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'and the whole or part of its business'.
Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 80, in page 243, line 14, after "not", insert "in his opinion".
No. 81, in page 243, line 18, after "not", insert "in his opinion".
No. 82, in page 256, line 22, leave out "28 days" and insert "three months".
No. 410, in page 264, line 17, leave out from beginning to end of line 13 on page 265.
Mr. Waterson: It is fair to say that the amendments—with one exception, or perhaps with none—were tabled at the relevant points of Committee proceedings. However, we continue to feel strongly about the issues with which they deal.
Amendment No. 79—in Committee, amendment No. 403—is supported by the CBI. The CBI makes the point, which was repeated by Opposition Members throughout Committee stage—much good it did us—that we should not be in the business of rescuing empty vessels, or companies as such; rather, we should be in the business of rescuing businesses. The distinction is subtle, but important. If a company has ceased trading, there is little point in rescuing it just for the sake of it. The Minister will recognise that the amendment echoes section 8 of the Insolvency Act 1986. It would make it abundantly clear that preserving and protecting businesses and enabling them to survive is the first priority.
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Amendments Nos. 80 and 81, which go together, would ensure that what matters at the end of the day is a judgment based on the professional knowledge and experience of the insolvency practitioner. As I said in Committee, although I do not want to labour the point, the aim is to avoid unhelpful disputes. I could not understand why the Minister in the Committee was not prepared to accept the relevant amendment, although I think it was another Minister who dealt with that part of the Bill; perhaps we shall be able to sneak it past the Minister here today.
Amendment No. 82 is somewhat symbolic. It is part of our effort to get it across to the Government that those who practise in insolvency are extremely nervous about—if not downright dismissive of—the time limits set out in the Bill. We were assured that the Bill in all its detail, including the provisions on insolvency, was widely consulted on before it saw the light of day. However, as the shoals of briefings and proposed amendments came pouring in from insolvency practitioners and others involved in insolvency, it became clear that either the consultation had not been clear or comprehensive enough, or the views expressed had not been heeded.
In Committee, I quoted one organisation that described the time limits as "preposterous". We do not believe that the time limits can be adhered to. It is all very well to say that extensions can be applied for, so it does not really matter, but that process will itself clog up the system. We did not have a satisfactory answer to that amendment in Committee, but that might again be attributable to the fact that it was another Minister who dealt with it there—a Minister who has now gone on to glory elsewhere in the Government.
Amendment No. 410 is supported by the CBI. The CBI feels strongly—strongly enough to ask us to press the amendment again on Report after doing so in Committee—that there should be no restriction on the length of time an administration can last; hence the CBI would have us remove paragraphs 75 to 77 in their entirety from schedule 16. Paragraph 78 will ensure that administrators will remain, as they are now, duty bound to seek orders terminating the administration in the event
either that the purpose is fully achieved, or that it becomes clear that the purpose cannot be achieved. Paragraph 78 is perfectly acceptable both to the Opposition and to the CBI. If creditors believe that an administrator is delaying matters—something which I suspect happens only rarely—the creditors have plentiful remedies available to them. However, once the administration procedure has started, it should continue for as long as it needs to. Any attempt to cap its duration is bound to be arbitrary, and may well lead to lots of applications for extensions.I doubt that the provisions in the Bill have a friend in the world. The CBI is not the only organisation to have condemned them—they have been condemned by just about everybody who has any practical experience of handling trading insolvency. If the Government are intent on imposing a cap, we and the CBI urge them to allow a period of at least one year, but it would be better if there were no cap at all. After Committee stage, we remain far from convinced that a cap is needed. There is none at the moment, and the system seems to work satisfactorily in that respect. I urge the House to accept the amendments.
Mr. Carmichael: It is unfortunate that we are again rehearsing a debate that we had in Committee, but the argument advanced by the hon. Member for Eastbourne (Mr. Waterson) on the need for the amendments is a good one. I hope that the Government will take on board the force of that argument.
