Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) (No.2) Regulations 2020
(3 years, 7 months ago)
Lords ChamberRead Hansard Text Read Debate Ministerial Extracts
Baroness Barran
That the Regulations laid before the House on 13 August be approved.
Relevant documents: 23rd Report from the Joint Committee on Statutory Instruments (special attention drawn to the instrument)
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Baroness Barran) (Con)
My Lords, I am pleased to introduce a statutory instrument laid before the House on 13 August. The Joint Committee on Statutory Instruments reported the regulations for unexpected use of the enabling powers due to an issue regarding inconsistency with regulations made by the Department for Work and Pensions. I shall discuss this in detail later in my speech. The Secondary Legislation Scrutiny Committee has not drawn the House’s attention to this instrument.
Before moving on to the detail of the instrument, I just take this opportunity to pay tribute to the role that charities all around our four nations have been playing in the national fight against coronavirus. They have been crucial in supporting communities, delivering food, combating loneliness and many other aspects, and we recognise that contribution.
The regulations we are discussing today make minor and technical modifications to the way that the Insolvency Act 1986 applies to charitable incorporated organisations, via the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012. They are necessary due to amendments to the Insolvency Act 1986 by the Corporate Insolvency and Governance Act 2020, which received Royal Assent on 25 June 2020.
The Corporate Insolvency and Governance Act 2020 delivered a package of measures, including 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. This is to ensure that such meetings are held safely, and in line with the restrictions on movement and gatherings.
A key measure in the Act is the introduction of a new, free-standing moratorium procedure intended to give corporate bodies, including charitable incorporated organisations, 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 amendments to the Insolvency Act 1986 apply to charitable incorporated organisations. However, this instrument disapplies provisions of the moratorium procedure that are not applicable or relevant to CIOs. These ensure the effective application of the moratorium provisions to CIOs and avoid unnecessary complexity for those relying on them.
The regulations also contain a slightly more substantive provision, which is to ensure that a CIO cannot apply to the Charity Commission for solvent voluntary dissolution during a moratorium period during which it is protected from creditor action. The voluntary dissolution procedure is unique to CIOs. It allows a solvent CIO to apply to the commission for it to be wound up, subject to its remaining assets—after settling all liabilities—being passed to another charity with the same or similar purposes. We would expect a CIO to exit a moratorium before making an application for solvent, voluntary dissolution, and the regulations reflect this.
As I mentioned at the start of my speech, the Joint Committee on Statutory Instruments reported the regulations for unexpected use of the enabling powers. Our approach in applying the new moratorium procedure to CIOs was to simplify the moratorium regime. Therefore we disapplied provisions considered unnecessary or extremely unlikely to have any practical application to such organisations. This included disapplying Section A51 of the Insolvency Act 1986, which provides power to make provision in regulations in connection with pension schemes. However, on 6 July 2020, the DWP used this provision to enact secondary legislation to extend its Pension Protection Fund moratorium provisions to CIOs. DCMS considers the likelihood of the Pension Protection Fund needing to intervene in a moratorium of a CIO as extremely low. However, to ensure that all relevant corporate forms are covered by the provision, DCMS will bring forward legislation, when parliamentary time allows, to enable these provisions to apply to CIOs. In the meantime, we do not anticipate there being any practical impacts on stakeholders whatever.
The JCSI report asks what communication took place between DCMS and the Department for Work and Pensions before either this SI or the DWP SI were made. Due to the urgency with which both sets of regulations were being made, unfortunately only limited communication took place but we have already taken steps to ensure better co-ordination in the future.
I bring one further issue to the attention of the House. DCMS made an initial set of regulations on 6 July but, due to an administrative error, the draft submitted was not the final draft of the instrument and therefore it included inaccuracies. Once this error was identified, DCMS made correcting regulations—the ones we are discussing today—as quickly as possible on 12 August. The department does not believe that stakeholders suffered or were inconvenienced in any way due to this error as the amendments are minor and technical and it is extremely unlikely they will have been relied on within the relevant period. However, DCMS wrote to the Joint Committee on Statutory Instruments to apologise. Having corrected this error, these regulations will be of great benefit to CIOs that wish to use the moratorium procedure, and I commend them to the House. I beg to move.
