Insolvency (Amendment) Bill: Final Stage

Executive Committee Business – in the Northern Ireland Assembly at 8:15 pm on 8 December 2015.

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Photo of Jonathan Bell Jonathan Bell DUP 8:15, 8 December 2015

I beg to move

That the Insolvency (Amendment) Bill [NIA 39/11-16] do now pass.

Insolvency is an unfortunate but very real fact of life. Those who get into financial difficulties range from ordinary consumers who simply cannot pay their debts to large companies that are household names. To give you some idea of the scale of the problem, during 2014-15, in Northern Ireland alone, 1,358 individuals were declared bankrupt, 557 obtained debt relief orders and 1,444 entered into an individual voluntary arrangement. In the same period, 233 companies were compulsorily wound up by the courts.

Broadly speaking, there are two sets of procedures needed to deal with insolvency. The first set comprises the rescue procedures. For example, voluntary arrangements give individuals and companies an opportunity to pay their debts over time, and administration gives companies breathing space while attempts are made to put together a rescue package to secure their future. A further set of procedures is, however, needed to deal with situations where an individual or company is so hopelessly engulfed by debt that rescue is not feasible or possible. The procedures to deal with such cases comprise bankruptcy, debt relief, winding up by the court and creditors voluntarily winding up. In administering those procedures, insolvency practitioners and the official receiver rely on an extensive and detailed legislative framework. That framework is modelled on the one that operates in England and Wales. My understanding is that it is the wish of those whose job it is to deal with insolvency that that should remain the case, and Members have expressed the same view.

Insolvency legislation needs to be modernised and improved to keep pace with changes in wider society. That need for change resulted in a surge in insolvency legislation made at Westminster during the lifetime of the last Parliament. That has prompted the need for a Bill to amend insolvency law in Northern Ireland.

The Insolvency (Amendment) Bill has had a long gestation. At times, it has had to be stalled to allow it to be amended to take account of developments at Westminster. I pay tribute to the work done by my predecessor, Arlene Foster, in taking the Bill through from introduction on 7 October last year to the end of its Committee Stage. I thank the Chair and members of the Committee for Enterprise, Trade and Investment for their diligent scrutiny of the original Bill and the subsequent amendments to it. I am grateful for the work done by the Office of the Legislative Counsel and for its willingness to draft amendments to the Bill at short notice.

The Bill includes a range of measures. Some will be of benefit primarily to the insolvency practitioner profession, while others will mainly benefit bankrupts or their creditors. The insolvency practitioner profession will welcome the measures to enable the use of modern methods of electronic communications in insolvency proceedings, and I am aware that there is support for the ending of licensing of insolvency practitioners by my Department. However, some bodies have expressed misgivings about the inclusion of provisions to allow insolvency practitioners to be partially authorised to take only individual or corporate cases. The Committee has looked into the matter in great depth and has taken oral evidence from insolvency practitioners as part of its deliberations.

It is important to note that it will remain possible to qualify and be authorised as an insolvency practitioner to deal with both individual and corporate cases. It is expected that the majority of those wishing to enter the profession will choose to do that. However, there will be instances where a practitioner who has chosen to specialise will be able to provide a more efficient and effective service to his or her clients. There is, however, a more fundamental issue. Partial authorisation is being brought in for the rest of the UK, and the legal advice is that we, in Northern Ireland, are obliged to do the same. The Committee was satisfied that that is the case.

A measure aimed at encouraging banks to allow bankrupts to have bank accounts will be welcomed by bankrupts and their advice and support organisations. Banks have historically tended to be reluctant to allow bankrupts to have accounts. In doing so, they are potentially exposed to the risk of claims from trustees in bankruptcy in respect of money paid out of bankrupts' accounts. Not being able to have a bank account can cause serious problems for the individuals concerned, as it is difficult to operate in today's environment without one. They will, for example, need an account to receive payment of wages and benefits and to allow them to take advantage of electronic commerce such as the provision of direct debit payments and associated discounts.

