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Lord Sharman: My Lords, I rise simply to echo the remarks of the noble Lord, Lord Kingsland. The Minister and the Government have come a very long way in meeting our concerns on this matter and I am grateful.
Lord McIntosh of Haringey: My Lords, the noble Lord, Lord Kingsland, is teasing me: the thought of arguing a point of law or legislative text with the noble and learned Lord, Lord Hoffmann, fills me with dread. The noble and learned Lord has known that for the 50 years that I have known him. Nevertheless, I shall do my best.
I am grateful for the comments of the noble Lords, Lord Kingsland and Lord Sharman, and I am interested in the points made by the noble Lord, Lord Hodgson, and the noble and learned Lord, Lord Hoffmann. I am not sure, however, that I understood the first point made by the noble Lord, Lord Hodgson. He asked whether Amendment No. 194 provided for the administrator to seek to rescue a whole or a part of the business.
Lord Hodgson of Astley Abbotts: My Lords, I appreciate the points made by the Minister, my noble friend Lord Kingsland and the noble Lord, Lord Sharman. The question was whether the Minister's comments covered the essence of Amendment No. 194. Can the administrator rescue a part of the business, or is he still compelled to rescue "the business" or "the whole of the business"?
Lord McIntosh of Haringey: My Lords, I said "part" in my speech. I think that I had better write to the noble Lord, Lord Hodgson, about how that is implemented in paragraph 3 as redrafted. I asked for paragraph 3 as incorporating the Government's amendments to be sent round, but unfortunately I only asked for it to be sent round to the Front Benches. I have now given it to the noble and learned Lord, Lord Hoffmann, but the noble Lord, Lord Hodgson, did not have a copy.
I hope that, when the noble and learned Lord, Lord Hoffmann, reads it, he will agree that it is not the case that rescue is "more or less on a par"—I hope that I am quoting him correctly—with the interests of creditors. I hope that sub-paragraphs (3) and (4) make that clear. The administrator must perform his function with the objective specified in sub-paragraph (1)(a)—that is, rescuing the company as a going concern—unless he thinks that it is not reasonably practical to achieve that. In other words, although the interests of creditors
are of course important, subject to sub-paragraph (4), they are not on a par with the company rescue. These are in an order of priority.I think that the second point made by the noble Lord, Lord Hodgson, was on the question of "think" and "reasonably believe". The point about the wording in the Bill is that it does not second guess the administrator's professional or commercial judgment. If necessary, we would expect the courts to assess whether the office holder, in this case the administrator, has been rational in his decision. We are not seeking to apply any other test.
On Question, amendment agreed to.
Lord McIntosh of Haringey moved Amendment No. 193:
- Page 258, line 6, leave out "with the objective of"
On Question, amendment agreed to.
[Amendment No. 194 not moved.]
[Amendment No. 195 had been withdrawn from the Marshalled List.]
Lord Kingsland moved Amendment No. 196:
- Page 258, line 6, after "company" insert "as a going concern"
On Question, amendment agreed to.
Lord McIntosh of Haringey moved Amendment No. 197:
- Page 258, line 7, leave out from beginning to "achieving" in line 8.
On Question, amendment agreed to.
[Amendments Nos. 198 to 200 not moved.]
Lord McIntosh of Haringey moved Amendment No. 201:
- Page 258, leave out lines 11 and 12.
On Question, amendment agreed to.
[Amendments Nos. 202 to 204 not moved.]
Lord McIntosh of Haringey moved Amendment No. 205:
- Page 258, line 15, leave out sub-paragraph (2) and insert—
On Question, amendment agreed to.
Lord McIntosh of Haringey moved Amendment No. 206:
The noble Lord said: My Lords, in moving Amendment No. 206, I should also like to speak to Amendments Nos. 210, 212, 213, 214, 215, 224, 226 and 230. I ask that the noble Lords, Lord Kingsland and Lord Hunt, move Amendment No. 229 from the Opposition Front Bench as it is in their names as well as that of the Government.
