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Insolvency etc.

353.     These clauses replace the provisions in sections 39 to 45 of the 1996 Act.

Clause 144 - Preparatory steps: notice

354.     This clause provides that specified steps are effective only if the person specified in respect of those steps has given the regulator notice. The steps and the persons who must give notice in respect of those steps are set out in the table in this clause. This clause replaces the provisions of sections 40(1) to 40(5) of the 1996 Act.

355.     The steps and the relevant persons who must give notice are as follows.

356.     Any step to enforce security over land held by a registered provider must be notified by the person taking that step. The step must be of a description prescribed for that purpose by the Secretary of State by order - this replaces section 39(3) of the 1996 Act.

357.     The presenting of a petition for the winding up of a registered provider that is either a registered company or an industrial and provident society must be notified by the petitioner.

358.     The passing of a resolution for the winding up of a registered provider that is a registered company or an industrial and provident society must be notified by the registered provider. The exception to this is the passing of a resolution for winding up that requires the regulator's consent under clause 161 or 163. This exception replaces section 40(5) of the 1996 Act.

359.     An application for an administration order in respect of a registered provider that is a registered company under paragraph 12 of Schedule B1 to the Insolvency Act 1986 must be notified by the applicant for the administration order.

360.     The appointment of an administrator in respect of a registered provider that is a registered company, under paragraph 14 (i.e. the holder of a qualifying floating charge) or paragraph 22 (i.e. the company itself or its directors) of Schedule B1 to the Insolvency Act 1986 must be notified by the person making the appointment.

361.     The filing with the court of a copy of a notice of intention to appoint an administrator in respect of a registered provider that is a registered company under paragraph 14 or paragraph 22 of Schedule B1 to the Insolvency Act 1986 must be notified by the person filing the notice.

Clause 145 - Moratorium

362.      Subsection (1) of this clause and clause 146 provide that a moratorium on the disposal of land by a registered provider begins when one of the specified steps is taken in respect of that registered provider. This replaces the provision of section 42(1) of the 1996 Act.

363.     The steps and the person taking them are set out in a table in this clause. This table replaces the provisions of section 42(2) to 42(4) of the 1996 Act.

364.     Subsection (2) requires that where a step specified in the table in this clause is taken in respect of a registered provider, the person specified in the table for that kind of step must give the regulator notice that they have taken that step as soon as reasonably practicable. This replaces the provision of section 41(1) of the 1996 Act.

365.     Subsection (3) provides that the step taken is not itself invalidated if the notice required in subsection (2) is not given to the regulator but that the end of the moratorium period specified in clause 146(2) depends upon the notice being given to the regulator. This subsection replaces the provision of section 41(5) of the 1996 Act.

366.     Subsection (4) requires the regulator to give the HCA a copy of any notice received under clause 145.

367.     The steps and the relevant persons who must give notice are as follows.

368.     Any step to enforce security over land held by a registered provider must be notified by the person taking that step if the step is of a description by the Secretary of State by order - this replaces section 39(3) of the 1996 Act.

369.     The presenting of a petition for the winding up of a registered provider that is a registered company or an industrial and provident society (but not by the directors or other governing body of the provider) must be notified by the petitioner.

370.     The passing of a resolution for the winding up of a registered provider that is a registered company or an industrial and provident society must be notified by the registered provider.

371.     A decision by the directors or other governing body of a registered provider to move a resolution for the winding up of the registered provider (where it is a registered company or an industrial and provident society) must be notified by the registered provider.

372.     The making of an administration order in respect of a registered provider that is a registered company in accordance with paragraph 13 of Schedule B1 to the Insolvency Act 1986 must be notified by the person who applied for the administration order.

373.     The appointment of an administrator in respect of a registered provider that is a registered company, under paragraph 14 (i.e. the holder of a qualifying floating charge) or paragraph 22 (i.e. the company itself or its directors) of Schedule B1 to the Insolvency Act 1986 must be notified by the person making the appointment.

Clause 146 - Duration of moratorium

374.     This clause replaces the provisions of sections 43(1) to 43(6) of the 1996 Act.

375.     Subsection (1) specifies that the moratorium begins when one of the steps specified in clause 145 is taken.

376.     Subsection (2) specifies that the moratorium ends 28 working days after the regulator has received notice under clause 144(2) unless the moratorium is extended as provided for in subsection (3) of this clause or cancelled as provided for in subsection (5) of this clause. "Working day" is defined by clause 274.