Lord Foulkes of Cumnock (Lab Co-op) [V]
My Lords, I am really grateful to the Minister for her full and helpful explanation of the regulations. Like her, I shall first say a few words to put them into context and in doing so I declare an interest as a former chair of Age Scotland and, many years ago, a director of Age Concern Scotland. I know from that experience how difficult it is to fundraise. The pressures on charities to raise money to support vital work to help poor, vulnerable and lonely people are very great indeed, even in normal times.
The impact of Covid-19 on the charity sector has been significant, in some cases devastating, exacerbating many of the financial challenges facing charities across the United Kingdom, which were increasingly relied on to provide vital services—to older people in the case of Age UK—during the pandemic. Charities such as Age Scotland and Age UK and their regional and local partners have been doing their utmost to provide services to support older people despite these financial difficulties. For example, during lockdown Age UK lost one-third of its income overnight due to the closure of 400 of its charity shops. That was £900,000 a week. While the charity has made significant changes nationally to respond to this drop in income, many local Age UK branches have also had to make significant cutbacks, closing services and making staff redundant, with consequent effects on their clients. Some Age UK branches have closed, and many more will have to make similar decisions in the coming months, as the impact of the virus on the income of the organisation is becoming clearer. For Age UK such financial hardship could likely mean that many older people were left without support in future. It is incredibly sad and difficult for the staff in the partner charities who work tirelessly to support those most vulnerable in our community. For our elderly in society this is of grave concern, especially as we slowly see the erosion of other vital services that have successfully been provided until now for older people—for instance, the withdrawal of free TV licences for the over-75s. I am worried that this is a straw in the wind and that we will see the erosion of other services for the elderly.
While Age UK has now reopened around two-thirds of its charity shops and is beginning some recovery of its income, uncertainty around life getting back to normal and the threat of local and national lockdowns are a continuous threat to the charity and others. While the Government are providing some financial support to charities—after much cross-party pressure—it does not go far enough when many are likely to face even greater financial hardship and increasing workloads over the coming months. Indeed, the advice officered by the Government to charities in managing finances is vague and impractical. The GOV.UK website suggests
“developing alternative sources of funding or launching an emergency appeal”,
which is unlikely to be possible,
“borrowing money from banks”—
again, not likely to be successful—and
“reducing actual or planned spending”,
which is what they are doing, but that reduces services. Finally, it suggests
“stopping doing some of your charity’s activities”,
which is exactly what is happening, so the advice is not really very helpful.
I now turn to some specific points related to the regulations before us. The moratorium period is said to give an organisation breathing space during which time some creditors cannot take specific action of enforcement. Why only some of them and not all creditors? The breathing space that these regulations give is provided while remedies are sought. Will the Minister say what remedies and from where? Can she enlighten us on that? Furthermore, does the Minister believe that a 20-day delay is long enough, particularly given the extraordinary circumstances that we are in? Did the Government, for example, conduct an assessment before deciding on those 20 days? As the Minister sees, I have some concerns about the position charities are in and whether these regulations will be a significant help. Nevertheless, I support them today.
Baroness Bowles of Berkhamsted (LD) [V]
My Lords, I thank the Minister for the open and transparent introduction to this statutory instrument. I come to this debate as a veteran of the Corporate Insolvency and Governance Act, which, as the legislative background to the Explanatory Memorandum states, applies to CIOs apart from some housing cases.
When I saw the original SI listed for debate, I signed up to speak vaguely hoping that there might have been some special tailoring for CIOs, because in my heart I am still not convinced that the moratorium is as wholesome as hoped, due to the way in which, if there is an eventual insolvency after a moratorium, it results in creditor superpreference for banks, although this House did manage to chip away at some of that. However, we are where we are, and I guess we will find out how it works out in the end.
Unfortunately, the Explanatory Memorandum for this SI is one of the most unhelpful I have ever seen. While it says that the SI deletes irrelevant things, it says nothing about what is considered irrelevant. I spent some time collating the amendments with the amended Insolvency Act, the 2012 regulations and other regulations, and discovered for myself, as the Minister has admitted, that this will not be the end of the chain. I found that the DCMS did not know what the DWP was doing with regard to the Pension Protection Fund. It was in another concession to this House during the passage of the moratorium legislation that the DWP was given power to regulate for the Pension Protection Fund to have a place at the moratorium table. When regulating for that, the DWP—wisely, in my view—drafted it widely enough to cover CIO pension schemes.
