Corporate Governance and Insolvency

Drew Hendry Excerpts

Tuesday 20th March 2018 Commons Chamber

[Andrew Griffiths]

As my right hon. Friend will know, we have not hung about in relation to improvements within the corporate governance structure. We will soon lay a further statutory instrument which will enhance even further the corporate governance measures we have introduced. The consultation will take place within the normal rules of a consultation, and we hope to bring forward proposals as a matter of urgency.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

I thank the Minister for giving me advance sight of his statement. On engagement, will the Government consider proposals to force chief executives and company directors to engage directly with small business owners or groups of affected individuals? In the recent instances involving the Global Restructuring Group and the Royal Bank of Scotland branch closures, there has been a refusal on the part of directors to meet those affected. As my hon. Friend the Member for Glasgow North (Patrick Grady) pointed out, a lot of the problems that this consultation seeks to address could have been avoided simply through early engagement with those in charge.

With prohibitive costs often preventing individuals from pursuing legal options after being affected by insolvency, will the Government’s strategy look at ways of ensuring that legal recourse is available to those who will already be in financial difficulties as a result of insolvency? On contract and pensions protections, small businesses should not be the ones to suffer when a failed large company goes bust, and it should not only be in high-profile cases that the Government step in to protect pensions. What measures will this strategy take to ensure that small and medium-sized enterprises are protected when contracts or payments are halted due to a large company collapsing, and that any protection for creditors is mirrored by protection for workers and pension holders? These proposals are aimed at improving the range of options available following a company becoming insolvent. However, a proactive approach could help to prevent that from happening in the first place. Does the Minister agree that one way to ensure this would be for organisations to take profit warnings seriously and not to continue to hand out contracts to firms that issue them?

[Andrew Griffiths]

I thank the hon. Gentleman for his detailed and important questions, many of which related to small businesses. As the Minister with responsibility for small businesses, I take those questions extremely seriously. It is not just large corporate collapses, such as that of Carillion, that affect the thousands of small businesses in the supply chain. The collapse of a small business can affect other small businesses as well. We have all seen cases in our constituencies of small businesses losing money because of phoenix businesses that go into liquidation, change their name and reappear. It is the same people selling the same products, fleecing people time and again. We are giving the Insolvency Service the ability in this consultation to investigate companies that have already been dissolved, and that will go a long way towards sending the clear message to directors who think they can get away with fleecing small businesses in that way that the Insolvency Service will come and get them.

The hon. Gentleman talked about pensions. It is important that directors should clearly understand, through this White Paper and through the consultation, as well as through the Department for Work and Pensions White Paper, that there will be consequences if they fleece their pension fund, that there will be fines and penalties and that they could spend time in prison if they have been found to be fleecing their pension fund in an unacceptable way.

The hon. Gentleman also talked about the need for small businesses to be treated in an ethical way. In the spring statement last week, the Chancellor demonstrated a clear recognition and understanding that small businesses were being fleeced, particularly in relation to late payments. He said that he would consult on how we could end the “scourge of late payments”. If we could do that, we would see £14 billion taken from the pockets of big businesses and put into the pockets of small businesses. Also, when insolvencies such as that of Carillion do happen, payments will stay in the bank accounts of the company that had gone bust not for 128 days but for only 30 days.