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30 Oct 2002 : Column 945—continued

8.15 pm

To accompany the widening of the gateway for criminal proceedings, we have introduced an additional safeguard which must be taken into consideration by a public authority before information is disclosed under the gateway. Lords Amendment No. 152 therefore adds a requirement that, before disclosing information for the purposes of UK criminal proceedings, the disclosing authority must have satisfied itself that the disclosure is proportionate to what is sought to be achieved by it. This amendment responds to one tabled in the Lords Committee and, together with amendment No. 186, brings clause 237 into line with the Anti-Terrorism, Crime and Security Act 2001.

Lords Amendment No. 153 responds to two important recommendations made by the Joint Committee on Human Rights to ensure that the provisions on overseas disclosure are subject to tighter safeguards. First, the Committee recommended that the considerations that will be used by UK public authorities when making decisions on whether to disclose information to overseas authorities should be placed on the face of the Bill. Secondly, the Committee recommended that the criteria should include a consideration on whether the disclosure being contemplated would be proportionate to a pressing social need which the disclosure would address, and whether the matter for which disclosure is sought is sufficiently serious to justify disclosure. Amendment No. 153 therefore adds to clause 238 a set of considerations to which an authority must have regard before disclosing information to an overseas authority.

Mr. Bellingham: In the other place, there was some discussion about the different rules pertaining to British overseas territories. Can the Minister elaborate on whether they will be treated any differently from other countries?

Miss Johnson: I would be grateful for a reference to the report of the debate in the other place in which those matters were considered, because I am not familiar with the point that the hon. Gentleman makes.

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On disclosure to overseas authorities, amendment No. 154 will ensure that legislation which is to be specified for the purposes of Community or domestic infringements in part 8 will fall within the definition of Xrelevant legislation". That will enable public authorities in the UK to disclose information to overseas authorities where those authorities wish to carry out investigations or bring civil proceedings under their equivalent legislation.

If the hon. Member for North-West Norfolk (Mr. Bellingham) could supply me with the details of the point that he has just made, I hope to be able to reply to it.

Lords amendment agreed to.

Lords amendments Nos. 149 to 155 agreed to.

Clause 246

Prohibition of Appointment of Administrative Receiver

Lords amendment : No. 156, in page 172, line 34, leave out X72F" and insert X72FA".

Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.

Mr. Deputy Speaker: With this we may discuss Lords amendments Nos. 157 to 160 and amendment No.165.

Miss Johnson: During the passage of the Bill concerns were expressed about the potential impact that the prohibition of the appointment of an administrative receiver would have on the social housing sector. Following constructive dialogues between officials and representatives from all parts of the sector, I am pleased to say that we were able to take on board and act upon their concerns. It was recognised that both the Housing Act 1996— which covers England and Wales—and the Housing (Scotland) Act 2001 provide for a moratorium period which provides an alternative means to facilitate rescues and provide a stay on unilateral action by lenders when registered social landlords are in financial difficulty. The provisions apply to housing associations that are registered social landlords.

Lords amendments Nos. 157 and 156 and Nos. 158 to 160 are consequential amendments. They exclude organisations that are companies from the prohibition on the appointment of an administrative receiver.

Lords amendment No. 165 ensures that the enabling power extending administration and company voluntary arrangements to industrial and provident societies does not apply to industrial and provident societies that are registered social landlords.

Lords amendments agreed to.

Lords amendments Nos. 157 to 160 agreed to.

Clause 247

Liquidator's Powers

Lords amendment: No. 161, in page 176, line 8, at end insert—
X( ) Subsection (2) shall also not apply to a company if—

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(a) the liquidator, administrator or receiver applies to the court for an order under this subsection on the ground that the cost of making a distribution to unsecured creditors would be disproportionate to the benefits, and
(b) the court orders that subsection (2) shall not apply."

Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.

Mr. Deputy Speaker: With this it will be convenient to take Lords amendments Nos. 162 to 164, 174, 175 and 229 to 264.