The Bill addresses the problem by giving banks protection against claims by trustees.

At Second Stage, Mr Allister QC asked to have provision for a code of conduct for insolvency practitioners included in the Bill. My predecessor responded to that request by agreeing to an extensive additional provision being inserted by way of amendment at Consideration Stage. The result, while not a code of conduct as such, will achieve the same outcome. Insolvency practitioners can expect, therefore, to be subject to a much more rigorous regulatory regime in future. That is because the professional bodies responsible for regulating insolvency practitioners will now be required to carry out their functions in conformity with objectives aimed at ensuring that the insolvency practitioners are acting fairly and properly and providing a good service at reasonable cost. There will be a range of penalties for bodies that fail to meet those objectives, up to and including having their recognition revoked.

In summary, the Bill is a mix of measures aimed at modernising and improving insolvency administration for the benefit of those who practice the profession and those who use it. I therefore commend the Insolvency (Amendment) Bill to the House.

Photo of Patsy McGlone Patsy McGlone Social Democratic and Labour Party 8:30, 8 December 2015

Go raibh maith agat, a Phríomh-LeasCheann Comhairle. The Committee welcomes the Final Stage of the Insolvency (Amendment) Bill, which is intended to update insolvency legislation made before the advent of modern methods of electronic communication. I thank the Minister, and more particularly his predecessor, and especially the officials — I see some of them here today — for their positive engagement with the Committee in both pre-legislative scrutiny and the Committee Stage. It is always very helpful when the officials who attend the Committee are well across their brief and experienced in the advice that they give the Committee. I thank them for that. I thank all those who gave evidence at Committee Stage. I also thank Committee colleagues for their full and conscientious consideration of what were often technical and complex issues.

The Bill helps to bring insolvency legislation into the twenty-first century by maximising the use of electronic communications. It establishes that documents stored and transmitted electronically in the course of insolvency proceedings are as good and valid in law as paper documents. It enables the use of means such as video and teleconferencing at meetings of creditors, members or contributors of companies. It also provides for improvements in the way in which the work of insolvency practitioners is monitored and controlled.

The Committee engaged in a call for evidence from interested organisations and individuals and from the Department. Evidence indicated that there is broad support for the Bill, although concerns were raised over a number of provisions in it. I will focus on the Committee’s consideration of these concerns at Committee Stage. The Committee agreed that the introduction of provisions at clause 1 for remote attendance at meetings is a practical and helpful addition to existing arrangements. It will increase access to interested parties, reduce costs and help to make the administration of insolvency cases easier by allowing for the use of modern methods of communication and eliminating unnecessary procedural requirements.

Issues were raised in relation to verifying the identity of remote attendees. However, the Department assured the Committee that safeguards, including password protections and firewalls, will be put in place. The Committee noted that there is also a requirement in the Bill for anyone proposing to hold remote meetings to ensure the identification of those attending and the security of any electronic means of communication used to enable attendance. In addition, every insolvency practitioner is subject to monitoring by their recognised professional body, which will seek to ensure that insolvency practitioners adhere to best practice.

Some concern was expressed about the need to build in adequate time to allow a suitable venue to be identified and for creditors to be informed. The Department informed the Committee that time periods for individual requirements for meetings are specified elsewhere in legislation and that the same requirements for quite generous time periods will remain in place. Following full consideration of the evidence, the Committee was content with clause 1 as drafted.

At clause 3, the Bill introduces provisions for the requirement to hold a meeting to present progress reports in voluntary winding-up procedures to be replaced by a requirement to issue a report on progress. That is intended to reduce the cost of holding meetings that are poorly attended or not of any particular benefit.

The Committee considered options to avoid the situation where, in practice, IPs would have to operate the legacy legislation and the amended legislation concurrently on their portfolios of cases. However, following consideration, the Committee agreed that, where a procedure is under way, those involved would expect the case to be conducted in accordance with the existing law. The Committee agreed that it would be bad practice for any party to be confronted by a different procedure than the one they had expected and started off with at the outset of that particular case. The Committee was therefore content with clause 3 as drafted.

