Section 269 & Schedule 23: Minor and consequential amendments

784.     Section 269 gives effect to Schedule 23, which makes minor and consequential amendments to the Insolvency Act 1986 as a result of the changes being made in the Act. Some of these amendments, such as those made because of the removal of summary bankruptcy, have been mentioned elsewhere. Paragraph 14 reflects the fact that the Official Receiver can act as a nominee and supervisor in an individual voluntary arrangement. Therefore the appointment provisions for Official Receivers in section 399 and the rules-making provisions in Schedule 23 have been amended accordingly.

785.     Paragraph 12 extends the offence of concealment of property to section 354 Insolvency Act 1986 to include any failure to account for the loss of any substantial property to the trustee. Currently, the provisions in section 354(3) set out the scope of the offence of a bankrupt failing - without reasonable excuse - either to account to the Official Receiver or the court for substantial losses or give satisfactory explanation for how such a loss came about. However, the realisation of assets is often administered by a trustee other than the Official Receiver.

786.     Paragraph 13 adds subsections (4) and (5) to section 355 (concealment and falsification of accounting records) Insolvency Act 1986. The current provisions of section 355(2) and (3) detail offences relating to bankrupts who destroy, conceal, alter or dispose of books, papers or records in the twelve months prior to a bankruptcy petition being presented, or between the petition and order. In the case of 'trading records', that period is extended to two years (section 361 of the Insolvency Act 1986). The Act also repeals the current provisions of section 361, which will be dealt with by the new bankruptcy restrictions regime. As the availability of adequate records is crucial to the examination of the bankrupt's estates and enquiries into the bankrupt's affairs, subsection (4) extends the period from twelve months to two years. Subsection (5) provides a definition of the term 'trading record'.

787.     County Court Administration Orders ('CCAOs') are made in the county courts and fall outside the insolvency regime. They are mechanisms for dealing with individuals with multiple debts and give the debtor respite from enforcement proceedings while they pay off their debts. Only those who have a county court judgment against them, at least one other debt, and total debts of less than £5,000, can apply for a CCAO. Currently, section 429 Insolvency Act 1986 allows a court to make an order placing restrictions on acquiring credit and the use of a trading name for up to two years where a debtor has failed to pay under a CCAO. Paragraph 15 amends section 429 County Courts Act 1984 to reflect the fact that restrictions flowing from the making of a bankruptcy order will only be for one year following the change to the discharge period. Therefore restrictions flowing from a CCAO will be similarly limited.

Money

788.     The current financial regime of The Insolvency Service comprises numerous fees (see the Insolvency Fees Order 1986) covering case administration and a Secretary of State Fee, none of which achieves full cost recovery of activities undertaken by The Service. In addition, because of the low rate of interest set for estate balances invested in the Insolvency Services Investment Account, the amount returned to estates is considerably less than the level of investment income received by the account. The excess income is currently paid into the Consolidated Fund and amounted to some £43 million in 2000-01.

789.     The Government has announced its intention to reform the regime to make it simpler and more transparent. It is also proposed to make the regime fairer to creditors, for example by returning to insolvent estates those investment returns that currently flow into the Consolidated Fund. The majority of the changes necessary to achieve reform will be made by using existing powers and changes to secondary legislation and Rules. However, there are two specific areas that require primary legislation, and provisions for these are included in the Act.

Section 270: Fees

790.     Section 270 subsection (1) inserts a new section 415A into the Insolvency Act 1986.

791.     The new section will enable the Secretary of State to charge a fee to bodies recognised under section 391 Insolvency Act 1986 as a professional body for the purposes of licensing insolvency practitioners (IPs). It is intended that fees prescribed under this provision not only cover the cost of recognition but also the cost of monitoring the bodies' activities, such as overseeing their procedures and ensuring that licensing is carried out properly. The fee will also cover the cost of more general regulatory functions carried out by The Insolvency Service, such as representation on the Joint Insolvency Council and keeping IPs informed of legislative and other developments through the issuing of newsletters and guidance. The cost of these regulatory functions is currently met by the DTI but the new policy is that they should fall to the profession. The fee, which will be set out in secondary legislation, will be charged to each body based on the number of IPs licensed by them.

792.     Subsection (2) of new section 415A provides for a fee to be charged to those IPs licensed by the Secretary of State under section 392, and will be based on the cost of granting and maintaining authorisation. The fee will also include the cost of monitoring the IP and the general regulatory functions undertaken by The Insolvency Service. As with the fee for the recognised bodies, the fee for IPs licensed by the Secretary of State will be set through secondary legislation. The level of the authorisation element of the fee will reflect more closely that charged by the recognised bodies to those IPs they license than the current authorisation fee of £100, which was set in 1986.

