Corporate Insolvency and Governance Bill

Baroness Henig Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Tuesday 16th June 2020 Lords Chamber

Relevant document: 14th Report from the Delegated Powers Committee

[The Deputy Chairman of Committees (Baroness Henig) (Lab)]

My Lords, a limited number of Members are here in the Chamber, respecting social distancing, and if the capacity of the Chamber is exceeded, I will immediately adjourn the House. Other Members will participate remotely, but all Members will be treated equally, wherever they are. For Members participating remotely, microphones will unmute shortly before they are to speak—please accept any on-screen prompt to unmute. Microphones will be muted after each speech. I ask noble Lords to be patient if there are any short delays as we switch between physical and remote participants. I should remind the House that our normal courtesies in debate still very much apply in this new hybrid way of working.

I shall begin by setting out how these proceedings will work. A participants’ list for today’s proceedings has been published and is in my brief, which Members should have received. I also have lists of Members who have put their names to the amendments or expressed an interest in speaking on each group. I will call Members to speak in the order listed. Members’ microphones will be muted by the broadcasters except when I call a Member to speak. Interventions during speeches or before the noble Lord sits down are not permitted, and uncalled speakers will not be heard.

During the debate on each group, I will invite Members, including Members in the Chamber, to email the clerk if they wish to speak after the Minister. I will call Members to speak in order of request and will call the Minister to reply each time. Debate will take place on the lead amendment in each group only. The groupings are binding and it will not be possible to de-group an amendment for separate debate. A Member intending to press an amendment already debated to a Division should give notice in the debate. Leave should be given to withdraw amendments. When putting the Question, I will collect voices in the Chamber only. If a Member taking part remotely intends to trigger a Division, they should make this clear when speaking on the group.

Clause 1: Moratoriums in Great Britain

Amendment 1

Moved by

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[Lord Hope of Craighead (CB) [V]]

My Lords, I will speak to Amendment 4 on the Marshalled List, which is in my name.

The context for what I propose is to be found in new Section A8, which requires the monitor, as soon as reasonably practicable after the moratorium comes into force, to notify every creditor of the company of whose claim he is aware, giving notice of when the moratorium came into force and when it will come to an end. The importance of this duty is highlighted by the fact that the monitor commits an offence if he fails without a reasonable excuse to comply with it. That is as it should be, as the creditors need to know about the moratorium as soon as possible, because it has such an obvious effect on them and their interests. Their right to recover the debt is effectively frozen for the duration of the moratorium. That may have significant adverse effects, which may need to be provided for urgently to avoid the creditors’ financial embarrassment. But the monitor’s duty to notify the creditors extends only to those of whose claims he is aware. There is no suggestion anywhere in the Bill, so far as I can see, that the monitor is under a duty to make inquiries. Therefore, the provision, as it stands, is a rather weak protection for the creditors, whose interests will inevitably be disadvantaged by the moratorium, against which they are being given no right to object.

In that context, I am proposing an addition to the list of relevant documents in new Section A6. These are the documents that must accompany the directors’ application for a moratorium. The amendment seeks to add to the definition of “the relevant documents” in Section A6(1) a list by the directors of all known creditors of the company. The aim of the amendment is to ensure that the monitor has access to this information as soon as possible. That is because he really does need it, if the performance of his duty to notify is to be effective for the protection of the creditors. The directors are, of course, in a much better position to say who the creditors are than the monitor, who is a newcomer to its affairs. Adding this list to the definition will greatly strengthen the effectiveness of the duty to notify in new Section A8. It will enable the performance by the monitor of his duty to notify to be much more effectively scrutinised, and enforced, if necessary, than it would be if all that can be done is to rely on what he happens to be “aware” of.

I should explain that the need for a provision of this kind was drawn to my attention by the Law Society of England and Wales. The wording of it has its support, and I invite the Minister to look at it very carefully. I appreciate, of course, the pressure the Minister is under to get the Bill through as soon as possible, and that the time he may need to get clearance for any amendments to it is also very limited. I would therefore be content if the Minister would give an assurance that he will indeed look at this matter and at the gap in the creditors’ protection that it exposes, perhaps with a view to an amendment by regulation under the power provided by Clause 18(1)(a), as R3 suggests, once the way these measures are working out in practice has been tested in the marketplace.

[The Deputy Chairman of Committees]

I understand that the noble Lord, Lord Lennie, does not wish to speak, so I call the noble Lord, Lord Hodgson of Astley Abbotts.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I have Amendments 8, 21 and 42 in this group. I remind your Lordships’ House of my entry in the register of interests.

The amendments are of a practical nature and are drawn from my experience as an investor in and director of private equity funds and small companies over many years. Before I turn to them, I will just repeat to the Minister how unsatisfactory is the way the Bill is being dealt with. We are mixing coronavirus amendments —which we all understand have to happen quickly—with permanent changes to our insolvency law, and this is a rushed job that may well rebound to cause more trouble for the Government than they like. The reason I want to repeat the points that I made at Second Reading is that since that debate on a Bill littered with Henry VIII clauses took place, we have had a report from the Delegated Powers and Regulatory Reform Committee. I do not think I have ever read a report that is quite so critical of a Bill. I have to say to my noble friend that if Members of your Lordships’ House are inclined to push amendments to restrict those Henry VIII clauses today or at future date, I shall feel obliged to support them, because we have a very bad mix here.

