Asked by: Lara Bird (Scottish National Party - Arbroath and Broughty Ferry)
Question to the Department for Business, Innovation, Science and Trade:
To ask the Secretary of State for Business, Innovation, Science and Trade, what rights individual creditors have to (a) scrutinise and (b) challenge administrator fees and expenditure where those costs may materially reduce the amount available for distribution to creditors.
Answered by Blair McDougall - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Jointly with the Department for Energy Security and Net Zero)
Creditors have statutory rights to consider and challenge an administrator’s remuneration and expenses.
Administrators must provide creditors with the relevant information about their remuneration and expenses, and creditors may request further information about the costs incurred.
Where a creditor considers that an administrator’s remuneration or expenses are excessive, insolvency legislation provides mechanisms for those costs to be challenged, including through the courts.
Asked by: Lara Bird (Scottish National Party - Arbroath and Broughty Ferry)
Question to the Department for Business, Innovation, Science and Trade:
To ask the Secretary of State for Business, Innovation, Science and Trade, whether he plans to introduce improved rights for purchasers in large property administrations to establish (a) representative creditor committees and (b) equivalent mechanisms to scrutinise administrator decisions, fees, asset recoveries and investigations.
Answered by Blair McDougall - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Jointly with the Department for Energy Security and Net Zero)
There are no plans to introduce improved rights as the insolvency framework already contains robust safeguards to ensure that administrators, who are authorised insolvency practitioners, are subject to appropriate oversight and scrutiny to ensure transparency and accountability. Administrators must provide creditors with regular progress reports, and seek their approval for their initial proposals as well as their remuneration and expenses. Creditors must also be invited to establish a creditors' committee to represent their interests and assist the administrator in the administration, and may request further information about an office-holder's remuneration and expenses.
Asked by: Lara Bird (Scottish National Party - Arbroath and Broughty Ferry)
Question to the Department for Business, Innovation, Science and Trade:
To ask the Secretary of State for Business, Innovation, Science and Trade, whether he plans to review the adequacy of the regulatory and insolvency framework in providing protection for consumers purchasing off-plan property from developers operating through multiple connected companies.
Answered by Blair McDougall - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Jointly with the Department for Energy Security and Net Zero)
The Government is currently considering responses to its recently concluded Corporate Civil Enforcement Reforms consultation.
The regulatory and insolvency framework balances the interests of consumers, employees, businesses and other creditors. Duties of company directors are set out in legislation, and they are expected to comply with company and insolvency law and uphold the highest standards of corporate governance.
The recent consultation included proposals to modernise corporate enforcement, such as automatic disqualification of directors where companies are wound up by the court on public interest grounds, and director restrictions to tackle misconduct more quickly and prevent escalation.
Asked by: Lara Bird (Scottish National Party - Arbroath and Broughty Ferry)
Question to the Department for Business, Innovation, Science and Trade:
To ask the Secretary of State for Business, Innovation, Science and Trade, whether he is considering the potential merits of changes to insolvency or consumer-protection legislation to provide greater protection to purchasers of off-plan residential property, including greater protection for deposits.
Answered by Blair McDougall - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Jointly with the Department for Energy Security and Net Zero)
The Government keeps insolvency legislation under regular review to ensure that it continues to provide appropriate protection for businesses and consumers. There are existing safeguards when a developer becomes subject to insolvency proceedings, including powers to investigate directors’ conduct with particular attention paid to deposits accepted when developers are unable to fulfil their obligations. Where misconduct is identified, and it is in the public interest to do so, enforcement action may follow to disqualify the directors from acting in the management of a company for a period of between 2 and 15 years.
Asked by: Lara Bird (Scottish National Party - Arbroath and Broughty Ferry)
Question to the Department for Business, Innovation, Science and Trade:
To ask the Secretary of State for Business, Innovation, Science and Trade, when amounts are owed between companies within the same property development group, what mechanisms exist to ensure that potentially recoverable funds or assets are adequately investigated and pursued for the benefit of creditors.
Answered by Blair McDougall - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Jointly with the Department for Energy Security and Net Zero)
Where a company enters administration or liquidation, the insolvency practitioner acting as office-holder is responsible for identifying and dealing with the company’s assets, including any amounts due from other companies.
