I move amendment No. 226.
In page 126, before section 163, to insert the following new section:
"163.—(1) Where, on an application by the examiner, the court is satisfied that the disposal (with or without other assets) of any property of the company which is subject to a security which, as created, was a floating charge or the exercise by the examiner of his powers in relation to such property would be likely to facilitate the survival of the whole or any part of the company as a going concern, the court may by order authorise the examiner to dispose of the property, or exercise his powers in relation to it, as the case may be, as if it were not subject to the security.
(2) Where, on an application by the examiner, the court is satisfied that the disposal (with or without other assets) of——
(a) any property of the company subject to a security other than a security to which subsection (1) applies, or
(b) any goods in the possession of the company under a hire-purchase agreement,
would be likely to facilitate the survival of the whole or any part of the company as a going concern, the court may be order authorise the examiner to dispose of the property as if it were not subject to the security or to dispose of the goods as if all rights of the owner under the hire-purchase agreement were vested in the company.
(3) Where property is disposed of under subsection (1), the holder of the security shall have the same priority in respect of any property of the company directly or indirectly representing the property disposed of as he would have had in respect of the property subject to the security.
(4) It shall be a condition of an order under subsection (2) that——
(a) the net proceeds of the disposal, and
(b) where those proceeds are less than such amount as may be determined by the court to be the net amount which would be realised on a sale of the property or goods in the open market by a willing vendor, such sums as may be required to make good the deficiency, shall be applied towards discharging the sums secured by the security or payable under the hire-purchase agreement.
(5) Where a condition imposed in pursuance of subsection (4) relates to two or more securities, that condition requires the net proceeds of the disposal and, where paragraph (b) of that subsection applies, the sums mentioned in that paragraph to be applied towards the sums secured by those securities in the order of their priorities.
(6) An office copy of an order under subsection (1) or (2) in relation to a security shall, within 7 days after the making of the order, be delivered by the examiner to the registrar of companies.
(7) If the examiner without reasonable excuse fails to comply with subsection (6), he shall be liable to a fine not exceeding £1,000 and, for continued contravention, to a daily default fine not exceeding £50.
(8) References in this section to a hire-purchase agreement include a conditional sale agreement, a retention of title agreement and an agreement for the bailment of goods which is capable of subsisting for more than 3 months.".
Section 163 was introduced by way of amendment in the Seanad and was based on a British provision, namely section 15 of the UK Insolvency Act, 1986. The reason for its introduction was that a company could effectively be hamstrung during the protection period if some of its assets, for example, buildings incurring heavy overheads, were the subject of a fixed security. This could clearly be a drain on the company's resources during the protection period and it was felt the examiner should be able to dispose of such property whether or not he had been given power by a court actually to run the business. As aquid pro quo however, the section provides that the examiner should be required to account to the security holder for the proceeds of any such disposal.
The effect of this section as currently drafted, therefore, is to allow the examiner, with the approval of the court, to dispose of property subject to a fixed charge as if it was not so subject but to account to the chargeholder for the proceeds. Similar arguments applied in cases where goods in the company's possession are the subject of retention of title agreements. Obviously if the supplier concerned could simply grab the goods, the company's position could very quickly become untenable. Accordingly, the section also currently gives the examiner a certain freedom to manoeuvre in this respect.
I have recently looked again at the UK provision involved and I am now proposing a further refinement which has to do with property subject to a floating charge. The most convenient way to effect this refinement is to replace the section altogether with a new version, and that is what amendment No. 226 does. The main changes are the addition of new subsections (1) and (3) with some other minor consequential drafting changes. Subsection (1) provides that where the court agrees with the examiner that the disposal or other treatment by the examiner of property which is subject to a floating charge would be likely to lead to the survival of the company as a going concern, the court may allow the examiner to do so as if the property were not subject to the charge. Where this happens, however, subsection (3) provides that the holder of the floating charge will nevertheless retain his priority rights over the property involved. This means that the rights of the chargeholder in a winding up to claim ahead of the unsecured creditors would not be affected.
While, as I said earlier, this extension of the section is based on a UK idea it differs in as much as my proposal would require the examiner to get the approval of the court before dealing with property subject to a floating charge, whereas the British provision contains no such restrictions. This extension of the power of the examiner to property covered by a floating charge is the only substantive change I am proposing to make to the section.
I note that in the printing of this amendment a slight error has occurred in subsection (4). This subsection repeats subsection (3) in the Bill, with a change in the reference in line 1 to subsection (2) rather than subsection (1). However, the last clause in paragraph (b), that is, "shall be applied towards discharging the sum secured by the security or payable under the hire-purchase agreement" should not be intended as part of that paragraph. I mentioned this so that the correct layout can be used when the section is included in the next print of the Bill.