Corporate Insolvency and Governance Bill

Baroness Bryan of Partick Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 23rd June 2020 Lords Chamber

[Lord Kerslake (CB) [V]]

My Lords, I was pleased to add my name to Amendment 75 and congratulate the noble Lord, Lord Stevenson of Balmacara, on proposing it.

The Bill contains some important benefits for companies that get into difficulties, which will help them, help the economy and protect jobs. Insolvent companies or companies that are likely to become insolvent can obtain a 20 business day moratorium period that will allow viable businesses time to restructure or seek new investment free from creditor action.

A good company—sadly, good companies will be affected by the economic impact of Covid-19—would keep its workforce well informed and consult them as a matter of routine. However, we know that, in a period of duress, the employees are often at the back of the queue in finding out what is happening in their own company, even though they are likely to be significantly at risk—perhaps the most at risk—of redundancy, changes in terms and conditions or changes in pension as a consequence of subsequent restructuring, or indeed closure if no resolution can be found.

In these circumstances, the provision in this amendment will provide an important safeguard and reduce the risk of employees being left out of vital decisions and discussions that will affect their livelihoods. I really hope that the Government can see their way to supporting this amendment, or something very close to it.

[Baroness Bryan of Partick (Lab) [V]]

My Lords, I too speak in support of Amendment 75. Although it is much weaker than the original amendments, it touches on an important debate that is happening not just in the UK but in most of the developed capitalist countries about the status of employees in a company.

Nearly 30 years ago, two academics wrote a paper entitled “The End of History for Corporate Law”. As often happens with such pronouncements, they were premature. The authors assumed that shareholder capitalism was unchallengeable. It is now common to hear senior executives and influential economists extol the importance of moving towards stakeholder capitalism. The chief executive of Black Rock, Larry Fink, wrote recently about climate change but said that sharing data should go

“beyond climate to questions around how each company serves its full set of stakeholders, such as the diversity of its workforce”.

The Financial Times reported that a business round table of 151 US chief executives has revised its concept of “purpose of corporation”. They have renounced shareholder value and would instead lead their companies to the benefit of all stakeholders—customers, suppliers, employees and communities. Mark Carney wrote recently in the Economist that companies would be judged on how they treated employees, suppliers and customers, by who shared and who hoarded, and that the corona crisis was

“a test of stakeholder capitalism.”

He might have had in mind companies such as easyJet, which has sought state aid after cancelling most of its flights but went ahead with a £174 million dividend payout while asking employees to take unpaid leave and face substantial changes to their terms and conditions.

This amendment should be knocking at an open door. I am sure that noble Lords will want to accept it, and that what it calls for will become common practice before too long. It is a modest proposal that does no more than require a company to consult the representatives of its employees. I am sure that many of us would want to go further than that, and no doubt this is an issue that we will return to over the coming months and years.

[Lord Hendy (Lab) [V]]

My Lords, I too shall speak to Amendment 75. In precisely one week’s time, we will celebrate the 70th anniversary of the ratification by the United Kingdom on 30 June 1950 of Convention No. 98 of the International Labour Organization, one of the two most fundamental conventions in international labour law. It has not only been expressly ratified by 167 nations but is considered part of customary international law. Article 4 reads as follows:

“Measures appropriate to national conditions shall be taken, where necessary, to encourage and promote the full development and utilisation of machinery for voluntary negotiation between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements.”


Another anniversary will be commemorated on 11 July, for on that day in 1962, as a member of the Council of Europe, the United Kingdom ratified Article 6 of the 1961 European Social Charter. The article reads:

“With a view to ensuring the effective exercise of the right to bargain collectively, the Contracting Parties undertake … to promote joint consultation between workers and employers … to promote, where necessary and appropriate, machinery for voluntary negotiations between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements”.


This amendment does not seek the fulfilment of the Government’s obligation to promote collective bargaining on the consequences for workers in a company that is running into financial difficulties and the measures such as a moratorium to alleviate them, but it does require the fulfilment of the more modest obligation to promote consultation between workers and employers about such consequences. It is difficult to the point of impossibility to see what objection there could be to the imposition on directors of an obligation to hear from their workers—in this case their employees—their perceptions of and suggestions for ameliorating the company’s situation. Under the Companies Act, directors already have an obligation to take into account the interests of the employees, so it is really not asking much to require them to ask their employees to express their views.

Given that the biggest impact of the moratoria and other measures relating to a company’s financial difficulties will be on the workers whose livelihoods are on the line, why not hear their voices? They will be the most ardent and innovative in finding ways of keeping the company alive. Certainly, the Minister and his team have offered no objection to the principle or the practicality of this so far. All that has been said is that employees are already protected and that the courts have a duty to ensure that arrangements are fair and equitable.

The first point is hopeless. There is no extant legal obligation to hear the voices of workers, no obligation to bargain collectively, no obligation to consult save where collective redundancy procedures apply, and no requirement to have worker directors on the board. The second point is equally without merit. There is no provision for workers to be parties to, to be represented, or even to be heard in the specific court proceedings to which this Bill relates. Without hearing from representatives of the workers in respect of the measures being proposed, how can the court be satisfied that any measure is fair and equitable to them? I urge the Government to accept the amendment and to fulfil at least partly their international legal obligations.