the company enters administration,'',

    (b) for subsection (3)(c) substitute—

    ''(c) where neither paragraph (a) nor (b) applies but an administrator or administrative receiver has at any time been appointed in respect of the company in question, any court which has jurisdiction to wind it up.'', and

    (c) for subsection (3A)(b) substitute—

    ''(b) in a case within paragraph (c) of that subsection, to the appointment of the administrator or (as the case may be) administrative receiver.''

    24C In section 7(3) (duty of office-holder to report to Secretary of State) for paragraph (c) substitute—

    ''(c) in the case of a company which is in administration, the administrator,''.

No. 572, in page 277, line 12, at end insert—

    '24D The Companies Act 1989 shall be amended as follows

    24E In section 161(4) (disapplication of enactments to default proceedings) for ''sections 10(1)(c), 11(3), 126, 128, 130, 185 or 285 of the Insolvency Act 1986'' substitute ''section 126, 128, 130, 185 or 285 of, or paragraph 41(6) (including as applied by paragraph 42) of Schedule B1 to, the Insolvency Act 1986''.'

Column Number: 603

No. 573, in page 278, line 22, at end insert—

    '30A In section 215(3) (provision of Financial Services Compensation Scheme in relation to insolvency) for ''presents a petition under section 9 of the 1986 Act or Article 22 of the 1989 Order'' substitute ''makes an administration application under Schedule B1 to the 1986 Act or presents a petition under Article 22 of the 1989 Order''.'—[Mr. Alexander.]

Schedule 17, as amended, agreed to.

Clause 240 ordered to stand part of the Bill.

 
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