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New clause 6 is technical in nature and will enable clause 230, which relates to the registration of charges, to operate effectively in relation to Scottish floating charges. A recent Act of the Scottish Parliament, the Bankruptcy and Diligence etc. Act (Scotland) 2007, will undermine certain of the intended effects of clause 230 with regard to Scottish floating charges.
Hon. Members will recall that clause 230 provides that charges issued by a company in favour of a central bank shall be exempt from the requirement to register details of the charges that they grant at Companies House and at their own offices. Although that applies generally, in practice it will apply most often to charges granted by banks and building societies in order to secure lending from a central bank.
Part 25 of the Companies Act 2006 means that any company that receives liquidity assistance from the Bank of England and offers the Bank a charge by way of collateral has to register the fact that it has done so. The requirement to register charges at Companies House and on the companies register could provide untimely market visibility of the liquidity support that banks receive, so clause 230 removes the Companies Act requirement in the case of charges to central banks. Charges granted in receipt of normal commercial lending by other institutions will still have to be registered.
The Bankruptcy and Diligence etc. Act (Scotland) 2007 will, when it comes into force, undermine the provisions of clause 230 that relate to the Companies Act. The 2007 Act provides that a Scottish floating charge is not created until it has been registered on the Scottish register of floating charges so that the act of registration itself creates the charge. For companies whose floating charges are subject to Scottish law, therefore, such charges would need to be registered if they are to be regarded in law as having been created. Such registration would undermine the intent of clause 230.
There is also a possibility of legal ambiguity occurring, should the Government not take the steps laid out in the amendment. In particular, the courts could determine that the provisions of clause 230, as it stands, mean that the registration of charges shall not be possible, even where that is legally required in order for them to be created. That could lead to a situation in which Scottish institutions were not able to grant floating charges at all, and the possibility of such a legal interpretation reinforces the need for clarification.
New clause 6 addresses both difficulties and ensures that the provisions of clause 230, which has been scrutinised by the Committee, can operate throughout the United Kingdom. In consequence, Government amendment No. 33 would mean that clause 239 is laid with reference to Scotland only.