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That allows modifications to be made as necessary in order for the 1986 Act to be made to work effectively for these bodies. We have kept within the structure that was already there and provided this power to make modifications in a way that would be consistent with the 1986 Act.

Amendments Nos. 83 and 85 would remove that order-making power. I do not believe that that is what the noble Baroness wants—she just wanted the clarification that the 1986 framework, which has served us so well to date, would be the framework to which we would adhere. I can give her the assurance. As the noble Baroness knows, it is already the case that the Insolvency Act 1986 is applied to mutuals with modifications and mutuals are listed as the relevant body. For example, in Schedule 15 to the Building Societies Act 1986, similar amendments or modifications are likely to be needed for winding-up for convictions for breach of an order under this Bill. I hope that the noble Baroness will therefore be reassured that we do not propose to behave in a way that is outwith that which she would expect.

Baroness Noakes: I am very grateful to the Minister for her response, which I could have anticipated. I was trying to probe how far the power could be used. She said that the power would enable the Act to apply to different kinds of bodies, which I understand, but I was proposing that the power was extremely wide and

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could be used to change some core elements of the 1986 Act—and, if that were the case, the negative procedure would not be appropriate. Will the Minister clarify whether there are any constraints on how this power could be used? It is the circumscription of the power that I seek to explore—not the existence of the power itself, which the Minister has properly identified.

Baroness Scotland of Asthal: We think that the modifications would have to be consistent with the Insolvency Act. If we wanted to do anything further than that we would probably have to go back to have a debate—in which I know the noble Baroness would engage—on whether there needed to be changes to the Insolvency Act. That is how we see the provision working, and that is why we think that the negative resolution procedure is perfectly proper.

Baroness Noakes: I am grateful to the Minister for that response. I shall certainly take that back and discuss it with the Association of Business Recovery Professionals. For this evening, I am well content and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes moved Amendment No. 84:

The noble Baroness said: Amendment No. 84 is another probing amendment. I shall speak also to the other three amendments in the group.

As the Minister explained, Clause 27(11) defines the term “relevant body”, which is used in subsection (6), and relevant bodies can be subject to winding-up orders under Clause 27. As she also explained, although they are defined largely unremarkably in paragraphs (a) to (c), paragraph (d) gives the Secretary of State the power to add,

That is in itself a wide power. The Explanatory Notes, again, offer no help on how such a power could be used.

Amendment No. 84 adds a requirement for such an order to be made using the affirmative procedure, and Amendment No. 131 removes the power from the list of negative procedure powers in Clause 76(6). Amendments Nos. 86 and 132 are the mirror amendments for the Northern Ireland provisions.

We are not entirely sure why paragraph (d) is needed at all. Are the Government not able now to define the bodies that they wish to be included in this clause? I assume that the Government have satisfied themselves that all kinds of body currently in existence are within the clause. I assume that the Government are happy that the most recent innovations in the corporate sphere are included; for example, limited liability partnerships under the Limited Liability Partnerships Act 2000 or community interest companies under the Companies (Audit, Investigations and Community Enterprise) Act 2004. I assume that those are included in Clause 27 and will not need to be

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brought within it using the paragraph (d) procedure. The Minister may also wish to comment on whether and to what extent overseas companies are within Clause 27 without the paragraph (d) power. The question is whether the Government are sure that their current formulation of Clause 27 includes all types of body that should be within the scope of Clause 27. Presumably it should be open to the Government when inventing new forms of body to ensure, if it was deemed appropriate, that the relevant legislation incorporates provisions corresponding to those in Clause 27.

Perhaps I may approach this from a slightly different direction. Clause 27 is fundamentally about corporate or business structures that could be wound up. The Insolvency Act was designed around such bodies. But the power in paragraph (d) applies to,

and hence is not limited to corporate or business bodies. As the power to amend in relation to relevant bodies is in principle quite wide, that raises wide issues.

