Company Liquidations

Oral Answers to Questions — Trade – in the House of Commons at 12:00 am on 25th April 1983.

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Photo of Mr Gwilym Roberts Mr Gwilym Roberts , Cannock 12:00 am, 25th April 1983

asked the Minister for Trade what representations he has received about companies in liquidation and the problems facing unsecured creditors; and if he will make a statement.

Photo of Dr Gerard Vaughan Dr Gerard Vaughan , Reading South

My Department has received and continues to receive many representations about companies in liquidation and the claims of unsecured creditors. These particularly seek a strengthening of the laws governing payments in advance and directors' conduct, and a restriction on the ease with which directors can set up another company without regard to the debts outstanding from an earlier liquidation. These matters were among those considered by the Insolvency Law Review Committee to which I referred in my answer earlier today to my hon. Friend the Member for Beaconsfield (Mr. Smith).

Photo of Mr Gwilym Roberts Mr Gwilym Roberts , Cannock

Does the Minister accept that urgent action is needed in view of the thousands of tragedies that have occurred in terms of home improvements not carried out, holidays lost and so on? Will he at least consider the matter to which he referred, which is the ability of directors who are in debt to set up other companies at will?

Photo of Dr Gerard Vaughan Dr Gerard Vaughan , Reading South

I accept entirely what the hon. Gentleman says about this. As he knows from my answers earlier today and on previous occasions, I share his concern. I think he will also accept, however, that the recommendations of the Cork committee are extremely complex and form an interrelated and integrated package. I am considering whether some matters can be pulled out of the package for advance legislation, but it is extremely difficult.

Photo of Stephen Dorrell Stephen Dorrell , Loughborough

Does my hon. Friend agree that one of the most worrying aspects of this is the problem of people making payments to small businesses which claim to be able to carry out home improvements but which then go bust, and the directors simply move to the next town to repeat the same fiasco? Does my hon. Friend agree that the losers are, first, those interested in the future of small businesses, and, secondly, the unfortunate consumers, who are repreatedly taken for a ride?

Photo of Dr Gerard Vaughan Dr Gerard Vaughan , Reading South

I share my hon. Friend's concern. It is an absolute disgrace that small people who cannot carry debts of this kind are unwittingly led into these situations by unscrupulous traders who repeat the same process time and again. I should be glad to hear of any instances that hon. Members come across, as I wish to do something about this.

Photo of Mr John Fraser Mr John Fraser , Lambeth Norwood

Does the Minister agree with the Cork committee view that the scales are weighted far too heavily in favour of preferential creditors and debenture holders, especially those with floating charges? Does he endorse the recommendation that at least 10 per cent. of a company's funds should be made available for unsecured creditors?

Photo of Dr Gerard Vaughan Dr Gerard Vaughan , Reading South

As the hon. Gentleman knows, we are considering both those matters. Discussions are currently taking place and I hope fairly soon to be able to bring proposals before the House. I ask the House to be patient, however, as it is a very complicated matter.