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Amendment 62 deletes section 10(3)(b) and (c). Section 10(1) states that a debtor will satisfy the debt if they in good faith pay the last person who they knew held the debt. Section 10(3) includes a provision that a debtor will not be considered to have performed other than in good faith just because the debtor is deemed to have received notice of an assignation of the debt. I consider that, if the assignee can demonstrate that the processes for intimation have been complied with, the onus should be on the debtor to demonstrate that they were in good faith.

Regarding amendment 63, the bill states that the debtor will satisfy the debt if they in good faith pay the last person who they knew held the debt. The bill says that the debtor will not be considered not to be in good faith if they have received intimation of an assignation of a debt. Amendment 63 removes that provision and should be read in conjunction with amendment 62. I consider that, if the assignee can demonstrate that the processes for intimation have been complied with, the onus should be on the debtor to demonstrate that they were in good faith.

I look forward to hearing the minister’s reaction to amendments 62 and 63 and his explanation of amendments 4 and 8 in his name.

I move amendment 62.

I thank the minister for his helpful remarks and explanation. If it is okay with the minister, it would be helpful for the amendments to be agreed to now, but I would welcome working with him to get them absolutely right for stage 3. It would be helpful to have them ready for that, however, so I intend to press amendment 54.

Amendment 54 agreed to.

I support the minister’s amendments 4 and 8.

There is a balance to be struck between the rights of debtors and creditors. I accept what the minister has said and will go away and reflect on his comments. For that reason, I seek permission to withdraw amendment 62.

Amendment 62, by agreement, withdrawn.

Amendment 63 not moved.

Section 10 agreed to.

Sections 11 and 12 agreed to.

After section 12

Amendment 4 moved—[Tom Arthur]—and agreed to.

Section 13—Asserting defence or right of compensation

The committee will be bored with hearing my voice by the end of the meeting. All my amendments deal with insolvency. I will briefly go through each one.

Amendment 58 replaces an existing ground on which an individual will be considered to be insolvent. The reason for that is that section 4 provides for the legal effect of an assignation document in the event of the assignor’s insolvency. Section 4(6) provides for circumstances where

“an assignor who is an individual, or the estate of which may be sequestrated by virtue of section 6 of the Bankruptcy (Scotland) Act 2016, becomes insolvent”.

Those circumstances are set out in sections 4(6)(a)(i) to (vi). As initially drafted, they included those where the assignor grants a trust deed for creditors or makes a composition or an arrangement with creditors. I have spoken to practitioners, who consider—as do I—that those circumstances are too vague: a trust deed could only include a privately agreed trust arrangement and a particular specified statutory protected trust deed. I consider that only the latter should apply. In respect of compositions and arrangements with creditors, I note that “composition” was a specific technical term until 2014, when its technical use was repealed. I also note that “arrangement” is a technical term in English law, but not in Scots law. I therefore consider that references to compositions and arrangements should be removed.

Amendment 58 would clarify that where the Accountant in Bankruptcy registers such a protected trust deed, that is a basis for recognition of the assignor’s insolvency, and it removes references to “compositions”—a historical technical term in Scotland, which is of no continuing importance—and “arrangements”, which are a technical term in England, but not in Scots law.

Amendment 59 would ensure that a company voluntary arrangement—CVA—only constitutes the insolvency of an assignor for the purposes of the assignation provisions in the bill if it affects the relevant claim in question. That would prevent irrelevant CVAs from affecting assignations and would reflect the position adopted in respect of administration receivers set out in section 4(6)(b)(iii).

Amendment 60 would ensure that a restructuring plan that affects an assigned claim under part 26A of the Companies Act 2006 would constitute the insolvency of an assignor. Part 26A deals with arrangements and reconstructions of companies in financial difficulty. Section 901A sets out provisions for part 26A to apply to a company where it is encountering financial difficulties that

“may affect ... its ability to carry on business as a going concern”

and where

“a compromise or arrangement is proposed between the company”

and its creditors or shareholders with a view to

“eliminate, reduce or prevent, or mitigate”

the financial difficulties that it is experiencing. In other contexts—for example, in section 233B of the Insolvency Act 1986—part 26A arrangements are recognised as being relevant insolvency procedures. The bill makes no reference to such arrangements under the 2006 act, and I consider that it should do so to ensure consistency with the wider insolvency law. In line with the approach taken in respect of administrative receiverships, that should apply only to the extent that it affects the claim.

