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.
INSOLVENCY BILL [HL]
1. This bill received pre-legislative scrutiny
by the House of Commons Trade and Industry Committee. The report
of that Committee
raises an issue which is discussed below (Schedule 1, paragraph
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.
SCHEDULE 1, PARAGRAPH 4
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".
Clearly that recommendation did not lead to changes to the draft
bill or the amendment of the bill during its passage through the
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.
OTHER HENRY VIII POWERS IN SCHEDULE A1
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.
SCHEDULE 1, PARAGRAPH 10
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.
LIFE PEERAGES (APPOINTMENTS COMMISSION) BILL [HL]
13. This bill contains no delegated legislative
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 (http://www.parliament.uk), where
further information about the work of the Committee is also available. Back