In Committee, I described the subject of time scales for administration as a "major issue". The subject certainly attracted a lot of attention and discussion both during our debate in Committee and in debate in another place. I acknowledge the force of the arguments that have been put to us. Currently, no limits are placed on the length of administration. This has led to some criticism that some administrations have gone on too long, and that the lack of certainty of when the process will conclude can be a distinct disincentive for businesses and lenders when considering administration.
The need for the inclusion of a time limit for the process of administration has been generally accepted but, as I explained in Committee, it is important that limits are set at a level that reflects the practicalities of administration and at a length that commands the confidence of those with an interest in administration. As a result of the clear concerns surrounding the issue of the time limits, the Government undertook to give this matter further consideration in consultation with interested parties and to table any appropriate amendments that were identified as necessary.
Officials have met with the relevant interested parties, not only the insolvency profession itself but also representatives of both lenders and business, including the CBI, the British Bankers' Association and the Finance and Leasing Association. Those discussions were constructive and these amendments take into account the points made.
We are all in agreement that the Bill should be amended so that the administrator will now have up to 12 months, as opposed to three months currently proposed in the Bill, before having to seek an extension from either the creditors or the court and the Government were happy to withdraw their own amendment and be associated with Amendment No. 229 in the name of the Opposition and the Government. Amendment No. 230 will allow creditors to extend this period by a further six months, rather than three as the Bill presently states, while the court will continue to be able to extend the administration for a specified period.
The amendments also lengthen the time limits for the administrator bringing forward his proposals and holding a creditors' meeting. Proposals will now have to be brought forward within eight weeks and a
Although we accept the need to lengthen the time limits we are keen for administrations to be concluded as quickly as is reasonably practicable in the circumstances of each individual case. The time limits should not become the norm. For example, we would expect administrations that are straightforward because of their size or lack of complexity, to be capable of being completed within the new initial 12-month period.
In order to reflect this approach, new paragraph 3A proposed in Amendment No. 206 places a general duty on the administrator to perform his functions as quickly and efficiently as reasonably practicable. We have also included a specific duty for the administrator to act,
However, while the Government and Opposition Members were all in agreement on overall time limits for an administration, the same cannot be said for Opposition Amendments Nos. 211 and 216, which seek to extend the period during which the administrator must send out proposals and hold an initial creditors' meeting to three months and four months respectively. I am a little surprised at those amendments in view of the constructive discussions that officials had with not only the insolvency profession itself but also representatives of both lenders and business, including the CBI, the British Bankers' Association and the Finance and Leasing Association. During the discussions a general consensus was reached, and it was that consensus that formed the basis of the Government's amendments.
In most cases it should be reasonable to expect the administrator to send proposals out to creditors and to hold an initial creditors' meeting within the time limits that we are now proposing. In those exceptional cases where the proposals are likely to take longer to prepare, perhaps as regards a particularly large company or one with a complex business structure, the administrator will continue to have recourse to the creditors and/or the court to agree an extension to the time limits. I beg to move.
Lord Hunt of Wirral: My Lords, I am grateful to the Minister for the work that his officials have done over the past few days to try to resolve a number of issues. People have worked exceedingly hard and a series of
I refer, first, to Amendment No. 206, which the Minister has just moved and which states:
In addition, that standard of performance should be subject to the fundamental duty of the administrator to act in the interests of the company's creditors as a whole as cases may occur where quick action may not lead to the best outcome for creditors. We have already dealt with the consequences of some of the legal phraseology in the notable and effective contribution of the noble and learned Lord, Lord Hoffmann.
