I start by warmly welcoming the amendments tabled by the Minister, which respond in a very positive fashion to the amendment that I moved in Committee. I had no idea I was being so persuasive. That was a trick I should learn in other places. I clearly have something that I did not know I had. The points that the noble Viscount went on to make are also well taken. Even so, there are a couple of things that we would like to suggest are also taken into account.
For the reasons outlined, the necessity of IT equipment to the continuity of a business in difficulty cannot be overstated. Frankly, without this, there is no chance of any continuation, or of selling on, and thus of maintaining economic activity and jobs. IT is today as central as supplies of water and utilities. Therefore we also welcome the Government’s amendments to add on-sellers of utilities to the list of supplies that must continue. Given our desire to enhance business rescue, especially in these difficult times when banks are less than helpful, this change to prevent certain suppliers withdrawing services to struggling businesses is a significant step forward. We are delighted that the Government heard this plea.
The one area that we wish to raise, covered in the amendments that have been tabled, is the new mandatory requirement for a personal guarantee from the office holder—the insolvency practitioner—to cover essential
supplies. Subsection (3) of government Amendment 84C permits the supplier to terminate the supply unless an insolvency office holder personally guarantees any charges arising from the continuation of the supply. This is a move away from the current legislation, which provides for an optional personal guarantee.
Although Section 233 of the 1986 Insolvency Act contains an optional guarantee in subsection (2)(a), when the Bank of England, FSA and HMT introduced equivalent provisions to protect financial institutions, this optional guarantee provision was removed, and there are now no provisions for such personal guarantees. This position for financial institutions is right, as we see no case for a personal guarantee from an office holder, since an insolvency practitioner should not be subject to personal liability when acting as the agent for the company.
Contrast the situation affecting directors, who are not mandatorily subject to such personal liability even though they have a similar relationship to their company. Such a requirement for a personal guarantee appears particularly inappropriate in respect of certain types of insolvency, such as for a supervisor in a voluntary arrangement who has no control over the business. The mandatory guarantee requirement in the government amendment is therefore a backwards step, and our amendments are to align the provisions with the recent regime for financial institutions, by removing the requirements for mandatory personal guarantees from office holders.
Our first two amendments also take this opportunity to amend the 1986 Insolvency Act to remove the optional guarantee from Section 233(2)(a) so that the provisions for essential services in the 1986 Act are brought into line with the protection regime for financial institutions. It is hard to understand the requirement for a personal guarantee, as there is no reason why insolvency practitioners should be subjected to personal liability when acting as the agent of the company. There is a real danger that such a requirement would reduce use of this tool with a real threat, therefore, to business rescue.
The existence of a mandatory personal guarantee would be particularly detrimental in CVAs where the management retains control of the business with the insolvency practitioner acting as supervisor. Given the limited control insolvency practitioners have over the business, with no control over the assets, they would be exposing themselves to significant risk by providing a personal guarantee. It is very unlikely that any insolvency practitioner would, in fact, go down this route. I should add that the proposed 28-day maximum credit period in subsections (2)(c) and (3)(c) of the new clauses is a reasonable compromise. Thus the demand for an additional personal guarantee seems excessive. We know the Government share our desire to maximise company rescues—often with the role of an insolvency practitioner as key. We trust they will not undermine their otherwise welcome amendments by the introduction of this counterproductive measure. I beg to move.