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30 Oct 2002 : Column 948—continued

Mr. Greg Knight: I am grateful to the Minister for her lucid explanation of the amendments, but I am suspicious by nature and I seek clarification and reassurance in respect of Lords amendment No. 161, which states that the subsection shall not apply to a company if

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Can the Minister tell us the precise scope of that provision? My concern is that if a liquidator has inflated his or her fees, or has a large fee built in, inflated or not, could that be an argument for the liquidator saying that a distribution to unsecured creditors would be Xdisproportionate to the benefits". I am concerned that a fat-cat liquidator could use that provision to deny a payout to a small, unsecured creditor solely on the grounds that he or she wished to be well paid for the work undertaken. I hope that the amendment would not lead to that situation.

Mr. Eric Forth (Bromley and Chislehurst): I am interested in the concept of proportionality in that context. Has my right hon. Friend given any thought to, or is he concerned about, the validity of the mechanisms that are available to judge proportionality in that case? While I follow his argument and share his concern, I am interested to know whether the judgment of proportionality will be appropriate in such cases.

Mr. Knight: Perhaps I have not given that matter the depth of thought that I should have done. I will no doubt want to reflect upon it later.

What I find slightly sinister about the provision is the requirement for the court to have a role. We all know that a liquidator can make all sorts of applications to a court—after all, he is not paying and the costs will come out of the general funds. What about the poor unsecured creditor? How does the creditor have a voice to tell the court that it should not go down that road, as the liquidator is using the provision as an excuse for not paying him when he should be paid—the liquidator is merely ensuring that he gets his own fees? I hope that the Minister will be able to reassure the House that the Government are not introducing a loophole that would allow fat-cat liquidators to ride roughshod over the poor unsecured creditor.

Mr. Mark Field: It is a great pleasure to join in debate with my right hon. Friends the Members for Bromley and Chislehurst (Mr. Forth) and for East Yorkshire (Mr. Knight). I suspect that they are already having withdrawal symptoms at the prospect of not being able to speak at such a late hour on Wednesday evenings. I was intrigued to see a long-lost interest in insolvency matters coming to the fore.

I am glad that the Minister has agreed with many of the Lords amendments. We discussed this matter at length in Committee and there were clearly some technical concerns. On a personal level, I am grateful to the Minister for thanking those hon. Members who contributed to the Standing Committee. I confess that on my website, which I have got up and running recently—I am sure that the hon. Lady is a regular and has logged on to it to find out what is going on in the Cities of London and Westminster, and I only wish that many other people were similarly minded—I made it clear that one of the least glamorous aspects of parliamentary life is being involved in a Standing Committee, going through legislation line by line. When I say that it is the least glamorous, it is not a reflection on the Minister, of course; it is because one has to grind through the technical amendments.

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I hope that we were able to make some positive contributions to the insolvency provisions in the Bill. I pay tribute to a number of law societies, in particular the City of London Law Society, to which the Minister referred. Its contribution on the technical aspects of floating charges will, I hope, ensure, that the insolvency provisions will remain intact for some time.

Mr. Robathan: I wish to put right an earlier omission. I paid tribute to my hon. Friend the Member for Eastbourne (Mr. Waterson), who took this Bill through the Standing Committee for the Opposition, but I did not mention those who sat with him on the Benches in Committee and did very valuable work, in particular my hon. Friends the Members for Cities of London and Westminster (Mr. Field) and for Huntingdon (Mr. Djanogly).

Mr. Field: My hon. Friend the Member for Huntingdon (Mr. Djanogly) and I are in a nice position—we find that we are positive experts on this legislation since the Opposition Front-Bench trade and industry team has changed entirely.

Crown preference is one area that we discussed at some length in Committee that has not been mentioned—apart from a tangential reference by the Minister earlier. I appreciate that some of the amendments would protect the position of unsecured creditors to a certain extent in the event that Crown preference was done away with. When we first considered the provision, the Minister was keen to make it clear that there would be a windfall of about #70 million to #100 million a year on which the Crown would no longer be looking for first preference.

One of the potential problems with Crown preference is that a number of smaller companies—indeed, they need not be particularly small—have a good arrangement with the local Customs and Excise and Inland Revenue and thus have an arrangement by which they do not have to pay all their outstanding debt to the Government up front.

The football sector has been depressed recently and constant concern has been expressed about it. The Minister may have read in the financial press of the worry about some football clubs, which had come to positive agreements with their local Inland Revenue office about large sums of money that were due at a particular time. The imposition of Crown preference will mean that if a football club looks as though it is about to go into administration or even to go bankrupt, the Inland Revenue or Customs and Excise may decide to pull the plug earlier. That will be the result—no doubt unintentional—of the imposition of Crown preference. One of the underlying intentions of the measure, rightly, is to stop failing companies going to the wall either unnecessarily or too soon.

Mr. Hoban: Before I became a Member of the House, I had personal experience of working with companies that did not have a high asset base—their principal assets were people. I am concerned that not only football clubs but IT companies, architects and design companies will be affected. A slight pause in their income flow and in the collection of their debts might give rise to the situation to which my hon. Friend

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refers—triggering bankruptcy by the Inland Revenue or Customs and Excise, to get the money immediately rather than letting the business trade through.

Mr. Mark Field: I thank my hon. Friend, who has articulated my point rather more clearly than I could. I hope the Minister will be able to draw something from what has been said and that she will be able to deal with the genuine concerns that have been expressed about Crown preference.

The subject is extremely technical and I applaud the Government for holding large-scale consultations during the past few months and especially over the past two or three years. I have already referred to the local law society in my constituency, but several professional bodies, in particular the Association of Business Recovery Professionals has also made constructive comments that will ensure that our amendments make the law much more workable.

Mr. Djanogly: The Minister kindly offered to give us further explanations if required. I should appreciate her further comments on the provisions on administrators in amendment No. 241, as those provisions have been developed since we last discussed them. Will the Minister also explain why, in amendment No. 244, a decision was taken to insert the words Xone year", while amendment No. 245 specifies six months?

I concur with my hon. Friend and the Minister as regards the comments about the input to the Bill.

Mr. Greg Knight: As regards amendment No. 241, I am troubled by paragraph 65, which states:

What does that mean? If an unsecured creditor becomes an irritant and is becoming belligerent with the administrator, could the administrator pay them off to get them off his back? That could happen if my interpretation is right. I think that it was an American politician who said that his concern about democracy was that

My concern is that the provision might mean that the belligerent unsecured creditor always got his money, while the reasonable person who tried to obtain a payout by moderate dealings with the liquidator was left out in the cold.

Mr. Djanogly: I thank my right hon. Friend for that intervention, and he makes a very good point. I note that the administrator could make such a payment if he thought that it would be likely to help to achieve the purposes of administration. Again, I reiterate my original request: I would appreciate it if the Minister would explain that issue.

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