The purpose of Amendment 8 is to facilitate and encourage the use of moratoriums. Events leading to a company’s collapse proceed at two speeds. It first happens at a slow speed, while the directors think, hope and pray that something will turn up—that a contract will be won, some money will come in, or an investor will appear. Inevitably, when Mr Micawber does not turn up, things have to move very quickly indeed. Then, if they decide to appoint a monitor, the time for him to make his decision is very limited indeed. As we know from the wording of the Bill, he has to make a statement that it is likely that a moratorium would result in the rescue of the company as a going concern.

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Amendments 2 to 6 not moved.

[The Deputy Chairman of Committees]

We now come to the group beginning with Amendment 7. I remind noble Lords that anyone wishing to speak after the Minister should email the clerk during the debate. Anyone wishing to press this or any other amendment in this group to a Division should make that clear in the debate.

Amendment 7

Moved by

Better Regulation

Baroness Henig Excerpts

Thursday 7th December 2017 Lords Chamber

[Baroness Henig (Lab)]

My Lords, I am honoured to be listed twice in this debate. I feel a bit like New York—so good they named it twice. I first draw attention to my interests as listed in the Lords register, and to the fact that for six years, from 2007 to 2013, I was the chair of the regulatory body for private security.

I commend the noble Baroness, Lady Neville-Rolfe, for introducing this important debate. I hope that she is not regretting it in any way. I strongly agree with her that proportionate regulation is very important—proportionate, that is, to the risk involved; a point made, I think, by the noble Lord, Whitty, with which I strongly agree.

I make the point about regulation being proportionate to risk because I want to speak about regulation in the private security industry, where two factors have dramatically increased the level of potential risk to the public. The first is the change in the number of private security guards, as against police officers, patrolling public space and buildings. As the numbers of police officers have consistently fallen since 2010, the numbers of security guards on the front line have risen, and they far outnumber the police as the front line of defence in our main shopping areas, streets and crowded places.

The second factor, which I need hardly emphasise, is the escalating threat of terrorist activity—to a level which is critically high in terms of risk to the public. The question arises therefore: is the basic regulation introduced to govern private security in 2003 still appropriate, effective and proportionate to the risks now entailed in 2017? The answer to that question has to be no, so what is being done about it?

It is incredible to recall that, as recently as 2010, the then Government declared their intention to abolish the Security Industry Authority—the regulatory body—and deregulate the private security industry. As a result, there was a huge outcry from the major industry bodies themselves and the businesses and their representatives, who told the Government how effective seven years of regulation had already been in raising standards and driving criminals from the sector. Commendably, they succeeded in getting the Government to change their mind. However, they also argued that regulation in the sector needed to develop, that as well as requiring individuals working in the industry to be licensed, businesses needed to be regulated and that we needed to stop unscrupulous operators lowering standards and undercutting quality operators. They argued that the four days of basic training needed to be revisited and that the stringent requirements for companies in the approved contractor scheme should be extended to all businesses.

Importantly, this was businesses not complaining about red tape but taking the lead in being forward-looking and calling for appropriate changes in regulation. The Home Office agreed with them, and the Minister for home affairs in the House of Lords—now a very senior Member of this House—told us in 2011 in this House, and told the industry, that the changes it was calling for would definitely be brought in before the end of the last Parliament. He said that business licensing would definitely happen. However, nothing happened. After this morning’s debate, I cannot help wondering whether the noble Lord, Lord Curry, and the Better Regulation Executive had anything to do with that.

At the same time, the Leveson inquiry revealed another major weakness in the sector—the unscrupulous and often criminal activity of some private investigators. Regulation of that sector was included in the Private Security Industry Act 2001, but was postponed by the Government in 2010. After Leveson, the then Home Secretary—now the Prime Minister—promised that such regulation, which was strongly backed by the bodies representing private investigators, would be introduced as soon as possible and certainly by the end of the Parliament. Again, nothing happened.

When I raised both of these issues in this House in 2015, I was assured by the noble Lord, Lord Bates, that they would be a high priority for the new Government. Of course, they were not: that was just more false promises. Clearly we have a situation where regulation deemed essential by one government department—in this case, the Home Office—can be blocked by another, even in the face of escalating security threats and rising terrorist activity.

In 2016, a triennial review of the Security Industry Authority was completed; the report and recommendations were handed over to the Home Office. Nearly a year and a half later, we have heard nothing about this, despite Written Questions to the Home Office asking what has happened. I wonder whether the delay and the disappearance of the report have anything to do with my understanding that the independent reviewer has recommended both the licensing of private security businesses and the regulation of private investigators.

Given the risks and threats that we all now face, this is just not good enough. The security guards on the front line against terror have had basic training, and they will do their best: we have seen that in many brave actions this year. However, counterterrorism training, for example, though available, is voluntary. It is not yet an integral part of the four days of basic training that security guards receive. It should be: the Minister in charge of counterterrorism in the Home Office wants it to be. What has to happen to turn intentions such as this into action?

For some years now, the Scottish Government have insisted that security contracts in the Scottish public sector are awarded only to approved contractors, which is to say those who operate to the highest standards. That is surely appropriate to protect the public. The Government in England and Wales, not surprisingly, have not followed suit, so I am truly grateful to the noble Baroness opposite for raising the whole issue of regulation. I suggest to her that she deploy her considerable talents to persuading government colleagues in the trade department and the Cabinet Office that proportionate and effective regulation matters, that it should be taken seriously and that, without it, public safety is being endangered every day.