§ '(1) A member of a recognised professional body is authorised to act as an insolvency practitioner if he is permitted so to act by or under the rules of that body.
§ (2) The Secretary of State may by order declare a body which appears to him to fall within subsection (3) below to be a recognised professional body for purposes of this section; and any such order may be revoked by a further order if it appears to the Secretary of State that the body no longer falls within that subsection.
§ (3) This subsection applies to any body which regulates the practice of a profession and maintains and enforces rules for securing that such of its members as are permitted by or under the rules to act as insolvency practitioners—
- (a) are fit and proper persons so to act; and
- (b) meet acceptable requirements as to education and practical training and experience.
§ (4) Any order under subsection (2) above shall have effect from such date as is specified in the order: and any such order revoking a previous order may make provision whereby members of the body in question continue to he treated as authorised to act as insolvency practitioners for a specified period after the revocation takes effect.
§ (5) In this section references to members of a recognised professional body are references to persons who, whether members of that body or not, are subject to its rules in the practice of the profession in question.'.[Mr. Fletcher]
§ Brought up, and read the First time.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alex Fletcher)
I beg to move, That the clause be read a Second time.
§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
With this it will be convenient to take new clause 6—Applications for authorisation.
Government new clause 7—Grant, refusal and withdrawal of authorisation.
Government amendments Nos. 5 to 7, 233 and 239.
§ Mr. Fletcher
This clause replaces the existing delegation clause 5 in the Bill, and provides that a member of a recognised professional body is authorised to act as an insolvency practitioner if he is permitted to act by the rules of that body. We expect such members to comprise the largest proportion of qualified insolvency practitioners in future. On application by a body for recognition, the Secretary of State will have regard to whether it regulates the practice of a profession and will seek assurances that it will be able to maintain and enforce rules for securing that those of its members authorised to act as insolvency practitioners are fit and proper persons, and meet acceptable requirements as to education, practical training and experience.
Our consultations with the main accounting and legal bodies will ensure that those requirements are suitably balanced between the member of a recognised professional body and the person authorised to act by the Secretary of State or other relevant authority.
The purpose of new clause 6 is to lay down the manner, content and form of an individual's application to the 527 relevant authority. It also gives the latter various powers in relation to applications. Amendment No. 7 deletes clause 3 dealing with applications for certificates. The relevant authority will also have to consider whether the applicant meets the prescribed requirements with respect to education, practical training and experience. This differs from existing provisions in the Bill, in that we have added education and have stipulated that training should be practical.
The effect of these changes is to ensure that those applying to relevant authorities—and we expect that they will mainly be individuals who do not belong to professional bodies recognised for insolvency purposes—will have to meet requirements equally demanding as those faced by members of professional bodies.
§ Mr. Gerald Bermingham (St. Helens, South)
Will the Minister tell us whether he sees the Department's role as supervisory? Each of the professional bodies has its own rules and regulations about training and, of course, there ought to be some uniformity between them. In future, does the Department see itself telling the Law Society, the Bar Council, the Institute of Chartered Accountants and the Institute of Insolvency Practitioners exactly what remit they must follow to secure adequacy of training?
§ Mr. Fletcher
I would not use the term supervisory body, but, as the hon. Gentleman suggests, it is important there should be a balance of expectation between the relevant authority and the qualifications, education, training and experience looked for by the professional body. This will be done. At the moment, we are discussing with the professional bodies precisely what standards and what rules there should be for establishing this new arrangement, because there must be similarity in the way that various bodies and the Secretary of State exercise their powers. That is what the hon. Gentleman has referred to, and I hope that clarifies the point he made. It is not just a matter of making sure that the new arrangements continue to be managed properly by the professional bodies; it is a matter of saying that they get off to a good start and that rules are laid down that can be referred to if any doubt or any questions arise in future.
§ Mr. Bermingham
The Minister has pinpointed the matter that worries me. Is the Department of Trade going to say to the Institute of Chartered Accountants or the Institute of Certified Accountants, "These are the criteria which we will demand in the training courses so that a person may become an insolvency practitioner"? If that is the case, it seems that the Department of Trade is seeking to interfere in the standards and codes of conduct of those professional bodies.
