Prohibition of appointment
of administrative receiver
Mr. Alexander: I beg to move amendment No. 581, in page 166, line 40, after first 'of', insert
'a receiver who on appointment would be'.
This is a technical amendment to correct a reference to a floating charge-holder in Scotland being entitled to appoint an administrative receiver. It has been put to us that the relevant charge documentation often refers not specifically to the appointment of an administrative receiver but to the appointment of a receiver. When that person is appointed, if he or she falls within the definition given in section 51 of the Insolvency Act 1986, by virtue of section 251(b) of that Act, he or she is an administrative receiver. The amendment will ensure that clause 241, which deals with the prohibition of appointment of such a receiver, reflects that. I ask hon. Members to support the amendment.
Amendment agreed to.
Mr. Waterson: I beg to move amendment No. 523, in page 167, line 7, after 'instrument,' insert
'and the date so appointed shall be a date after the date of such order'.
The amendment is designed to prevent the Secretary of State from fixing the date retrospectively. If she could do that, it would mean that the parties to a floating charge would not know when they created the charge whether it would carry the right to appoint an administrative receiver or not. That would make the decisions involved more difficult for both the lender and borrower. In a detailed press release of 12 November 2001, the Under-Secretary was quoted as saying that the existing provisions would apply to all floating charges entered into before the commencement of this part of the Bill. It would be reassuring for the business community if that matter could be set straight in the Bill.
Mr. Djanogly: I certainly support the amendment. Clearly, there will be an interim period between Royal Assent and the date when the order is made and it is important that businesses should know where they stand. However, I want to ask the Minister why the Government have included these provisions at all? If the Government believe that prohibiting administrative receivership is the way forward, why not say that and allow the Bill to receive Royal Assent? Why should that provision be introduced by way of order?
Mr. Alexander: Put simply, the amendment is unnecessary. It is designed to add a provision to the
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Bill to prevent the Secretary of State from legislating retrospectively. I can assure Conservative Members that we have made it clear to all interested parties—and I am happy to confirm it for the record—that the power will not be exercised so as to apply the new law retrospectively to any floating charge created before new section 72A comes into force. I hope that that gives the degree of comfort that is sought.
Mr. Field: There is a practical concern, with which the Minister has not dealt in any detail. There will now be a great incentive for creditors to ensure that their interests are protected by a floating charge prior to the Bill coming into force. That will have a negative effect, given what the Government are trying to achieve. Would it therefore not be better to go down the road of this amendment than to find that a lot of floating charges are created to fall just inside the time limit to which the Minister referred?
Mr. Alexander: To be perfectly honest, I am not convinced by the argument outlined by the hon. Gentleman or the rationale of the amendment. Bringing in powers on the appointed day by order is normal practice and although we are cognisant of the risks of retrospective legislation, we believe that the existing drafting of the provision is suitable for the implementation of complex provisions. We have given assurances, which I have been happy to confirm today, that deal with the concerns expressed by the hon. Member for Eastbourne. The statutory construction that we propose is the correct way forward and it advances the Bill's objectives. On that basis, I ask the hon. Gentleman to withdraw the amendment.
Mr. Djanogly: I would appreciate a reply to my question. Why do the powers need to be brought in by order at all?
Mr. Alexander: It is normal practice to do so. I hope that that answers the hon. Gentleman's point. We retain our original position on that.
Mr. Waterson: I do not want to appear churlish, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Alexander: I beg to move amendment No. 477, in page 168, line 17, leave out from second 'project' to end of line 20 and insert—
The Chairman: With this it will be convenient to consider Government amendment No. 478.
Mr. Alexander: The purpose of the amendments is to ensure that new section 72E, which excepts project finance generally, is consistent with the other project finance provisions. The existing provisions refer to ''the'' project company in 72E(1)(b). That is not quite apt, since the definition of ''project company'' found in paragraph 6 of Schedule 2A provides that a number of companies may be project companies. The substitution of 72E(1)(b) will also mean that this exception works similarly to new sections 72C and 72D as regards the definition of step-in rights in paragraph 6 of Schedule 2A.
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Step-in rights are taken by financiers to protect their security where a project runs into trouble. Such rights are usually over the main project company carrying out the project rather than all companies carrying it out, hence the wording of paragraph 6 of Schedule 2A. Therefore, the exception will apply where such rights are taken over a project company, but the rights do not need to be taken over all project companies. I ask the Committee to support the amendments.
