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Lord Sharman: As the Minister quite rightly said, my noble friend Lady Maddock spoke to this issue on Second Reading. Unfortunately she cannot be with us this evening, but she has advised me that in her view the amendments as tabled do exactly what she was looking for. She has asked me to express her thanks to the Minister for addressing the issue.
On Question, amendment agreed to.
Lord McIntosh of Haringey moved Amendments Nos. 349 to 352:
- Page 174, line 18, at end insert—
On Question, amendments agreed to.
Clause 246, as amended, agreed to.
Schedule 18 [Schedule 2A to Insolvency Act 1986]:
[Amendment No. 353 not moved.]
Clause 247 [Abolition of Crown preference]:
[Amendments Nos. 354 and 355 not moved.]
Clause 248 [Unsecured creditors]:
[Amendments Nos. 356 to 360 not moved.]
On Question, Whether Clause 248 shall stand part of the Bill?
Lord Hunt of Wirral: Clause 248 inserts a new Section 176A after Section 176 of the Insolvency Act 1986. New Section 176A provides for a percentage share of the company's assets to go to unsecured creditors although the percentage will be set by statutory instrument and will be subject to consultation. I think that in its current form this clause is most unsatisfactory. It concerns a vital issue which is the share of floating charge assets that will be given to unsecured creditors. I feel strongly that this is a radical proposal that will have an inevitable effect on lending to businesses.
In the circumstances, I really do not believe that it is good enough that a point as fundamental as this does not appear yet to have been thought through by the Government. We shall have to await consultation later in the year followed by a statutory instrument and therefore there will be no real debate. My purpose in initiating a brief debate on Clause 248 is for the Minister to have the opportunity to reassure me, to
Lord McIntosh of Haringey: I hope that I can do a little more than that. I shall try to respond to the consultation point. Perhaps it would be helpful if I said a little more about the effect of Clause 248 and the way it will work.
We announced in the White Paper, Insolvency: A Second Chance, that we would make provisions to ensure that the benefit of the abolition of the Crown's preferential status will go to unsecured creditors. It is, after all, they who are at the end of the queue and for whom there is often nothing left after costs and secured creditors have been paid. It is estimated that an additional £70 million per year will become available to unsecured creditors as a result of the Crown giving up its preferential status. It is only right that unsecured creditors—including those in cases in which a floating charge has been given—receive the benefit of this money. This clause achieves that promise.
Therefore, in company insolvency cases where a floating charge has been given, this clause instructs the office-holder to set aside—or "ring-fence"—a proportion of the money that he has available for the floating charge holder and to hold it for distribution to unsecured creditors.
While exact figures are not available to show what the Crown gets as a result of its preferential status as a proportion of all distributions made in insolvencies, we estimate—from figures held by the Insolvency Service—that, preferentially, the Crown gets
But, we would not want the costs of distribution to the unsecured creditors to outweigh the benefits of the additional money and so we propose to set the ring fence on a sliding scale with a de minimis level. We shall prescribe by secondary legislation exact figures in the light of consultation with interested parties. I believe that that was the matter about which the noble Lord, Lord Hunt, was concerned. But, for example, we might provide that the ring fence is 50 per cent of the first £10,000 available for distribution to the floating charge holder; then 10 per cent until the net property reaches the value of £1,000,000; and thereafter the figure should be reduced to 5 per cent. I give that as an example, but consultation will take place. This section will apply to property subject to a floating charge of any company over which a liquidator—or provisional liquidator—has been appointed, or which is in administration or receivership. But it allows for creditors agreeing to a voluntary arrangement to set the ring fence aside.
As I say, consultation will take place with all interested parties. In other words, it will not be restricted. We shall carry it out as soon as we can. We shall start immediately after Royal Assent. We intend to bring it to a close in the New Year.
Lord Grocott: I beg to move that the House be now resumed.
Moved accordingly, and, on Question, Motion agreed to.
"72FA SIXTH EXCEPTION: REGISTERED SOCIAL LANDLORD
Section 72A does not prevent the appointment of an administrative receiver of a company which is registered as a social landlord under Part I of the Housing Act 1996 (c. 52) or under Part 3 of the Housing (Scotland) Act 2001 (asp 10)."
Page 174, line 19, leave out "72F" and insert "72FA"
Page 174, line 20, leave out "72F" and insert "72FA"
Page 174, line 28, leave out "72F" and insert "72FA"
House adjourned at ten minutes past eleven o'clock.
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