I beg to move amendment No. 524, in page 170, line 16, at end insert 'appointed under such floating charge'.

With this we may take the following amendments: No. 439, in page 170, leave out lines 17 to 22 and insert—

'(2) A prescribed part of the company's net property shall be applied towards the satisfaction of debts that are neither preferential nor secured and shall not be distributed to the proprietor of a floating charge except in so far as it exceeds the amount required for the satisfaction of such debts.

(a) where subsection (1)(a) applies the liquidator shall use the prescribed part to pay the unsecured debts in whole or in part.

(b) where subsection (1)(b) applies the administrator shall use the prescribed part to pay the unsecured debts in whole or in part or, if so authorised by proposals approved under paragraph 51 of Schedule B1, make it available for that purpose to a liquidator of the company, the supervisor of a voluntary arrangement to which the company is subject or the company itself.

(c) where subsection (1)(c) applies the provisional liquidator shall, subject to any order of the court, retain the prescribed part until a winding-up order is made or the petition dismissed.

(d) where subsection (1)(d) applies the receiver shall use the prescribed part to pay the unsecured debts in whole or in part or make it available for that purpose to any liquidator of the company.'.

No. 440, in page 170, line 25, after 'minimum', insert

'amount or less than the prescribed minimum proportion of the unsecured debts.'.

No. 525, in page 170, line 35, after 'property', insert

'subject to a floating charge'.

Government amendment No. 479.

No. 457, in page 170, line 36, at end add

'and limited to the value of the assets over which the fixed charge subsists.'.

No. 526, in page 170, line 38, leave out 'the company's' and insert 'such'.

No. 458, in page 170, line 38, at end add

'including any trading loss incurred.'.

Government amendment No. 480.

No. 459, in page 171, line 12, after 'creation', insert

'; in Scotland, references to the creation of a charge are—

(a) in the case of a floating charge, the date on which the instrument creating the floating charge was executed by the company creating the charge, and

(b) in any other case, the date on which the right of the person entitled to the benefit of the charge was constituted as a real right.'.

No. 429, in page 171, line 13, at end insert—

' ''Receiver'' means an administrative receiver or (in Scotland) a receiver appointed under Chapter II of Part III of the Insolvency Act 1986.'.

Government amendment No. 481.

You will be relieved to hear that only a few of the amendments are tabled by Conservative Members, Mr. Conway, the others having been tabled by the Government or Liberal Democrats, which makes a nice change.

Amendment No. 524 is a technical amendment, which is code for saying that I shall read my brief, in the hope that someone understands it. The amendment is designed to make it clear that the requirements to make funds available out of net property, which, I believe, is the appropriate term of art, does not apply to a receiver who is only appointed under a fixed charge and, therefore, has no control over net property. I look forward to the Under-Secretary explaining the consequences of that.

On amendment No. 439, practitioners feel that the phrase ''make . . . available'' in clause 176A(2)(a) is too vague to be implemented in practice. I hope that the Under-Secretary will deal with that entirely practical concern.

Amendment No. 525 also relates to net property. I am told that the current definition of net property requires it to be calculated on all the company's properties, including not only the property subject to the floating charge, but any property subject to a fixed charge and property not subject to any charge at all. An example has been given of a receiver appointed under a floating charge over assets worth £50,000. The company has uncharged assets worth £1 million, so the required percentage to be made available to unsecured creditors is fixed at 10 per cent. The Bill would require the receiver to make available £100,000, of which only £50,000 would be under his control.

If the amendment were accepted, proposed new subsection (5)(a) would apparently still be needed because a floating charge can exist over property subject to a prior fixed charge. The subsection allows such a prior fixed charge to be taken into account but, because the definition is changed to refer only to floating charge assets, would exclude fixed charges over other assets. That seems perfectly sensible in the context.

Amendment No. 526 is minor and technical and needs no explanation. Amendment No. 429 stems from the Scottish briefing and would add a definition of ''receiver.'' Receiver is a broad term covering every kind of receiver appointed under a fixed or floating charge. The new responsibility under the proposed new clause should affect only receivers who are administrative receivers, or the Scottish equivalent; that is, a receiver appointed under a floating charge to the whole, or substantially the whole, of the company's assets.

The administrative receiver controls the company's destiny in the same sense as a liquidator, administrator or professional liquidator. It may be argued that secured creditors will endeavour to avoid the effect of the proposed new clause by taking security in the form of floating charges over only part of the company's assets, so that any receiver appointed would fall outside the scope of the new clause. That is not thought to be a significant risk, however, as the security-taking would be inconvenient and give the secured creditor no effective control of the situation.