Today, we are debating the second version of the DCMS’s SI, and it is still wrong, because section A51, which relates to the Pension Protection Fund provision, has been deleted. Thus, we will be getting another correction, and, indeed, I note in the Forthcoming Business that on 21 October we are getting another top-up SI from the DWP. Who knows what else may be wrong? That is my criticism: it is impossible to tell from the Explanatory Memorandum what is going on, and it leaves the reader to do all the work. What do we get explained? Well, it explains that the previous statutory instrument was wrongly drafted, and that the second regulation really—really—makes sure that the amendments of the first regulation fall away and we are back to the beginning.
The sole explanation of what else it does is in paragraph 7.2:
“This instrument makes minor and technical modifications to ensure the effective application of the moratorium provisions”.
Finito. Even though the last SI was wrong, and this one is wrong about the interaction with the DWP regulations, we are expected to accept that all is hunky-dory without explanation. Worse, the ordinary person is expected to accept and understand that, because that is who the Explanatory Memorandum is for; it is not just for Members of this House or the other place, who may get suspicious and dig.
The Explanatory Memorandum might have tried a little harder and listed the reasons for the various clusters of amendments, such as “because they relate to Scotland”, which CIOs do not cover. It might have explained that definitions from deleted section A27 have been moved to new subsection 13 in section A31. Indeed, had it explained that section A51 was deleted because it was not thought that CIOs would have pension schemes, someone reading such an explanation might have noticed the mistake; or, thinking about that statement, such a person might have suggested that it would not do any harm to leave it in, even if it remained unused, just in case, and that that would be a better solution.
I am sorry to say it is badly done, because I do appreciate that everyone is under a lot of pressure—but think of all the time wasted on having three SIs when one should have been enough. So, I ask, please try to do better and explain better.
Finally, there was no mention of the solvent voluntary liquidation provision—a substantive provision—in the Explanatory Memorandum, or how that interacts with the change in the creditor order as a result of a moratorium being attempted first. Will the Minister confirm that a different result will happen dependent upon whether or not a moratorium had been tried first, because of the disturbance to the creditor order created by the act of having the moratorium?
Of course, today we will pass this flawed SI—and wait for the next round.
Lord Kirkhope of Harrogate (Con) [V]
My Lords, I am participating in this debate on what could at first sight appear to be a very simple piece of rectifying legislation. It comes before us in the same week as did other measures of a similar nature, including the draft Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020, the debate on which I participated in, as a former Mental Health Act commissioner, last Tuesday.
The general thrust of both measures is to offer a breathing space in the event of debts being incurred during the current Covid crisis. I support that approach, but I believe that these good intentions of the Government need to be reflected in legislation which is both clear and appropriate in specific circumstances, and is fully understood by both those who benefit and those who, as creditors, may feel under their own pressures as a result of Covid and the measures introduced.
On Tuesday, I felt the need to make this point clear in regard to mental health patients in crisis. Today, I want to do so for the charitable incorporated organisations. I find it interesting to note, having read through the entire Hansard record in both Houses of the passage of the Corporate Insolvency and Governance Act 2020—the primary legislation to which this SI is related—how little the plight of CIOs has been mentioned. MPs and noble Lords spoke at length and amended with enthusiasm areas of the legislation concerned with major corporate entities, many of them known to the tabloid-reading public as well as those who got their fingers burnt when dealing with them. As for CIOs, I searched in vain for any real interest in their fate—little wonder that this SI is before us because of drafting errors in an earlier attempt. The Government did point out that the first SI had, as far as they were concerned, done little damage.
It is worth us considering what CIOs are and how they are affected in the present Covid crisis particularly. Originally, many charities had been set up, as noble Lords will know, as charitable companies regulated by both the Charity Commission and Companies House. These are known as community interest companies. It is now often preferred for charities to convert to, or be established as, charitable incorporated organisations, because the process is easy and the benefits tangible. First, the regulation lies solely with the Charity Commission, not Companies House. Secondly, there are clear tax and other fiscal benefits, as well as a clearer path for the receipt of public grants and donations to pursue their core charitable aims, together with eligibility for gift aid on donations. Add to those rate relief on premises, avoidance of stamp duty land tax on property transactions and free software, et cetera, and it is clear that being a CIO has many advantages that help to power such organisations.
