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Lord Kingsland: I am grateful to the noble Lord who is, however, proving uncharacteristically obdurate today. It seems to me that, under Amendment No. 274, there is an important distinction to be made between the situation where a secured creditor applies to the court for the appointment of an administrator and that where the provisional liquidator is appointed under the company's own petition. That distinction is not made under the Bill and I hope that, over the summer adjournment, the Minister will think again about its importance. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hunt of Wirral moved Amendment No. 275:
- Page 257, line 16, leave out "with the court" and insert "on the next day the court office is open"
The noble Lord said: As the Minister has pointed out, we dealt with a substantial part of this group of amendments in an earlier debate. The previous amendment was withdrawn on the clear understanding from the Minister that arrangements for filing need to follow practical realities, particularly where timing is of the essence.
Perhaps I may deal with the other amendments in the group, particularly Amendments Nos. 281, 282 and 283. They are technical amendments designed to ensure that the administrator's appointment does not come into effect before he is aware of it. With those provisos, and referring back to the previous issue, I beg to move.
Lord Sharman: We debated these amendments earlier. I want simply to reiterate what I said then. The weekend problem is a very real one, as is the issue of an administrator acting without knowing that he has been appointed. I hope that the Minister will take these matters on board.
Lord McIntosh of Haringey: I can certainly give an assurance that ways will be found of ensuring that the administrator knows that he has been appointed. There will be no difficulty about that.
As regards the discussions on taking account of cases where time is of the essence, to which I have already referred, if any progress has been made in the inter-departmental discussions I shall write to noble Lords opposite before we reach the Report stage. I hope that it will be possible to do so.
Lord Hunt of Wirral: In the light of that assurance, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 276 to 291 not moved.]
Lord Hunt of Wirral moved Amendment No. 292:
- Page 262, line 20, at end insert "or stay any voluntary winding-up of the company"
The noble Lord said: This is a technical amendment to ensure that paragraph 37 applies equally to compulsory and voluntary liquidations. I look forward to the Minister's response. I beg to move.
Lord McIntosh of Haringey: I believe that this point was answered in the debate in the other place. If a company is in liquidation, a court may make an administration order only on the application of the liquidator. Paragraph 37(2)(c) then allows the court to make any other consequential provision as may be necessary. That could include an order to stay a voluntary winding-up.
Lord Hunt of Wirral: In the light of that explanation, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 293 and 294 not moved.]
Lord Kingsland moved Amendment No. 295:
- Page 267, line 35, after "proposals" insert ", a copy of the statement of affairs and a list of the creditors of the company of whose claim he is aware giving the name and address of and the amount of the claim by every such creditor"
The noble Lord said: Under paragraph 48 of Schedule 16, the administrator of a company is obliged to send a statement of his proposals for achieving the purpose of the administration to every creditor of the company of whose name and address he is aware. This is an important document because it will be considered by the creditors at a meeting and may be approved by them, either without or with modification, provided that the administrator consents to the modification. The administrator then manages the company's affairs, business and property in accordance with those proposals. They form, in effect, the basis of the future conduct of the administration.
We believe that it is essential for the creditors to be sent a statement of the company's affairs prepared pursuant to paragraph 46 so that they can make a proper decision as to whether to approve the administrator's proposals. The statement of the company's affairs should contain a comprehensive account of the company's financial position. Furthermore, it is essential that that should be made available to the creditors before the creditors' meeting. The creditors cannot make a reasonable decision on the administrator's proposals without such financial information. We therefore believe that the statement of affairs should be sent out with the administrator's proposals.
We also feel that it would be appropriate for creditors to be sent a list of names and addresses of all the other creditors and the amounts of their claims. We think that this is also an important document and one to be sent at an early stage so that creditors can identify other creditors with a view to summoning a creditors' meeting.
Under paragraph 51, the administrator need not call an initial creditors' meeting to consider his proposals if, for example, he forms the view that the company has insufficient property to enable a distribution to be made to unsecured creditors. However, paragraph 51(2) provides that the administrator shall summon an initial creditors' meeting if it is requested by creditors of the company whose debts amount to at least 10 per cent of its total debts. A creditor who wants the administrator to summon an initial creditors' meeting must be able to contact other creditors with a view to joining with them so that their debts amount to at least 10 per cent of the total debts of the company. Creditors will also need to know what the total debts of the company are, and that should also be apparent from the statement of affairs and from the list of creditors.
In short, we believe that it is essential that the creditors are sent a list so that they can take steps to request an administrator to summon a creditors' meeting for the purpose of approving the administrator's proposals. I beg to move.