§ Mr. Fletcher
We are making sure that we get off to a good start. It is not a matter of laying down rules, but a matter of agreeing with the professional bodies. I take the implication of the hon. Gentleman's point, that these bodies are well used to regulating the professional standards of their members. However, we must try to achieve the maximum amount of equivalence of treatment between the individual bodies—there will be several of them—and the way the authorisation is carried out by the Department. For that reason, we are having consultations with the professional bodies and wish to lay down guidelines for their benefit as well as for our own.
528 I was saying that we expect that those who are authorised by the relevant authority will be mainly individuals who do not belong to professional bodies recognised for insolvency purposes. I added that they will have to meet requirements equally demanding as those faced by members of the professional bodies. That is the obverse of the point made by the hon. Gentleman. For obvious reasons there cannot be the same requirements for those applying to the Secretary of State, because they will have a different background from that of members of professional bodies. We will seek to balance them as near as we can, and our consultations with the main professional bodies are continuing on that basis. One other change is that subsection (3) will allow more flexibility in fixing the length of time that an authorisation can continue in force.
Amendment No. 5 is necessary, because, whereas clause 2 refers to certification of practitioners by the Secretary of State, the provisions introduced by new clauses 5, 6 and 7 refer to authorisation by membership of a recognised body or by a relevant authority. Accordingly, amendments to clause 2 are necessary to accommodate these changes. The amendment to clause 2, which is amendment No. 6, adds references to the mental health legislation and is as a result of an amendment moved in Committee by my hon. Friend the Member for Tynemouth (Mr. Trotter). It is intended that any person who is subject to either of the specified mental health enactments will be disqualified from acting as an insolvency practitioner. Should an order under the mental health legislation be lifted, it will be possible for a person to apply for authorisation in the normal way. The hon. Gentleman will remember that we considered this matter in Committee.
Turning to amendment No. 233, schedule 9 contains the transitional provisions relating to insolvency practitioners, but makes reference only to clause 2(2). The additions to that clause expand subsection (2) into two subsections, Nos. 2 and 3. Therefore, an appropriate amendment to schedule 9 is required. The amendment to schedule 10 is amendment No. 239. Section 302(1) of the Companies Act 1985 provides that an undischarged bankrupt who is formally appointed or assumes the role of a director or liquidator of a company commits an offence unless he first obtains leave of the court to so act. The words, "or liquidator" have been rendered redundant by existing clause 238 and amended clause 248 which disqualifies an undischarged bankrupt from acting as an insolvency practitioner, which term includes a liquidator, in any circumstances. I commend the amendments to the House.
§ Mr. Bryan Gould (Dagenham)
My calculation is that simply to read out the vast number and volume of Government amendments and new clauses, let alone explain them and debate them, would take some hours. Therefore, in commenting on many of the amendments we are constrained to be extremely brief, and I shall be brief.
When we considered the provisions in Committee we had before us a relatively simple, comprehensible structure. Either someone obtained the necessary authorisation by being a member of a recognised professional body or, if he could not achieve that, he applied for individual certification and, no doubt, obtained it from the Secretary of State.
I imagine that the Minister was telling the House that this new and much more complex structure was the 529 consequence of consultations with the professional bodies. I am rather taken aback to discover that what should have been a relatively simple change has required several new clauses and further amendments. So we are left with a more complicated position.
What we now face leaves open a number of questions. As my hon. Friend the Member for St. Helens, South (Mr. Bermingham) asked, what will be the role of the Secretary of State in this? Surely he will take some sort of co-ordinating responsibility to ensure some uniformity of practice and standards, even if his role is not supervisory.
What will be the attitude of the Secretary of State and the relevant authorities to the questions which engaged members of the Committee when we discussed these matters? For example, what will be the attitude towards members of professional bodies—let us say, the Law Society or the Institute of Accountants—who have not passed specialised papers in insolvency? What rule, principle or practice will he applied?
Given that one of the major objectives of the new provisions is to make it possible for those who have never passed and are never likely to pass examinations or to gain admission to a professional body nevertheless to qualify as insolvency practitioners, what do we know about the criteria which the Minister or the relevant authorities will apply to experience? It is exactly from that area that some of the major problems have arisen in the past and where some of those who have most disgraced the profession have come. I argue that experience, while necessary as a qualifying condition simply because it is needed for transitional purposes, should be limited to that transitional period and that we should be aiming to move towards a profession where either membership of a recognised professional body or the passing of some recognised examination should be the essential precondition for entry into the profession. Will the Minister explain how the new structure will reflect upon and influence those matters?