I am asking the Minister where the boundaries are. Would it be possible that categories of individual, who are persons, could be brought in under paragraph (d) orders? Could the power be used to bring in charities that are not set up as companies or other kinds of unincorporated body? Are there any limits—rather as I was discussing on the previous amendment—to how this power could be used? As the Minister will see, we have concerns about this power being used to add relevant bodies under paragraph (d) with only the weakest of parliamentary procedures to oversee the use of that power. Our amendments in this group therefore focus on making the power subject to the affirmative procedure rather than the negative one.

The Minister will be aware from my remarks that we are also concerned about the appropriateness of the power in paragraph (d). It is important that the Minister should comment on the extent of the power as well as on the parliamentary process. I beg to move.

9.30 pm

Baroness Scotland of Asthal: I reassure the noble Baroness that we have tried to identify all the relevant bodies in the list, including the limited liability partnerships. However, as she has had the delight of engaging in a number of debates since she entered this Chamber, she will be aware that we have, together, formed new bodies, identities and forms which have come into being in other legislation. She identified a number of them which she hoped would be covered. I assure her that they are.

It is clear that bodies may be created in the future that will need to be covered by paragraph (d). That provision would allow those bodies to be properly included without having to follow the affirmative resolution procedure. As the noble Baroness said, we discussed the purposes behind Clauses 27 and 28, and why they are necessary.

Amendments Nos. 84 and 86 would change the procedure for the order-making power to add to the list of relevant bodies from negative resolution to

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affirmative resolution. We agree with the Delegated Powers and Regulatory Reform Committee, which stated in its report on the Bill:

For the same reasons, we say to the noble Baroness that this is a limited area of application. Therefore, it would be onerous to use the affirmative procedure in order to bring it into being. Amendments Nos. 131 and 132 are consequential on these amendments.

We looked at this matter but came to the view that the negative resolution procedure was the most appropriate level of parliamentary scrutiny. On that basis I resist the noble Baroness’s amendments.

Baroness Noakes: I thank the Minister for that reply. She stressed that the reason for using the negative procedure was that the power was limited in its application. I was trying to probe the nature of these limitations. That is why I asked various questions about what sorts of person the power might apply to. I did not detect any limitations in the Minister’s response, so I am left with the impression that this is a very wide power which perhaps ought to be subject to the affirmative process. I do not know how the Delegated Powers and Regulatory Reform Committee reached the conclusion that the power was limited; I cannot see how it is limited. Perhaps the Minister can help me on that.

Baroness Scotland of Asthal: I refer to our earlier debate. The body would need to be a body that it would be appropriate to wind up, but otherwise it is a wide power to allow us to add bodies as necessary. As we have just discussed, those bodies have in the main been created by law. They are therefore able to be adequately identified. If and when those new bodies are created, they can be added.

The noble Baroness will know that “person” can be a legal person as well as a natural person. Therefore, when one is seeking an inclusive term which can include all sorts of legal personalities, it is not unusual to use “person”, which would include bodies corporate and other bodies which have been properly identified.

The noble Baroness asked about charities; the issue depends very much on the nature of the charities. As she knows, some charities can be companies. We see this not as a wide power, but as an opportunity to include bodies and personalities, including corporate personalities, as they are created to make sure that they are consistent, as one would expect. We do not think that this power could be used inappropriately. That is why, because of the constraints that are put in—I am not supposed to use Latin any more, so I had better not finish that thought.

We are looking to keep the group of entities similar, and they are identified in the way in which I have indicated. The negative resolution procedure is appropriate. That is why we were able to satisfy the Delegated Powers and Regulatory Reform Committee that it was an appropriate procedure to adopt. I am very happy to write to the noble Baroness further if she thinks that might help her.