377.     Subsection (3) allows the regulator to extend the moratorium for a specified period provided that the registered provider's secured creditors, who the regulator is able to locate following reasonable enquiries, have consented to the extension. There is no limit to the number of extensions that may occur provided the secured creditors consent to those extensions.

378.     Subsection (4) requires that, when the moratorium is extended, the regulator must notify the registered provider, and any liquidator, administrator, administrative receiver or receiver appointed in respect of the registered provider or its land, and the HCA.

379.     Subsection (5) allows the regulator to cancel the moratorium if it is satisfied that it is unnecessary to make proposals under clause 151.

380.     Subsection (6) requires the regulator to consult the person who took the step specified in clause 145 that triggered the moratorium before cancelling the moratorium as provided for in subsection (5).

381.     Subsection (7) requires the regulator to give notice to the registered provider and those of its secured creditors the regulator is able to locate after making reasonable enquiries when the moratorium ends and to provide an explanation of the effects of clause 147. The latter requirement does not apply where the regulator has cancelled the moratorium under subsection (5).

382.     Subsection (8) sets out that the regulator must notify the HCA when a moratorium ends.

383.     Subsection (9) specifies that any further steps taken during a moratorium do not have the effect of either starting a new moratorium or of altering the existing moratorium's duration as defined in this clause.

Clause 147 - Further moratorium

384.     This clause replaces the provisions of sections 43(7) and (8) of the 1996 Act.

385.     Subsection (1) of the clause defines when the provisions of this clause apply. It applies if a moratorium ends other than by cancellation by the regulator under clause 146(5), and a further step specified in clause 145 is taken in relation to the same registered provider within 3 years from the end of that moratorium.

386.     Subsection (2) provides that a further step of this kind does not automatically trigger a further moratorium.

387.     Subsection (3) allows the regulator to impose a further moratorium for a specified period but only if all of the registered provider's secured creditors whom the regulator is able to locate after making reasonable enquiries consent to that further moratorium.

388.     Subsection (4) requires the regulator to notify the registered provider, and any liquidator, administrator, administrative receiver, receiver appointed in respect of the registered provider or its land, and the HCA if it imposes a further moratorium under subsection (3).

389.     Subsection (5) provides that all of the provisions in clauses 144 to 158 apply to a further moratorium imposed by the regulator under this clause as they would to a first moratorium, except for clause 146(2).

Clause 148 - Effect of moratorium

390.     This clause together with clause 149 replaces the provisions of section 42(2) to 42(6) of the 1996 Act.

391.     Subsection (1) provides that the HCA may not give the registered provider a direction under section 36(4) (to repay or reapply grant) and may not take steps to enforce such a direction against the registered provider, during a moratorium.

392.      Subsection (2) provides that the registered provider's land may not be disposed of without the regulator's prior written consent during a moratorium, and that any purported disposal without such consent is void.

393.     Subsection (3) provides that clause 149 sets out the exceptions to subsection (1), and are therefore disposals which do not require the regulator's prior written consent during a moratorium.

394.     Subsection (4) provides that the regulator's consent may be given before the moratorium begins and may be subject to conditions.

395.     Subsection (5) provides that the requirement for the regulator's prior written consent under this clause does not prevent a liquidator from disclaiming land as onerous property during a moratorium.

396.     Subsection (6) includes within the definition of "land" in this clause any present or future interest in rent or other receipts arising from land.

Clause 149 - Exempted disposals

397.     Subsection (1) provides that the list of exceptions set out in this clause do not require the regulator's prior written consent under clause 148. This replaces the provision of section 42(3) of the 1996 Act.

398.     Subsections (2) to (8) set out the following exceptions:

  • a letting under an assured tenancy or an assured agricultural occupancy

  • a letting under what would be an assured tenancy or an assured agricultural occupancy but for the provisions of paragraphs 4 to 8, 12(1)(h) and 12ZA to 12B of Schedule 1 to the Housing Act 1988 (this schedule sets out tenancies which cannot be assured tenancies)

  • a letting under a secure tenancy

  • a letting under what would be a secure tenancy but for any of paragraphs 2-12 of Schedule 1 to the Housing Act 1985 (this schedule sets out tenancies which are not secure tenancies)

  • a disposal to which section 81 or 133 of the Housing Act 1988 applies (which are disposals that require the Secretary of State's consent)

  • a disposal under the right to buy

  • a disposal under a tenant's right to acquire.