§ Mr. Jeremy Hanley (Richmond and Barnes)
Will the Minister say what form of consultation he will be holding with the professional bodies during the summer recess? If that consultation is to be meaningful, no doubt coupled with our experience so far—it is unique in my experience to have 1,000 Government amendments made to a Bill of 200 clauses originating in the other place—surely there are bound to be more amendments recommended during the recess. What is the procedure for bringing what might be wise and sensible amendments before the House when right hon. and hon. Members return after the recess?
§ Mr. Bruce Millan (Glasgow, Govan)
I must first declare an interest as a member of the Institute of Chartered Accountants of Scotland, which hopes to be one of the recognised professional bodies and has been engaged in discussions with the Government. I am also parliamentary adviser to the institute.
I take the point made by the hon. Member for Richmond and Barnes (Mr. Hanley). We are in difficulty in dealing with this vast number of amendments to a Bill that has already been through the other place and in any case has been under discussion for a number of years, what with the Cork report, the White Paper and so on. It is an unsatisfactory way of dealing with important legislation.
In the new clauses we have a complete rewriting of part I. It so happens that I welcome that, so I am not 530 complaining about the merits of what the Government are doing. However, it is not a satisfactory way of dealing with legislation, and it is extremely difficult, with not only this group of amendments but with a number of others that we shall be discussing later, to know exactly how the Bill will stand when the amendments have been made. There will be wholesale changes in the Bill if the various Government amendments are carried. I regret that we are dealing with important matters in his way.
I ask the Minister a couple of questions for clarification, and one of them follows on from what my hon. Friend the Member for St. Helens, South (Mr. Bermingham) said. I am not clear what the relevant authority will be, as distinct from the Secretary of State. As I understand it, the definitions of "relevant authorities" are exclusive of the professional bodies. Will the Minister confirm that a number of the other new clauses which refer to relevant authorities do not refer to the procedures under the recognised professional bodies?
If a member of a professional body is not granted authority under new clause 5 by the recognised professional body, I assume that he does not have an appeal from there to the tribunal. If he is turned down by his own professional body, it appears that there is nothing to stop him applying to the Secretary of State or the relevant authority and then subsequently to the tribunal. Will the Minister confirm that all the provisions about tribunals, appeals and so on are nothing to do with new clause 5, which deals with recognised professional bodies?
I come, then, to the matter raised by my hon. Friend the Member for St. Helens, South and by my hon. Friend the Member for Dagenham (Mr. Gould) about the rules. By amendment No. 10, the Government will be providing for rules by way of regulation, and these rules will includeprovision as to the matters to be taken into account in determining whether a person is a fit and proper person to act as an insolvency practitioner.As I read it, the amendment will apply to professional bodies as well as to the relevant authorities.
§ Mr. Millan
If that is correct, there will be a supervisory function by the Secretary of State. He will lay down the rules by way of regulation which will apply to applications to professional bodies as well as to applications to the relevant authorities. So there will be an element of standardisation. I do not complain about that, but it is unsatisfactory. We are dealing with it at a late stage in our consideration of the Bill, and we have no idea so far what is likely to be provided for in these regulations and we have no idea how far they will impose obligations on professional bodies and how far the professional bodies will have to change their internal rules and procedures to meet the regulations.
As I see it, by a subsequent amendment there will be supervision, but at the moment we have no idea what that supervision may entail.
§ Mr. Tim Smith (Beaconsfield)
I am a member of the Institute of Chartered Accountants in England and Wales, and its parliamentary adviser. Obviously the institute would hope to become a recognised professional body for the purposes of the new clauses.
I have a lot of sympathy with what has been said in the debate. Part of the answer to the hon. Member for Dagenham (Mr. Gould), who asked how we would 531 achieve a degree of consistency in the new arrangements, is that there is a precedent. It is not unprecedented for the Department to recognise bodies in this way because four are already recognised for the purposes of auditing under the Companies Acts. The Department does not recognise a body and leave it at that: it has a role in constantly supervising and ensuring that the body concerned maintains the highest standards. Nevertheless, a lot of detailed matters need to be dealt with.
