1 Report
1. The draft Legislative Reform (Insolvency)
(Miscellaneous Provisions) Order 2009 and Explanatory Document
were laid before Parliament on 13 May 2009. The draft Order contained
a total of seven proposals for changes to insolvency procedure,
including the following two proposals which are the principal
subject of this report:
- Removal of the requirement
for certain annual meetings rarely attended by creditors or members
and replacement (by means of separate rules) with a written progress
report
- Removal of the requirement for certain routine
reports to be filed at court in Individual Voluntary Arrangements
(IVAs).
2. We published our report on the legislative
reform order (LRO) as originally laid on 9 July 2009. In it, we
recommended approval of the Order. However, we made a number of
observations including chiefly that several of the proposals be
the subject of post-implementation review, that certain parts
of our report be drawn to the attention of the Insolvency Rules
Committee, and that Departments should avoid situations in which
the Committee is asked to consider legislative reform orders that
are contingent on other legislation.[1]
3. So far as the proposal on annual meetings
was concerned, we recommended that implementation of the proposal
be reviewed and consulted on not more than two years after commencement
to permit evaluation of any objections requiring reconsideration—including
in particular any objections that the lack of an annual meeting
might prejudice opportunities for communication with insolvency
practitioners. So far as the proposal on filing of routine IVA
reports was concerned we were satisfied that the proposal should
be approved as laid.
4. In its report of 12 June 2009, our counterpart
committee in the House of Lords expressed concern that the requirement
for abolition of annual meetings to be conditional on provision
of progress reports was to be contained not in the draft LRO,
but in parallel rules to be made by the Lord Chancellor. That
concern echoed the reservation we had expressed about LROs that
are contingent on other legislation. The Delegated Legislation
and Regulatory Reform Committee observed that without express
provision in the LRO there was no guarantee that the parallel
rules would be made, and recommended a change to the draft LRO
to include such provision.
5. Notwithstanding our own view that post-implementation
review would in the present case adequately cover the matter,
we understand and appreciate the position taken by the Delegated
Legislation and Regulatory Reform Committee. That position has
been accepted by the Insolvency Service with the result that a
revised draft LRO was laid before Parliament on 29 October 2009
together with accompanying statement. The re-laid LRO contains
an express requirement for the provision of progress reports to
creditors and the accompanying statement indicates that post-implementation
review will take place after two years, as we suggested. We
agree with the amendment.
6. As an additional matter, in the period between
laying of the original draft and re-laying the Insolvency Service
noticed an omission from the list of changes to the Insolvency
Act 1986 that are consequential on the proposal relating to filing
of routine reports in IVAs. The proposed solution would amend
section 263D of the Act so that an otherwise uncorrected reference
to filing with the court would be replaced by a reference to filing
with the Secretary of State, consistent with the proposed new
procedure for fast-track IVAs. The details are explained fully
in paragraph 22 of the accompanying statement. The proposed
consequential change to the LRO is entirely uncontroversial and
we are therefore content with the amendment.
7. We acknowledge that the Insolvency Service
has copied our initial report to the Insolvency Rules Committee
as we requested. We note also the accompanying statement's comment
that the Minister will in future have regard to the Committee's
wishes regarding LROs that are contingent on other legislation.
Finally, we welcome the Department's commitment to "issue
guidance to insolvency practitioners which will make it clear
that these initiatives will provide savings in the cost of administering
insolvencies and that those savings are expected to be passed
on to creditors by way of better returns."[2]
8. We are content with the proposed amendments
to the LRO and (subject to the recommendations contained in our
first report) with the content of the revised LRO as a whole,
and we therefore recommend that the revised draft Order be approved.
1 See the first Report on the Order, paragraph 20;
http://www.publications.parliament.uk/pa/cm200809/cmselect/cmdereg/883/883.pdf Back
2
See accompanying statement, paragraph 20 Back
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