Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) (No. 2) Regulations 2020
(Limited Text - Ministerial Extracts only)
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The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Matt Warman)
I beg to move,
That the Committee has considered the Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) (No. 2) Regulations 2020 (S.I. 2020, No. 856).
It is a pleasure to open the debate under your chairmanship, Mr Hollobone. The title of the regulations may not be short, but they are a short, technical measure. The Committee does not need reminding of the unprecedented events of 2020. However, I would like to take this opportunity to highlight the pivotal role that charities are playing in the national fight against the coronavirus.
Charities are the backbone and beating heart of our communities, and when our nation faced its greatest peacetime challenge, they rose to the occasion. They are fighting loneliness and isolation, giving shelter to the homeless and victims of domestic abuse, and providing meals to those in need. Charities are supporting those who need it most, at the time when they need it most. Their contribution is helping to ensure that our nation is well placed to bounce back from the pandemic. I pay tribute to their remarkable effort.
The Government have supported that effort with an unprecedented £750 million package of support, specifically for charities, social enterprises and the voluntary sector. That was in addition to cross-sectoral support measures such as the coronavirus job retention scheme. Charities have always made significant contributions to our communities, which is why the sustainability of that vital sector is key to this Government. A robust regulatory framework that creates public trust and allows charities to operate effectively is important to the Department for Digital, Culture, Media and Sport, and the regulations contribute towards that vision.
On 25 June 2020, the Corporate Insolvency and Governance Act 2020 received Royal Assent. Among the package of measures that it delivered was an amendment to insolvency law allowing corporate bodies, including charitable incorporated organisations, to continue trading while exploring options for rescue and restructure to avoid insolvency, and to provide them with temporary flexibility to hold their annual general meetings online or postpone them. That is to ensure that such meetings are held safely, and in line with restrictions.
The Act also introduced a new freestanding moratorium procedure, intended to give the relevant bodies regulated breathing space to explore restructure options, free from creditor action. The new moratorium provisions were applied by adding a new part A1 to the Insolvency Act 1986. The regulations that we are discussing today make minor and technical modifications to the way the 1986 Act applies to CIOs via the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012. Most of the modifications disapply provisions of the moratorium procedure that are not applicable or relevant to CIOs. They ensure the effective application of the moratorium provisions.
Our approach in applying the new moratorium procedure to CIOs was to disapply provisions considered unnecessary or extremely unlikely to have any practical impact, to simplify the moratorium procedure for CIOs. That included disapplying section A51 of the Insolvency Act 1986.
However, on 6 July 2020 the Department for Work and Pensions used the provision to enact secondary legislation to extend their Pension Protection Fund moratorium provisions to CIOs. We assess the likelihood of the Pension Protection Fund needing to intervene in a moratorium with respect to a CIO as extremely low. However, DCMS recognises the value of ensuring that all corporate forms are covered by the provision, and will bring forward legislation. In the meantime, we do not anticipate any practical impacts.
I want to bring one further issue to the attention of the Committee, which is that the regulations modify the initial regulations made on 6 July, which contained a number of errors and needed to be corrected, although we do not believe that any stakeholder suffered detriment due to the error. We have, however, written to the Joint Committee on Statutory Instruments to apologise for that.
The error having been corrected, the regulations will benefit CIOs that wish to make use of the moratorium procedure and strengthen our important charity sector.
Matt Warman
I thank the hon. Member for York Central for her support. The regulations have been in effect since 12 August, so some of the organisations that she mentions will have already had the opportunity to benefit from them. We do not believe that prior to that period, when the original regulations were in effect, any CIO had cause to make use of them, so the impact is genuinely as low as it could be.
The hon. Lady asked several questions about the notice period and creditors. These DCMS regulations are in line with wider Department for Business, Energy and Industrial Strategy policy, but I am happy to ask my BEIS colleagues to write to her, if appropriate, or to write to her myself, depending on where the balance ends up.
The hon. Lady paid tribute to the work of trustees, as we all should. They are a hugely important part of our charity sector and take on far greater responsibilities than is often widely understood. It is important to recognise that role.
On the hon. Lady’s broader point about support for the charity sector, I simply say that the Government have put in place a significant package of support for charities and for the broader economy, much of which also applies to charities. As she knows, the Chancellor will make a statement shortly that will provide broader support to the economy as well. I look forward to working with the charity sector and my colleagues in the Lords, under whose brief this area more generally falls, to make sure that charities receive maximum support.
Hon. Members on both sides of the House are acutely aware of how important charities’ role is. We look forward to playing as much of a role as we can to support them and the broader economy. With that, I commend the regulations, which are part of that broader support package, to the Committee.
Question put and agreed to.