Mr. Mark Field (Cities of London and Westminster): I also wish to speak briefly on this matter, but with reference to the Bill itself rather than relying on briefings from various bodies.
The Government's goal has been as far as possible to create a level playing field for unsecured creditors. I understand that reasoning, although insolvency is highly technical and something of a minefield. I tabled amendment No. 439 to register my concern about subsection (2). When paragraph (a) refers to the liquidator making a prescribed part of the net property available for the satisfaction of unsecured debts, it is not clear whether the ordinary unsecured creditor would not be in a better position than a creditor with a floating charge, who would not qualify under paragraph (a) but would be given only the crumbs under paragraph (b).
How does the Under-Secretary envisage the mechanics of the measure working, in the context of straightforward insolvency involving entirely unsecured creditors, creditors with floating charges and secured creditors? Given the Government's plans effectively to neutralise some of the effects of floating charges, it is not clear how that would operate.
Miss Johnson: The purpose of amendments Nos. 524 and 429 is to restrict the ambit of new section 176A so that it affects only a receiver who is an
Column Number: 625administrative receiver. The amendments are unnecessary and could provide a loophole for a secured creditor to avoid the effect of the new section. Although it is accepted that the term ''receiver'' is broad and covers every kind of receiver appointed under a fixed or floating charge, it is clear enough that the section refers only to property that is available for distribution to the holder of a floating charge.
I should like to clarify the matter of net property, so that it is clear to members of the Committee as I proceed. To answer the hon. Member for Orkney and Shetland (Mr. Carmichael), the net property is the property available for distribution to the floating charge holder and it therefore includes any trading loss if the office holder has continued the company's trading. The hon. Member for Eastbourne (Mr. Waterson) delved into the definition of net property in section 176A(5). The net property is the amount available to distribute after taking account of a variety of things, such as the liability secured by a fixed charge and any preferential debt. I should like that to be clear. I hope that hon. Members agree that the amendments are unnecessary.
On first sight, I found it difficult to understand what amendment No. 439 would achieve, and I am not entirely clear now. I can assume only that Opposition Members feel that the drafting dealing with whom the prescribed part is to be set aside for needs to be clarified. I do not agree; the new section dealing with the issue is clear.
I believe that the purpose of amendment No. 440 is to provide for the prescribed part of the company's net profit, which will be set aside for distribution to unsecured creditors, to be an amount that represents at least a prescribed proportion of the unsecured debts. I have some sympathy with the sentiments behind the amendment, but it is not necessary. We propose that there should be a set minimum financial level that the prescribed part ought to reach, and below which the liquidator will not have to consider distribution unless he or she can clearly see that the benefits of such a distribution outweigh the costs.
It is our view that the office holder does not need further discretion. We shall, of course, consult interested parties on the issue, but from discussions already held, we are minded to set the de minimis level of property available for distribution at £5,000. To provide the office holder with the discretion not to distribute if the prescribed fund is greater than that would surely lead to people questioning why we had a de minimis figure in the first place. In addition, and also from discussions held so far, we can think of few occasions when it would not be cost-effective for an office holder to distribute funds of at least £5,000.
In commenting on amendment No. 525, I shall also speak to amendments Nos. 457, 526 and 458. The amendments may have merit in seeking to achieve clarity on what constitutes the net property of a company on which the office holder can base his calculation for the prescribed part, but they are
Column Number: 626unnecessary because we have suggested amendment No. 479 to deal with the matter.
I should explain that Government amendments Nos. 479, 480 and 481 are minor, as they clarify and ensure consistency. Amendment No. 479 makes it clear that the company's net property embraces only the property that is subject to a floating charge. That deals with the issues raised in amendments Nos. 525, 457, 526 and 458. Amendment No. 480 makes it clear that an order prescribing part of a company's net property may include other methods of calculating the prescribed amount and not just those in section 176A(6)(a) and (b). That is because, although we have it in mind that the ring fence will be set on a sliding scale with a de minimis level, we have not yet consulted interested parties, so we must ensure that the vires in the Bill are wide enough to allow other methods of calculation, if necessary.
The final Government amendment, No. 481, is merely a matter of consistency. It ensures that the same wording is used in new section 176A(9) and (10). I hope, therefore, that I have persuaded Opposition Members to support the Government amendments.
I appreciate why Opposition Members tabled amendment No. 459, but I assure them that it is unnecessary. Government amendment No. 479 makes it clear that the company's net property embraces only property that is subject to a floating charge. We are considering a further consequential amendment to remove the definition of a fixed charge in subsection (8), as the relevant section no longer refers to such a charge. As a result, amendment No. 459 is unnecessary, and there is no difference in England, Wales or Scotland as to when a floating charge is created.
On the point raised by the hon. Member for Cities of London and Westminster (Mr. Field), the floating charge holder will still have the final claim on the assets covered by the floating charge after the property has been removed from the available floating charge assets. That will still leave the majority of funds available to the floating charge holder. With that, I commend the Government amendments to the Committee.
Mr. Waterson: I am fairly reassured by what the Under-Secretary said, although what matters is whether the practitioners are reassured. She said that there is to be further consultation on one or two amendments, which will be helpful, given that they are designed to make it easier to operate the provisions in the real world. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Chairman: I remind the Committee that I shall not call amendments, other than Government amendments, for a Division unless the hon. Members who tabled them advise the Clerk that they want me to do so.
Amendments made: No. 479, in page 170, line 35, leave out from 'property' to end of line 39 and insert
Column Number: 627
No. 480, in page 170, line 41, after 'may', insert ', in particular,'
No. 481, in page 171, line 19, leave out 'reason' and insert 'virtue'.ó[Miss Melanie Johnson.]
Question proposed, That the clause stand part of the Bill.
Mr. Waterson: I want to use the clause stand part debate to discuss a couple of issues that were raised by the British Bankers Association. As we know, the association takes a close interest in what the Committee is up to.
The first point, which is fair, is that it is difficult to get to grips with the details of what is proposed because they are not in the clause. The Government presumably envisage making detailed regulations in due course on the nature of the pot of money for unsecured creditors and on how it will be administered. Once again, I must ask the Under-Secretary when the draft regulations are likely to be available. I assume that the plan is to produce drafts for discussion, and bodies such as the British Bankers Association will no doubt have a great deal to say about them at that time. However, it is difficult to take a significant view on those matters in the absence of the regulations.
The association also says that when the Cork committee first made its proposals about 20 years ago, it was very much of the view that the funds should be available first to the administrator or liquidator to pursue recalcitrant debtors. The funds available for distribution could then be boosted, and the balance of the fund offered to unsecured creditors.
The big idea at the time was to enable the administrator or liquidator to achieve maximum debt recovery on behalf of those creditors. The British Bankers Association points out that insolvency practitioners thought then, and still think, that the idea is good, but that it has not found its way into legislation. The Under-Secretary may be able to put my mind at rest at a stroke by saying that it will be included in the regulations, so I shall not delay for a moment the opportunity for her to tell me so.
Miss Johnson: Indeed, I can reassure the hon. Gentleman by saying that the draft regulations will be available for consultationówe are working on them. Once the Bill has gone through its parliamentary process, we shall probably be in a position to start consultation, which will ensure that there has been a full discussion with interested parties by the time the secondary legislation is drafted.
Question put and agreed to.
Clause 243, as amended, ordered to stand part of the Bill.
|©Parliamentary copyright 2002||Prepared 14 May 2002|