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Lord Kingsland moved Amendment No. 15:
- Page 23, leave out line 10 and insert--
The noble Lord said: My Lords, in Committee we were concerned about what is now paragraph 36 of the new Schedule A1 which deals with the effect of the approval of a voluntary arrangement. Sub-paragraph (2) provides that a voluntary arrangement binds those who are entitled to vote at the creditors' meetings and those who would have been so entitled if they had had notice of it. I made the point that a creditor would still be entitled to vote at a creditors' meeting even if he had not had notice of it. Sub-paragraph (2)(b)(ii) has no effect because no creditor would have been entitled to vote if he had had notice of the creditors' meeting. Notice is irrelevant for the purposes of entitlement to vote.
The Minister took me somewhat to task and referred me to Rule 1.17, which provides that every creditor who was given notice of the creditors' meeting is entitled to vote at that meeting. That rule does not say that a creditor who was not given notice of the creditors' meeting is not entitled to vote at that meeting. Indeed a creditor who was not given notice of the creditors' meeting is entitled to vote at that meeting, and I refer the Minister to the case of Re Debtors. The noble Lord's criticism of my comments is, therefore, if I may say so with all due respect, misconceived. I assert that my original comments stand. I beg to move.
Lord McIntosh of Haringey: My Lords, I hope that I can give the noble Lord some comfort, although not in the context of this Bill but of the insolvency rules.
The noble Lord's amendments still have the unfortunate effect of an unknown creditor--one who had not had notice of the meeting to consider the voluntary arrangement proposal--being bound by the arrangement when he should not be. We want a voluntary arrangement to bind only those who would have been entitled to vote at a meeting if they had had notice of it. We do not want a creditor who could have been entitled to vote to be bound by a voluntary
We intend to make provision in the insolvency rules to define the circumstances in which an unknown creditor would have been entitled to vote at the creditors' meeting if he had had notice of it. I believe that that is the crux of the point addressed by the noble Lord, Lord Kingsland. That will make it possible to say with certainty whether an unknown creditor would have been entitled to vote and therefore whether or not he is bound by the arrangement.
Without such a provision, those concerned would be left trying to second guess how the chairman of the meeting would have dealt with the claim of an unknown creditor under Rule 1.17 if he had had that claim before him at the time of the meeting. That would be an unsatisfactory state of affairs. Therefore, we propose to amend the Insolvency Rules 1986 to make clear the circumstances in which an unknown creditor would have been entitled to vote at the creditors' meeting if he had received notice of it.
In relation to company voluntary arrangements in England and Wales, Rule 1.17(3) of the insolvency rules currently provides that:
In addition, any creditor can appeal to the court under Rule 1.17(5) in relation to the chairman's decision on a creditor's entitlement to vote. Where the chairman has allowed or refused a creditor the right to vote, that decision could be reversed by the court. That, too, introduces an element of doubt in that it may transpire that some creditors who possibly would be allowed to vote in the event cannot in fact do so. The point is that a creditor with a claim could vote if the chairman of the meeting agreed but would not be able to vote if the chairman did not agree the claim. We consider that only those who would be entitled to vote should be bound by a voluntary arrangement; hence, the proposed change to the rules.
We do not believe that the proposed amendments would address this issue and they could mean that an unknown creditor would be bound by a voluntary arrangement when he would not have been entitled to vote. I do not know whether the noble Lord ever studied symbolic logic as part of philosophy, but this is one of the most severe tests of syllogistic thinking to which I have ever been subjected. I am not certain that I have passed the test, but I believe that fundamentally
Lord Kingsland: My Lords, I found the Minister's reply both courteous and comprehensive. I should like time to reflect on whether or not I am pleased with what he said. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 16 and 17 not moved.]
Baroness Buscombe moved Amendment No. 18:
The noble Baroness said: My Lords, paragraph 40 of Schedule 1 does not prevent an officer of a company or a debtor being privy to another person concealing, fraudulently removing or pawning any of the company's or the debtor's property. When we moved this amendment in Grand Committee, the Minister justified the paragraph by relying on its long history dating back to the Debtors Act 1869. With great respect, we feel that that is not good enough.
The provisions of the Bill give a company or a debtor the right to obtain a moratorium on the say-so of a mere authorised person. During that moratorium, all the rights of all the creditors are suspended and the directors have an almost entirely free hand as to their conduct of the company's business. The nominee has no real duties to perform and will be totally powerless to prevent anyone concealing, fraudulently removing or pawning any of the company's or the debtor's property.
That was not the position when the Debtors Act 1869 was enacted. It was not the position when the Bankruptcy Act 1914 was enacted. It was not the position when the Companies Act 1929 was enacted. It was also not the position when the Companies Act 1948 was enacted and it was not the position when the Companies Act 1985 was enacted. It will be the position if this Bill is enacted.
The company's or the debtor's property will be totally unprotected. The creditors will be powerless. They will have to rely on the directors or the debtor to ensure that no one can conceal, fraudulently remove or pawn any of the company's or the debtor's property. If the directors or the debtor are privy to anyone doing that, it must be clear that they run the risk of being prosecuted. There is no other protection. I beg to move.
Lord McIntosh of Haringey: My Lords, I congratulate the noble Baroness, Lady Buscombe, on climbing painfully up the reverse history tree which I gave to her in Committee. She found her way back from 1869 to 1985 with consummate skill. However, I believe that she is exaggerating the risks which are involved in the Bill as it is at present proposed.
As currently drafted, among other things, sub-paragraph (3) provides that during a moratorium an officer of the company is guilty of an offence if he was
All the above apply now and have applied throughout the complicated history of these provisions. None of the other sections provides for an officer or a debtor to be guilty of an offence if they are privy to another concealing, fraudulently removing or pawning any of the company's or debtor's property. This does not present a difficulty because existing legislation allows for the prosecution of directors who are privy to others dealing with the company's property in a way which causes an offence under Section 206 and paragraph 40 of Schedule A1. Officers might be prosecuted under, for example, the Accessories and Abetters Act 1861 in England and Wales and under equivalent laws in Scotland.
I believe that our difficulty comes back to the issue which did not convince the noble Baroness, Lady Buscombe. I said in Committee--and this is a real concern--that if the paragraph was to be amended as proposed, it could cast doubt on the meaning of the existing provisions on which it was modelled and also on the use of other legislation to prosecute those officers who are privy to offences by others in relation to company assets. That is why we cannot accept the amendment.
("(ii) could have been so entitled (but was not present or represented at it) but did not have notice of it,").
"A creditor shall not vote in respect of a debt for an unliquidated amount, or any debt whose value is not ascertained, except where the chairman agrees to put upon the debt an estimated minimum value for the purpose of entitlement to vote".
Such a creditor whose debt is unliquidated or not ascertained could therefore be entitled to vote, but only if the chairman of the meeting first agreed to put a value on the debt. Where he did not do so, that creditor would not be able to vote and would not be bound by the voluntary agreement.
Page 26, line 36, leave out ("(c), (d) and (e)") and insert ("(a) to (f)").
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