Enterprise Bill

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Mr. Alexander: On amendment No. 414, I appreciate the point made by the hon. Member for Eastbourne that serving notice to a company appears to be unnecessary if it has appointed an administrator. However, it will be more straightforward to have the same notice requirements in all cases. It will also protect against abuse by ensuring that a company is

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aware of the appointment if someone attempts to appoint an administrator without the appropriate authority.

Amendment No. 415 would remove the requirement for an administrator to obtain a list of a company's creditors. An administrator needs the creditors' details in order to notify them of their appointment and, in due course, to send them their proposals and invite them to a creditors' meeting, if one is to be held. Although I agree that, in practice, details of creditors normally need to be assembled from a variety of sources, once they have been assembled they will constitute a list for the purposes of the provision.

Mr. Waterson: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Carmichael: I beg to move amendment No. 464, in page 252, line 24, leave out 'thinks' and insert 'reasonably believes'.

The Chairman: With this we may discuss the following amendments: No. 465, in page 254, line 19, leave out 'thinks' and insert 'reasonably believes'.

No. 470, in page 261, line 31, leave out 'thinks' and insert 'reasonably believes'.

No. 476, in page 263, line 41, leave out 'thinks' and insert 'reasonably believes'.

No. 456, in clause 243, page 170, line 26, leave out 'thinks' and insert 'reasonably believes'.

Mr. Carmichael: The purpose of the amendments is to clarify that the assessment that an administrator makes under paragraph 47(2)(b), paragraph 52(1)(c) and subsequent paragraphs will be justified on an objective basis. The Law Society of Scotland takes the view that the words ''reasonably believes'' would achieve that objective, whereas the word ''thinks'' will not. If that is what the society thinks, who am I to argue with it? If an administrator takes the view that the objectives mentioned in schedule 16(3)(1)(a) and (b) cannot be achieved, the assessment should be capable of justification on an objective, rather than a subjective, basis. It is as simple as that.

Mr. Alexander: The hon. Member for Orkney and Shetland made it clear that the group of amendments relate to a single point. I heard what he said about the desire for decisions made by the administrator, or other office holders in the terms of the ring fence, to be subject to an objective test rather than a test that he considers to be purely subjective. The word ''thinks'' in those paragraphs means that the administrator will have to reach a considered view. In such situations, the administrator's decision would be subject to a rationality test by which it would be challenged if it could be shown that no reasonable administrator would have acted in such a way in those circumstances.

We neither expect nor want the courts to second-guess an administrator's professional or commercial judgment in exercising their duties. The administrator is the person who will have all the facts about a case

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and will be best placed to determine what is appropriate. That is, of course, without prejudice to the rights of creditors or members under paragraph 73 to challenge an administrator's decision where it has unfairly prejudiced their interests. I therefore argue that the approach taken in the drafting best captures the spirit and intention of the Bill.

Mr. Carmichael: I assure the Minister and the Committee that I am not willing to divide the Committee on the amendment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Waterson: I beg to move amendment No. 416, in page 252, line 33, leave out '28 days' and insert 'three months'.

The amendment is a perfect example of a theme that has already been touched on, and will be touched on many more times, which is that of the time limits set out in the Bill. The CBI has some pretty trenchant things to say about those. They complain about the stringent time limits, and make the point that those carrying out the consultation have been told that the proposed time limits are wholly unworkable over and over again by people who know what they are talking about. The CBI also said that experienced practitioners have described the limits as preposterous, and suggests that the only reason for sticking with them is purely political. It goes on to say that they are most unwelcome.

I must say that I am bemused as to what possible political benefit they could accrue to anyone, even on the assumption that the average voter would have a clue what we are all on about. Indeed, if some Martian were to descend to our Committee, he would probably wonder whether we were some strange sect that met in secret to recite chants. I slightly discount the political motive; I err more on the side of natural incompetence. There seems to be a flaw in the consultation. I cannot help feeling that everyone here would be far better occupied doing other things, and the Minister and his officials would be far better occupied sitting down with the practitioners, rather than using the elaborate procedures of the Committee to bring the two together.

Amendment No. 416 would delete the words ''28 days'' and insert the words ''three months''. We are advised that the period of 28 days is too short. The first few weeks of any administration make great demands on the administrator. The first priority is to establish the situation, and stabilise the business as far as possible. The practitioners have asked what is wrong with a period of three months. That figure is not just plucked from the air. It is currently prescribed by section 23 of the Insolvency Act 1986. Best practice would be to send out the administrators' proposals as soon as possible. There is no reason why an administrator should hold back once he has formed his views on the situation of a particular company. However, insistence on a period of 28 days will, apart from anything else, lead to an avalanche of applications to the court under paragraph 105 for extensions of time.

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The amendment is based wholly on practicalities and common sense. If 28 days is thought by practitioners to be absurdly inadequate in many cases, why not stick with the period of three months as set out in the 1986 Act?

Mr. McWalter: Although I very much enjoy the descriptions by the hon. Member for Eastbourne of how arcane our deliberations are, it seems to me that there is an important point at stake. Most of the time, I have viewed the representations of the Opposition regarding increased or decreased time scales with considerable suspicion. In this case, however, I think that they might be on the right lines.

I was approached by the Non-Administrative Receivers Association—the association for insolvency practitioners—at the back end of 1997. I organised a meeting for those practitioners with the then Minister to discuss the unsatisfactory state of the law in relation to insolvency and protecting businesses from going under unnecessarily.

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The issue is serious and, whether it has an electoral impact or not, it is incumbent on us to do our level best to ensure that the state of such arrangements is satisfactory. I am worried that the effect of too short a time scale could be that the administration arrangements, particularly those designed to achieve a rescue of a company or some part of a company's activities, would be frustrated by the fact that the administrator was given insufficient scope and time to devise a statement that did justice to the capacity of the company to persist with all, most or some of its activities. On this rare occasion, I hope that the Minister gives some careful thought to the representations that were made, however humorously, by the Opposition.

The Chairman: I am glad that the hon. Gentleman has just finished to save me cutting him off mid-flow.

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

        Adjourned till this day at half-past Two o'clock.

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The following Members attended the Committee:
Conway, Mr. Derek (Chairman)
Alexander, Mr.
Atkins, Charlotte
Barnes, Mr.
Borrow, Mr.
Brown, Mr. Russell
Burnham, Andy
Cable, Dr.
Campbell, Mrs.
Carmichael, Mr.

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Djanogly, Mr.
Field, Mr. Mark
Hendry, Mr.
Irranca-Davies, Huw
Lansley, Mr.
McWalter, Mr.
Pearson, Mr.
Purchase, Mr.
Thomas, Mr. Gareth R.
Waterson, Mr.

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