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Banking Bill

I wish to speak to Amendment 85, which is based on my great concern, from experience, of the confusion that arises in any offset arrangement at the closing out of a business. The clause completely underestimates the extent of the hazard which is initiated and which causes untold suffering and confusion to all parties in trying to bring about a satisfactory resolution of any transfer of a bank’s ownership in these circumstances. The Insolvency Act 1986 is extremely explicit on the rules governing offset. It has become a matter of custom and practice and is very well policed and overseen by the insolvency practitioner profession, which, to my knowledge, has produced no great dissent during its 23 years of life. I invite the Minister to consider an actual case in which I was involved. You have to bear in mind that on the day that you close out a huge transaction such as this, a lot of people will rush to complete transactions against the clock. Let us suppose that on the morning of the day when you are going to close the whole deal, you receive a transfer of half a billion pounds’ worth of funds from America, representing a combination of consideration and debt repayment for a subsidiary of a company that banks with the bank with which you are dealing. To whom does that half billion belong in the hours leading up to and through the completion process? There are at least half a dozen applicants for the ownership of that money. If the Government now try to introduce a provision that effectively gives them the right to direct where that half billion goes, they will spend the rest of their natural life in litigation. The situation is complex. First, the assumption is that the company being sold is owned by a company which banks with a syndicate of banks, because all these loans are syndicated. Some £200 million of the £500 million is due to be the consideration, but when, only two hours away from the company being sold or restructured, the banks get the half billion pounds, they will try to imply that the whole amount belongs to them to divide according to whatever ratio they represent in sharing the overall debt of the company to the banks. That immediately opens up the possibility of a challenge by the shareholding owners of the company that has effectively sold the company in question, and beyond that is the question of who provided the funding to the company. Perhaps it was a subsidiary owned in America—which is what happened in my case—with £300 million of debt to the American subsidiary. What about the American banks? Would they not have a claim? They would have lawyers queuing up to have a go on that one. The whole situation is so complex that it seems the only safe way for the Government to deal with it is to knock out paragraph (c) in order to allow the Insolvency Act 1986 to continue to rule. It has never let us down yet and it will guide us with accuracy through any challenge that may come. The Government have a hard enough task already; they should not make it go from the difficult to the impossible.