The only downside, if you can call it that, is that the Charity Commission requires much greater reporting requirements and regulations, and structure requirements; thresholds for requiring independent examination and an audit are much lower than for other charities. That said, one wonders how often the concessions in this piece of secondary legislation will be required. Can my noble friend the Minister tell us how often, despite the tighter control, CIOs go bust? How often does she think this moratorium might be used and be very helpful? Can she also give us a clearer idea of the status of the insolvency practitioners who must oversee the moratorium? Will future government guidance specify these, and are there any limits on the costs that might be incurred?
I see in the present GOV.UK Covid-19 guidance note that reference is made to the provisions of assistance, but little is said about the details. The guidance offers
“temporary suspension of the use of statutory demands and a restriction on winding up petitions, where a … CIO cannot pay its bills due to the coronavirus emergency”.
That is helpful, but surely in view of the controls and financial status of the CIO, it will or should occur in only a small number of cases. Much of the income comes from the very bodies which could issue statutory demands anyway.
This measure and so many others are no doubt necessary in the present crisis, but it is essential that we keep them proportionate to the perceived problems and try to make them as realistic and understandable as possible.
Baroness Scott of Needham Market (LD) [V]
My Lords, it is fascinating how a debate on a modest SI on a Friday afternoon is throwing up such interesting and potentially far-reaching issues. I declare an interest as a trustee of two charities: the Industry and Parliament Trust and Community Action Suffolk. I absolutely associate myself with the remarks of the Minister about the role that charities play in public life generally and during the difficult pandemic period. I also back up the remarks of the noble Lord, Lord Foulkes, on how difficult many charities and voluntary organisations are finding things.
I will confine my remarks to points raised by the Joint Committee on Statutory Instruments, of which I am a member. As the Minister outlined in her full introduction, the predecessor SI had something of a chequered history in its drafting and procedure. These regulations modify the initial regulations laid on 6 July, which, as we have heard, contained a number of errors which were picked up by the JCSI. The Minister has assured us that no stakeholders have been negatively impacted by these problems, but I respectfully note that that is rather beside the point—had they been badly impacted, it would have been worse in some ways, but this shows how much better it is to get it right first time.
The JCSI picked up the question of communications between the DWP and DCMS, which clearly fell down here. The Minister has been very open about that and we welcome her reassurance that they will try to do better going forward. What she has not referred to, and which is very serious in my view and that of the committee, is the requirement to notify both Speakers when a regulation comes into force before it is laid before Parliament. The Speakers should be notified immediately, and in this case they were not; the notification arrived 13 days later. Having asked for an explanation, we have not seen a satisfactory reason why this delay took place. This is very serious.
I am not picking on the Bill team here. There is clearly is quite a problem across the Civil Service. The Secondary Legislation Scrutiny Committee report of 1 October highlights that, so far in this Session, 8.5% of instruments have had to be replaced or corrected. It regards 5% as the absolute maximum to which that should apply.
In recent weeks, both Houses have spent a lot of time debating and thinking about a meaningful role for Parliament in the scrutiny and agreeing of secondary legislation, but I would also argue that proper drafting is an important part of this that we must not neglect. That legal certainty is important.
In my 20 years in the House, I have seen an increased tendency for legislation to rely for important detail on swathes of delegated powers that come forward, sometimes many years later, in the form of regulations and secondary instruments. When you add that trend to the immediate challenges of legislation related to both Brexit and Covid, the Civil Service is having to draft SIs at a pace that could never have been foreseen. Nevertheless, we must get it right.
I will finish with a quick remark about the role of the Joint Committee on Statutory Instruments. The legal advisers available to work with the committee are absolutely superb; I see this every week in my working life. It is fair to say that, although they are not exactly the friends of the department—it is important that they maintain independence on Parliament’s behalf to ensure a split between the Executive and Parliament—they are not the enemies of the department either. They just see themselves as complementary and are always happy to work with departments that have any doubts about procedure. If departments could see them more as a kind of critical friend, it might save us having to come back and revisit the 8.5% of SIs that we have heard about.
Lord Bhatia (Non-Afl) [V]
My Lords, I welcome the regulations because charities play a vital role in protecting communities, individuals and other not-for-profit organisations. The provision of a moratorium is therefore important and will protect charities from going under. Charities often have a short-term cash-flow problem; these regulations provide breathing space for them.
