My Lords, I rise to speak to Amendments 5 and 6 in my name and that of the noble Lord, Lord Leigh of Hurley.
Amendment 5 seeks to add a new clause that would require the Secretary of State to report on the resources and the powers available to both the Secretary of State and the Insolvency Service in relation to the Bill. It covers similar territory to the amendment of the noble Baroness, Lady Blake. Despite the Minister’s comments in Committee that resources are always available for cases in the public interest, members of the insolvency and restructuring profession report that they often see cases involving significant breaches by directors that
are not investigated and acted on. This would suggest that the Insolvency Service is currently resource-constrained.
That view is supported by looking at figures on the disqualification of directors of insolvent companies by the Insolvency Service. These show a roughly flat line of disqualifications made by the service over a number of years—a constant rate of disqualification, irrespective of economic conditions, trends or fluctuations in the number of corporate insolvencies. Again, that suggests a resourcing issue for the service.
That situation could get worse without a commitment to fund the additional cases that the Bill will create. We have therefore tabled our Amendment 5, which would require the Government to report six months after the Bill has been passed on whether the appropriate resources were available to undertake the additional investigations required as a result of the legislation.
I thank the Minister, who met me and the noble Lord, Lord Leigh, to discuss these amendments—I think very productively. It is clear that the Minister and the Insolvency Service grasp the point that the more resources that there are, the better the return, or likely return, to the taxpayer. We are looking for something from the Minister that indicates that Her Majesty’s Treasury shares this understanding. We of course do not want to upset delicate negotiations that may now be under way between the Minister’s department and the Treasury, but a clear indication that the resource issue is in hand would help negate the need for this amendment.
It would also be helpful if the Minister were able to comment on the nature of the cases that this legislation will enable. Our understanding is that the Bill gives the Insolvency Service the power to pursue recompense from the former directors of dissolved companies and that this can be done via compensation orders without the cost of reinstating the companies in question. The key issue for clarification is which creditors may benefit from these future compensation orders. Can he confirm that future beneficiaries will include all other creditors in addition to Her Majesty’s Treasury? The Minister has just nodded. Can he confirm that the Insolvency Service will include the plights of those other creditors in its calculation of the public interest when it decides which cases to pursue?
The second amendment, Amendment 6, would also add another clause. This time, it creates a requirement on the Secretary of State to report on the impact of the legislation on the investigations into the conduct of directors of dissolved companies. The principal purpose of this amendment is to weigh the success of the legislation by measuring and reporting its ability to claw back money from directors of dissolved companies. We know that the Insolvency Service already has a duty to report annually. However, at the moment, our reading is that the metric we propose here is not explicitly included in the list of requirements on which to report. Again, following discussions with the Minister, it seems reasonable for this “cash-back” criterion to be added to the Insolvency Service’s annual report agenda. We hope that his response to this amendment will do just that, rather than requiring primary legislation. I trust that he is able to make those undertakings.
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