Select Committee on Delegated Powers and Deregulation Sixth Report


16 FEBRUARY 2000

By the Select Committee appointed to report whether the provisions of any bill inappropriately delegate legislative power, or whether they subject the exercise of legislative power to an inappropriate degree of parliamentary scrutiny; to report on documents laid before Parliament under section 3(3) of the Deregulation and Contracting Out Act 1994 and on draft orders laid under section 1(4) of that Act; and to perform, in respect of such documents and orders, the functions performed in respect of other instruments by the Joint Committee on Statutory Instruments.



1.  This bill received pre-legislative scrutiny by the House of Commons Trade and Industry Committee. The report of that Committee[1] raises an issue which is discussed below (Schedule 1, paragraph 4).

2.  The Department's memorandum gives an account of all the powers and this note refers only to those which raise issues which the House may wish to consider.


3.  This clause is concerned with the consequences in Great Britain of an order made in Northern Ireland disqualifying a person from being a company director. Subsection (2) provides for the possibility that the law in Northern Ireland may be amended on the lines of clause 6 to provide for disqualification undertakings as an alternative to disqualification orders. If that change takes place, the Secretary of State will be able to make "modifications" of the relevant Great Britain legislation to give effect to Northern Ireland undertakings in Great Britain. This is in effect a Henry VIII power but as its limits are precisely defined, the Committee considers that delegation is appropriate as is the negative procedure provided in subsection (3).


4.  At present UNCITRAL, an organisation within the United Nations, is producing a Model Law on cross-border insolvency. When the final version is settled, it will be necessary for the United Kingdom to determine how best to give effect to it. The clause enables this to be done by subordinate legislation - regulations made by the Secretary of State with the agreement of the Lord Chancellor. The memorandum states that it is thought right that Parliament should have the opportunity to debate the contents of any regulations and so affirmative procedure is provided by subsection (5). The Committee considers that this is the appropriate way to implement this international agreement and welcomes the provision of affirmative procedure for this Henry VIII power.


5.  Schedule 1 "enables the directors of a company to obtain an initial moratorium for the company where they propose a voluntary arrangement under Part I of the Insolvency Act 1986" (clause 1(a)). The Schedule makes a number of amendments to the 1986 Act the major amendment being the addition by paragraph 4 of a new Schedule A1. Paragraphs 2 to 4 of that Schedule define the conditions which have to be satisfied if a company is to be eligible for a moratorium. The present policy is to limit eligibility to small companies as defined in section 247(3) of the Companies Act 1985 - see paragraph 3(2)(a) of the Schedule. But the Government thinks it right for there to be the possibility of extending eligibility, hence the power in paragraph 5 to "modify the qualifications for eligibility of a company for a moratorium". While it is possible to modify those qualifications without making a textual amendment to paragraph 3(2)(a), the power can be seen as, in substance, a Henry VIII power. Parliamentary control over powers in the new Schedule is provided by paragraph 42. Sub-paragraph (3) of that paragraph makes it clear that any regulations may amend or repeal any enactment and sub-paragraph (4) applies negative procedure.

6.  When the House of Commons Trade and Industry Committee reported on the draft bill it commented "Regulations extending eligibility for a moratorium to larger companies should require further consultation so that the results of experience to date can be factored into the decision; and the secondary legislation should require affirmative resolution".[2] Clearly that recommendation did not lead to changes to the draft bill or the amendment of the bill during its passage through the Commons.

7.  The Committee wishes to draw this recommendation to the attention of the House. In our view, the appropriate level of control for a Henry VIII power is a matter of judgment for the House, and perhaps the chief issue affecting that judgement is the importance of the change to be made and whether it is controversial. In considering paragraph 5 of the new Schedule, the House will no doubt wish to bear in mind the comments of the House of Commons Trade and Industry Committee. For our part we consider that the impact upon the rights of creditors is potentially such as to warrant the affirmative procedure.

8.  We should add that in discussing this power the Committee has assumed that the power is limited to changing the requirements set out in paragraph 3, but it is far from clear that this is what the words will achieve.


9.  The new Schedule A1 inserted by paragraph 4 of Schedule 1 to the bill contains other Henry VIII powers. Paragraph 7(4) allow regulations to modify the requirements in paragraph 7 as to the documents to be deposited with the court to obtain a moratorium. Paragraph 8(7) allows an order to increase or reduce the initial time limit (in paragraph 8(3)) on a moratorium. Paragraph 30 is concerned with the extension of the moratorium by resolution of the company. Sub-paragraph (2) places a two month limit on the length of the moratorium but sub-paragraph (7) allows this to be increased or reduced by order made by the Secretary of State. All these powers are subject to negative procedure.

10.  The Committee considers that negative procedure is appropriate for these Henry VIII powers as each is severely restricted and none raises controversial policy issues.


11.  This paragraph inserts a new section, section 417A, in the 1986 Act. This provides a power to increase or reduce the sums specified in paragraphs 16(1) and 39(4) of the new Schedule A1. The memorandum states that this power is needed because inflation (or deflation) can bring about changes which deprive those provisions of their intended effect. The Committee considers that negative procedure, provided by subsection (3), is appropriate for this limited Henry VIII power.


12.  The Committee has noted the Henry VIII powers, and suggested that, with one exception, they do not need to be drawn to the attention of the House. The Committee wishes to draw the House's attention to the power (in paragraphs 5 of Schedule A1, inserted in the 1986 Act by paragraph 4 of Schedule 1 to the bill) to modify the qualifications for eligibility of a company for a moratorium, where we recommend that the bill should be amended to provide for the affirmative resolution procedure. There is nothing else in the bill which the Committee wishes to draw to the attention of the House.


13.  This bill contains no delegated legislative powers.[3]

1  2nd Report 1999-2000, Draft Insolvency Bill (HC 112). Back
2  Paragraph 24 of the Trade and Industry Committee's report. Back
3  This report is also published on the Internet at the House of Lords Select Committee Home Page (, where further information about the work of the Committee is also available. Back

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