Enterprise Bill

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Mr. Harry Barnes (North-East Derbyshire): On the representations and involvement of the British Bankers Association, it may be remembered that earlier, when we were dealing with mergers, I quoted at length from an internal document of the BBA. I have been informed by a journalist who has investigated the matter that the BBA claims it is a forgery. Why it is a forgery, and why someone has gone to such great lengths to present it to me and alert me to other matters that we have been discussing, is of interest.

Question put and agreed to.

Clause 239 ordered to stand part of the Bill.

Schedule 16

Schedule B1 to Insolvency Act 1986

10.15 am

Mr. Alexander: I beg to move amendment No. 485, in page 239, line 18, after first ''office'', insert

    ''(by reason of resignation, death or otherwise)''.

The Chairman: With this it will be convenient to take Government amendments Nos. 500 and 501.

Mr. Alexander: Amendment No. 485 will clarify paragraph 1(1)(d), to make it clear that a company does not cease to be in administration simply because an administrator resigns or dies. We would not want a company to lose the protection of the moratorium in such circumstances and for the company or creditor to have to go to the trouble and expense of putting the company back into administration because a particular administrator had resigned or died. Provisions later in the schedule deal with the replacing of an administrator in such circumstances.

Amendments Nos. 500 and 501 change the wording of paragraphs 97(1) and 98(1) to reflect the new wording of paragraph 1(1)(d). I ask the Committee to support the amendments.

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Mr. Waterson: I do not object to the amendments in principle, but I want to make the point that the first snowflake in this blizzard of amendments is a set of Government amendments. There are many Government amendments to this part of the Bill. The CBI has pointed out, not just in the context of these amendments, but more generally, that the changes to the Bill are

    ''very different from the measures foreshadowed in the various stages of consultation.''

When it refers to consultation as ''perfunctory'', we should be rather concerned. It is evident that these and what the Minister has called a blizzard of amendments will take up a lot of the Committee's time, and it is because of matters that were not thought through when the Bill was drafted. However, broadly speaking, this first raft of Government amendments, one of very many at which we shall be looking, is not at all objectionable.

Mr. Alexander: For the record, it might be helpful if I clarify the consultation process that has been undertaken. There was consultation on personal bankruptcy for the White Paper in 2000, which contained the ''Fresh Start'' proposals for insolvency. There was further consultation on personal and company proposals in July 2001. In the light of that consultation, policy was refined. It is fair to say, as I emphasised in moving the amendments, that we have sought a balanced approach. On the one hand, we have ensured genuine consultation with the parties involved, but on the other we have reflected that that has a consequential impact on drafting and recognised that amendments might, therefore, need to be made.

I fear that the alternative is to have a consultation process but, regardless of its outcome, not introduce any amendments. A more constructive way for the Government to prove their sincerity over consultation and discussion is to ensure that, where points need to be made, either of a technical nature, such as those that I have just outlined, or more substantive ones, they are brought before the Committee so that there is an opportunity to discuss them.

Amendment agreed to.

Mr. Waterson: I beg to move amendment No. 403, in page 239, line 25, after ''company'', insert

    ''and the whole or part of its business''.

The Chairman: With this it will be convenient to take the following amendments: No. 460, in page 239, line 25, after ''company'', insert

    ''or the whole or any part of its undertaking''.

No. 575, in page 239, line 26, after ''where'', insert

    ''in the opinion of the administrator''.

No. 404, in page 239, line 26, after ''not'', insert ''in his opinion''.

No. 461, in page 239, line 26, after ''company'', insert

    ''or the whole or any part of its undertaking''.

No. 576, in page 239, line 30, after ''where'', insert

    ''in the opinion of the administrator''.

No. 405, in page 239, line 30, after ''not'', insert ''in his opinion''.

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No. 462, in page 239, line 30, after ''company'', insert

    ''or the whole or any part of its undertaking''.

Government amendment No. 486.

Mr. Waterson: I am happy to speak to amendments Nos. 403, 404 and 405. The Liberal Democrats will speak to their amendments, and there is also a Government amendment in the group.

The amendments return us to the question of whether we are trying to save companies or businesses. My hon. Friend the Member for Huntingdon has dealt very eloquently with that issue, which runs through this part of the Bill. With all due respect to the Minister, it is all very well for him to say that he agrees that it is businesses that need to be saved—I paraphrase, and hope I do not do him any unfairness in doing so—but in that case, why does the Bill not say so? The Bill does not make that clear. That is why the CBI and others are quite exercised about the matter. To reiterate our position, which is also the CBI's, it is the rescue of businesses not necessarily companies that matters.

