I have some unrelated points on the issues surrounding insolvency. The term ''issues surrounding'' is a phrase that we are not supposed to use any more because it irritates people. It certainly irritates me if somebody else uses it. Nevertheless, it is appropriate to raise such issues on this clause now.
Scheme rescue is the main subject of the clause. The National Association of Pension Funds has flagged up a concern about the definition of a scheme rescue. The explanatory notes say that that
''occurs when a solvency practitioner in relation to the employer is able to confirm the pension scheme has or has not been rescued and therefore will or will not enter the PPF.''
That suggests that the PPF may not be called on despite the employer being insolvent. I am sure that that is not the intention, but it is worth getting the Under-Secretary to clarify it.
The NAPF is also concerned about how we define insolvency, which pertains to this clause and related clauses. The definition could go wider than what is meant by the word ''liquidation''. It says that as drafted
''it appears possible that where a company voluntary arrangement is proposed, a cash-strapped employer with an underfunded scheme could dump it on the PPF but continue to trade, having cleared some of its non-pension debts. There needs to be greater clarity.''
There is anecdotal evidence that a number of schemes are tottering on in the hope of being parked in the PPF once it is up and running, despite the challenging time scale for getting everything organised.
There is a third suggestion, which did not lend itself to an amendment. I am not convinced that it is fair to deal with it now, but the Under-Secretary may want to reflect on it and write to me. The British Chambers of Commerce says that it could be in the worst possible interests of scheme members for it to be wound up because the company has become insolvent
''at a time when the assets are significantly below the level of liabilities.''
It thinks that that could be temporary. I am sure that many companies that are not going bust also fervently hope that that is the case, despite the effects of FRS 17.
The British Chambers of Commerce wants a provision so that if there is a proposal to wind up a scheme, an application is first submitted to the regulator for authorisation so that he can examine the merits of the application. If the accrued liabilities exceed the current value of the assets by, say, more than 10 per cent., and if the regulator thinks that there is a reasonable chance that the scheme could meet a higher proportion of those liabilities by continuing as a closed scheme, he should be able to instruct the trustees to do just that. If they are not willing to continue the scheme on that basis, the regulator should have the power to employ an independent trustee company, which already happens in some circumstances, to act on the scheme's behalf.
Such a provision could help to rescue a scheme which was not in the most serious of difficulties. It could also reduce the cost to the PPF and, consequently, the levies proposed for other pension schemes as a result. The British Chambers of Commerce feels strongly about that and has more general reservations, and its idea is worth considering. Perhaps if the Under-Secretary has considered and discarded it, he might share his reasons for doing that with the Committee.
The hon. Gentleman's first point, raised by the National Association of Pension Funds, relates to what scheme rescue is. It includes those situations in which the employer can emerge successfully from insolvency proceedings with a scheme intact, or when a purchaser of a business agrees to take over a scheme and protect members' benefits. If, however, the employer's business is to be sold on without the pension scheme being transferred, the pension liabilities will be left behind with the original employer, which is likely to be dissolved or to cease trading, with its creditors, including the pension scheme, paid out of any remaining assets. It will be clear in those circumstances that there is no employer to support the scheme in future and the scheme has not, therefore, been rescued.
Creditors' voluntary liquidation allows an insolvent company to put itself into liquidation and wind up its affairs without the need for a court order. The distinction is between that and members' voluntary liquidation, which allows a solvent company to put itself into liquidation and to wind up its affairs—for example, when no one is left to run a family business.
In general, members' voluntary liquidations are not included as an insolvency event for the purposes of the PPF as they apply to a solvent form of company wind-up. For example, a company going into members' voluntary liquidation can make a statutory declaration that it will be able to pay all its debts in full, together with interest at the official rate, within a specified period not exceeding 12 months from the date of the commencement of the winding up. However, there are circumstances in which members' voluntary liquidation can be converted into a creditors' voluntary liquidation if it transpires that the debts cannot be paid in full within the specified period. Although clause 95 recognises CVLs—creditors' voluntary liquidations—triggered in the usual way, a
resolution is passed for a voluntary winding up of the company without a declaration of solvency.
The Government amendment will ensure that CVLs that occur as a result of a conversion from MVLs—creditors', as opposed to members', voluntary liquidations—are also covered. Members of such schemes are thus able to benefit from PPF protection. As for the hon. Gentleman's third point about the British Chambers of Commerce, I should like to take up his offer and reflect on what he said. We do not want to come up with an answer now that is not the Government's final settlement. Perhaps we can write to him and other members of the Committee about that.
Question put and agreed to.
Clause 96, as amended, ordered to stand part of the Bill.