793.     Subsection (3) provides for payment of fees that relate to the operation of the Insolvency Services Account by The Insolvency Service and money paid into or out of the Account. The Insolvency Service will separate out the costs that relate to its operation of the Insolvency Service Account so that these costs are met by insolvent estates. This will allow for clear identification of those banking services that are carried out in respect of all cases, and that will be charged through an annual service fee, and those that relate to specific estates and transactions such as investment requests by IPs or the volume of payments out of the account through cheques or bank transfers. These changes will also enable the ending of the current arrangements whereby a number of different fees are used to meet these costs and to cross-subsidise other functions. Subsection (4) applies the conditions that apply to fees under section 414 to those introduced under 415A.

Sections 271 and 272: Insolvency Services Account: interest & Insolvency Services Accounts

794.     Section 405 of the Insolvency Act 1986 requires that any excess in investment income from the Insolvency Service Investment Account after payments to insolvent estates and tax should be paid into the Consolidated Fund. Schedule 8 paragraph 16 and Schedule 9 paragraph 21 of the Insolvency Act 1986 enables the interest rate for the return of investment income to insolvent estates to be set through secondary legislation. The current rate of 3.5% has applied to companies since before the implementation of the 1986 Act. The Insolvency Act 2000 provided for payment of interest into bankruptcy estates.

795.     Section 271 introduces additions to Schedules 8 and 9 to the Insolvency Act 1986 to allow Rules to be made providing for the interest rate to be set by the Secretary of State by the issuing of a Notice, as opposed to through secondary legislation. This will enable the rate to be reviewed at regular intervals, probably annually, and allow changes in investment returns to the Account to flow through to insolvent estates without having to make regular amendments through statutory instruments.

796.     Section 272 subsection (1) removes the requirement under section 405 Insolvency Act 1986 for excess income from the Insolvency Services Investment Account to be paid into the Consolidated Fund.

797.     Section 408 of the Insolvency Act 1986 provides for recourse to the Consolidated Fund where, after payments received from the Investment Account, the Insolvency Services Account has insufficient funds to meet its liabilities. Subsection (2) of section 272 substitutes for the current section 408 a new section that incorporates the circumstances covered by the current section 408 and section 405 but provides wider powers that allow for adjustments to be made between the Insolvency Services Account or the Insolvency Services Investment Account and the Consolidated Fund. Adjustments may be necessary due to short-term fluctuations between the expected income, based on the level at which the interest rates are set and the actual investment return. This is because interest rates are set in advance, whereas the Investment Account is made up of investments purchased at different times, for different amounts, with differing returns and over different periods. New section 408 will enable the maintenance of a 'buffer' in the account to deal with such fluctuations and there may be occasions where adjustments need to be made between the account and the Consolidated Fund.

PART 11: SUPPLEMENTARY

Section 274: Provision of financial assistance for consumer purposes

798.     This section confirms the Secretary of State's powers to fund a wide range of activities that benefit consumers, including funding bodies such as the National Consumer Council and National Association of Citizens Advice Bureaux.

Sections 275, 276, 277, 278, 279, 280 and 281: Financial provision, Transitional or transitory provision and savings, Power to make consequential amendments etc., Minor and consequential amendments and repeals, Commencement, Extent & Short title

799.     These sections deal with the financial provision (section 275), commencement (section 279), territorial extent (section 280) and short title of the Act (section 281). Section 277 gives the Secretary of State power to make by order supplementary, incidental or consequential provision for the purposes of, or in consequence of, or for giving full effect to, the Act. Section 276 gives the Secretary of State power to introduce by order transitional or transitory provisions and savings as appropriate in connection with the coming into force of any provision in the Act. Schedule 24 sets out those transitional provisions that have already been identified, including the arrangements that will govern the handling of cases during the transition from the old FTA 1973 merger and monopoly regimes to their successor regimes. Section 278 gives effect to Schedules 25 and 26, which contain minor and consequential amendments, repeals and revocations.

COMMENCEMENT DATES

800.     All substantive provisions of the Act are to come into force by commencement orders.

HANSARD REFERENCES

801.     The following table sets out the dates and Hansard references for each stage of this Act's passage through Parliament.

ANNEX A

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ANNEX B

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ANNEX C: MARKET PUBLIC INTEREST CASES

(a) Market Investigations

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(b) Undertakings in Lieu

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ANNEX D: MARKET INVESTIGATIONS: REMEDIES IN REGULATED MARKETS

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ANNEX E

ANNEX F

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ANNEX G

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ANNEX H

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