Sometimes, a business is best and most appropriately rescued through its corporate structure. Sometimes, it is best just to sell off the business to another organisation. Rescuing the company should never be a narrow first priority where it still has an ongoing business. I endorse the CBI's comment in its briefing that nothing is gained from rescuing empty vessels. If a company has stopped trading, there is no point in rescuing it. Amendment No. 403 is designed to echo section 8 of the 1986 Act to make it clear—it sounds like the Minister agrees with this—that surviving businesses are the first priority.

Mr. Djanogly: The same situation may result when a vessel is full but its liabilities are even fuller.

Mr. Waterson: I am sure that that is right. A vessel may be half full or half empty and still get into such situations. The Minister has confessed to producing in a different incarnation empty vessels to put on the shelf. No doubt that was part of a tax-avoidance scheme, and there is nothing wrong with that. I am sure that he was not doing anything inappropriate or illegal.

Amendments Nos. 404 and 405 go together. Sub-paragraphs (1)(b) and (c) identify alternative objectives where higher objectives are not reasonably practicable. The current wording could lead to frequent, unhelpful and distracting arguments about whether a higher objective is practicable. At the end of the day, the decision must be driven by the professional judgment and experience of the insolvency practitioner. Administrators should be able to progress down through the hierarchy of objectives whenever it is not practicable to achieve the higher objectives, and they are accountable for making that judgment. The amendments are designed to avoid unhelpful disputes that would distract from the central objective in a particular administration.

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The Chairman: Before I call the next speaker, I want to make it clear to the Committee that because this is a large group of amendments, unless the proposers of an amendment other than in this instance the hon. Member for Eastbourne and subsequently the Minister with Government amendment No. 406 indicate to me that they intend to divide the Committee, I will not put the questions individually. If anyone wants to divide the Committee on any of their amendments in the group, they need to inform me quietly to ensure that that happens.

Mr. Carmichael: For my part, these are points of detail rather than principle, and it is unlikely that I will seek to divide the Committee.

Since other Members have spoken in general terms, I shall place on record my unbounded joy at the prospect of four sittings on the detail of insolvency. Like the Minister, my background involves membership of the Law Society of Scotland. However, years spent trawling around the sheriffs courts dealing with criminal court business, occasionally dabbling in personal injuries actions and, to the extreme alarm of my former employers, occasionally undertaking a domestic conveyance, do not qualify me to speak as an authority on insolvency law.

A useful briefing and drafting supplied by the Law Society of Scotland, the full worth of which I did not fully appreciate when I was in practice, provides the genesis of amendments Nos. 460 to 462. Since I have left practice, that organisation's usefulness has suddenly blossomed, and I must place on record my gratitude to it. The Minister may wish to express his gratitude to it, because he is still a member. Politics is a funny old business and one day we may go back to dabbling in conveyancing.

Amendments Nos. 460 to 462 are all the same. One is consequential on the other, and I intend to deal with them together. The Minister has already indicated a fair degree of sympathy for them during the stand part debate on clause 239. Under the Bill, the administrator of a company must perform his functions with the objective of rescuing the company. However, an administrator may believe that he or she can rescue the business of the company, or part of the business, without rescuing the company itself. In those circumstances, the administrator would not be entitled to act under the Bill. That represents a departure from the circumstances in which an administrator can act at present.

The amendment would ensure that paragraph (3) is consistent with provision on administration in section 83A of the Insolvency Act 1986. I am sure that I do not need to remind hon. Members of the terms of that. However, I will do, to remind myself. The terms are that administrators have frequently been able to preserve businesses or parts of them, and consequentially the employment that comes with that, even though the company itself has been beyond rescue. The amendments make it clear that that remains a permissible objective. They are intended to be supportive of the broad thrust of the schedule, and of the broad thrust of insolvency provision, which was expounded quite eloquently on Second Reading by the

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Under-Secretary when she spoke at some length on the question of a business failure not necessarily meaning disaster.

The question of what is supportive or reasonably practicable may be the subject of lengthy mitigation. Under amendments Nos. 575 and 576, however, it would be for the administrator to decide what is reasonably practicable, and thus truncate—or possibly avoid—lengthy, unhelpful court proceedings.

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