399.     This list of exceptions replicates the effect of section 42(3) of the 1996 Act

Clause 150 - interim manager

400.     This clause gives the regulator power to appoint an interim manager during a moratorium. The appointment of an interim manager comes to an end at the end of the moratorium, on a date specified in the appointment, or on the agreement of proposals under clause 151. Proposals themselves may provide for the appointment of a manager under clause 154.

401.     Subsection (5) provides that an interim manager shall have any power specified in the appointment, and any other power in relation to the registered provider's affairs required by the manager for the purposes specified in the appointment. However, subsection (6) provides that an interim manager manager's powers are more limited than those of a manager appointed under clause 154; an interim manager may not dispose of land or grant security over land.

Clause 151 - Proposals

402.     Subsection (1) gives the regulator the power to make proposals about the future ownership and management of the registered provider's property during a moratorium with the objective of ensuring that the property will be properly managed by a registered provider. This replaces section 44(1) of the 1996 Act.

403.     Subsection (2) specifies that, when making proposals, the regulator must:

  • have regard to the interests of all of the registered providers' creditors (replaces section 44(2)(b) of the 1996 Act),

  • as far as reasonably possible, avoid making the position of unsecured creditors worse (replaces section 44(5) of the 1996 Act).

404.     Subsection (3) allows the proposals to include the appointment of a manager as described in clause 154 to implement some or all of the regulator's proposals.

405.     Subsection (4) specifies things that the regulator's proposals must not include. This replaces section 44(4) of the 1996 Act. The things that may not be included in proposals are:

  • a preferential debt being paid other than in priority to a non-preferential debt,

  • any preferential creditor being paid a lesser proportion of their preferential debt than any other preferential creditor.

406.     Subsection (5) provides that where the registered provider is a charity, the regulator's proposals may not require the charity to act outside the terms of its trusts, and that the proposals may provide for the disposal of the registered provider's accommodation only to another charity whose objects are similar to those of the registered provider. This subsection replaces section 44(6) of the 1996 Act.

Clause 152 - Proposals: procedure

407.     Subsection (1) requires the regulator to consult the following before making proposals:

  • the registered provider (replaces section 44(2)(a) of the 1996 Act),

  • its tenants as far as it is reasonably practicable (replaces section 44(2)(a) of the 1996 Act),

  • the Financial Services Authority, if the registered provider is an industrial and provident society (replaces section 44(3)(a) of the 1996 Act),

  • the Charity Commission, if the registered provider is a registered charity (replaces section 44(3)(b) of the 1996 Act).

408.     Subsection (2) requires the regulator to send a copy of its proposals to-

  • the registered provider and its officers,

  • such of its secured creditors as the regulator is able to locate after making reasonable enquires, and

  • any liquidator, administrator, administrative receiver or receiver appointed in respect of the registered provider or its land.

409.     Subsection (3) requires the regulator to make arrangements for the proposals to be brought to the attention of -

  • the members and officers of the registered provider,

  • its tenants, and

  • its unsecured creditors.

410.     Subsections (2) and (3) replace the provisions of section 44(7) of the 1996 Act.

411.     Subsection (4) specifies that the regulator's proposals have effect if all of the registered provider's secured creditors to whom proposals were sent agree to those proposals by giving written notice to that effect to the regulator.

412.     Subsection (5) provides that further modifications to the proposals may be made and that these shall also have effect if all of the registered provider's secured creditors to whom the proposals were sent agree to those modifications by giving written notice to that effect to the regulator, and the regulator consents.

413.     Subsections (4) and (5) replace the provisions of section 45(1) of the 1996 Act.

414.     Subsection (6) requires the regulator to send a copy of the proposals agreed under subsections (4) or (5) to the following:

  • the registered provider and its officers,

  • its secured creditors to whom the original proposals were sent,

  • any liquidator, administrator, administrative receiver or receiver appointed in respect of the registered provider or its land,

  • the Financial Services Authority, if the registered provider is an industrial and provident society,

  • the Charity Commission, if the registered provider is a registered charity.

415.     Subsection (7) requires the regulator to make arrangements for bringing the agreed proposals to the attention of the following:

  • the members of the registered provider,

  • its tenants, and

  • its unsecured creditors.

416.     Subsections (6) and (7) replace the provisions of section 45(4) of the 1996 Act.

417.     Subsection (8) allows for the proposals to be amended by agreement between the regulator and the secured creditors to whom the original proposals were sent. Where such amendments are made and agreed, the provisions of clauses 151 and 152 apply to the amended proposals as they did to the original proposals. This replaces section 45(5) of the 1996 Act.