Amendment 71 ensures that a restructuring plan under part 26A of the 2006 act, which affects the encumbered property, constitutes the insolvency of a provider. Part 26A deals with arrangements and reconstructions of companies in financial difficulty. Section 901A sets out provisions for part 26A to apply to a company where it is encountering financial difficulties that

“may affect ... its ability to carry on business as a going concern”

and where

“a compromise or arrangement is proposed between the company”

and its creditors or shareholders with a view to

“eliminate, reduce or prevent, or mitigate”

the financial difficulties that it is experiencing. In other contexts—for example, in section 233B of the Insolvency Act 1986—part 26A arrangements are recognised as being relevant insolvency procedures. The bill makes no reference to such arrangements under the 2006 act and I consider that it should do so to ensure consistency with wider insolvency law. In line with the approach taken in respect of administrative receiverships, that should apply only to the extent that it affects the encumbered property.

Amendment 70 would replace an existing ground on which a provider who is an individual will be considered to be insolvent. Section 47 of the bill provides for the legal effect of a creation of a pledge in the event of the provider’s insolvency. Section 47(3) provides the circumstances where

“a provider who is an individual, or the estate of which may be sequestrated by virtue of section 6 of the Bankruptcy (Scotland) Act 2016, becomes insolvent”.

Those circumstances are set out in sections 47(3)(i) to (vi). As initially drafted, they include the provider granting a trust deed for creditors or making a composition or arrangement with creditors. Having spoken to those within the profession, it is my view that we should consider that those are too vague. A trust deed could include a privately agreed trust arrangement and a particular specified statutory protected trust deed. The Law Society and I consider that only the latter should apply. In respect of compositions and arrangements with creditors, I note that “composition” was a specific technical term until 2014, when its technical use was repealed. As I have said previously, it is a technical term that is used in English law but not, as I understand it, in Scots law. We therefore consider that references to compositions and arrangements should be removed for clarity.

Amendment 70 would clarify that when the Accountant in Bankruptcy registers such a protected trust deed, that is a basis for recognition of the provider’s insolvency, and it would remove references to “compositions”—a historical term in Scotland—and “arrangements” which is a technical term in England but not Scotland.

Finally—you will be glad to hear, convener—I move to amendment 72, which would ensure that a company voluntary arrangement only constitutes the insolvency of a provider for the purposes of the pledge provisions in the bill if it affects the relevant encumbered property in question. That would prevent irrelevant CVAs from affecting statutory pledges, and reflect the position adopted in respect of administrative receivers set out in section 47(3)(b)(iii).

I appreciate that those are all fairly technical amendments and no doubt lawyers will discuss them for years if they are accepted. However, it is important to pass them because we need clarification around insolvency and how the bill relates to other acts. For that reason, I hope that the committee will accept them.

I move amendment 58.

I said in my opening remarks on the amendments that I did not think that this sort of thing would happen frequently. I note the minister’s use of the word “routinely”, and I agree with him; my hope is that, if we get the bill right, what we are talking about will be the exception rather than the rule.

However, I think that that leads to a slight contradiction in the minister’s argument that, because this will happen so often, it will put extra costs on others to meet. I think that the proposed provision will be used irregularly, but it might well be required from time to time as the legislation develops. This is an important message for Parliament to send out, and it is important for the Parliament to give the Scottish Government a steer on this—indeed, more than a steer—and to set out where we think that we should end up, which is that we do not think that the third sector should be involved in having to pay the fee in question.

I accept what the minister has said about consultation being carried out on the issue once the bill becomes an act, but I point out that the committee, in its report, was certainly of the view that not-for-profit third sector organisations should not be charged for such searches. We want to give the public and the Scottish Government the clear message that charging in those circumstances is not a road that we want to go down.