I can see no particular reason why we are so desperate to rescue companies when, as the hon. Gentleman said, that is a fairly meaningless term. That seems to run contrary to the Government's approach in much of the Bill, where they speak about wanting to keep or foster the culture of enterprise and avoid unnecessary administration or bankruptcy. We should look at the business itself rather than the legal entity. On amendment No. 80, we should rely on the administrator's exercise of professional judgment and not encourage a rush to litigation, which is the inevitable consequence of the clause as currently framed. Amendment No. 82 deals with the problem of indecent haste. I am sure that administrators will not drag their heels, so we are putting unnecessary pressure on them by setting a time limit of 28 days. A similar argument applies to the ending of time limits in amendment No. 410. The CBI and others have made good sound arguments which reflect experience, or the practicalities, to use the Minister's own words. The Government should give greater weight to them than appears to have been the case.
Miss Melanie Johnson: Amendment No. 79 specifies that the first objective of administration is to rescue a company and all or part of its business. As the Minister of State, Cabinet Office made clear in Committee—I am sure that he did so and assure the hon. Member for Eastbourne that I am aware of what was said in Committee—that is the clear intention behind the new purpose. The hon. Gentleman and I are in agreement that there is no sense in the administrator trying to rescue companies that are empty shells, particularly if he or she could get a better deal for creditors by selling its constituent businesses as going concerns. To "rescue the company" self-evidently means to rescue it as a going concern, with all or much of its business intact.
The courts will take a practical line in interpreting the purpose. I draw hon. Members' attention to the explanatory notes, which say that
- "company rescue in the context of the clause means the company continuing as a going concern with all or a significant part of its business . . . For the purpose of these clauses, a proposal that would result in a shell company remaining would not be considered a rescue."
Miss Johnson: The Bill was drafted by draftsmen who are familiar with what the courts are likely to do with the Bill's wording. Our aim is exactly the same as Opposition Members', so the amendment is not necessary. I hope that they understand the Government's position, as they allege they did not before. I hope that they realise that we agree utterly about the meaning of the provision; we believe it means what it says. but they would like more specific wording.
Amendments Nos. 80 and 81 deal with the test of what is "reasonably practicable", which governs the administrator's choice of objectives. They seek to qualify that test by specifying that it means "reasonably practicable" in the opinion of the administrator. Again, there is no disagreement between Opposition Members and the Government about that principle, but we diverge about the way in which the Bill will work in practice. The administrator is the person on the ground who is in possession of all the facts and is best placed to determine whether a particular course of action is reasonably practicable or not on the basis of his or her experience and professional judgment. It is not the courts' practice to second-guess administrators' commercial judgment in such cases, so we do not expect the provisions to be interpreted in that way; my hon. Friend the Minister of State, Cabinet Office said so in Committee. I therefore believe that the amendments are unnecessary.
Amendment No. 82 deals with one of the new time scales introduced in the revised administration procedure. The Bill requires the administrator to send a copy of proposals to creditors within 28 days' of his or her appointment; the amendment would extend that period to three months. Again, the issue was debated extensively in Committee, when we explained that the new time limits for administration would provide greater certainty to creditors and would help to make the procedure more accessible to small firms, for which the costs of running a lengthy administration can be a considerable barrier against entering the administration procedure. In conjunction with changes introduced elsewhere in the legislation, administration will become more accessible and attractive. Cases going into administration will become smaller and more straightforward, and the new time scales will prove more than adequate for them.
For larger and more complex cases for which the administrator needs more time, there are provisions to enable him or her to extend the time periods either by creditor consent for specified periods or with the permission of the court for whatever period the court thinks fit. The time limits in the Bill are rightly stringent
to increase certainty and accessibility for companies and creditors, but the process is sufficiently flexible, particularly because of the provisions for extension, to ensure that it can be adapted to meet the needs of particular cases. I therefore hope that I have persuaded the hon. Member for Eastbourne to withdraw his amendment.
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