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'(3) Section 356 of that Act (Authority's powers to participate in proceedings: company voluntary arrangements) is amended as follows--
(a) for subsection (1), there is substituted--
"(1) Where a voluntary arrangement has effect under Part I of the 1986 Act in respect of a company or insolvent partnership which is an authorised person, the Authority may apply to the court under section 6 or 7 of that Act.",
(b) for subsection (2), there is substituted--
"(2) Where a voluntary arrangement has been approved under Part II of the 1989 Order in respect of a company or insolvent partnership which is an authorised person, the Authority may apply to the court under Article 19 or 20 of that Order.",
(c) in subsection (3), for "either" there is substituted "any" '.
Mr. Deputy Speaker (Sir Alan Haselhurst): With this it will be convenient to discuss Government amendments Nos. 52 and 53.
Dr. Howells: In Committee, the hon. Member for South-West Hertfordshire (Mr. Page) asked whether the Financial Services Authority should also be given the right to apply to a court under paragraph 39 of proposed new schedule A1 to the Insolvency Act 1986, and he subsequently wrote to me on that point. I have carefully considered what he said, and I have concluded that we should afford the authority that further right--the right to make applications to the court on the grounds that any of the company's creditors or any other person is dissatisfied with the actions of the supervisor, and for the authority to be heard if such an application is made by another.
However, we need to go a stage further. Such rights should also be afforded to the authority in respect of applications under section 7 of the 1986 Act and article 20 of the Insolvency (Northern Ireland) Order 1989. Those involve a procedure relating to existing voluntary arrangements without a moratorium, both here and in Northern Ireland. Such rights were not included in the Financial Services and Markets Act 2000 when it was passing through Parliament. We have concluded that they should have been, especially as the authority is given such rights in that Act to make an application and to appear on an application by another, in relation to the actions of a supervisor and the individual voluntary arrangements procedures.
We have therefore tabled amendments Nos. 51, 52 and 53, to give the authority the right to make applications and be heard on applications under those three provisions. All three allow applications to be made where any of the company's creditors, or any other person, is dissatisfied by any act, omission or decision of the supervisor.
Mr. Page: I wish to express to the Minister my appreciation of the fact that he has listened to the arguments. We shall support him if amendments Nos. 51, 52 and 53 are pressed to a vote.
Clause 17
Amendment made: No. 52, in page 10, line 8, after "except" insert "section 15(3),".--[Dr. Howells.]
Schedule 1
Dr. Howells: I beg to move amendment No. 5, in page 11, line 37, at end insert--
'"money market contract" and "money market charge" have the meanings given by the Financial Markets and Insolvency (Money Market) Regulations 1995 ("the 1995 regulations"),'.
Mr. Deputy Speaker: With this it will be convenient to discuss the following: Government amendments Nos. 6 to 9.
Amendment No. 1, in page 12, line 24, after "small", insert "or medium".
Amendment No. 2, in page 14, line 12, leave out "28" and insert "90".
Government amendments Nos. 10 to 12.
Dr. Howells: The Bill already contains provisions to prevent the moratorium prejudicing the existing modifications of insolvency law applicable to contracts undertaken in connection with certain key operations on the financial markets. The modifications to insolvency law are contained in part 7 of the Companies Act 1989 and the provisions in the Bill are to be found in paragraphs 2 and 23 of the proposed schedule A1 to the Insolvency Act 1986.
The purpose of the modification of insolvency law is to protect the integrity of the financial markets, to provide an appropriate framework to deal with the possibility that a market participant may default on his obligations, and to avoid systemic risk. However, a little more is needed.
The amendments are intended to ensure that the moratorium does not prejudice the existing modifications of insolvency law relating to "money market contracts", "money market charges" and "related contracts" as defined in the Financial Markets and Insolvency (Money Market) Regulations 1995, and "system-charges" as defined in the Financial Markets and Insolvency Regulations 1996.
The amendments are necessary to enable financial markets to continue to function in the event of the insolvency of one of the market participants. The Government do not believe that these exemptions will have a significant effect on the operation or effectiveness of the moratorium, because it is to be an option for smaller companies that would not normally participate in such markets.
