Official Report 428KB pdf
Bankruptcy and Debt Advice (Scotland) Act 2014 (Consequential Provisions) Order 2016 [Draft]
Public Services Reform (Insolvency) (Scotland) Order 2016 [Draft]
Item 3 on the agenda is evidence on the draft Bankruptcy and Debt Advice (Scotland) Act 2014 (Consequential Provisions) Order 2016 and the draft Public Services Reform (Insolvency) (Scotland) Order 2016.
I welcome Fergus Ewing, Minister for Business, Energy and Tourism, who will give evidence on the orders. He will be joined shortly—I hope—by Scottish Government officials Alex Reid, head of policy development at the Accountant in Bankruptcy, and Graham Fisher, head of branch 1 in the constitutional and civil law division.
Minister, do you want to introduce this item?
Yes. Thank you, convener, and good morning, all. I am very pleased to have the chance to address the committee today and to bring forward two orders of a different nature. They might seek to achieve different outcomes, but what they both have in common is that they are intended to make life a wee bit easier for some of the people of Scotland.
The first order is the Bankruptcy and Debt Advice (Scotland) Act 2014 (Consequential Provisions) Order 2016. As members are aware, the Bankruptcy (Scotland) Bill, which is a consolidation bill, is making its way through the parliamentary process, and I am pleased to note that it recently passed stage 1. The bill will put Scotland’s bankruptcy legislation in one place—in one document—aiding the accessibility and understanding of bankruptcy law for practitioners and those who are affected by it.
In order for the consolidation bill to have full effect, we require to make two minor consequential amendments to the Bankruptcy (Scotland) Act 1985. They clarify cross-references in provisions on when the apparent insolvency of a debtor is constituted and provisions that, for the avoidance of doubt, the fact that limited liability partnerships cannot be sequestrated does not affect their apparent insolvency.
In the view of my officials—and in my view—the consolidation bill could properly pick up those missed changes. However, we have taken on board the feedback from the Delegated Powers and Law Reform Committee, which has called for the amendments to be made in order that it is clear that the bill accurately consolidates the current law in that respect. I am confident that the minor amendments that are proposed in the order will allow a pure consolidation of the existing law on bankruptcy. However, I am happy to address any questions that the committee might have.
The next order is the Public Services Reform (Insolvency) (Scotland) Order 2016. Members will be aware that, in some respects, current Scottish corporate insolvency legislation, particularly on devolved elements of corporate insolvency such as the process of winding up, is out of step with legislation and associated practices elsewhere in the UK and with some reserved areas. The order was laid in the Scottish Parliament on 18 January following extensive consultation under the super-affirmative procedure. It is the necessary first step in making changes to devolved areas of the Insolvency Act 1986 as they relate to corporate insolvency procedures in Scotland.
The legislative landscape in the area of corporate insolvency administration is complex, and that is partly due to the mix of reserved and devolved competence. Administration and the legal effect of company winding-up procedures are reserved to Westminster, but receivership and the process of winding up are devolved. There is a mismatch between some of the actions that an insolvency practitioner takes in relation to a company that is registered in Scotland and the equivalent process for a company that is registered in England.
Examples include the convening of an annual meeting of creditors and members in Scotland compared with the simpler process of the sending of a progress report in England and Wales, and the fact that websites and electronic means of reporting and correspondence can be used in England and Wales but that is excluded in Scotland. The fact that we are taking forward a plan to redress the situation is warmly welcomed by insolvency stakeholders.
As a precursor to the preparation of modernised insolvency rules for Scotland, it is appropriate first to bring the position for devolved areas of corporate insolvency in Scotland into line with the position for England and Wales. That follows amendments that have already been made to the Insolvency Act 1986 by the Legislative Reform (Insolvency) (Advertising Requirements) Order 2009, but principally the Legislative Reform (Insolvency) (Miscellaneous Provisions) Order 2010. Reforms that were introduced by the Small Business, Enterprise and Employment Act 2015 have also been taken into consideration.
11:30The order will allow us to set about modernising and streamlining the secondary legislation—the insolvency rules. The Accountant in Bankruptcy is establishing a Scottish rules working group, which will work with the UK Insolvency Service to inform the drafting of new Scottish rules. The focus will be on making the rules useable for end users and consistent with the modernised rules that are being developed in England and Wales.
