Lord Leigh of Hurley (Con)
I rise to support Amendment 8, to which I have added my name, and thank the noble Lord, Lord Fox, and the noble Baroness, Lady Pinnock, for doing the hard work on the drafting. It is much appreciated. I am happy to support the amendment.
First, I disclose my interests as set out in the register, not least that I am a shareholder and chairman of Manolete Partners plc, which is an AIM-listed insolvency litigation firm. It does not exactly touch the Bill, but it is worth drawing your Lordships’ attention to it. Over many years, I have been a director of a large number of companies and other relevant organisations, one or two of which have become dormant and subsequently been dissolved—although, I hasten to add, with no loss of anyone else’s money.
I, too, thank R3 for its briefing and its perennial helpful guidance and advice. I apologise for not being present at Second Reading. As this Committee now knows, that was due to a last-minute change of date; I associate myself with the remarks made by the noble Lord, Lord Hunt of Kings Heath.
The Bill is sorely needed, and the Government’s proposals in respect of dissolved companies are very welcome. However, there has been much debate on the effectiveness of the measures proposed in Clause 2(6), which is what we are here to discuss this afternoon. I note that there was much debate on this subject in the other place. At that point, proposals were put down for new clauses that are broadly in line with this amendment, which is slightly different in its purpose from the amendment in the name of the noble Baroness, Lady Blake.
I think we all agree that the route proposed in the Bill is better than a criminal sanction because there is a lower burden of proof. On resources, which have been mentioned by a number of noble Lords, it is difficult to know what the numbers might be. It is worth noting that there are some 500,000 company dissolutions a year in the UK, of which some 5,000 might need investigation by the Insolvency Service. That figure of 5,000 has been out there for some time. The reason it has been quoted is that it is the number of companies that have been struck off and where a process has been started to put them back on the register, so we know that there are at least 5,000 companies a year that have gone back on the register. To do that costs a few thousand pounds, so many people are deterred from bothering to go to court to get companies put back on the register, with all that entails. There might in fact be many more cases worthy of investigation under the proposed new, simpler system, which we all welcome. This will be a big increase from the 1,200 cases a year, I think, that are currently investigated, hence the concern that this clause seeks to address.
In the other place, the Minister, Luke Hall, is not a BEIS Minister. That goes back to the poignant points made by my noble friend Lord Cormack that a hybrid Bill sometimes suffers from one Minister addressing parts of the Bill that do not centre on his or her expertise. We are extremely fortunate to be blessed with the great knowledge and experience of the BEIS Minister in front of us this afternoon. Mr Hall assured the other place in Committee that the Insolvency Service produces reports on its own activities, which is correct. However, these amendments would ensure that specific questions we would want answered are addressed in those reports, and with a degree of independence. I am not sure that a report by the Insolvency Service would be able to determine the points we made, as it is bound to be accused of a conflict of interest in opining on whether sufficient powers and resources are available to it. It would be nice to see an independent report laid before Parliament.
As the noble Lord, Lord Fox, said, the acid point we really need to be told is how much money is recovered from directors through this route for creditors other than HM Government. We would all be delighted to see them, through HMRC or any other agency, recoup all the proceeds they are owed, but will the Secretary of State continue to look with quite the same zeal as we know he or she will for government money when it comes to acting for other creditors? Perhaps the Minister will be able to set out—this afternoon or later—exactly how the Government intend to prosecute culpable directors and recoup the funds.
The Minister mentioned compensation orders as the route to recoup funds but, as I understand it, compensation orders can be used to benefit only one creditor, so can the Minister comment on how they will be widened to benefit other creditors? In addition to explaining how the compensation orders will be used, will the Minister set out whether dissolved companies with culpable directors will then be put through an insolvency process?
I hope this might be addressed on Report and a commitment made to look at how Companies House operates—particularly to consider some of the ideas raised during the passage of this Bill, such as not letting Companies House strike off a company until the Insolvency Service has had a good opportunity to look at the exact circumstances of it being struck off.
Finally—and I hope the Minister will allow me to raise this matter in this debate—I wonder whether he feels moved to comment at some point in Committee or later on some of the interesting issues raised by the noble Lord, Lord Sikka, at Second Reading. They were not addressed in our previous sitting, and I think there should be some opportunity, at the very least for a right of reply for the insolvency profession and others on some of the very serious accusations made at Second Reading. It would also be helpful if the Government could commit to set out their view on the insolvency profession and its regulation at some point.