Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) (No.2) Regulations 2020

Baroness Bowles of Berkhamsted Excerpts

Friday 9th October 2020 Lords Chamber

[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.