Corporate Insolvency and Governance Bill

Viscount Trenchard Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Tuesday 9th June 2020 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I thank my noble friend for introducing this Second Reading debate today with his usual clear and methodical approach. While declaring my interests as stated in the register, I am delighted to be able to speak from these Benches and believe it is important that we should revert as soon as possible to something nearer our normal ways of working, as the House of Commons has done. It may well be that the noble Baroness, Lady Jones of Moulsecoomb, and her noble friend have ample opportunities to hold the Government to account under this system, but I feel myself persuaded by my noble friend Lord Dobbs, who, employing his natural eloquence, made the case for our proper return very well.

The Bill seeks to address the perceived failings in our current arrangements. I was surprised to note that the UK languishes at 14th place in the World Bank corporate insolvency rankings, below, inter alia, Slovenia and Iceland. Japan, Finland and the US occupy the top three positions. As noble Lords will be aware, the Government intend to negotiate free trade agreements with Japan and the US this year, and it would be good if the UK’s ranking in the World Bank’s table in future approximated more closely to theirs.

I believe that the permanent measures included in the Bill should assist in achieving that. They enjoy the broad support of the legal profession, and the reforms on moratoriums, restructuring plans and termination clauses have been worked on for some time. I hope that the Minister will commit that the Government will review the new insolvency and restructuring arrangements within, say, three years, and make sure that they are working as well as intended. The justification for the fast-tracking of this Bill, however, is driven by the temporary provisions on wrongful trading and winding-up petitions. They are also retrospective in effect, which we rightly normally avoid in this country. I believe that noble Lords will applaud the Government’s intention, which is to support businesses which were viable immediately prior to the realisation of the onset of the Covid-19 pandemic, but whose future is now seriously threatened, especially companies operating in the entertainment and leisure sectors.

The Government have introduced several schemes to provide immediate financial relief to companies suffering from the effects of the pandemic, and those eligible to receive loans will be much less likely to need to avail themselves of the protections provided by this Bill. What progress are the Government making in persuading the European Commission to change its definition of “undertaking in difficulty” to permit companies financed through their growth period by shareholder loans to borrow, or to resolve to apply a better definition of viable companies? My understanding is that not all member states are as diligent as we are in applying the Commission’s definition, even though we are supposed to have left the EU. Creditors’ rights to make winding-up petitions are curtailed by the need to satisfy the coronavirus test. It is not clear whether this will lead to a view that “it just isn’t worth bringing a winding-up petition, so don’t bother because you will fail” or whether people will seek to use and satisfy the coronavirus test to bring petitions that might not otherwise have been brought. It is interesting that judges have already started to grant injunctions to restrain creditors from proceeding with winding-up petitions in cases where the Bill, once enacted, would mean that the petition was dismissed when heard because it would fail the test.

With this Bill, the Government add some useful tools to the toolbox without interfering too much with well-established principles. I welcome the Bill and trust that your Lordships’ House will support my noble friend in securing its enactment without undue delay.

Covid-19: British Business Bank

Viscount Trenchard Excerpts

Thursday 30th April 2020 Lords Chamber

[Lord Callanan]

I thank the noble Baroness for that suggestion, but the British Business Bank’s finance hub already provides full details on CBILS and our other loan guarantee schemes, including all details of accredited lenders. In addition, businesses may use one of the BBB’s designated online referral platforms, which may help them to find finance providers offering the product they are looking for.

[Viscount Trenchard (Con)]

My Lords, I declare my interests as shown in the register. Under the British Business Bank’s revised eligibility guidelines, start-up companies whose losses have been financed by share- holders through long-term loans are ruled ineligible under EU state aid rules, which define companies whose accumulated losses exceed half their paid-in capital as “undertakings in difficulty”. That is the case even when they turn profitable and their accounts have been signed off as going concerns. Does the Minister not agree that the BBB should allow lenders to apply more flexible eligibility criteria to companies carrying long-term debt, which is in effect a form of capital, and that the EU definition of many such companies is misleading and inappropriate?

[Lord Callanan]

We are constantly reviewing the loan guarantee schemes to make sure that as many businesses as possible can benefit from them. That is why we made the changes that I referred to earlier in the week. As I said to an earlier questioner, although the UK has left the EU, under the terms of the withdrawal agreement we are still subject to EU state aid rules.

Covid-19: Business Interruption Loans

Viscount Trenchard Excerpts

Wednesday 22nd April 2020 Lords Chamber

[Lord Callanan]

My noble friend asked two good questions. We are aware of her first point about vetoes, and are considering it closely as we work out the further details of the scheme. As regards her second point, private investor capital lent alongside the government capital will not qualify for EIS relief.

[Viscount Trenchard (Con)]

My Lords, I declare my interests as set out in the register. I regret that the Government’s intention to rescue sound businesses whose income has suddenly and completely dried up through the provision of CBILS loans has been less effective than intended as a result of the 20% personal guarantee requirement of some lenders, as pointed out by my noble friend Lord Forsyth. Does the Minister agree that a reduction of the personal guarantee requirement to 10% might make a considerable difference to the conversion rate of loan applications to lifelines extended?

[Lord Callanan]

We have made some changes to the scheme so that no personal guarantees are permitted for loans of below £250,000. For loans above that level, lenders are permitted, at their discretion, to require personal guarantees for up to 20% of the remaining loan value. They are never permitted to use directors’ primary personal residences as security, and of course lenders may turn to personal guarantees only post the recovery of business assets. That is a balanced approach which protects CBILS borrowers but, like many other aspects of these schemes, this is something that we will keep under constant review.