Clause 6 adds a requirement for the official receiver to notify the Department as well as report to the High Court whether a proposal by a bankrupt for a voluntary arrangement with the official receiver acting as nominee has been approved or rejected by the bankrupt's creditors. Those giving evidence to the Committee supported this proposal. However, the Westminster Small Business, Enterprise and Employment Act 2015 is intended to repeal the fast-track system entirely. When asked whether the system would be retained here, officials informed the Committee that the Department intends to repeal it in a future insolvency Bill to be passed during the next Assembly along with a large number of outstanding amendments to be made to insolvency law in Northern Ireland. On that basis, the Committee was content with clause 6 as drafted.

Clause 12 repeals provision in existing legislation that allows a bankruptcy to end within one year if the official receiver files a notice with the High Court stating that the investigation is unnecessary or concluded. The Committee considered the view that, if a bankrupt is disqualified from holding certain positions for the period of time, early discharge may allow that person to take up a position in society, such as in public service. The Department informed the Committee that there would be a cost to the Department to administer early discharge, which would outweigh any benefit to the individuals involved; that only two individuals had ever been discharged early in Northern Ireland; and that it is of very minor benefit to the individuals. The Committee was therefore content with clause 12 as drafted.

At a time when there is a backlog in cases where there are no assets to be realised, concern was raised by Committee members that the provision in clause 17 for a requirement for the Lord Chief Justice to be consulted may impact on processing times. Under clause 17, the Lord Chief Justice will have to be consulted about the making of orders creating a right of appeal to a court in respect of discretionary decisions to disqualify bankrupts from offices or positions. The Committee was content with the Department's response that, firstly, as the courts have an interest, it is essential that the Lord Chief Justice be consulted and, secondly, the clause will have no impact on processing times. The Committee was therefore content with clause 17 as drafted.

The Department brought a number of amendments to the Bill at Consideration Stage. I covered those in detail during the Consideration Stage debate. I do not intend to go over those areas again today as the Committee's consideration of the issues is already on record. However, there is one area that is worth emphasising. The Committee raised the issue with the Minister of the potential for a statutory code of conduct to oversee supervision, control, accountability and regulation of how IPs conduct themselves. The matter was, in fact, first brought to the Committee's attention by Mr Jim Allister MLA. I was looking round for him, but he is not here. I want to place on record our thanks to him for doing so.

The Committee considered the Department's outline proposals to put in place a regulatory objective through a future insolvency Bill to include requirements for appropriate training; ensuring consistent outcomes; providing high-quality services; acting transparently and with integrity; considering the interests of all creditors in any particular case; promoting the maximisation of the value of returns; and protecting and promoting the public interest. Thankfully, the Department had a change of heart and decided that provisions could be brought through the current Bill to police the conduct of insolvency practitioners. The Minister informed the Committee that, through the introduction of new clauses 14A to 14H, provisions for an effective route to policing and controlling the conduct of insolvency practitioners would be included in the Bill. This includes penalties that will apply to recognised professional bodies if they do not maintain a satisfactory standard of regulation. It also gives the Department the power to intervene directly by applying to the court for action to be taken against an IP.

That process will operate at two levels. First, the RPB will carry out monitoring inspections of its IPs. Secondly, at government level, there will be an annual programme of inspection whereby every recognised professional body is regularly inspected.

These are new procedures, and, as such, it is important that they are appropriately monitored and reviewed in a timely manner to ensure that they are not overly burdensome on the industry but, more importantly, that they provide the appropriate protection and assurances for those who are unfortunate enough to be involved in the insolvency process, as well as the protection of the public interest. I would welcome assurances from the Minister that this will, indeed, be the case and that the appropriate monitoring and review of these provisions will be undertaken.

Having given the Bill its full consideration and put forward recommendations for amendments, which were accepted by the Department, the Committee for Enterprise, Trade and Investment is content with the provisions in the Insolvency (Amendment) Bill.