I wish to ask two questions of my hon. Friend. First, as I did not have the good fortune to be a member of the Committee, I am not clear about the position of those insolvency practitioners who will be qualified by virtue of their experience. When the provisions in relation to auditors were enacted in 1948, only those qualified by experience up to the time that the Act came into force were recognised. That would seem to be the right parallel.
Secondly, I imagine that the changes to the Bill will be considered in another place, I hope in October rather than next week. If it is in October, those who have an interest in these matters will have had an opportunity to consider them. I understand that the new clauses under consideration today were tabled last Thursday, so that effectively there has been a good deal less than a working week in which to consider them. I hope that my hon. Friend will confirm that he is prepared to consider further representations if the interested parties have views to offer on them.
§ Mr. Bermingham
Consideration of the Bill is beginning to sound like the well-known musical which speaks of 1,001 nights. This is a Bill of 1,001 amendments, or small cuts. With respect to the Minister, we still seem not to have it right. I wish to draw his attention to several minor points.
As my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) said, amendment No. 10 refers to laying down the prescribed rules. Who will advise the Secretary of State what should be in the prescribed rules? We are now getting into a cyclic argument. I sincerely hope that the persons who advise the Secretary of State will be from among insolvency practitioners. I would shudder if I thought that civil servants would do this. The Minister knows well why I say that, after one or two comments which I made in Committee about advice received by Ministers on occasion.
With regard to new clause 5, I draw the attention of the Minister to the word "acceptable", which I suggest is the wrong word to use. It would be far better to use "prescribed". Indeed, new clause 12 contains a definition of "prescribed". This would perhaps get us out of the problem.
I should have declared an interest at the beginning of my speech, which I know is well known to hon. Members. I am a practising barrister and have acted as a solicitor in insolvency in the past and no doubt will do so again in future, so let the record show that the Bill is of some considerable interest to me.
I do not necessarily wish to see the Bill go on to the statute book. I shall have some comments to make on certain other clauses which are gobbledegook and will lead to litigation. Needless litigation benefits nobody. This is our last opportunity to attempt to get it right, bearing in 532 mind that it has taken over 100 years since the last Bill on these matters was brought in by Joseph Chamberlain in 1882, if my memory serves me correctly.
§ Mr. Bermingham
The Minister says that he remembers him. I say no more than that.
New clause 7 refers to the relevant authority which grants the application. The authority is to have regard tothe information furnished by the applicantandsuch other information, if any, as it may have".It is not clear whether the applicant will have any right of access to such information. All professional bodies at some stage receive the almost malicious complaint from a disgruntled or dissatisfied customer. Surely the applicant should have access to that sort of information, if nothing else, in order to rebut the allegation. It may well be that those other sources of information contain defamatory material which, if disseminated, would cause considerable professional damage.
§ Mr. Bermingham
I entirely accept what my hon. Friend says.
New clause 9 seems merely to give the applicant a right to make written representations to the authority. I suggest that that is not sufficient, and that the Minister should reconsider new clause 7 if the rules of natural justice are to be complied with.
§ Mr. Fletcher
If I may declare my interest, I am a member of the Institute of Chartered Accountants of Scotland, members of which, I observe, are just in the majority this evening, although I do not know what that proves.
The hon. Member for Dagenham (Mr. Gould) commented on the number of amendments. I apologise that so many amendments have been tabled on Report, and I know that it makes heavy reading for Members participating in the debate. The hon. Gentleman will appreciate that a number of them flow from undertakings which I gave in Committee. A number of groupings encompass technical amendments or are minor matters. The group of 28 amendments, starting with Government amendment No. 20, is concerned only with the definition of security throughout the Bill. Starting with Government amendment No. 25, there are 19 drafting amendments. I take the point that this is an unusually large number of amendments on Report, although I hasten to add that I think that it is not quite 1,000.
My hon. Friend the Member for Richmond and Barnes (Mr. Hanley) mentioned the question of consultation during the recess. My hon. Friend the Member for Beaconsfield (Mr. Smith) asked whether the Bill will be going to another place in the spillover of the Session. The answer is yes. There is, therefore, further time for certain matters. However, it should be remembered that the Bill started in the Lords so that the ability of the other place to make amendments is restricted in the usual way.
