Enterprise Act 2002 (Disqualification from Office: General) Order 2006

rose to move, That the Grand Committee do report to the House that it has considered the Enterprise Act 2002 (Disqualification from Office: General) Order 2006 [24th Report from the Joint Committee]. The noble Lord said: Most of the provisions of the Enterprise Act 2002, which amended or replaced individual insolvency provisions of the Insolvency Act 1986, came into force on 1 April 2004. The most significant of those provisions implemented the Government’s policy of encouraging entrepreneurs by reducing the stigma of bankruptcy. Among these was Section 256 of the Enterprise Act 2002, which substituted a new Section 279 of the Insolvency Act 1986. The new section provides that bankrupts are to be automatically discharged from bankruptcy at the end of the period of one year rather than three years, beginning with the date on which their bankruptcy commences. This applies without distinction to bankrupts who are merely unfortunate and to those whose conduct both before and after the making of a bankruptcy order is culpable. The Enterprise Act 2002 therefore introduced, by way of a new Schedule 4A to the Insolvency Act 1986, provisions intended not only to maintain the restrictions on that minority of bankrupts but to enhance those restrictions where a bankrupt’s conduct had been irresponsible or reckless. The enhancement was achieved by the bankruptcy restrictions order, which is a court order placing restrictions on the activities of the bankrupt which continue after discharge from bankruptcy; the interim bankruptcy restrictions order to deal with the period prior to the hearing of an application for a bankruptcy restrictions order; and the bankruptcy restrictions undertaking, enabling those bankrupts who are prepared to admit to their culpable conduct to provide an undertaking which has the same legal effect as a bankruptcy restrictions order, but by way of an offer by the bankrupt to the Secretary of State rather than by way of an application to the court. Following the Enterprise Act changes, it became necessary to review the many existing statutory provisions which disqualified bankrupts from holding an office or position. That is because those provisions did not reflect the distinction which the Enterprise Act 2002 made between the culpable bankrupt and the merely unfortunate and there are obviously offices or positions where it is necessary to provide continued protection to the public. Certain provisions were modified by the Enterprise Act itself by way of amendment to the Insolvency Act 1986. For example, Section 426A of the Insolvency Act 1986 provides that those who are made bankrupt in England and Wales are not thereby disqualified from sitting or voting in this place or of membership of the other place; but those persons in respect of whom a bankruptcy restrictions order has effect are so disqualified. Similar provision was made in respect of membership of local authorities by Section 267 of the Enterprise Act. For consistency, similar provisions also apply to MEPs and parish councillors. However, some of the changes were to be made by secondary legislation. Accordingly, Section 268 of the Enterprise Act enables non-insolvency legislation to be amended to reflect the bankruptcy restrictions regime. Those changes can be made by an affirmative order procedure and that is why we are here today. The draft statutory instrument currently before the Committee implements changes to bankruptcy disqualification provisions of a similar nature in a wide variety of legislation involving various departments. The changes generally remove disqualifications which automatically applied when a person became bankrupt. These changes will go some way to mitigate the negative social consequences of bankruptcy but will also take account of the more serious implications of the existence of a bankruptcy restrictions order or undertaking. I have already made reference to the distinction that needs to be made between those bankrupts who are culpable and those who are merely unfortunate. There are obviously offices or positions, particularly those where the financial probity of the office holder is of great importance, where it is necessary to provide continued protection to the public by extending the restrictions on membership to those subject to the bankruptcy restrictions regime. This instrument ensures that necessary protections are in place and to this end I draw the Committee’s attention in particular to the following amendments: in respect of the trustees of a charity, the instrument retains the restriction on that office being held by an undischarged bankrupt and extends the disqualification for being a trustee of a charity to those individuals subject to a bankruptcy restrictions order. Similarly, in respect of pension trustees, the instrument retains the restriction on that office being held by an undischarged bankrupt while extending the disqualification for being a pension trustee to those individuals subject to a bankruptcy restrictions order. Comparable changes are made in respect of a registrar of births, deaths and marriages, a plan manager of personal equity plans, and account managers of individual savings accounts. The restriction on holding that office while an undischarged bankrupt is retained, and those individuals subject to a bankruptcy restrictions order will also be disqualified from holding such offices. With regard to the bankruptcy restrictions regime, it might be useful for me to add that information regarding individuals who are subject to such restrictions is made publicly available. The Insolvency Service maintains free public registers which show details of bankruptcies that are either current or have ended in the past three months, current individual voluntary arrangements and fast track voluntary arrangements and current bankruptcy restrictions orders and undertakings. The registers may be searched on-line using a surname or part of a surname of the individual and the search can be of the whole of England and Wales, or the area covered by an individual official receiver’s office. The registers are available via the Insolvency Service website—www.insolvency.gov.uk. I commend the draft order to the Committee and beg to move. Moved, That the Grand Committee do report to the House that it has considered the Enterprise Act 2002 (Disqualification from Office: General) Order 2006 [24th Report from the Joint Committee].—(Lord Sainsbury of Turville.)