Photo of Gordon Dunne Gordon Dunne DUP

I, too, welcome the opportunity to speak at Final Stage. Considerable work has been carried out on the Bill since it was first introduced. We know that insolvency is a very complex and technical issue, and I think that all Committee members realised that over the last number of months. I commend all those involved in the Bill for their substantial work, including the Committee staff and DETI officials, as well as the many who took part in the consultation process.

The purpose of the Bill was always to update, amend and modernise some of the insolvency legislation, much of which is very detailed and specialised in nature and some of which had become outdated, and to ensure that, where possible, there is parity with England and Wales. The Bill is designed to assist those who find themselves in the very unfortunate position of being affected by insolvency and to ensure that those who administrate insolvency procedures are able to do that in the most effective and efficient way possible.

Insolvency continues to affect quite a number of businesses and organisations in Northern Ireland. Therefore, it is important that measures are put in place to make the processes as simple and as effective as possible to ensure that we have a modern and fit-for-purpose system in Northern Ireland and that the most effective and efficient system is in place for all those affected by insolvency, directly or indirectly.

Many similar measures have already been introduced in England and Wales through the Legislative Reform (Insolvency) (Miscellaneous Provisions) Order 2010. I commend the previous Enterprise Minister, Arlene Foster, for introducing the Bill, and my colleague, the current Minister, Jonathan Bell, for ensuring that it will progress through Final Stage today.

One of the Bill's main purposes is to allow for the electronic transfer of documents, which is a welcome step forward. The development that electronic documents will now have the same standing as hard copy documents is a positive step that will help to improve insolvency processes. It will allow for a more efficient, effective and streamlined process and help to reduce delays in the completion of transactions involving complex insolvency cases, which will only benefit all parties concerned. However, it is important that those without access to IT equipment are not put at any disadvantage by this process. That is why I am glad that certain safeguards have been built in to ensure that that will not be the case.

The Committee held a number of evidence sessions, and a wide range of stakeholders was involved, all of whom were valuable in helping to shape the Bill. There was general recognition that this was a progressive way to move forward, and I am happy to commend the Bill to the House.

Photo of Máirtín Ó Muilleoir Máirtín Ó Muilleoir Sinn Féin

Go raibh maith agat, a Phríomh-LeasCheann Comhairle. Ba mhaith liom fosta tréaslú le gach duine a raibh baint acu leis an Bhille seo ar shaineolaithe dócmhainneachta. I echo the thanks to the staff of the Bill Office, the DETI officials, the two Ministers and, of course, the Chair of the Committee. There were many times when we were discussing this issue that I was not sure that anyone understood 100% all the complexities, but I think that the Chair came close and kept us going forward.

It is clear that the demand for these changes came after the start of the crash, when we were deluged with administrations and people being made bankrupt. It has been a while in coming forward, but I think that this will bring relief to those who suffer the trauma of administration and those who are made bankrupt, which is a dreadful experience. It will also help the practitioners who are there to try to set affairs in order and make sure that those who are entitled to be paid and can be paid are paid, and then get people back on their feet. For all those reasons, it is a positive Bill. I think that it is welcome for those who have been waiting, perhaps too long, for this to go through. The Minister said that it has been a long time in gestation. I do not want to delay the birth any longer, so I am happy to endorse the Bill tonight.

Photo of Adrian Cochrane-Watson Adrian Cochrane-Watson UUP 8:45, 8 December 2015

I rise to speak briefly on the Bill and to offer my party's support. We are content for the Bill as it now stands to pass into law and be put on the statute book. I welcome the comments from the Minister, the Chair of the Committee and other Members who, unlike me, have been here through all of the Bill's various stages. As a relative newcomer to the Committee, I will not delay the House by repeating many of the issues that have been raised, not least because of the lateness of the hour and also because I find this a highly technical piece of legislation that is not in any way party political in nature. As far as my party is concerned, the main issue and the most important aspect of the legislation is that it will bring us into parity with the rest of the United Kingdom. Things have moved on, including technology, and we have to move on and be on a par. On that note, I will finish and take the opportunity to wish the Minister a merry Christmas. Hopefully, Minister, you and I will agree a New Year's resolution and we will come back in better humour with each other. I do thank you; and thank you, Mr Principal Deputy Speaker.

