Contents
- Attendance
- Decision on Taking Business in Private
- Draft Energy Strategy
- Subordinate Legislation
Subordinate Legislation
Insolvency (Regulation (EU) 2015/848) (Miscellaneous Amendments) (Scotland) Regulations 2017 [Draft]
I welcome the Minister for Business, Innovation and Energy, Paul Wheelhouse, who is here with Graham Fisher and Alex Reid. I invite the minister to make an opening statement on the instrument, which is being considered under the affirmative procedure.
I am pleased to have the opportunity to address the committee and introduce the regulations. They make several amendments to insolvency legislation to facilitate the implementation of the recast insolvency EU regulation 2015/848, in the fully devolved area of personal insolvency and in receivership. The recast EU regulation is primarily a restatement and modernisation of the existing European Commission regulation 1346/2000, and it aims to enhance administration of cross-border insolvency proceedings.
The primary purpose of the regulations is to make the necessary minor, technical and supporting amendments to bankruptcy and related devolved legislation in Scotland from 26 June 2017, on which date the main elements of the recast EU regulation will come into force. The regulations make minor amendments to the following pieces of primary legislation: the Insolvency Act 1986, in relation to receivers in Scotland; the Bankruptcy and Diligence etc (Scotland) Act 2007; and the Bankruptcy (Scotland) Act 2016. In terms of secondary legislation, the following instruments are amended: the Bankruptcy Fees (Scotland) Regulations 2014; the Public Services Reform (Insolvency) (Scotland) Order 2016; the Bankruptcy (Scotland) Regulations 2016; and the Bankruptcy (Applications and Decisions) (Scotland) Regulations 2016.
The amendments broadly replace existing references to EC regulation 1346/2000 with references to the corresponding provisions of EU regulation 2015/848. The regulations pick up references to the “EC Regulation” and replace them with “EU Regulation”, and they update the previous term “member State liquidator” with “member State insolvency practitioner”, which is the term that is adopted in the recast EU regulation.
One more substantive change in the recast EU regulation provides for insolvency practitioners in cross-border cases to supply undertakings that will avoid the need for secondary insolvency proceedings where a business has an establishment and assets in another member state. Necessary amendments have been made to the Bankruptcy (Scotland) Act 2016 in relation to actions by insolvency practitioners in those circumstances. That covers actions by Scottish insolvency practitioners where the main proceedings are in Scotland and actions by overseas practitioners where secondary proceedings in Scotland can be avoided.
I will today write formally to confirm the arrangements in respect of the implementation of aspects of the recast regulation that cover corporate insolvency proceedings spanning reserved and devolved competence. In summary, work has progressed on introducing the amendments through a UK statutory instrument using the powers in section 57(1) of the Scotland Act 1998. The snap UK election and the consequent pre-election period have stalled that process. However, work continues in conjunction with UK Government officials, and we remain hopeful that laying the UK statutory instrument soon after the election will avoid delaying the implementation. I will seek to engage with the relevant UK minister as soon as possible after the next Government is appointed.
I thank the committee for its on-going support and for taking the time to consider the regulations. We are, of course, happy to take any questions, and to outline any of the benefits if that would be helpful.
Thank you. As there are no questions, we move to the formal debate on the motion. I invite the minister to move motion S5M-05623.
Motion moved,
That the Economy, Jobs and Fair Work Committee recommends that the Insolvency (Regulation (EU) 2015/848) (Miscellaneous Amendments) (Scotland) Regulations 2017 [draft] be approved.—[Paul Wheelhouse]
Motion agreed to.
Public Services Reform (Corporate Insolvency and Bankruptcy) (Scotland) Order 2017 [Draft]
We move on to the next statutory instrument, which is also being considered under the affirmative procedure. I invite the minister to make his opening statement on the order.
I am pleased to have the opportunity to address the committee and to introduce the order, which will make modernising changes to corporate and personal insolvency legislation in Scotland.
There are two overarching policy objectives at play. First, the order makes further changes to the devolved areas of the Insolvency Act 1986 as they relate to corporate insolvency in Scotland, and it makes the legislative changes that are required to bring forward fully modernised and updated insolvency rules for Scotland. Secondly, the order will modernise personal insolvency legislation in Scotland in relation to the protection of essential supplies, and will promote the operation and rescue of viable businesses.