Amendment agreed to.
Amendment made: No. 478, in page 168, line 25, leave out paragraph (b).—[Mr. Alexander.]
Mr. Alexander: I beg to move amendment No. 587, in page 168, line 33, leave out 'if' and insert 'by virtue of'.
The Chairman: With this it will be convenient to take Government amendments Nos. 588 to 594 and 507 to 509.
Mr. Alexander: Amendments Nos. 588 to 594 are designed to narrow the scope of the exception in new section 72F to the prohibition of an appointment of an administrative receiver. Our policy is not that it should still be possible to appoint an administrative receiver of a company just because that company is a party to a market contract or because its property is subject to a system charge or a collateral security charge. The ability to appoint an administrative receiver in the context of such financial market charges is needed only where the administrative receiver is appointed by someone entitled to do so by virtue of a market charge, a system charge or a collateral security charge.
Amendment No. 588 removes the definitions that referred to the Financial Markets and Insolvency (Money Market) Regulations 1995, which were revoked on 1 December 2001. It also amends the reference in new section 72F(a) to deal specifically with a market charge.
Amendment No. 507 slightly widens the scope of the definition of ''party'' as set out in paragraph 1(3)(c) of new schedule 2A. As used there and in new section 72B, the term ''party'' includes a party to an agreement that forms part of the arrangement, which provides for raising finance as part of the arrangement, or which is necessary for the purposes of raising finance as part of the arrangement.
Concern was raised that the final part of the definition—that a party to a capital market arrangement includes one that is necessary for the purpose of raising finance—was too narrow and would not include the provision of, for example, an insurance policy by way of finance, a liquidity facility or some service to the arrangement, which may be necessary to implement the arrangement, but which is arguably not necessary to raise finance.
By using the word ''necessary'', the amendment will have two benefits. It will mean that the scope of the exception is not unwarrantably wide, because the agreement in question will need to be necessary for the purposes of implementing the capital markets arrangement. However, it is also general, and there is
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no scope to construe it so narrowly as to mean that the agreement must concern the raising of finance. It will include the agreement to provide insurance for the arrangement, because the provision of an insurance policy or a liquidity facility will usually be necessary for implementation.
Amendments Nos. 508 and 509 are in response to comments that we received on consultation. They extend the scope of the exceptions contained in new sections 72C, 72D and 72E to step-in rights and provide that the definition of finance will for, the purposes of paragraph 6 of new Schedule 2A, include an indemnity.
The revised wording of the provision on step-in rights will cover the situation in which a new company is used as a vehicle to help rescue a project that has gone wrong. The project financier who stepped in could then sell the new company vehicle to new financiers to carry on the project. The new wording will also provide for the situation in which the reference to assuming ''responsibility'' for continuing the project is not an appropriate way to refer to what happens in certain projects in practice. By extending the definition of finance to include an indemnity, we will cover the situation in which an insurer makes finance available by means of providing insurance to the financier of the project, and takes step-in rights. I therefore ask hon. Members to support the amendments.
Amendment agreed to.
Amendments made: No. 588, in page 168, line 34, leave out paragraphs (a) to (c) and insert—
'(a) a market charge within the meaning of section 173 of the Companies Act 1989 (c.40),'.
No. 589, in page 168, line 41, leave out 'there is'.
No. 590, in page 168, line 42, leave out 'over property of the company'.
No. 591, in page 168, line 44, leave out paragraph (e).
No. 592, in page 169, line 1, leave out 'there is'
No. 593, in page 169, line 1, leave out 'those regulations' and insert
'the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (S.I. 1999/2979)'.
No. 594, in page 169, line 2, leave out 'over property of the company'.
No. 507, in schedule 18, page 280, line 28, leave out 'raising finance as part of' and insert 'implementing'.
No. 508, in schedule 18, page 281, line 42, after 'to' insert—
No. 509, in schedule 18, page 281, line 43, at end insert—
(b) make arrangements for carrying out all or part of the project.
'(2) In sub-paragraph (1) a reference to the provision of finance includes a reference to the provision of an indemnity.'.—[Mr. Alexander.]
Question proposed, That the clause, as amended, stand part of the Bill.
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