The regulations also provide for new elements of the moratorium for charitable organisations to facilitate their rescue from financial difficulties. They are somewhat similar to chapter 11 provisions in the US. In difficult times, such as the Covid pandemic, many charities that owe rent or the repayment of loans given to community organisations find themselves in difficulty and unable to pay their creditors. These regulations will stop creditors attempting to take legal action against charities with defined new funds or grants. It becomes a legal battlefield as each creditor or debtor tries to get its money back. Often, the lawyers are the ones who gain the most. Arbitration—[Inaudible]—to avoid the legal costs.
As I said, charities play a vital role in supporting communities and individuals. All assistance must therefore be given to protect them. Indeed, the Government should consider giving grants or loans to charities in difficulty.
Lord Stevenson of Balmacara (Lab) [V]
My Lords, I declare my interests in charitable organisations as set out in the register. Like the noble Baroness, Lady Bowles of Berkhamsted, I am also a veteran of the Corporate Insolvency and Governance Act, as it now is, having spent many happy hours on it. Although I can confirm that we did not consult on or talk about this matter beforehand, I find myself in agreement with much of what she said in her presentation.
Before I get to that, I want to mention that, although I admire the effort of the noble Lord, Lord Kirkhope of Harrogate, to read through the entire saga of that Act, he missed the fact that both the noble Baroness, Lady Anelay of St Johns, and I raised the issue of CIOs and charitable bodies more generally in the then Bill, and their particular issues in relation to the legislation going forward. We asked that the interests they represent be taken care of as the Bill went forward both in Committee and on Report in your Lordships’ House, so I am a bit surprised that the noble Lord did not bring that up. However, I can understand that his eyes might have glazed over when we reached that point in the proceedings.
I agree with the noble Baroness, Lady Bowles, that the Explanatory Memorandum for this statutory instrument is not up to the standard that the House expects. There may be many reasons for that and, when the noble Baroness introduced the SI, she hinted at the problems it has been going through—but I found it very difficult to read. I am therefore very grateful that the Library decided to publish a little aide memoire on this debate, which I found much more helpful.
The problem is not so much that this is the second or third attempt to try to get right something that was going off track earlier; it is that some quite substantial issues do not seem to have been addressed. I ask the Minister whether she would consider having a meeting with noble Lords who are interested enough to want one—perhaps just those who are involved in this debate—to see whether we can find out what is happening on the ground. I am confused about it: not just on the pension issue but on what legislation might be coming down the track later in this area. We do not get much opportunity to talk about charities and, as my noble friend Lord Foulkes said, there are real issues affecting them at the moment. It would be useful to get a sense of where the department is going with this, so we can be sure, in our own minds, where we can be most helpful in trying to protect the interests of charities, as a way forward.
When the Minister introduced this SI, she said it was a necessary part of the process and was mainly about disapplying provisions that might otherwise cause complications or not be relevant to the charities involved. But I felt very uncomfortable with that approach. That might be resolved by a meeting but, at the moment, all we have to go on is the SI. I have five very quick points to make.
First, I did not agree with her analysis that the voluntary solvent dissolution procedures should be disallowed, because they go with the grain of what was intended by the Corporate Insolvency and Governance Act. If a charity is thinking about winding up and is solvent, it will probably have other charities to which it could transfer its activities and processes. I do not understand why it would be necessary to disapply the provision for dissolution, if that were the case. Surely it would be in the best interests of all concerned to quickly transfer the assets, as a going concern, to the new charity, and any hold-up in that would be a bad thing. I put that to the Minister and look forward to her response.
Secondly, the noble Baroness, Lady Bowles of Berkhamsted, is a much more expert observer of the pension schemes issue than I am, but I thought the point was that pensions issues should be within the scope of the moratorium. In other words, the creditor interest represented by the pensions due to those people who are employed by the charity needs to be protected, and that trumps the worry about this being overcomplicated. I understand that the issue has arisen because of a lack of communication with the Department for Work and Pensions, but it is still not clear—nor is it in the Explanatory Memorandum—exactly why the Government have chosen to act as they have, particularly as they now think they have got it wrong and want to bring further legislation later. That seems a very complicated way forward.
Thirdly, the Minister paid tribute to the work of charities during the Covid-19 pandemic, as did other noble Lords who spoke during this debate. But the issue is that the voluntary and community sector is facing a huge deficit in its processes, as my noble friend Lord Foulkes mentioned. While the Government have brought forward a tiny proportion, the gap between where the charities would expect to operate and where they are at the moment is enormous. Is there any hope for more funding here? Could the Minister respond?