My amendments are technical, but I assure the Committee that those who wrote my brief have used a brief turn of phrase, so I shall not delay our proceedings for long.

Amendment No. 457 invites the Under-Secretary to establish the extent of the liability that can be taken into account for the purposes of proposed new subsection (5)(a). Situations may occur in which the company's liability will exceed the value of the assets affected by a fixed charge. The holder of a fixed charge would not be entitled to claim more than that value, in contrast to the holder of a floating charge. The amendment stems from the Law Society of Scotland and invites the Under-Secretary to clarify whether the liability referred to in the subsection is restricted to the value of a fixed charge or not.

The purpose of amendment No. 258 is to establish whether trading losses are to be included when quantifying the cost of realising a company's property for the purposes of subsection (5)(c). The Law Society tells me that it envisages—I am sure that its position is quite reasonable—that, typically, solicitors' and estate agents' fees will be included in the cost of realising companies' property. However, it would be of some benefit if the Under-Secretary clarified whether trading losses that are incurred would also be included.

The Under-Secretary will be aware that insolvency practitioners may often continue to trade at a loss in order to secure a greater sum in realising an asset. The insolvency practitioner may realise more money for the property by continuing to trade but might, in doing so, incur trading losses. I welcome any clarification that the Under-Secretary can give us as to whether the trading losses incurred during this period are to be included in the cost of realising the company's property. There is an obvious link between the trading loss and the realisation of the property and there is a substantial argument for establishing that.

Amendment No. 459 is a technical amendment regarding the definition of the creation of a charge. It is the Law Society of Scotland's view that subsection (8) does not accurately reflect the points at which, in Scots law, a fixed or floating charge is created. The purpose of the amendment is to rectify that defect. It adopts the definitions given in section 410(5) of the Companies Act 1985 and is designed to ensure a degree of consistency of approach between the different legislation. Given the highly technical nature of the amendments, there may be some scope for the Under-Secretary to re-examine some of the matters involved. I invite her early comments.

I also wish to speak briefly on this matter, but with reference to the Bill itself rather than relying on briefings from various bodies.

The Government's goal has been as far as possible to create a level playing field for unsecured creditors. I understand that reasoning, although insolvency is highly technical and something of a minefield. I tabled amendment No. 439 to register my concern about subsection (2). When paragraph (a) refers to the liquidator making a prescribed part of the net property available for the satisfaction of unsecured debts, it is not clear whether the ordinary unsecured creditor would not be in a better position than a creditor with a floating charge, who would not qualify under paragraph (a) but would be given only the crumbs under paragraph (b).

How does the Under-Secretary envisage the mechanics of the measure working, in the context of straightforward insolvency involving entirely unsecured creditors, creditors with floating charges and secured creditors? Given the Government's plans effectively to neutralise some of the effects of floating charges, it is not clear how that would operate.

The purpose of amendments Nos. 524 and 429 is to restrict the ambit of new section 176A so that it affects only a receiver who is an

administrative receiver. The amendments are unnecessary and could provide a loophole for a secured creditor to avoid the effect of the new section. Although it is accepted that the term ''receiver'' is broad and covers every kind of receiver appointed under a fixed or floating charge, it is clear enough that the section refers only to property that is available for distribution to the holder of a floating charge.

I should like to clarify the matter of net property, so that it is clear to members of the Committee as I proceed. To answer the hon. Member for Orkney and Shetland (Mr. Carmichael), the net property is the property available for distribution to the floating charge holder and it therefore includes any trading loss if the office holder has continued the company's trading. The hon. Member for Eastbourne (Mr. Waterson) delved into the definition of net property in section 176A(5). The net property is the amount available to distribute after taking account of a variety of things, such as the liability secured by a fixed charge and any preferential debt. I should like that to be clear. I hope that hon. Members agree that the amendments are unnecessary.

On first sight, I found it difficult to understand what amendment No. 439 would achieve, and I am not entirely clear now. I can assume only that Opposition Members feel that the drafting dealing with whom the prescribed part is to be set aside for needs to be clarified. I do not agree; the new section dealing with the issue is clear.

I believe that the purpose of amendment No. 440 is to provide for the prescribed part of the company's net profit, which will be set aside for distribution to unsecured creditors, to be an amount that represents at least a prescribed proportion of the unsecured debts. I have some sympathy with the sentiments behind the amendment, but it is not necessary. We propose that there should be a set minimum financial level that the prescribed part ought to reach, and below which the liquidator will not have to consider distribution unless he or she can clearly see that the benefits of such a distribution outweigh the costs.