I know that the insolvency profession in Scotland welcomes the changes. The processes will be more efficient and effective and they will save the profession and creditors both time and money.
Thank you, minister. I want to pick up on a couple of points in the submission from the Institute of Chartered Accountants of Scotland. It suggests some amendments—which you referred to in passing—on areas that it feels should be covered but which are not. Can you tell us how the Scottish Government intends to deal with those suggestions?
We work closely with ICAS. A number of important issues were raised by ICAS and other stakeholders including R3—the Association of Business Recovery Professionals—and the Law Society of Scotland. I stress that the suggestions were all carefully considered, as you would expect, and they were incorporated where that was feasible. The reasons for not incorporating certain items were fed back to stakeholders and I am advised that they confirmed that they were agreeable to the suggested contents of the Public Services Reform (Insolvency) (Scotland) Order 2016.
It might be helpful, for the sake of getting them on the record, if I mention several areas that stakeholders suggested could have been included. One was the introduction of a specific power for a liquidator in a court winding-up to seek the direction of the court. It was thought that that suggestion had merit but that it would have wide-ranging consequences that were too detailed and technical to be considered in the time available before purdah.
Other suggestions were to add the ability for the appointment of receivers to be authenticated electronically, for the provisions on the prosecution of delinquent directors in liquidations to be extended to appointments other than liquidation, and for an additional filing requirement to include the Accountant in Bankruptcy. There was also a suggestion about the liquidator’s powers to disclaim onerous property, which I know from my involvement is a tremendously complex area.
Essentially, our position is that there is merit in some or all of those proposals and we need to work on taking them forward. That is not in dispute, and we are working with ICAS—with the insolvency practitioners. I think that they have accepted that the items that we are progressing are appropriate and they are content for us to take a little bit more time to work with them to get all the other matters right. It is good to have the opportunity to explain that for the benefit of any insolvency practitioners who might read the Official Report later.
I think that it has also been agreed—my officials, who are now here, will tell me whether I am going on a trip on my own or whether I am correct—that it is not envisaged that the insolvency rules will be in force for some considerable time. I think that the briefing mentions 2017. That gives us some more time to make sure that we get all those matters right, which we intend to do.
Thank you. I welcome Mr Fisher and Mr Reid. I was just about to ask you about timescales. I note that the ICAS submission states:
“The timescale to introduce new corporate insolvency rules in Scotland on 1 October 2016 is very challenging”.
Is that still the target date for the introduction of the new rules?
April 2017 is now the most likely date for the Scottish rules to come into force. There is an issue to be dealt with related to transfer of competence, as we need to deal with the Scottish rules in relation to areas of cross-competence. That will be done in due course, and it makes it look like April 2017 will be the date. That has been welcomed by R3 and ICAS.
Okay. Thank you. Do other members wish to come in on any points?
I thank the minister for being clear. Will all cross-border implications or situations be covered by the deliberations of the working group?
We are working with the UK Government on these matters, and that is the primary way in which we will make sure that what we do is appropriate and correct. However, I am sure that the working group that is to be formed will consider that as well. Perhaps Mr Reid can clarify that further.
The UK Insolvency Service will be part and parcel of the working group. It will develop rules for Scotland covering the strictly reserved areas. The working group has an important role to play in that, as well as in relation to the rules that will be developed for the devolved areas and the areas with cross-competence, so the cross-border issues are key to that group.
As there are no other questions, we will move on to agenda item 4, which is consideration of motion S4M-15253.
Motion moved,
That the Economy, Energy and Tourism Committee recommends that the Bankruptcy and Debt Advice (Scotland) Act 2014 (Consequential Provisions) Order 2016 [draft] be approved.—[Fergus Ewing.]
Motion agreed to.
We now move to item 5, which is consideration of motion S4M-15461.
Motion moved,
That the Economy, Energy and Tourism Committee recommends that the Public Services Reform (Insolvency) (Scotland) Order 2016 [draft] be approved.—[Fergus Ewing.]
Motion agreed to.
I thank the minister and the officials for their attendance.
Fireworks (Scotland) Amendment Regulations 2016 (SSI 2016/18)
Item 6 is consideration of a negative instrument. As members have no issues to raise, are we content for the regulations to come into force?
Members indicated agreement.
At this point, we will move into private session.
11:37 Meeting continued in private until 12:01.