Fourthly, I will address a question that was touched on earlier in the debate and that I want to make sure was registered by the Minister. The charitable sector is very pleased that the Government took steps to make sure that the quite difficult end-of-year processes and governance arrangements in relation to lockdown and restrictions were being dealt with, and they welcome the Government’s idea that trustees could have more time on these. However, I still think that there are concerns there. Could she put pressure on the Charity Commission to put out more practical guidance on this? From my own discussions, I understand that there are still concerns here.
Finally, a minor point was raised during the process of the Corporate Insolvency and Governance Act in relation to some charities who have collections within the ownership of the charitable bodies, which might be vulnerable if there were to be an insolvency. Clearly, the collections should be retained in the public interest, but there did not seem to be any mechanism when we raised this in the Bill for proceeding with that. Could the Minister respond to that?
Baroness Barran (Con)
My Lords, debating these regulations this afternoon has been a pleasure, and I appreciate the constructive tone brought to the debate very much. I will try to answer the points raised by your Lordships in the next few minutes. I think all noble Lords recognised the great and important impact of the voluntary sector, particularly during the Covid-19 pandemic.
Reference was made to the amount of funding needed by the sector. I remind your Lordships that the first sector-specific package announced by this Government was for the voluntary sector, to the tune of £750 million. Because I meet the sector very regularly, I know that there were a lot of concerns at the outset about the applicability of the coronavirus job retention scheme but, actually, billions of pounds have gone into the sector through the use of that scheme. We are delighted that we have been able to improve the resilience of the sector in that way.
The noble Lord, Lord Foulkes, asked about some creditors being prevented from taking enforcement action. Some of the restrictions that we have looked at are in relation to financial services and claims where proceedings are brought before an employment tribunal. He also asked whether 20 days was long enough. There is a mechanism whereby that can be extended once for the same amount of time without the involvement of the courts, and it can then be extended further with their approval.
The noble Baroness, Lady Bowles, and the noble Lord, Lord Stevenson of Balmacara, raised important points and I commend them both on their persistence in going through the SI in so much detail. It certainly was not the most user-friendly that I have ever tried to work my way through. She asked for some examples of the “minor and technical modifications”. For example, modifications were made to the instrument to remove references to Scotland, Northern Ireland and overseas companies, none of which is relevant to CIOs as, unlike companies, they can exist only in England and Wales.
Another example, which the noble Baroness referred to and was also explained in the Explanatory Memorandum, was the transitional provision to ensure that any moratorium period entered prior to the commencement of the Corporate Insolvency and Governance Act continues under the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations, as they were made prior to the amendment of the Act. I hope that those are satisfactory examples.
The noble Baroness also asked about special tailoring for CIOs. Our aim in bringing forward these regulations is to create a level playing field with charities for CIOs. Many charities are registered with Companies House, and this will put both governance structures on a level footing.
The noble Lord, Lord Stevenson, asked, as did the noble Baroness, Lady Bowles, about the Pension Protection Fund provisions and the likelihood of those being needed. We genuinely believe that the likelihood is extremely low, but perhaps I may run through the situation where they might be. The CIO would need to be in a position of severe financial distress, but with the realistic prospect of financial rescue, in order to enter a moratorium in the first place. The CIO would also need to employ staff who are participating in a defined benefit pension scheme, and since CIOs have been in existence only since 2012, we believe that very few would offer staff participation in a DB scheme. Once those two hurdles had been cleared, we would naturally expect trustees of a CIO in a moratorium to act reasonably and responsibly, and not in such a way as to undermine the rights of members of their pension scheme or impact on the Pension Protection Fund. I hope noble Lords agree that those are significant gates which they would have to pass through. This remains a theoretical possibility, so to ensure a level playing field, we will bring forward legislation when parliamentary time allows to reapply Section 51A to CIOs.
My noble friend Lord Kirkhope asked about the status of insolvency practitioners. My understanding is that they have to be qualified practitioners and that the details of the workings are set out in the Corporate Insolvency and Governance Act.
The noble Baroness, Lady Scott of Needham Market, asked about the delay in writing to the Speakers. I can assure her that we have made every effort to get those letters out as quickly as possible, and I can only apologise for the delay. I share her recognition of the importance of the accuracy of the legislation that we bring forward.
These regulations will help CIOs that need a protective breathing space to consider their options or to pursue a restructuring plan and, as such, I commend them to the House.