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Lord McIntosh of Haringey: I have no difficulty with much of what has been said. However, the matters raised by the amendments are really matters for the insolvency rules, rather than primary legislation. The noble Lord, Lord Hunt of Wirral, recognised that when he asked where we were with the insolvency

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rules. The difficulty is that they cannot be finalised until the Bill is in its final form. In other words, we cannot produce something to put out for consultation until we have a Bill.

I appreciate the desirability of offering draft insolvency rules to the Opposition while the Bill is progressing, but I do not want to prejudice the necessary consultation with the experts. If the noble Lords, Lord Hunt of Wirral and Lord Sharman, will forgive me, I will say simply that I recognise the importance of consent and signatures. We will amend the insolvency rules to effect those changes. It is probably a step too far to say whether the insolvency rules will then behave exactly as the amendments propose.

The amendments do not deal with the interesting and important issue of the Friday night application, raised by the noble Lord, Lord Hunt of Wirral. That is dealt with by the amendments in the group led by Amendment No. 275. I do not mind jumping the gun, if other noble Lords do not mind my doing so. The appointment of an administrator must take effect at the point at which the notice is filed in court. One of the effects for a company entering administration is that it becomes subject to a moratorium on legal and other proceedings. The court must be made aware of the point at which the administrator's appointment takes effect. That is the starting point.

It is also important that the court should underpin the administrative procedure, including cases in which the administrator is appointed by one of the out-of-court routes. We have provided that all administrators will be officers of the court, and that will give the court supervisory jurisdiction over them. It is right that the filing of the notice should be the trigger for their appointment.

The Friday night issue is valid. We want to make sure that administrators can act quickly and effectively. We must make sure that the arrangements for appointing administrators reflect practical realities and take account of cases in which time is of the essence, as the noble Lord, Lord Hunt of Wirral, said. Officials are working with colleagues in the Lord Chancellor's Department, the Court Service and the devolved Administrations to develop options for making court filing quick and accessible, including provision for filing documents outside normal court opening hours, when that is necessary.

I hope that that is a suitable response, not just to this amendment but to the later amendments.

Lord Freeman: I anticipate that I will not speak later to an amendment to which the Minister referred. I welcome what he said. Will he comment on the proposal that has been circulating for some kind of fax-back arrangement? That would be a recognition by officers of the court that proper notice has been given, so that an administrator can proceed, if necessary, over the weekend.

Lord McIntosh of Haringey: That is one of the options that Department of Trade and Industry

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Insolvency Service officials and officials from the Lord's Chancellor Department and the Court Service can consider. It makes good sense to me.

Lord Sharman: I had intended to speak to the issue when we came to the group led by Amendment No. 275. As it has been raised now, I must say that the practical experience is that those who seek to avail themselves of the assets of insolvent companies do not always pay attention to the niceties of the law. It is critically important that the administrator should be able to secure premises and the like. To do so, he needs the force of the law behind him. I hope that the Minister will, as he says, consider seriously this "weekend problem", as we might graphically describe it.

Lord McIntosh of Haringey: I agree entirely.

Lord Hunt of Wirral: We might have a way forward in looking at rules. As the Minister rightly said, the Bill is not yet in its final form. The rules to which he refers are almost certainly in draft form at the present time and are therefore not in their final form. Surely it is appropriate that the draft rules should be circulated to the Opposition Benches, and, indeed, to the Government Benches, so that we have an opportunity to look at them and to see the extent to which our fears are met by the detail of the rules. I do not expect the Minister to respond now, but perhaps he might think about my suggestion.

We respect that the rules would be in draft form and we agree that in no circumstances must the consultation be prejudiced in any way. The Minister has been forthcoming in responding so positively to this debate, which is linked with the later debate on Amendment No. 275. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 271 not moved.]

Lord Kingsland moved Amendment No. 272:


    Page 256, line 37, leave out "two" and insert "five"

The noble Lord said: In moving the amendment I shall speak also to Amendment No. 273. Amendment No. 272 is about timing. The extra days' notice to floating chargeholders would make the time limit more manageable. Amendment No. 273 is also about timing. Its purpose is to ensure that no delay should occur in urgent cases where all the competing secure creditors agree. I beg to move.

