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Legislative Reform (Insolvency) (Miscellaneous Provisions) Order 2009

My Lords, I first declare my interests, in particular as a partner in the national commercial law firm Beachcroft LLP, and the other interests set out in the Register. The order forms part of a long-running project designed to modernise and streamline various administrative aspects of formal insolvencies under the Insolvency Act 1986. The subject matter of this order was the subject of an Insolvency Service consultation which commenced in September 2007. The measures we have before us today were to have been implemented somewhat earlier than now but, despite the delays, they are to be welcomed. We are all grateful to the Minister and his shadow, whom I welcome to the club of shadows, for setting out so clearly the seven different areas ranging from remote attendance at creditors’ meetings to allowing insolvency practitioners to distribute information creditors by sending a link to a website. Other measures, as the Minister explained, dispense with the requirement to hold annual meetings, which reflects the practice for administrations following the changes to that procedure introduced by the Enterprise Act 2002. Further, the order removes the anomaly in the insolvency rules that required many documents to be verified by affidavit rather than by a statement of truth, which has been standard practice by the civil courts for many years. The day-to-day business of insolvency practice is much more than administrators or liquidators serving businesses and recovering assets. Insolvency practice is probably one of the most heavily regulated sectors in the UK, and insolvency practitioners, all of whom are licensed, must comply with a host of professional, regulatory and statutory requirements in the day-to-day conduct of their duties. While these requirements are intended to safeguard the interests of creditors and other stakeholders in formal insolvency, and indeed to a large extent they do, they impose considerable compliance and time costs on insolvency practitioners. In most instances, these costs must be borne by the creditors of insolvent companies every time an insolvency practitioner is required to hold a physical meeting or to post information to hundreds, sometimes thousands of creditors. This ultimately comes at a cost to the creditors themselves. We therefore expect that in most insolvencies there may well be material cost savings, once the provisions relating to modernising and streamlining communications with creditors are in place from 6 April next year. I particularly welcome the provision dispensing with the compulsory requirement to hold annual meetings in members’ and creditors’ voluntary windings-up. The original aim of those meetings was of course to enable creditors to question insolvency practitioners directly about the progress of liquidations. The reality, however, is that most such creditors’ meetings, some of which I have attended, are sparsely attended. It is not uncommon, and I have known this, for no creditors to be present at all. The expense of organising such meetings can often be a material one, particularly in smaller insolvencies. Alongside the possible practical benefits of these provisions, some of which I have just tried to outline, it is pleasing to see that on this occasion they are in line with the original intention of the legislative reforms introduced by the Enterprise Act 2002. The insolvency provisions of that Act, while principally dealing with the administration process, had the aim of streamlining the insolvency process, reducing the cost and increasing returns to creditors, once we—I had the honour to serve on that Committee—had persuaded the Government to drop some of the unrealistic timetables that they originally proposed. I pay tribute to the skill of the Enterprise Bill team at that time. They understood the problems and we were able to reach reasonable agreement over the progress of that legislation. Although it has taken some time for the proposals we are discussing today to reach implementation stage, the changes are entirely consistent with the aims of the Enterprise Act. It is pleasing to see in these proposals some recognition of the high administrative burdens on insolvency. I commend the Minister and his colleagues for recognising in this case that the lifting of a regulatory burden can be in the best interests of those whom the former rules were designed to protect. Many aspects of these provisions give a higher degree of discretion to insolvency practitioners, who, as experienced professionals, are accustomed to making decisions designed to facilitate optimal recoveries for creditors. I acknowledge also their valuable work on turnaround and preventing insolvency in the first place. I welcome the Minister’s commendation of the way in which insolvency practitioners have responded in seeking to increase the efficiency of the process. I pay particular tribute to R3, the trade body which represents 97 per cent of all licensed insolvency practitioners; much of its advice has been extremely valuable. I applaud any change which gives insolvency practitioners greater discretion to do their jobs, rather than being constrained by increasingly burdensome and outdated rules. We look forward to many more proposals designed to streamline the insolvency process and, ultimately, increase returns to creditors. A criticism one often hears of the insolvency regime is how poor the returns to unsecured creditors usually are. Although returns to creditors are largely a function of the deficit between how much creditors are owed and the assets of the company, any measures to reduce administrative time and costs in insolvency should be welcomed. In some cases, they should at least provide better returns to creditors and, by doing so, help to enhance the standing of the insolvency regime in England and Wales. There is much further work to be done in order to improve and modernise the insolvency regime and we look forward to further proposals to achieve these ends being introduced as soon as possible. Although these provisions are long overdue, they are welcomed as a step in the right direction.