Lord McIntosh of Haringey: Although the noble Lord, Lord Kingsland, has moved only Amendment No. 295, I shall have to respond also to Amendment No. 294 because the two are linked.
I can now do a little better than saying, "This is a matter for the insolvency rules, copies of which we shall get to noble Lords as soon as possible", because this issue is already covered by the insolvency rules. Rule 262.16 requires an administrator to send a copy or a summary of the statement of affairs along with his or her proposals.
As to the list of creditors, the administrator will need details of the company's creditors in order to notify them of his or her appointment and, in due course, to send them copies of his or her proposals and to invite them to a creditors' meeting if one is to be held. This information may not be held by the company in the form of the list required by the amendment, but once it has been assembled and given to the administrator it will constitute a list for the purposes of the provision. It will, after all, have been drawn principally from the company's own records. So I can give an even firmer assurance that the insolvency rules will cover both of these points.
Lord Kingsland: That is a most refreshing response. I thank the Minister, and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.30 p.m.
Lord Hunt of Wirral moved Amendment No. 296:
- Page 267, line 36, leave out "28 days" and insert "three months"
The noble Lord said: We move now to some very important amendments dealing with time-scales. In moving Amendment No. 296, I shall speak also to Amendment No. 297.
Paragraph 48(4) provides that the administrator is under an obligation to send a copy of the statement of his proposals for achieving the purpose of the
administration to the registrar of companies, to every creditor of the company and to every member of the company within a relatively short period of 28 days. I believe that to be an unrealistic period for the following reasons.We are referring to a very important document because, if approved by the creditors' meeting, the administrator must manage the company's affairs, business and property in accordance with the proposals in the document. The statement of his proposals will have to be a detailed document setting out the history of the company, its present financial position and the future plans during the administration and give sufficient financial information to enable the creditors to form a view as to whether or not they should approve the proposals.
Gathering the factual information for this statement of proposals will of course take some considerable time if it is done properly. The facts will need to be considered once the information has been gathered and decisions will have to be taken as to how to manage the company's affairs, business and property. Once those decisions have been taken, the relevant factors and the grounds for the decision will have to be put together in the statement. It then has to be printed, and sent out to all the creditors.
Therefore, we are talking about an extremely important exercise. On reflection, I believe that the Minister will conclude that it is unrealistic to expect an administrator to be able to prepare such a document within the relatively short period of 28 days. Of course, if he manages to do so, the doctrine of "more haste, less speed" may well come into operation. Although the administrator may well have complied with the time limit in this paragraph, the quality of the statement of his proposals will surely have suffered as a consequence. Indeed, in the more complex cases, or where there are thousands of creditors, the time limit of 28 days is, I believe, completely unrealistic.
The Minister may tell me and the Committee that the time limits can be extended under paragraphs 107 and 108 of the schedule either by the court, or with the consent of each secured creditor of the company or a majority of the creditors by value. However, I believe that it would be unrealistic to expect to obtain the informed consent of the creditors of the company before the time limit has expired, especially if there are thousands of creditors. Therefore, under the present provisions, it will surely become common practice for administrators to apply to the court for an extension of the 28-day time limit.
I can envisage circumstances in which the application would have to be made in almost every administration. Of course, if that application is to be made properly, the court will have to be put fully in the picture by being given all the relevant facts so that it can make up its mind as to whether or not to grant the extension of time. I suspect that such an application will need as much detail as is presently required for a petition for an administration order. Anything less than that sort of detail would be mere rubber-stamping, which would increase costs for no
conceivable effect, or benefit. If the court then refuses the extension of time, as no doubt it should if insufficient evidence is put before it, the position would then become even more impossible because the application to the court will have wasted several days.Although I understand the wish to produce a package of reforms that will speed up the whole process—and, indeed, sympathise with it—I hope that the Minister will accept that the present period for the approval of an administrator's proposals when an administration order is made is three months. That is a much more sensible period. As far as I am aware, there has been no criticism of that period. Therefore, in the absence of any criticism, I wonder why we should seek to change so dramatically to a period of 28 days.
Paragraph 50 of the schedule provides that the initial creditors' meeting,
- "must not be after the end of the period of six weeks beginning with the date on which the company enters administration".
In conclusion, those who have any experience of administration will know that the first few weeks of the process place enormous demands upon the administrator. As we discussed earlier, his first priority will be the stabilisation of the business. I hope that the Minister will look favourably on these amendments, which I believe will considerably improve the proposed legislation. I beg to move.
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