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Lord Williams of Elvel: I am not certain about this amendment. I accept that the corporation has a duty under Clause 44 to put forward proposals. In spite of what the noble Baroness, Lady Hamwee, said earlier, secured creditors have different types of security which may or may not involve the assignment of assets. As the noble Lord rightly points out, unsecured creditors, in Companies Act terms, come just before the shareholders.
I am not certain how the corporation can form proposals which protect the secured creditors--which they must do, as I understand it--leave the unsecured creditors no worse off than they otherwise would be and, at the same time, secure certain things that the corporation needs. Something has to give, so far as it is practicable.
What is going to give? In normal circumstances, if an administration takes control of a company and disposes of the assets, a receiver takes control and winds up the company or there is a voluntary winding-up of the company, the unsecured creditors take their lumps, as the noble Lord said; they are unsecured.
At the moment I am unclear, and hope that the Minister can help me, as to how unsecured creditors can be no worse off than they would be were the corporation not to intervene and yet the corporation have power--given the protection of the secured creditors--to intervene in the way the clause invites it to?
Lord Lucas: It may not always be the case, but in principle it should often be the case. A block of flats owned by a social landlord will be a difficult asset to sell on the open market. If it is sold to a private-sector landlord there will be a large number of extremely angry and disaffected tenants, which will not make it an attractive proposition for many landlords. On the other hand, if it is sold or transferred under Housing Corporation aegis to another social landlord which is better managed and is used to dealing with those matters, then it will be trusted by the tenants and have a higher potential value.
It is a question of the difference between realisation value and going-concern value when it comes to accounts. If the Housing Corporation can work the trick, the asset should be worth more than it would be if there was subsequent liquidation.
Lord Williams of Elvel: I accept that and that is absolutely right. The problem is, assuming that there is no going concern, how can the Housing Corporation produce a proposal--as the amendment requires--which leaves the unsecured creditors no worse off than they would otherwise be? I do not understand how the Housing Corporation can fulfil that requirement. I can understand how it can take over a block of flats and sell it under its aegis at a going-concern value which would protect the unsecured creditors. However, that is not what the amendment says.
Lord Lucas: I find myself at a loss in encompassing the problem envisaged by the noble Lord, Lord Williams. However, I shall consider what he said and write to him. So far as I can see, there may be occasions when the Housing Corporation cannot work this trick and therefore cannot produce a proposal. But one would hope that in most cases it would be able to do so.
On Question, amendment agreed to.
Lord Lucas moved Amendment No. 158:
The noble Lord said: I spoke to Amendment No. 158 with Amendment No. 143. I beg to move.
On Question, amendment agreed to.
[Amendments Nos. 159 and 160 not moved.]
Clause 44, as amended, agreed to.
Clause 45 [Effect of agreed proposals]:
Baroness Hamwee moved Amendment No. 161:
The noble Baroness said: In moving Amendment No. 161 I shall speak also to Amendment No. 162, which is a government amendment.
Amendment No. 161 provides that directors, members and trustees are not required to act in conflict with their fiduciary or other obligations since it would be unreasonable and probably unlawful for them to do so, and that the provisions of Clause 145 shall not affect their rights, including their right to resign.
The clause requires directors, members and trustees to co-operate in the implementation of the corporation's proposals. However, it is conceivable that they could be placed in a difficult or even an impossible position--there may be a conflict between their duties under this clause and their fiduciary duties. The corporation has wide powers but I do not believe that they should be so wide as to place the persons referred to in that situation.
The government amendment contains similar provisions, though it does not go so far as to deal with the question of the right to resign. I beg to move.
Lord Lucas: We are clearly ad idem on the first part of this amendment because Amendment No. 162 covers the situation. In relation to the right to resign, our legal advice is that, in the absence of express provision, the requirement to co-operate contained in Clause 45(3) would not affect the right to resign and therefore that part of Amendment No. 161 is unnecessary.
Baroness Hamwee: I am glad to have that assurance. On that basis, and on the assumption that the noble Lord is about to move Amendment No. 162, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lucas moved Amendment No. 162:
The noble Lord said: I have just spoken to Amendment No. 162. I beg to move.
On Question, amendment agreed to.
[Amendments Nos. 163 and 164 not moved.]
Clause 45, as amended, agreed to.
Clause 46 [Appointment of manager to implement agreed proposals]:
Lord Williams of Elvel moved Amendment No. 165:
The noble Lord said: At present, the wording of Clause 46 implies to us that the manager will take over the whole running of the association. I am not sure that that is what the Government intend. Nor is it borne out by the powers of the manager, which do not include the convening and holding of board meetings, but are largely related to transactions dealing with land. This point was debated in another place but there was a somewhat inconclusive result. I believe it is worth hearing what the Government feel about this because it seems to us that the wording of Clause 46 as presently drafted is defective. I beg to move.
Lord Lucas: It seems only fair, having given an amendment to the noble Baroness, Lady Hamwee, to give one to the noble Lord, Lord Williams, as well. The quality of his draftsmanship is well known but it is very rarely that the parliamentary draftsman cannot find any reason to argue. This is one occasion.
On Question, amendment agreed to.
Lord Lucas moved Amendment No. 166:
The noble Lord said: In moving this amendment, I wish to speak at the same time to Amendment No. 167. Amendment No. 166 places an obligation on the corporation to notify the Charity Commissioners if it
The corporation's proposal will have been drawn up after close consultation with the landlord, his secured creditors and the tenants. It will be in the interests of all parties to ensure that any manager appointed to implement the proposals should possess the necessary qualifications and experience. He must command the confidence of all the parties involved. The qualifications that are required will depend on the nature of the tasks that the manager has been appointed to carry out. In some instances, an experienced housing manager may be the most appropriate appointment. In others, someone with an insolvency or accounting qualification might be more suitable. It would be difficult for the Secretary of State to make an order covering all these eventualities. The judgment on what kind of manager is needed is best left to the corporation and the other parties to the proposal. I believe that we can trust to their good sense to ensure that a suitable appointment is made. I beg to move.
On Question, amendment agreed to.
Lord Lucas moved Amendment No. 167:
The noble Lord said: I have just spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Clause 46, as amended, agreed to.
Clause 47 [Powers of the manager]:
Page 26, line 44, leave out ("charitable").
Page 27, line 28, at end insert--
("but nothing in this subsection shall require the members, directors and trustees referred to in this subsection to act in a manner contrary to their fiduciary or other obligations as members, directors or trustees or affect their rights, including their right to resign.").
Page 27, line 28, at end insert--
("This does not mean that they have to do anything contrary to any fiduciary or other duty owed by them.").
Page 28, line 2, leave out ("of the registered social landlord").
Page 28, line 4, at end insert--
("( ) If the landlord is a registered charity, the Corporation shall give notice to the Charity Commissioners of the appointment.").
Page 28, line 8, leave out subsection (3).
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