Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2021
(Limited Text - Ministerial Extracts only)
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The Chair
Before we begin, may I encourage Members to wear masks when they are not speaking, in line with current Government guidance and that of the House of Commons Commission? Please also give each other and members of staff space when seated and when entering and leaving the room. Members should send their speaking notes by email to hansardnotes@ parliament.uk. Similarly, any officials in the Gallery should communicate electronically with Ministers—not that they will need your help, of course.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
I beg to move,
That the Committee has considered the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2021 (S.I. 2021, No. 718).
The regulations were laid before the House on 21 June 2021. Sir Gary, it is a pleasure to serve under your chairmanship to tackle this snappily titled SI, which will probably take me longer to read than to cover.
The past 18 months have been a huge challenge for all of us. We have started to lift the restrictions, and I am sure that everyone here shares my optimism that the early signs of a strong recovery signal a return to normality, but clearly many businesses are not out of the woods just yet. We have listened to the concerns of the business community and have been swift to act, providing affected businesses with the help and support that they need to survive. Many businesses have benefited from the economic package of support totalling £352 billion through furlough, the self-employment income support scheme, and support for businesses through grants, loans, and business rate and VAT relief. However, although we have now gone through the road map, many businesses continue to feel the longer-term effects of the pandemic.
The instrument before us has continued to help companies by extending one measure first introduced by the Corporate Insolvency and Governance Act 2020: specifically, the temporary suspension of issuing statutory demands and a restriction on company winding-up petitions until 30 September 2021. This measure has been extended several times by regulation, most recently from the end of March to 30 June. This instrument seeks to extend it one further time, providing confidence to businesses that they will be able to continue to trade as the economy gets back to normal. Since its introduction in June last year, the measure has protected many viable companies from aggressive creditor enforcement during really difficult trading times, and the temporary restriction on company winding-up petitions has meant that anyone who wants to wind up a company that has not paid its debts must satisfy a court that those debts are not covid-19 related.
As of today’s date, all businesses are able to reopen and trade without restriction. This extension aims to give the many companies that would be viable, were it not for the pandemic, much-needed time to get back on their feet as the economy begins to return to normal. The measure is intended to help companies that may be subject to aggressive creditor enforcement, but the Government have always been clear that it is not to be seen as a payment holiday. Where companies can pay their debts, they should do so. The added protection that this measure gives also allows those companies with unavoidable accrued arrears caused by the pandemic time to take advice from restructuring professionals and to negotiate and reach agreements with their creditors wherever possible, without facing the threat of being compulsorily liquidated while they do so.
I know that many businesses and their representatives will welcome the continued support that these regulations will give them. I also recognise that this measure will mean a further period of uncertainty for creditors, during which their rights to enforce recovery of debts will be temporarily restricted. However, as I have said, the measure is intended to help those in financial difficulty as a result of the pandemic, and should not be used as an excuse to avoid payment. Where a company can pay its debts, it should do so. We do not take this action lightly; we are aware of its impact on creditors, and we are continuing to monitor the situation carefully and consult with stakeholders and the business community to determine what further action may be necessary when these regulations expire at the end of September. I commend the regulations to the Committee.
Paul Scully
I appreciate the hon. Lady’s support, her party’s support and the support of her predecessor, the hon. Member for Manchester Central (Lucy Powell), who was patient in returning to this Committee Room and others to talk about these statutory instruments and regulations. I beg the hon. Lady’s patience to do likewise over the next few weeks.
We do not want to keep any measures in place for a day longer than we need to, so that we can return to the free market. However, I talked about the £352 billion-worth of support that the Government have given to businesses. That gives us 352 billion reasons why we need to shape the next bit, to ensure that we can avoid the cliff edges that the hon. Lady talked about and viable businesses can start to work through their recovery, so that we do not lose the implicit gains that we have made by being able to support jobs, businesses and livelihoods.
We know that these measures have had a significant impact on the normal work of insolvency legislation and the rights of creditors, which is why it is important that we get the balance right between allowing recovery and allowing the market and creditors to return to normal. We will keep the measures under review and continue to work with colleagues across the House to keep them abreast of our thinking and our stakeholder reviews, as they develop.
Many landlords are demonstrating best practice by working closely with tenants to find solutions that work for both parties, and we are grateful to see those discussions taking place. As the hon. Lady said, the Government have extended the commercial rents moratorium to March 2022. We will introduce legislation to support the orderly resolution of commercial rent arrears for tenants that were affected by restrictions during the pandemic. That legislation will ring-fence the rent debt accrued and set out a process of finding arbitration between landlords and tenants.
We recognised the potential for cliff-edge scenarios, including the role of the accumulation of unpaid debts becoming due when restrictions and Government fiscal support expire. Work is ongoing to develop solutions to enable a viable exit from these measures. We hope to make an announcement soon.
The points raised today have highlighted the importance of the measures in the legislation. This regulation will provide much-needed continuing support for businesses to concentrate their best efforts on continuing to trade and build on the foundations of our economic recovery un-impinged by that threat to their viability.
I sincerely hope that companies and their creditors will come together in good faith to maintain their future trading relationships and secure the benefits to both themselves and the economy as a whole. I thank hon. Members for their valuable contributions to the debate and I commend the regulations to the Committee.
Question put and agreed to.