Miss Johnson: Before detailing the amendments and the thinking behind them, I wish to thank the Opposition parties for their keen interest in the fine details of this legislation. I am extremely grateful for the various amendments that have been tabled in both Houses relating to the corporate insolvency provisions of this Bill.

I am grateful because those amendments have provided us with an opportunity to revisit the drafting of the provisions and to refine it so that our policy aims are clarified in the Bill. Indeed, this process was started way back in the summer, during the debates in this House. It was at that time that our attention was drawn to the potential pitfalls that we faced in seeking to make the administration procedure practicable and workable while ensuring that it remained both fair and focused. I believe that we now have a Bill that is exactly that, and it is for that reason that I am grateful to hon. Members and to those in another place. I shall now turn to the details of the amendments in question.

The need for Lords amendment No. 161 was recognised following an amendment tabled, but not moved, by the Opposition in the Lords Committee. It gives the office holder the ability to apply to the court in order that he does not have to implement the ring fence in instances where, despite the net property exceeding the prescribed minimum, he or she feels that the costs of distributing the prescribed part would outweigh the benefits.

Mr. Djanogly: In what circumstances is the provision likely to apply? I agree with the thinking behind the amendment, but its application is quite general.

Miss Johnson: I believe the provision could apply in cases where there is a huge number of unsecured creditors. In such cases, the costs of distributing the prescribed part may be disproportionate to the benefit gained from the distribution and the office holder should be able to take action to disapply this new section.

In order to obtain an order under this subsection, the office holder will have to satisfy the court that the costs of distribution would be disproportionate to the benefits.

We are grateful to the City of London Law Society for bringing the need for Lords amendments Nos. 162 and 163 to our attention. Our policy has always been that the calculation of the prescribed part will not apply to charges created before the section's commencement, but that it is to apply to any floating charge created after the section's commencement. An existing floating charge granted prior to commencement will not be subject to the new section.

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Where a company has granted both pre- and post-commencement floating charges, an insolvency office holder would pay out to fixed security holders, then pay the expenses of the winding up, then pay any remaining preferential claims, then pay out to the pre-commencement floating charge holders, and then he would apply the prescribed part to the net property available to the post-commencement floating charge holders.

It is not anticipated that there will be a problem with pre-commencement charges that have subordinated their claim to a post-commencement charge. They will have done so in the knowledge that they will be waiving their right not to be subject to the new section 176A.

Lords amendments Nos. 164, 174 and 175 are consequential and technical amendments necessary to ensure that the appropriate insolvency provisions extend to Scotland in addition to England and Wales, to align the Bill with the Insolvency Act 2000 and facilitate the drafting of insolvency rules. They are consequential on other amendments to the Bill.

Lords amendment No. 164 applies to clause 249. It will ensure that the powers that a Scottish liquidator has to take antecedent recovery actions against a company are also included in part I of schedule 4 to the Insolvency Act 1986 and will, as a result of clause 249, need the sanction of the court or the liquidation committee, or a meeting of creditors where there is no committee, before taking any such action. The reason for the amendment is to ensure that the benefit flowing to unsecured creditors from the abolition of the Crown's preferential status cannot be used for such actions without creditors' approval.

Lords amendments Nos. 174 and 175 ensure that provisions in clauses 249 to 251 will extend to Scotland.

Lords amendments Nos. 229 to 234 deal with purposes of administration. Lords amendments Nos. 235 to 240 and 242 to 245 deal with time scales, while amendments Nos. 241 and 246 to 258 are technical and relate to schedule 16, which deals with the detailed processes of administration.

Lords amendment No. 241 applies to the types of payments to be made to an administrator, and Lords amendments Nos. 246 and 252 deal with various matters which would normally be required in accordance with the Insolvency Act 1986 when a company goes into creditors' voluntary liquidation but which, where that liquidation follows immediately after administration, are not necessary or appropriate.

I should be happy to give the House further details of the amendments in this group if hon. Members wish.

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