Lord McIntosh of Haringey: The reason we have a two-day notice period for the holders of prior floating charges is to make it compatible with the notice requirements for companies or their directors appointing administrators by the out-of-court route. A company has to give five days' notice to floating chargeholders before appointing an administrator. That allows the floating chargeholder the opportunity to appoint his own choice of administrator if he so

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decides. Before appointing, the floating chargeholder will have to give notice to the holder of any prior charges. To give those prior chargeholders five days' notice would take them beyond the date that the company or its directors could appoint their own choice of administrator. That is why we want a shorter period.

The issue behind Amendment No. 273 was raised in the Commons. We tabled an amendment on Report to make sure that a prior floating chargeholder was able to consent in writing, in which case the full two-day period would not be necessary. That government amendment is now paragraph 14(1)(b).

Lord Kingsland: It sounds as though the Minister has some good answers. I shall reflect on them, and meanwhile beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 273 not moved.]

Lord Kingsland moved Amendment No. 274:


    Page 257, line 11, after "appointed" insert "on a winding-up petition presented by a creditor"

The noble Lord said: In moving the amendment I shall speak also to Amendments Nos. 284 and 285.

Lord McIntosh of Haringey: Not to Amendment No. 286?

Lord Kingsland: I am not sure that I shall speak to Amendment No. 286, unless the Minister has a major concession to make on it. He is shaking his head, so I shall leave him to reflect on it over the summer.

The purpose of the provisions is to permit secured creditors, whose loan is in default, to proceed quickly and cheaply to appoint an administrator of their choosing. Where a provisional liquidator has been appointed on a creditor's winding-up petition, it is fair to require that the secured creditor should apply to the court for the appointment of an administrator, who will, in effect, replace the provisional liquidator.

However, it would be wrong, in principle, to have such a requirement where the provisional liquidator is appointed on the company's own petition. It is acutely undesirable that the company should be given a further opportunity to compete with the secured creditor over the choice of the insolvency office holder.

I have two observations on Amendments Nos. 284, 285 and 286—if I may draw Amendment No. 286 into the family. First, in a so-called rescue culture there is much to be said for not limiting the remedies available to all stakeholders in any way. Regardless of history, the board of a company might, legitimately, take the view that, in the circumstances currently facing the company, the appropriate course of action would be to take the company into administration. Serial protection seekers will get into quite enough trouble without needing this provision as well.

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Moreover, if paragraph 23 remains, we should prevent directors circumventing the clause by lending the company a nominal amount secured by fixed and floating charges over the whole of the assets and then appointing an administrator under paragraph 13. I beg to move.

9.15 p.m.

Lord Sharman: I support Amendment No. 274, to which my noble friend Lord Razzall has added his name. I will add nothing to what was said by the noble Lord, Lord Kingsland; he said it far more eloquently than I could.

Lord McIntosh of Haringey: I appreciate the concern expressed by the noble Lord, Lord Kingsland, that the floating charge holders should not be prevented from using the new quick out-of-court route for putting a company into administration if a provisional liquidator has been appointed following a petition by the company. But under the proposals in the Bill the provisional liquidator will not have been appointed by the company but by the court, which will have decided that it was right to do so. Therefore, given that the provisional liquidator is a court appointee, it would not be right for a floating charge holder to be able to displace him or her without a court hearing. In those circumstances, it would be open for the floating charge holder to apply for administration through the court, but not in the way that Amendment No. 274 would provide.

As regards Amendment No. 284, I share the aim of making administration as accessible as possible to companies which get into financial difficulties. However, we believe that the prohibition we have included—that is, against using the out-of-court route in the 12 months following the end of an unsuccessful attempt to put in place the company's voluntary arrangements—is a necessary protection to prevent a small minority of unscrupulous companies and directors from making serial use of moratorium procedures to the detriment of their creditors.

If there are genuinely good reasons for the company to go into administration during this period, it can apply through the courts, but it should not be using the out-of-court route here. That strikes the right balance between protecting the interests of creditors and ensuring that administration is accessible to companies and their directors.

Amendments Nos. 285 and 286 are different versions of the same thing. I fully support the principle behind them but they are not necessary. The matter has been dealt with elsewhere. Section 245 of the Insolvency Act 1986 deals with situations where a company gives connected parties floating charges. Where a charge is granted to a connected party in the two years before an administration, Section 245 provides that it is invalid except for the value of moneys lent to the company at the time when the charge was created.

If only a nominal sum was lent for the purpose of establishing a floating charge, the floating charge would be valid for that nominal sum. However, it

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would be unlikely to relate to the whole, or substantially the whole, of the company's property, so it would not entitle the holder to appoint an administrator by the out-of-court route.


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