For that reason, I will press amendment 11.

I apologise—I meant amendment 64.

I accept what the minister has said, but is one reason for the bill not to encourage intimation to take place more regularly? I accept that people have been using English law, so intimation has not been happening but, once the bill’s provisions are in place, surely intimation will be more common.

Good morning. I will set out some context for all my amendments.

Clearly, we are supportive of the bill in principle, and I welcome the comments that the Scottish Government has made. I hope that my amendments will clarify some things and ensure that the bill will work in practice.

I am grateful to the groups that have been in touch with me and have suggested amendments. I am particularly grateful to the Law Society of Scotland, which I have had a number of conversations with and which has helped me with some of my amendments. I hope that my amendments will be dealt with in a constructive way, and I look forward to hearing what the minister has to say.

I turn to amendments 54, 67 and 74, all of which are in my name.

Amendment 54 would expressly allow the assignation document to refer to the claim by reference to another document or data that is not reproduced in the assignation document itself. That is important because a number of invoice discounting systems use online portal-based invoice discounting systems, and we need to ensure that they are able to utilise the register of assignations. Similarly, I am sure that we want to avoid lengthy documents, including customer lists, needing to be uploaded to the register. This approach is coherent with and follows the approach taken to conditions for assignation in section 2(4). I ask the committee to accept amendment 54.

If it passes, amendment 67 would expressly allow the constitutive document in a pledge to refer to the property pledged by reference to another document or data that is not reproduced in the constitutive document itself. I lodged amendment 67 because, having spoken to a number of people in practice, I found that they generally consider that a number of pledges will be composite pledges referring to a large number of the debtor’s assets, and that having to upload such asset lists might be prejudicial to debtors. Again, I hope that this is a constructive amendment that the committee can support this morning.

Amendment 74 would affect section 56 of the bill. It expressly allows for an amendment document in respect of a pledge to refer to the property pledged by reference to another document or data that is not reproduced in the constitutive document itself. Again, having spoken to those in practice, I consider that a number of pledges will be composite pledges referring to a large number of the debtor’s assets, and that having to upload such asset lists might be prejudicial to debtors. That could also apply in respect of an amendment of a pledge. Amendment 74 will make things clearer for those who are dealing with this day in and day out.

I look forward to hearing the minister’s response to my amendments.

I move amendment 54.

I thank the minister for lodging those amendments, which are helpful and will get the committee to where we want be. However, I am looking for clarification. There is a balance to be got right in the treatment of individuals as opposed to sole traders. We started our discussions on the bill by saying that the threshold here could be £1,000. Would there be any advantage in considering, at stage 3, whether the situation could be clarified further by having the figure increased to, say, £5,000 or £10,000? Would that give absolute clarity to individuals, or would it not bring them any benefit? I genuinely seek clarification on that point so that we can keep a balance between individuals and sole traders.

Amendment 61 ensures that, as the minister has outlined, the timescales for valid intimation will also be subject to a determination as to the method of service. As he has suggested, some concerns have been raised about the wording in the bill as introduced that some of the detail in respect of intimation is slightly too prescriptive, and more aspects of intimation, including how long after serving a notice should receipt of such notice be deemed, should be subject to a determination as to the method of service, too. However, I intend to reflect on what the minister has said and will not move the amendment today.

I am still inclined to move amendment 65, which seeks to change the definition of “assignee” by including the assignee’s trustees or agents. I accept what the minister has said about provision for this being made later on in the bill, but it is still my view that this amendment is helpful and will give clarity. Simply defining the assignee as

“the person to whom a claim is assigned”

lacks clarity; after all, trustees and agents of the assignee can act on the assignee’s behalf, and it is possible for creditors to hold claims and pledges as trustees and/or agents for themselves and other creditors. Amendment 65 simply makes it clear that those acting in the place of assignees are included in the definition of “assignee”. Clarity is always a good thing, and the amendment will just put into the bill something that people will be able to understand and refer to.

Finally, I will be supporting all of the minister’s amendments.