Corporate Insolvency and Governance Bill

Baroness Garden of Frognal Excerpts

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

[Baroness Barker (LD) [V]]

My Lords, I wish to address the different types of company that will be impacted by the legislation but about which there is little in the Bill. There are 43 building societies and 27 friendly societies registered under the Friendly Societies Act 1992, some 9,000 registered under the Friendly Societies Act 1974, co-ops, mutual benefit societies and credit unions, all of which have binding rules with regard to the holding of their AGMs—plus 22,000 charitable incorporated organisations, as well as 4,500 more in Scotland. While the temporary provisions of the Bill, such as the relaxation on the holding of AGMs and some types of filing, are welcome, the permanent provisions should have been subject to greater scrutiny than is possible in three short days, and including them in the Bill is opportunistic of the Government.

I want to look at Clause 10, containing the new arrangements regarding wrongful trading. Many charities that may be constituted as companies limited by guarantee or charities that are beneficiaries of wholly owned trading companies have not been eligible for the furlough scheme or CBILS. The sector has lost £4 billion in the 12 weeks from April to June. Charities on average hold reserves of between three and six months’ expenditure, and charities that are active in the area of arts and sports, even if they are open soon, are unlikely to generate income at pre-Covid levels. For all of them, Clause 10 will be most important from July until the end of 2020. I therefore ask the Government whether they will think now about changing the timescale for Clause 10.

The main proposals that apply to CIOs are in paragraphs 43 to 49 of Schedule 3. Paragraphs 58 and 59 enable regulations to be made to apply the moratorium provisions to co-operatives and community benefit societies, while paragraph 54 alters the definition of “insolvency” in the Insolvency Act 1986 as it applies to organisations of those types. What do the Government intend to include in those regulations? When will they be published? When will CIOs, mutuals and co-ops know how the regulations will apply to their businesses? Have the Charity Commission, Companies House and the CIC regulator been involved in the drawing up of the regulations that apply to these companies?

Could the Minister explain the exemptions for registered social landlords? Given the potential rise in extensive homelessness, that is very important. Have local authorities been involved in the discussions about those companies?

In their initial handling of Covid, the Government made a fundamental mistake in March by putting in place measures that treated all companies the same. They are not. These companies are different; they are subject to different tax regimes and different laws. The Bill must not compound the problems that are currently in danger of putting thousands of charities and social enterprises out of business. Will the Minister agree to meet representatives of charities and social enterprises before the Bill reaches its next stage? For once this sector should be at the forefront, not the end, of the Government’s considerations.

[The Deputy Speaker (Baroness Garden of Frognal) (LD)]

I understand that the noble Baroness, Lady Kennedy of Cradley, will no longer be speaking in this debate. I therefore call Lord Flight.