Photo of Kieran McCarthy Kieran McCarthy Alliance

Like others, I will be brief. As I said earlier, Christmas is coming, so we want to get away and get our work and family business done. On behalf of the Alliance Party, I support the Bill and I thank Minister Bell for bringing it to this stage in the Assembly for approval. Insolvency is, of course, a very difficult process for business people and has a significant financial and emotional toll on people affected.

Northern Ireland, like most regions, is emerging from recession, and, as a result of that, we have seen the impact that insolvency can have. Sadly, we have also seen the deficiencies in the law highlighted more often as a result. This is largely a Bill to tidy up the insolvency laws in Northern Ireland. In part, this is about restoring parity between the laws in England and Wales and this region. Although there is no financial cost to having different laws, there is a good case for harmonising some of these rules because of the increasing number of businesses that operate across all jurisdictions. As I understand, there are nine objectives in the Bill, and Alliance is content that the broad thrust of the Bill is well intended and will improve the insolvency process. For example, the proposed abolition of the little-used clause relating to early discharge is welcome. This has been demonstrated in England and Wales to be costly, with little benefit to justify the cost. While I am not on the Committee, I have full confidence in all its members. They have fulfilled their duties and done a good job, and I commend them all for that.

In conclusion, as this is the Final Stage of the Insolvency (Amendment) Bill, it is also the final Christmas when I will have the privilege to contribute to the Assembly. Mr Principal Deputy Speaker, I take this opportunity to wish you, the Speaker and the Deputy Speakers, all your staff, all the staff working in this Building, and my 107 Assembly colleagues and their staff a very happy and enjoyable Christmas and a peaceful and prosperous 2016.

Some Members:

Hear, hear.

Photo of Jonathan Bell Jonathan Bell DUP

I am grateful to all Members who have contributed to the debate. I thank the Chair, Mr McGlone. I think that the reason that this debate has been so short is because of the work that was done in Committee.

I think that, sometimes, people do not fully appreciate the work that Members undertake in Committees, but their work has been comprehensive and diligent, and they have done a huge amount. I think that they can take great credit for the way in which this Bill has gone through. My sincere thanks for that and for his words of commendation to Mrs Foster, to the officials for the comprehensive work that they undertook and to myself.

(Mr Speaker in the Chair)

Mr Dunne, in an excellent contribution, raised the point about safeguards, and I assure him that there will be safeguards to ensure that anyone who is unable to receive communications electronically will not be at a disadvantage.

I thank Mr Ó Muilleoir for another constructive contribution to the debate. He acknowledged the difficulties that many people found themselves in through a crash, in many cases through no fault of their own. The fact that we have proper legislation will be helpful in future.

I thank Mr Cochrane-Watson for a comprehensive contribution to the debate and for his party's support. He is my friend now; he will be my friend after Christmas, and I wish him a very happy Christmas and prosperous new year.

I turn to the contribution made by Kieran McCarthy, not so much for what he said, excellent though it was, but for the point that he made that it was his last Christmas contribution. I have been privileged to know Mr McCarthy for a number of years. We both served on Ards borough Council, and it was with a certain sadness that I heard him say that this was his last contribution at Christmas. Anybody who knows Kieran knows that he is a gentleman of the highest integrity. He had huge support from right across all sections of my constituency. He worked extremely hard, from what I could see, in council and in the House. I thank him for his Christmas best wishes, and I assure him of the best wishes from all the House, and particularly from Strangford, for the excellent contribution that he has made. I commend the Insolvency (Amendment) Bill to the House.

Photo of Mitchel McLaughlin Mitchel McLaughlin Speaker

Thank you. I thought that you were going to forget to do that.

Question put and agreed to. Resolved:

That the Insolvency (Amendment) Bill [NIA 39/11-16] do now pass.