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The Deputy Chairman of Committees (Lord Ampthill): Before I put the Question that the Title be postponed, it may be helpful to remind your Lordships of the procedure for today's Committee stage. Except in one important respect, our proceedings will be exactly as in a normal Committee of the Whole House. We shall go through the Bill clause by clause; noble Lords will speak standing; all noble Lords are free to attend and participate; and the proceedings will be recorded in Hansard. The one difference is that the House has agreed that there shall be no Divisions in a Grand Committee. Any issue on which agreement cannot be reached should be considered again at Report stage, when, if necessary, a Division may be called. Unless, therefore, an amendment is likely to be agreed to, it should be withdrawn.
The noble Lord said: Paragraph 1 of Schedule 1 to the Bill provides for the Insolvency Act 1986 to be amended in accordance with Part I of the schedule. Members of the Committee will have observed that Schedule 1 is not divided into parts; therefore, the amendment removes the words "Part I of". I beg to move.
The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 3 and 4. The directors of an eligible company are to be able to obtain a moratorium by filing the required documents at the court. That is provided for in paragraph 8 of Schedule A1 to the Bill. The directors do not, of course, have a free hand. Before they can obtain a
The noble Baroness said: In moving Amendment No. 5, I wish to speak also to Amendments Nos. 6, 24, 28, 67, 84 and 86. Paragraph 6(2)(a) of the new Schedule A1 inserted by paragraph 4 of Schedule 1 to the Bill provides for the nominee to submit a statement to the directors as regards his opinion on, among other things, whether or not the proposed voluntary arrangement has a reasonable prospect of being approved and implemented.
It is, however, open to the creditors meeting to approve the proposed voluntary arrangement with modifications. Paragraph 6(2)(a) does not refer to any possible modifications that might be proposed by the creditors. On one view, the nominee in forming his opinion should not take into account such modifications. This point is made good if one looks at paragraph 22(1)(a) and 23(2)(a)(i), which refer only to modifications under paragraph 29(7), which are modifications for which the directors intend to seek the approval of the meeting. It appears to be intended that the nominee can have regard to only those modifications proposed by the director and only if he has received notice of them. He must therefore ignore all other possible modifications. That, we believe, imposes far too strict a test.
In essence, the nominee has to form a view on whether the proposed moratorium has a reasonable prospect of being approved and implemented. He might form that view that it needs only minor modifications and might be confident that in that case it has a reasonable prospect of being approved and implemented.
Paragraph 6 does not permit him to have regard to those minor changes, so he cannot submit the statement. In other places in the Bill he is entitled to certain specific modifications. At first sight this might
Lord McIntosh of Haringey: These amendments would mean that the nominee would be required to consider not only the proposed voluntary arrangement as it stands before him at the point of time at which he is required to consider it, whether in relation to a company or an individual, but also the proposed voluntary arrangement in the light of any modifications which might possibly be made to it.
We consider that the nominee should look at the proposed individual or proposed company voluntary arrangement as he understands it will be put to the creditors and, if applicable, to shareholders. The Bill, as drafted, already makes provision for the nominee to consider the proposal as amended by any modification notified to him by the directors. We would not want him to consider it as it might conceivably be modified.
The directors might never be prepared to agree to further modifications, in which case the meetings would be unlikely to approve and implement the voluntary arrangement. We would not want the company to, say, be able to obtain a moratorium in such circumstances as it would be entirely inappropriate. Indeed, it would undermine the necessary confidence of the nominee that the moratorium was justified. The amendments would also place an unreasonable burden on nominees, who would be obliged to make decisions on the basis of what inevitably would be conjecture.
It is very unusual for a voluntary arrangement to be prepared before the moratorium starts without the proposed nominee being a party to its drafting. I understand the desire of the noble Baroness, Lady Buscombe, for more flexibility, but I think that amendments of this kind would lead to the risk that moratoriums were put forward before they had been properly thought out and agreed.
Baroness Buscombe: I thank the Minister for his response to the amendments, although I cannot agree with what he has said. I shall want to read his words carefully in Hansard. It appears to be intended that the nominee can have regard only to those modifications proposed by the directors, and only if he has received notice. We believe that that is too strict. We do not think that we are being too flexible by making the suggested changes. I beg leave to withdraw the amendment.
The noble Baroness said: Paragraph 8(3) of new Schedule A1 provides for the moratorium to end if either the meeting of the company or the meeting of its creditors has not first met before the end of the specified period. If no one turns up to the meeting of the company it may be said that the meeting has not been held. The moratorium will therefore end at the end of the specified period. However, paragraph 34 of the new Schedule A1 makes it clear that if the meeting of the company and the meeting of the creditors come to different decisions, the decision of the meeting of the creditors is to take effect subject to an application to the court by a member of the company. We entirely agree with that provision. Once a company's financial affairs are such that a moratorium is appropriate, the views of creditors must be paramount.
The possibility of members not turning up to the meeting of the company and bringing the moratorium to an end in accordance with paragraph 8(3) is, therefore, we believe, inconsistent with the principle that the creditors' views are paramount. If creditors' views are paramount surely it is wrong for the moratorium to end just because members do not turn up. It is even conceivable that members might decide not to bother to hold a meeting and so destroy any prospect of a moratorium. They may ask why they should bother to attend, and quite often members are simply not interested; they say "There is nothing in it for us so why bother?". That does happen in practice. Indeed, it is possible, and does happen, that one might have to go so far as to offer something to them in order for them to turn up, something which otherwise would go to the creditors. I beg to move.
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