Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2020

Baroness Healy of Primrose Hill Excerpts

Tuesday 19th January 2021 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, since the emergence of Covid-19, the Government have been swift to act and provide businesses with help and support to give them every chance to survive and get through this difficult period of uncertainty. Since March last year, businesses have benefited from an unprecedented package of government support targeted at saving jobs and livelihoods, such as the furlough and job retention schemes, as well as billions of pounds in loans, rates relief, tax deferrals and grants.

Today, all areas of Great Britain are again subject to restrictions put in place to limit the spread of the virus and to help save lives. These restrictions are crucial to prevent our NHS from being overwhelmed and we wait for everyone to be vaccinated. But until life returns to normal, we have to recognise that the impact on business is severe and continuing. The adverse effects that these essential restrictions continue to have on many businesses, particularly those in the retail and hospitality sectors, have been well documented and well debated in our House. Once again, the Government have acted quickly following the introduction of the latest national restrictions, with a new £4.6 billion package of lockdown grants to support businesses and to help protect jobs.

These regulations, which were laid before the House on 9 December 2020, will continue to help companies by extending the temporary suspension on using statutory demands to wind up companies and other restrictions on company winding-up petitions to 31 March 2021. First introduced by the Corporate Insolvency and Governance Act 2020, these measures were extended from the end of September 2020 by order to 31 December and this instrument seeks to extend them further. The measures, like others in that Act, are aimed at supporting directors in guiding their companies through the period in which business is being affected by the current pandemic. Since their introduction in March last year, these temporary measures have helped to protect many viable companies from aggressive creditor enforcement during unprecedented trading conditions.

The temporary restrictions on company winding-up petitions that the regulations seek to extend mean that a petitioner must satisfy a court that any debts are not Covid-19 related. In this way, companies that would be viable but for the effects of the virus will not face action from creditors seeking to wind them up because they have been unable to pay their debts due to the trading restrictions that have been necessary to protect our citizens and the National Health Service. This extension will further help to support companies while national restrictions continue to affect the trading capability of many of our businesses.

While these measures are intended to help companies that may be subject to aggressive creditor enforcement, the Government have been clear that they are not to be seen as a payment holiday. Where companies can pay their debts, they should, of course, do so. It is important to note that these measures aim to encourage forbearance and do not extinguish any existing creditor rights or interests.

In addition to the protection that this measure gives, it is also intended to give those companies with unavoidable accrued arrears caused by the pandemic time to take advice from restructuring professionals and to negotiate and reach agreements with their creditors wherever that is possible. I know that many companies have done so successfully and I am grateful to them, but I urge others to do so and to plan for the post-Covid future with confidence.

I know that many businesses and their business representatives will welcome the continued support that these regulations will give them during this very uncertain time. But I also recognise that these measures will mean a further period of uncertainty for creditors where their rights to enforce recovery of their debts are temporarily suspended. The Government continue to ask for forbearance in allowing people and businesses to meet their debt obligations during these difficult and unprecedented times. As I said, these measures do not extinguish any existing rights or interests. Instead, they temporarily remove one mechanism for enforcing a debt and therefore provide additional protection to companies in distress as a result of the virus. A variety of other debt enforcement methods will remain. We think it is right, therefore, that any consideration of an extension and for how long should be done on an individual basis, rather than in the round, considering all the circumstances and potential impacts.

In conclusion, we do not take this action lightly and we will review carefully before taking any further decisions when this extension period expires at the end of March. Therefore, I commend these regulations to the House and I beg to move.

[The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)]

I inform the Committee that the clock is not working currently and remind them that speeches are limited to six minutes. I call the next speaker, the noble Lord, Lord Sikka.