I hope that the Minister might reflect that the court's power to remove the practitioner—I refer to paragraph 88 of Schedule B1—will alone suffice. Perhaps I may reconstruct for the Minister what is at the present time the courts' attitude in the case of the liquidator which is summarised in the judgment of Mr Justice Neuberger in AMP Enterprises Ltd v Hoffman, [2002] All ER (D) 393 (Jul). All I would say to the Minister is that any legislation which he now proposes will be held, in my belief, alongside that very clear judgment. Mr Justice Neuberger said:
I hope that between now and next Monday the Minister will give some thought to whether the wording of Amendment No. 206 does not impose an
I am very grateful to the Minister, as I said previously, for proposing the time limits in the government amendments; they are welcomed and broadly acceptable. However, he referred to Amendments Nos. 211 and 216. Amendment No. 211 would leave out "28 days" and insert "three months" and Amendment No. 216 would leave out "six weeks" and insert "four months". I realise that the purpose of these amendments is to set realistic and achievable targets. I am grateful to the Minister for having said that he will provide limits that will command a wider consensus and for the extent of the consultations. It might be helpful if he reminded the House of the details of those consultations; I believe that a number of parties may not have been consulted during the time available.
Amendment No. 227 would leave out paragraphs 76 to 78. As the Minister knows, we should have preferred there to be no time limit relating to administrations. In relation to complicated administrations, in many cases one year would be far too short. In the time available, I have not yet been able to consult the practitioners sufficiently on the end time limits, but I should like to do so. I realise—such is the situation in this Session—that that means before next Monday; however, I hope that the Minister will allow me sufficient time to consult on the final backstop time limit. I am very grateful to him and his colleagues for having advanced a more realistic approach to the time limits following consultation.
"(2) Subject to sub-paragraph (4), the administrator of a company must perform his functions in the interests of the company's creditors as a whole.
(3) The administrator must perform his functions with the objective specified in sub-paragraph (1)(a) unless he thinks either—
(a) that it is not reasonably practicable to achieve that objective, or
(b) that the objective specified in sub-paragraph (1)(b) would achieve a better result for the company's creditors as a whole.
(4) The administrator may perform his functions with the objective specified in sub-paragraph (1)(c) only if—
(a) he thinks that it is not reasonably practicable to achieve either of the objectives specified in sub-paragraph (1)(a) and (b), and
(b) he does not unnecessarily harm the interests of the creditors of the company as a whole."
Page 258, line 19, at end insert—
"3A The administrator of a company must perform his functions as quickly and efficiently as is reasonably practicable."
"as soon as is reasonably practicable",
in bringing forward his proposals to creditors and calling a creditors' meeting. Our intention remains for streamlined administration to be a quick and practical business recovery vehicle that will attract the confidence of practitioners, companies of all sizes, lenders and the business community as a whole. Striking the right balance on time limits between the concerns of all those with an interest in administration is a key element in meeting that objective. We believe that the amendments achieve that balance.
5.15 p.m.
"The administrator of a company must perform his functions as quickly and efficiently as is reasonably practicable".
Who could possibly oppose the amendment? Its purpose is recognised and is laudable. However, I am advised by the many legal brains who have focused on it that its actual wording imposes something of an impossibly high standard in that every administrator must always, every minute of every day and every day of every week and month, perform with the greatest reasonably practicable speed and efficiency. It is suggested that he should be required to perform with such speed and efficiency as would be expected of a reasonably competent insolvency practitioner in the circumstances of the particular case.
"As a matter of ordinary statutory interpretation, s 108 of the 1986 Act gave the court discretion as to whether or not to remove a liquidator. In such cases, the court might have to carry out a balancing exercise. On one hand, it would expect any liquidator to be efficient, vigorous and unbiased in his conduct of the liquidation, and should have no hesitation in removing him if it was satisfied that he did not live up to expectations. On the other hand, if the liquidator was honest, the court should think carefully before removing him, and it was not enough to say that his conduct had fallen short of ideal, as that would encourage disgruntled creditors to make such applications when their agent was not appointed a liquidator".
I believe that the Minister will appreciate that that is a clear statement of the circumstances in which the court would use its existing power to remove the practitioner.
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