Amendments made: No. 6, in page 11, line 40, at end insert--
'"related contract" has the meaning given by the 1995 regulations,'.
No. 7, in page 11, line 42, at end insert--
'"system-charge" has the meaning given by the Financial Markets and Insolvency Regulations 1996,'.
No. 8, in page 12, line 11, after "contract", insert--
', a money market contract or a related contract'.
No. 9, in page 12, line 12, after "charge", insert--
', a money market charge or a system-charge'.--[Dr. Howells.]
Mr. Chope: I beg to move amendment No. 15, in page 13, leave out lines 6 and 7 and insert--
'(a) such information as is necessary for a nominee to be able to judge if there is a reasonable prospect of drawing up a workable voluntary arrangement which warrants being submitted to creditors,'.
Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 16, in page 13, leave out lines 16 and 17 and insert--
'(a) there is a reasonable prospect of a workable voluntary arrangement being drawn up which warrants being submitted to creditors,'.
No. 34, in page 13, line 16, leave out "the proposed" and insert "a".
No. 17, in page 13, line 24, at end insert--
'but he shall take steps to assure himself independently of the validity of information submitted by directors in relation to sub-paragraph (2)(b).'.
No. 44, in page 13, line 35, at end insert--
'(iii) a statement from the directors of the company stating that the nominee is independent of the company's officers, the company, its subsidiaries and associated companies.'.
No. 35, in page 13, line 39, leave out "the proposed" and insert "a".
No. 36, in page 20, line 6, leave out "the proposed" and insert "a".
No. 37, in page 20, line 27, leave out "the proposed" and insert "a".
No. 38, in page 33, line 39, leave out "the proposed" and insert "a".
No. 39, in schedule 3, page 39, line 5, leave out "the" and insert "a".
No. 40, in page 39, line 5, leave out--
'which the debtor is proposing'.
No. 41, in page 40, line 2, leave out "the" and insert "a".
No. 42, in page 40, line 2, leave out--
'which the debtor is proposing'.
Mr. Chope: The amendments are motivated by the unanimous recommendations of the Select Committee on Trade and Industry. They are designed to ensure that a moratorium works better in practice than we fear that it will work under the Bill as drafted.
Paragraph 19 of the report refers in detail to the concerns that were expressed to us by, among others, the Institute of Chartered Accountants in England and Wales. We reached the conclusion that a balance is required between the recognition that a moratorium may be needed urgently to give time for a nominee to sit down with directors and others to find out whether proposals can be put to a creditors meeting with a chance of acceptance, and a limitation on the possibility of making the protection of a moratorium available simply on demand. In that case, there would be no chance of other arrangements subsequently being accepted. Unfortunately, the Bill does not deal with that concern in the way that we hoped it would. Despite having talked about consultation, the Government have dismissed rather peremptorily the concerns that have been expressed.
The Institute of Chartered Accountants in England and Wales supports a moratorium as part of the existing procedure for company voluntary arrangements, but it does not believe that the Bill will achieve the right result. It says:
- In order for the company to obtain the moratorium, the directors are expected to submit to the nominee the terms of the proposed voluntary arrangement and a statement of the company's affairs. The nominee is expected to provide the directors with a statement indicating whether or not, in his opinion, the proposed arrangement is reasonable and the company is likely to have sufficient funds available during the moratorium.
- The implications of these requirements are that, before the moratorium begins, the directors will have to have obtained all the information they need to formulate a proposed arrangement and to prepare the statement of affairs. Similarly, the nominee is expected to have been able to form opinions before the moratorium begins. This seems contrary to the purpose of the moratorium which is to allow time for the directors to put together a voluntary arrangement. We consider that all that should be necessary to obtain a moratorium would be a requirement for the directors to submit to the court a petition giving the reason why a moratorium is necessary, the name of the nominee and a letter of acceptance of appointment from the nominee and a funding proposal for the 28 days of the moratorium.
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