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Baroness Noakes: I am grateful to the Minister for that. We do not want to delay things this evening. I am trying to ensure that the power is related to company-like bodies, which is too imprecise a term for an amendment, but she will understand that I am trying to see where the boundaries are. Perhaps it would help if she could write to me. In the mean time, I will think further about what she has said this evening. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 27 shall stand part of the Bill?

Baroness Noakes: I decided to use a stand part debate to explore some of the Government’s thinking on Clause 27. I have not tabled anything about opposing the Question whether Clause 28 should stand part, but I am sure that the Minister will appreciate that my comments apply with equal force to the Northern Irish equivalent. As we have discussed, Section 124A of the Insolvency Act already allows the Secretary of State to present a petition allowing for the winding up of a company in a number of circumstances, including investigation under the Companies Act 1985 or the Financial Services and Markets Act 2000, or following information obtained under Section 2 of the Criminal Justice Act 1987. The basis for winding up under Section 124A is that it is,

that the company be wound up and that the court has to consider that it is just and equitable.

The Minister read out the equivalent parts of Clause 27 earlier. The one difference is the word “expedient”, which is in Section 124A of the 1986 Act. Will the Minister say why that word, which presumably had some significance when it was drafted for the purpose of the 1986 Act, has been omitted from the equivalent provision in Clause 27?

The one significant difference between Section 124A and Clause 27 is that Clause 27 has a very specific requirement that the body has to have been convicted of an offence under Clause 25 on failing to comply with a serious crime prevention order. Section 124A is much more broadly based, because it does not require any kind of conviction. It does not even require insolvency. The Section 124A provisions have been used significantly. I understand that between 30 and 70 petitions are presented each year, and I have not been made aware of any problems in using that power. I invite the Minister first to say in what respects the existing power under Section 124A was felt to be insufficient for the purposes of catching companies that have been convicted of an offence under Clause 25. Is Section 124A not wide enough to allow petitions in those circumstances?

I am aware that Clause 27 allows various persons other than the Secretary of State to present a petition, but that is not the focus of my inquiry. I am seeking an explanation about the powers to obtain a winding-up order under Clause 27 in comparison with those under Section 124A, rather than about the persons who may use the power. My first concern is why we have Clause 27 instead of Section 124A. Let

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us assume that the Minister will convince me, as I am sure she will, that Clause 27 is necessary. Will she explain why the Government have chosen to include substantive provisions relating to the winding up of companies in the body of criminal law rather than that of insolvency law?

Concern has been expressed by R3, the association that I referred to earlier, about the fragmentation of insolvency law between different statutes. It believes that fragmentation carries a risk of anomalies and inconsistencies for the treatment of different companies in substantially similar circumstances.

Which Minister or Secretary of State will be responsible for bringing forward secondary legislation under Clause 27? Will it be the Secretary of State for Trade and Industry, who has primary responsibility for insolvency law, or the Home Secretary? Does the Insolvency Service, which acts as a repository of technical expertise in the highly complex law relating to company insolvencies and winding up, agree with the drafting of Clause 27?

I suggest that a more satisfactory way of achieving the policy objective behind Clause 27, which we do not have a problem with, would be to amend Clause 124A of the Insolvency Act 1986 so that all relevant insolvency provisions were kept together as an integrated and coherent whole. That is the preference of R3, as I mentioned earlier. The fear is that the Bill creates a tiny island of insolvency law and a great ocean of criminal law, which could in due course have unintended consequences for the coherence of insolvency law overall. I look forward to the Minister’s response.

Lord Burnett: I know that I am raising matters that have been covered previously, but I have been trying to remember whether any description of a “person”—because, as the Minister said, “person” is a wide expression that is often used in the taxes Acts—that is now in existence is not covered by the Bill, as it is drafted. As the Minister rightly said, it could be a charitable trust or a charitable company, and if one wants to wind that company up or proceed against trustees, provisions already exist for that. Limited liability partnerships, on which I had the questionable privilege of speaking in the other place, are covered. I suspect that the only “person” that will be subject to subsection (11)(d) will be something like a limited liability partnership to be created in the future. Can the Minister think of anything at all that exists now that is not covered by the provisions already in the Bill? I understand the reasons for subsection (11)(d), but I cannot remember whether anything exists that is not covered by the Bill as it stands.