The hon. Member for Dagenham asked about professional members who have no special training or 533 experience. They will not be authorised. Part of the transitional arrangements is that, if a person is acting as a liquidator when the Bill is enacted, he will continue to act as a liquidator in a liquidation. Thereafter, members of professional bodies will have to show that they have the requisite amount of training and experience before being authorised by the professional body to act as liquidator. Non-professional persons will have to satisfy requirements of training and experience and show that they are fit and proper persons in respect of professional bodies, that is, their own assessment of the fitness of the member, plus the guidelines laid down in the rules which will decide whether they will be authorised by the professional body.
The right hon. Member for Glasgow, Govan (Mr. Millan) referred to the tribunal. One reason for the large number of amendments is that the professional bodies were unhappy about having a tribunal second-guessing their authorisations. That is understandable. A professional body can choose whether to seek recognition or to be regarded as a relevant body. If it seeks recognition, the tribunal will not apply to the professional body.
§ Mr. Millan
What about someone who is not recognised by his professional body and applies to the relevant authority? There is nothing to stop that happening. That must be unsatisfactory, because if a person cannot get his professional body to recognise him as a fit and proper person it is a little odd that he should be able to go to the relevant authority.
§ Mr. Fletcher
The right hon. Gentleman is correct. Nothing in the Bill will prevent a person who is turned down by his professional body from making an application to the relevant authority. However, in considering the application, the relevant body will take into account the reasons why the applicant was turned down by his professional body.
Having applied to the relevant body, an applicant would have the right to appeal to the tribunal, which would take the final decision.
§ Mr. Millan
Will there not be, in effect, an appeal to the tribunal against the decision of a professional body?
§ Mr. Fletcher
I do not think that the tribunal will take that view. We cannot write into the Bill a provision to prevent an individual from making an application.
§ Mr. Fletcher
We cannot prevent people from applying for anything. If a person wishes to make an application to the relevant authority, he will be free to do so. However, I am sure that the relevant authority and, more important, the tribunal will want to know why that person had been turned down by his professional body.
§ Mr. Hanley
If an individual is turned down by his professional body and is successful on an appeal to the tribunal, will the Secretary of State license him to practise in insolvency or will the professional body be ordered to 534 register that person? It is important for the integrity of professional organisations that they should not be forced to take on a person whom they had previously rejected.
§ Mr. Fletcher
The Secretary of State will have no power to direct a professional body to authorise one of its members to be an insolvency practitioner.
I understand the point that is being made, but it would be rare for a person to be turned down by his professional body and be authorised on appeal to the tribunal after applying to the relevant authority. If it happened, that person would be authorised by the Secretary of State and not by his professional body. It is a valid debating point. but the situation is unlikely to arise.
§ Mr. Tim Smith
My hon. Friend says that the situation is unlikely to arise and that he finds it difficult to envisage a person being turned down by his professional body and subsequently being accepted under the alternative mechanism. Why not put into the Bill a provision to ensure that that cannot happen? Why is that objectionable?
§ Mr. Millan
Surely there is a difference between making an application to the relevant authority in the first instance and following the appropriate procedures—it is fair enough if a member of a professional body wants to do that—and the system in the Bill, which allows someone who is rejected by his professional body, which decides that one of its members is not fit to be an insolvency practitioner—because of his lack of experience or training or for other reasons—to circumvent that decision by going through the relevant authority. Ultimately, the appeal to the tribunal is effectively an appeal against the decision of the professional body, a process which other provisions in the Bill are meant to exclude.
Given the difficulty in making further amendments in another place, I am not sure that we can alter the Bill now, but the Government have not got it right.
§ Mr. Fletcher
The right hon. Gentleman overlooks what I said earlier about the equivalence of treatment and standards which will be in in the rules. If a person is turned down by his professional body and applies to the relevant authority, the authority will make its assessment on the same basis and under the same rules as the professional body made its decision. The right hon. Gentleman said that an applicant might lack sufficient training or experience. I find it hard to believe that the relevant authority or, on appeal, the tribunal would take a different view from the professional organisation.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.