Office-holders have wide powers to secure company property and seek information and, where appropriate, pursue recovery action. Where relevant legal thresholds are met, they may also seek to overturn certain transactions made prior to the insolvency proceedings that were not to the benefit of all of the creditors, so that assets may be restored for the benefit of the insolvent estate and its creditors.
Asked by: Lara Bird (Scottish National Party - Arbroath and Broughty Ferry)
Question to the Department for Business, Innovation, Science and Trade:
To ask the Secretary of State for Business, Innovation, Science and Trade, what oversight mechanisms are in place governing the fees and expenses charged by insolvency practitioners in large property administrations involving hundreds of individual purchasers.
Answered by Blair McDougall - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Jointly with the Department for Energy Security and Net Zero)
Insolvency practitioners must follow statutory requirements and regulatory guidance on how their remuneration must be reported. The requirements seek to ensure that fees are a fair and reasonable reflection of the work undertaken while appointed.
Insolvency practitioners are subject to a robust regulatory regime, where they are monitored by Recognised Professional Bodies, who are themselves subject to oversight regulation by the Secretary of State.
Creditors are given opportunities to question fees and challenge them, with the court being the ultimate arbiter if disputes cannot be resolved.
Asked by: Lara Bird (Scottish National Party - Arbroath and Broughty Ferry)
Question to the Department for Business, Innovation, Science and Trade:
To ask the Secretary of State for Business, Innovation, Science and Trade, what assessment he has made of the adequacy of the insolvency framework in providing protection to purchasers who have paid deposits for properties that have not yet been completed when the developer enters administration.
Answered by Blair McDougall - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Jointly with the Department for Energy Security and Net Zero)
The insolvency framework does not provide specific protections for purchasers of uncompleted properties. An administrator is under a statutory duty to assess the company's assets and liabilities and must act in the interests of creditors as a whole. The treatment of any purchaser's claim will depend on the circumstances of the case, including any contractual arrangements. Once assets have been realised and claims agreed, any remaining funds will be distributed according to the order of priority set out in legislation.
Asked by: Lara Bird (Scottish National Party - Arbroath and Broughty Ferry)
Question to the Department for Business, Innovation, Science and Trade:
To ask the Secretary of State for Business, Innovation, Science and Trade, what powers and obligations do administrators have to investigate transactions between connected companies within a property development group where one or more companies subsequently enter administration.
Answered by Blair McDougall - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Jointly with the Department for Energy Security and Net Zero)
Administrators are regulated Insolvency Practitioners, appointed to manage the company’s affairs, business and property. Their statutory duties include making appropriate enquiries into transactions entered into by the company which includes intercompany transactions. Where transactions meet the relevant legal tests, the administrator may seek to reverse the transaction for the benefit of all creditors.
Asked by: Lara Bird (Scottish National Party - Arbroath and Broughty Ferry)
Question to the Department for Business, Innovation, Science and Trade:
To ask the Secretary of State for Business, Innovation, Science and Trade, what assessment he has made of the adequacy of requirements for disclosure of related-party transactions and intercompany balances to allow purchasers and other unsecured creditors to understand how funds were moved within a property development group before insolvency.
Answered by Blair McDougall - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Jointly with the Department for Energy Security and Net Zero)
The Companies Act 2006 sets out legal requirements in respect of related-party transactions. These include the rights and duties of the company directors and shadow directors within Part 10, disclosure obligations in Part 15 and financial assistance rules in Part 17.
Where a company enters insolvency, the insolvency framework provides mechanisms to investigate the company’s affairs and transactions before insolvency, including transactions involving connected parties. These protections sit alongside company reporting and disclosure requirements.
Asked by: Lara Bird (Scottish National Party - Arbroath and Broughty Ferry)
Question to the Department for Business, Innovation, Science and Trade:
To ask the Secretary of State for Business, Innovation, Science and Trade, where purchaser funds are transferred between connected companies or used in connection with other developments within the same corporate group, what legal or regulatory requirements govern those transactions.
Answered by Blair McDougall - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Jointly with the Department for Energy Security and Net Zero)
The Companies Act 2006 sets out legal requirements in respect of related-party transactions. These include the rights and duties of the company directors and shadow directors within Part 10, disclosure obligations in Part 15 and financial assistance rules in Part 17.
Where a company enters insolvency, the insolvency framework provides mechanisms to investigate the company’s affairs and transactions before insolvency, including transactions involving connected parties. These protections sit alongside company reporting and disclosure requirements.