Baroness Scotland of Asthal: First, on the question raised by the noble Lord, Lord Burnett, I do not think that anything is not covered by the Bill at the moment; but, as I said to the noble Baroness, Lady Noakes, as things have evolved, we have created new bodies that should properly be included in any such list. The list is up-to-date as of today, but whether we will have created anything else by a year or two hence, I could not possibly comment.



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On at least two occasions the noble Baroness suggested putting these orders into the criminal law. The whole purpose of the Government making these orders is, actually, to make civil orders. The prevention orders will not be made in relation to crime; they are protective orders. That is why we have borrowed from the Insolvency Act. One of the things that we are trying to do in relation to the authorities that are charged with interdiction of high-volume, serious crime is to be able to take action in a comprehensive and inclusive way in relation to these criminals. I know that the noble Baroness is familiar with the threat that they pose to legitimate business, particularly because they have previously created companies for the sole purpose of having a sham through which their nefarious practices can be covered.

9.45 pm

The noble Baroness is correct with regard to the way in which we have used the current provisions of insolvency to deal with those circumstances. It is not because the circumstances have not been found to be well proven; it is because they are well proven that, when looking at these provisions in terms of what the High Court can do in considering an application, we see this as being one thing that the court may be minded to do and will be entitled to do within these proceedings.

The clause provides the applicant authorities with the power to petition the court for the winding up of a company, partnership or relevant body. This is so that, where such a body is being used for serious criminal purposes, it is possible to stop such activity through the authority where appropriate. At the time of making an application to the High Court, such an authority might make a number of orders in relation to stopping the activity. It might be winding up the company, making an application to restrict the movement of the individual or seeking to make appropriate further or other conditions on their ability to act. Clause 27(2) to (4) provide for the winding up of a company for that purpose.

Subsection (5) allows the Secretary of State to make an order to allow the court to wind up a partnership. Subsection (6) allows the Secretary of State to make an order to allow the court to wind up a relevant body. The court will not be able to wind up a partnership or a relevant body unless the secondary legislation under those subsections has been made.

The noble Baroness was right to highlight the provisions of Section 124A of the Insolvency Act 1986, because that is an example of winding up a company where it is in the public interest to do so. We have tapped into that legislation and used that framework so that the court can make an order within it. It is not the case that Section 124A is insufficient—that is not the point; rather, we simply wanted to provide for the court to be able to tap into that legislation when dealing with serious organised crimes and applications in this way. We wanted to provide for an applicant authority under the Bill to petition the court for winding up rather than having to go back through the route provided for an application in the

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Insolvency Act; otherwise, a number of applications would be going through the court at different times. This is a way of consolidating matters and enabling one application to be made in relation to one body.

We have acted in that way in order to prevent fragmentation, and we have avoided creating any new procedures. If the noble Baroness goes through all the safeguards that we have in relation to Her Majesty’s Customs and Excise and so on, she will see the way in which we have transported provisions from past legislation into these provisions. We have sought to remove any duplication so that there is consistency, a framework and a synergy, and we are not doing anything outwith what was argued about and debated when those other provisions were passed. We are not adding anything.

I have looked at whether we can find a reason why the word “expedient” has been left out on this occasion. It simply seems to me that the issues have been differently framed. It does not seem to have great significance other than being a drafting difference. The key is that the court must consider that winding up would be, first, just and, secondly, equitable, and those two safeguards will ensure that winding up occurs only when appropriate. I shall look at that issue and try to get a better explanation for why it is not there. I certainly did not have specific briefing on it and it does not seem to have a real significance. I shall need to have an explanation for the Committee as to why it is not there.


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