The order seeks to address several points with regard to corporate insolvency proceedings, which I will briefly outline. The order will facilitate remote attendance at meetings of members of a company in creditors’ voluntary winding up, winding up by the court and receivership in Scotland. In future, any such meetings can be carried out remotely, which offers the potential to bring logistical benefits to the insolvency profession and to reduce costs. That is welcome, as any reduction in costs during insolvency proceedings provides the potential for increased dividends to creditors or for remaining funds to be returned to those who should be in receipt of them. The changes will bring the position in Scotland in line with that already in place in England and Wales.
The order makes provision to enable the content of the current Receivership (Scotland) Regulations 1986 to be subsumed into the new insolvency rules for Scotland, which will simplify the statute book. The order will also make changes to ensure appropriate flexibility to make provision on liquidation committees in the new insolvency rules, which, in that case, will bring the position into line with the position in England and Wales.
The order will amend the savings and transitional provisions that were set out in the previous Public Services Reform (Insolvency) (Scotland) Order 2016, which made some initial changes to the Insolvency Act 1986 to lay the foundation for the modernised insolvency rules. The change aims in due course to harmonise the approach to commencement of the new rules in Scotland with the approach to commencement of the new Insolvency (England and Wales) Rules 2016. The overall aim is that insolvency practitioners will be able to follow the new legislation, once in force, for all cases, irrespective of when the appointment is taken. Adopting a different approach in the new insolvency rules in Scotland from that in the new rules in England and Wales would be legitimate but, on this occasion, it would serve only to introduce unnecessary complication and confusion for those using the legislation.
The insolvency profession in Scotland welcomes the changes and I am pleased that the order will assist us to modernise and streamline the secondary legislation—namely, the new insolvency rules.
On personal insolvency, the order will enact changes equivalent to those that have already been made in England and Wales. In the context of sequestration and trust deeds granted by a business debtor, current legislation prevents providers of gas, electricity, water and telecoms services from demanding payment of outstanding charges as a condition of continuing supply, although it allows them to make it a condition of supply that the office holder guarantees payment of continuing charges.
The modern-day business environment has evolved and businesses can now be reliant on supply by on-sellers of utilities and telecoms services and by suppliers of information technology goods and services. The order introduces modernising changes by adding such suppliers to the list of those who are currently prevented from demanding payment of outstanding charges as a condition of continuing supply, subject to the same safeguard.
Importantly, the order also introduces a further change that will support the on-going operation and recovery of viable businesses across Scotland that are party to a protected trust deed. When a trading entity enters insolvency, suppliers may take a number of actions that can severely impede the chances of rescue, even if their invoices are being paid on time and in full. For example, some essential suppliers, such as those supplying essential IT services, can withdraw their services altogether, even though they are essential for the preservation of the business. That can be deeply unhelpful and can make the salvaging of a viable business much harder.
The further change that I am proposing today will introduce protections against essential utility and IT suppliers exercising insolvency-related clauses in their supply contracts where a trading entity is subject to a protected trust deed in Scotland, subject to safeguards for the suppliers. It is a welcome development.
The order that the committee is considering today has been the subject of informal and formal consultation as part of the superaffirmative procedure that applies, prior to being laid before the Parliament for scrutiny. I am grateful to those who responded to the consultation. As the accompanying explanatory document details, one minor adjustment was made to the draft order that was laid for consultation in light of the feedback that was received.
I understand that the committee scrutinised an earlier draft of the order when it was laid for consultation as part of the superaffirmative procedure and that it requested scenario-based examples of how the changes that are contained in the order might impact on trading organisations’ creditors. My officials have provided a response, which I hope has proved to be helpful.
The order will make worthwhile improvements that make processes more efficient and effective. I thank committee members for their support and for taking the time to consider the order. We are happy to take questions or to outline other benefits, if that would be helpful to the committee.
Thank you, minister. As there are no questions, we move to the formal debate on the motion. I invite the minister to move motion S5M-05504.
Motion moved,
That the Economy, Jobs and Fair Work Committee recommends that the Public Services Reform (Corporate Insolvency and Bankruptcy) (Scotland) Order 2017 [draft] be approved.—[Paul Wheelhouse]
Motion agreed to.
I also invite the committee to agree that I, as convener, and the clerks can produce a short factual report of the committee’s decision on the two instruments and arrange publication. Are we agreed?
Members indicated agreement.
12:11 Meeting continued in private until 12:32.Previous
Draft Energy Strategy