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Lord Sainsbury of Turville: Clause 239 requires the OFT to publish criteria to be applied by a public authority in deciding whether to disclose information in pursuance of Section 238. However, in light of the previous government Amendment No. 259, which adds to the considerations to which a public authority must have regard before disclosing information to an overseas authority, this clause is now obsolete. Therefore, I oppose the Question that Clause 239 shall stand part.
Schedule 16 [Schedule B1 to Insolvency Act 1986]:
Lord Hunt of Wirral moved Amendment No. 261:
The noble Lord said: In moving Amendment No. 261 I shall speak also to Amendment No. 262. Part 10 of the Bill deals with insolvency. We are here concerned with some significant reforms of the existing law which did not receive sufficient scrutiny in the House of Commons from all sides of the House, and once again it falls to this House to consider them carefully. I hope that the Minister will accept that the amendments that we have tabled are designed to make the changes work in practice. I hope that they will give rise to some interesting discussions.
Schedule 16 contains the detailed provisions relating to the administration of a company. It involves the appointment of a person to manage the company's affairs, business and property in the interests of the creditors of the company. The person appointed to manage the company's affairs, business and property is called an administrator.
Paragraph 3 of Schedule 16 provides that the administrator must perform his or her functions with the objective of rescuing the company, achieving a better result for the company's creditors as a whole than would be likely if the company were wound up or of realising property in order to make a distribution to one or more secured or preferential creditors.
However, I am concerned with the objective of rescuing the company. As the Minister, with his experience of business, will know, often the greatest asset of a company is the people whom it employs. It is possible to envisage under the Bill as presently draftedparagraph 3 of Schedule 16that it would be possible to keep and to preserve the company as a shell while the people, the company's most important asset, walk out through the door. Therefore, here we are dealing with the urgent necessity not only of the administrator being able to move to preserve and to rescue the company, but also the business itself.
I believe that rescuing the company on its own is a pointless objective. I have sought to demonstrate that by looking at a possible end result. Perhaps I can give an example. Suppose a company has gone into administration; the administrator of the company has performed his functions with the objective of rescuing the company and has been completely successful so that he is left as the administrator of a company with no debts or liabilities and no assets or business. That is perfectly possible under the present wording. It would mean that he was the administrator of a company that was rescued but the result is entirely worthless. A company that has nothing, does nothing and has no purpose is of no use.
By contrast the objective of preserving all or part of the company's business would be beneficial to the employees of the business, creditors of the company who may be paid out of the proceeds of the sale of the business or from future profits, and of course it would be beneficial to the economy as a whole.
Amendment No. 261 has been put forward by the reconstruction experts R3, the Association of Business Recovery Professionals. I suppose that it is slightly curious that I should be asking the Minister to prefer Amendment No. 262. The noble Lord sits there with such a benign countenance; indeed, Hansard should record that I have just had the benefit of a Cheshire cat smile, which greatly uplifted me in the belief that perhaps he agrees with me that Amendment No. 262 might be the better of the two amendments. But I await hearing from him.
The Government should support the aim of these amendments. I was a little mystified as to why they were unable to do so in the other place. I therefore propose an amendmentAmendment No. 262 is preferred but Amendment No. 261 as an alternativeto focus attention on preserving all or part of the existing business rather than just the company. I beg to move.
Lord Sharman: The name of my noble friend Lord Razzall stands to two amendments in the group. I rise to support the underlying principle behind the group of amendments. Current practice in administration is normally to effect a rescue by the sale of a business or the undertaking, not necessarily by preserving the company. The Bill would impose a primary duty to rescue the company. In that sense I think that it needs revision.
I shall not delay the Committee long. If the Bill passes into law in its current form, administrators will be more cautious about selling businesses in the future than they have been in the past, with the related adverse effect on the economy and on employment as the noble Lord, Lord Hunt, has already said. I support the amendment.
Lord McIntosh of Haringey: I am grateful to the noble Lord, Lord Hunt, for giving me notice that he intended to separate out Amendments Nos. 261 and 262 from the group. It gives me a certain amount of
difficulty because I proposed to be sympathetic to one of the two amendments in this group and to several of the amendments in the next group. The arguments for my sympathy are much the same. This group deals with the issue of company and business rescue. The next group deals with a mixture of that and of who is responsible for deciding whether or not certain objectives are reasonably practicable.I shall confine myself to the first issue of company and business rescue. I have listened carefully to what has been said. Company rescue is at the heart of the revised administration procedure. We want to make sure that viable companies do not go to the wall unnecessarily. That is why we are restricting administrative receivership and revising administration to focus on rescue and to make it more accessible to companies as well as their creditors. That is not just good for the companies themselves; it is also good for their suppliers, customers and employees.
The emphasis on company rescue will create more incentive for company management to take action promptly and use the administration procedure before the situation becomes terminal. That is why the purpose directs the administrator first to perform his or her functions "with the objective of rescuing the company". But if noble Lords will look at paragraph 630 of the Explanatory Notes, they will see that rescuing the company is qualified by,
The first priority is to rescue the company as a going concern with much of its business intact. We would not want the administrator to rescue the company if it is to the detriment of creditor value. We must be quite clear on that, both for practitioners who need to act on it and for the courts which need to interpret it. So we intend to table an amendment on Report to make clear that the first objective of administration will be to rescue the company as a going concern. I do not have the exact wording. We intend to table an amendment to make clear that the administrator will not be required to pursue the first objective of rescuing the company if the second objective would provide a better result for the creditors of the company as a whole.
By contrast, I am not so sympathetic to Amendment No. 261. It would remove the concept of rescuing the company entirely in favour of preserving the whole or merely a part of the business of the company. The noble Lord, Lord Hunt, will remember the city fathers of Limerick who resolved that the existing city gaol should be replaced, that it should remain in use until the new gaol was ready but that it should be built from the same stones as the existing gaol. I think that we would be unwise to follow that example. But I hope that, with my expression of sympathy for Amendment No. 262, Amendment No. 261 will be withdrawn.
Lord Hunt of Wirral: I am grateful to the Minister. I have already indicated my preference for Amendment No. 262. I am interested in his idea of introducing a phrase similar to "a going concern". I shall want to study the words that he comes forward with if he does not adopt Amendment No. 262, which I would still hope that he might consider. But this is a time to reflect and to return to the matter later. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 262 not moved.]
Lord Freeman moved Amendment No. 263:
The noble Lord said: In moving Amendment No. 263 I shall speak also to Amendments Nos. 265 and 267 which were previously grouped with Amendments Nos. 261 and 262 but which have now been separated. I shall be brief because a large part of what I would have said has been much more eloquently said by my noble friend Lord Hunt and by the noble Lord, Lord Sharman.
However, I have one additional point. The sequence of objectives which administrators in my judgment should face lacks an intermediate objectivethe first one the Minister has indicated that he is minded to accept an amendment on. The prime objective is to save the company and all or a substantial part of the undertaking. I believe that a second objective should be inserted after that, which is that if the administrator cannot save both the company and the undertaking then he should try to save the whole or part of the undertaking. Then third and fourth priorities are as set out in the Billa better result for the creditors than in a winding-up and to realise property for one or more secured creditors or preferential creditors.
The proposed amendment is a refinementan additional minor but important pointto the amendment that the Minister has indicated that he might accept.
I remind the Minister that most administrators end up by saving part of all of the undertaking and not the company. That is the reality of the situation today. My amendment addresses that. I beg to move.
(aa) where in his opinion it is not reasonably practicable to achieve the result mentioned in paragraph (a), with the objective of rescuing the whole or any part of the company's undertaking,"
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