Clause 153 - Proposals: effect

418.     Subsection (1) lists those who are obliged to implement agreed proposals. This replaces section 45(2) of the 1996 Act. The list is as follows:

  • the regulator,

  • the registered provider,

  • its secured creditors,

  • any liquidator, administrator, administrative receiver or receiver appointed in respect of the registered provider or its land.

419.     Subsection (2) lists those who are obliged to co-operate with the implementation of the agreed proposals. They are the members of the governing body of the registered providers as follows:

  • for a registered charity, its trustees,

  • for an industrial and provident society, its committee members, and

  • for a registered company, its directors.

420.     Subsection (3) provides that subsection (2) does not oblige or permit those who are expected to co-operate to breach a fiduciary duty to the registered provider or other duty.

421.     Subsections (2) and (3) replace the provisions of sections 45(2) and 45(3) of the 1996 Act.

Clause 154 - Manager: appointment

422.     This clause replaces the provisions of section 46 of the 1996 Act.

423.     Subsection (1) provides that this clause applies where agreed proposals provide for the appointment of a manager.

424.     Subsection (2) specifies that the proposals must provide for the manager to be paid reasonable remuneration and expenses.

425.     Subsection (3) provides that the regulator will appoint the manager.

426.     Subsection (4) provides that the regulator may give directions to the manager which may be general or specific in nature, or both.

427.     Subsection (5) provides that the manager may apply to the High Court for directions, and that the directions of the regulator under subsection (4) are subject to directions of the High Court.

428.     Subsection (6) provides that the regulator must notify the Charity Commission that a manager has been appointed, if the registered provider is a charity.

429.     Subsection (7) provides that the regulator may appoint a new manager in place of a person who ceases to be a manager under this clause for whatever reason, and that the new manager's terms of appointment will be as specified in the proposals, or as determined by the regulator.

Clause 155 - Manager: powers

430.     This clause replaces the provisions of section 47 of the 1996 Act.

431.     Subsection (1) expresses the manager's general powers as follows:

  • the manager may do anything necessary for the purpose of the appointment,

  • the manager acts as the registered provider's agent, and is not personally liable on a contract, and

  • the manager has ostensible authority to act for the registered provider with the effect that a person dealing with the manager in good faith and for value does not need to further inquire into the manager's powers.

432.     Subsection (2) sets out a list of the specific powers that the terms of a manager's appointment may confer as follows:

    a)     to sell or otherwise dispose of land by public auction or private contract;

    b)     to raise or borrow money;

    c)     to grant security over land;

    d)     to grant or accept surrender of a lease;

    e)     to take a lease;

    f)     to take possession of property;

    g)     to appoint a solicitor, accountant or other professional to assist the manager;

    h)     to appoint agents and staff (and to dismiss them);

    i)     to make payments;

    j)     to bring or defend legal proceedings;

    k)     to refer a question to arbitration;

    l)     to make any arrangement or compromise;

    m)     to carry on the business of the registered provider;

    n)     to carry out works and do other things in connection with the management or transfer of land;

    o)     to take out insurance;

    p)     to use the registered body's seal

    q)     to execute in the name and on behalf of the registered provider any deed, receipt, or other document;

    r)     to do anything incidental to a power in paragraphs (a) to (q).

433.     Subsection (3) requires the manager to consult and inform the registered provider's tenants as far as it is reasonably practicable to do so about any exercise of power that is likely to affect them.

Clause 156 - Manager of industrial and provident society: extra powers

434.     This clause replaces the provisions of section 48 of the 1996 Act.

435.     Subsection (1) specifies that this clause applies to a manager appointed under clause 154 to implement proposals where the registered provider is an industrial and provident society.

436.     Subsection (2) specifies that the appointment of the manager may include the power to make and execute on behalf of the registered provider an instrument that has the effect of transferring its engagements, or providing for its amalgamation with another industrial and provident society.

437.     Subsection (3) provides that an instrument for amalgamation has the same effect as a resolution under section 50 of the Industrial and Provident Societies Act 1965.

438.     Subsection (4) provides that an instrument for transferring engagements has the same effect as a transfer of engagements under sections 51 and 52 of the Industrial and Provident Societies Act 1965.

439.     Subsection (5) requires a copy of the instrument to be sent to and registered by the Financial Services Authority.

440.     Subsection (6) specifies that the instrument does not take effect until the copy is registered.

441.     Subsection (7) specifies that the copy must be sent to the Financial Services Authority for registration within 14 days of the execution of the instrument, but that the copy registered is not invalid if it is registered after that time.

 
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