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Clause 132

Part of Banking Bill – in a Public Bill Committee at 11:00 am on 18th November 2008.

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Photo of David Gauke David Gauke Shadow Minister (Treasury) 11:00 am, 18th November 2008

I beg to move amendment No. 179, in clause 132, page 71, leave out lines 28 to 33.

The amendment relates to the applied provisions set out in the clause that would amend section 178 of the Insolvency Act 1986. Our concern is that the provisions amended by the Bill for the most part relate to administration, as one would expect given that the clause relates to administration. Section 178 of the 1986 Act relates to liquidation and specifically gives power to a liquidator to disclaim any onerous property. For those purposes onerous property includes

“any unprofitable contract, and...any other property of the company which is unsaleable or not readily saleable or is such that it may give rise to a liability to pay money or perform any other onerous act.”

Why should that power of disclaiming onerous property be available to an administrator rather than a liquidator? I recognise that the power is only to be given with the Bank of England’s consent and exercised with that consent, but it does not seem appropriate to give the power of disclaiming onerous property to an administrator, especially given the protection for creditors in section 178(6) of the 1986 Act:

“Any person sustaining loss or damage in consequence of the operation of a disclaimer under this section is deemed a creditor of the company to the extent of the loss or damage and accordingly may prove for the loss or damage in the winding up.”

With an administration there may not be a winding-up, so that section does not fit well with the modification to it in clause 132. It would help the Committee if the Minister could explain why section 178 is amended and  why it is necessary for an administrator to be able to disclaim property, given that as a rule administrators do not have that ability.