It is our view that the office holder does not need further discretion. We shall, of course, consult interested parties on the issue, but from discussions already held, we are minded to set the de minimis level of property available for distribution at £5,000. To provide the office holder with the discretion not to distribute if the prescribed fund is greater than that would surely lead to people questioning why we had a de minimis figure in the first place. In addition, and also from discussions held so far, we can think of few occasions when it would not be cost-effective for an office holder to distribute funds of at least £5,000.

In commenting on amendment No. 525, I shall also speak to amendments Nos. 457, 526 and 458. The amendments may have merit in seeking to achieve clarity on what constitutes the net property of a company on which the office holder can base his calculation for the prescribed part, but they are

unnecessary because we have suggested amendment No. 479 to deal with the matter.

I should explain that Government amendments Nos. 479, 480 and 481 are minor, as they clarify and ensure consistency. Amendment No. 479 makes it clear that the company's net property embraces only the property that is subject to a floating charge. That deals with the issues raised in amendments Nos. 525, 457, 526 and 458. Amendment No. 480 makes it clear that an order prescribing part of a company's net property may include other methods of calculating the prescribed amount and not just those in section 176A(6)(a) and (b). That is because, although we have it in mind that the ring fence will be set on a sliding scale with a de minimis level, we have not yet consulted interested parties, so we must ensure that the vires in the Bill are wide enough to allow other methods of calculation, if necessary.

The final Government amendment, No. 481, is merely a matter of consistency. It ensures that the same wording is used in new section 176A(9) and (10). I hope, therefore, that I have persuaded Opposition Members to support the Government amendments.

I appreciate why Opposition Members tabled amendment No. 459, but I assure them that it is unnecessary. Government amendment No. 479 makes it clear that the company's net property embraces only property that is subject to a floating charge. We are considering a further consequential amendment to remove the definition of a fixed charge in subsection (8), as the relevant section no longer refers to such a charge. As a result, amendment No. 459 is unnecessary, and there is no difference in England, Wales or Scotland as to when a floating charge is created.

On the point raised by the hon. Member for Cities of London and Westminster (Mr. Field), the floating charge holder will still have the final claim on the assets covered by the floating charge after the property has been removed from the available floating charge assets. That will still leave the majority of funds available to the floating charge holder. With that, I commend the Government amendments to the Committee.

I am fairly reassured by what the Under-Secretary said, although what matters is whether the practitioners are reassured. She said that there is to be further consultation on one or two amendments, which will be helpful, given that they are designed to make it easier to operate the provisions in the real world. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I remind the Committee that I shall not call amendments, other than Government amendments, for a Division unless the hon. Members who tabled them advise the Clerk that they want me to do so.

Amendments made: No. 479, in page 170, line 35, leave out from 'property' to end of line 39 and insert

'which would, but for this section, be available for satisfaction of claims of holders of debentures secured by, or holders of, any floating charge created by the company.'

No. 480, in page 170, line 41, after 'may', insert ', in particular,'

No. 481, in page 171, line 19, leave out 'reason' and insert 'virtue'.—[Miss Melanie Johnson.]

Question proposed, That the clause stand part of the Bill.

I want to use the clause stand part debate to discuss a couple of issues that were raised by the British Bankers Association. As we know, the association takes a close interest in what the Committee is up to.

The first point, which is fair, is that it is difficult to get to grips with the details of what is proposed because they are not in the clause. The Government presumably envisage making detailed regulations in due course on the nature of the pot of money for unsecured creditors and on how it will be administered. Once again, I must ask the Under-Secretary when the draft regulations are likely to be available. I assume that the plan is to produce drafts for discussion, and bodies such as the British Bankers Association will no doubt have a great deal to say about them at that time. However, it is difficult to take a significant view on those matters in the absence of the regulations.

The association also says that when the Cork committee first made its proposals about 20 years ago, it was very much of the view that the funds should be available first to the administrator or liquidator to pursue recalcitrant debtors. The funds available for distribution could then be boosted, and the balance of the fund offered to unsecured creditors.

The big idea at the time was to enable the administrator or liquidator to achieve maximum debt recovery on behalf of those creditors. The British Bankers Association points out that insolvency practitioners thought then, and still think, that the idea is good, but that it has not found its way into legislation. The Under-Secretary may be able to put my mind at rest at a stroke by saying that it will be included in the regulations, so I shall not delay for a moment the opportunity for her to tell me so.

Indeed, I can reassure the hon. Gentleman by saying that the draft regulations will be available for consultation—we are working on them. Once the Bill has gone through its parliamentary process, we shall probably be in a position to start consultation, which will ensure that there has been a full discussion with interested parties by the time the secondary legislation is drafted.

Question put and agreed to.

Clause 243, as amended, ordered to stand part of the Bill.