Corporate Insolvency and Governance Bill

Earl Howe Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Tuesday 16th June 2020 Lords Chamber

[Lord Stevenson of Balmacara [V]]

My Lords, the point raised by the noble Lord, Lord Fox, is self-evident. We have already covered much of its ground, so I do not think that anything else needs to be said. I believe that the best thing is for the Minister to respond directly to the debate.

[Earl Howe (Con)]

My Lords, I thank the noble Lord, Lord Fox, for tabling these amendments. As he said, they seek on the one hand to time-limit the period within which the moratorium provisions are in force and require a review of the operation of the provisions to be carried out, and, on the other hand, to limit the ability to extend the sunset date of the powers to make temporary amendments to insolvency and related legislation in Clauses 18 and 26. Here, I am referring to Amendments 68, 69 and 74, which I will cover as they are in this group.

I shall start with the moratorium. As the noble Lord knows, the point of this measure is to give financially distressed companies breathing space from their creditors so as to pursue a rescue or restructure. It forms part of a package of rescue tools in the Bill that will help ensure that viable companies do not fail, thereby saving businesses and jobs. This new procedure will of course be useful during the Covid-19 pandemic but it will also have a longer-lasting benefit to the economy after this period. Therefore, making this measure temporary will serve little purpose. Doing so would, instead, create uncertainty. I ask the noble Lord how a financially distressed company could conduct its rescue planning without some assurance that the restructuring tools would still be available after a certain point in time.

All the permanent provisions contained in the Bill, including the moratorium, have not just been developed in the short time since Covid-19 first appeared; rather, they have been subject to a considerable period of consultation and engagement dating back to 2015. This process included the then Government’s review of the corporate insolvency framework public consultation in 2016 and, since then, there has been an extensive period of engagement with a wide range of stakeholders. The measures have been developed and refined over several years against a backdrop of strong calls to introduce them as early as possible to ensure that the UK keeps pace with restructuring reforms introduced in a number of other jurisdictions and to ensure that we remain one of the top restructuring hubs in the world.

Furthermore, I assure the noble Lord that the Government take their role in reviewing legislation very seriously. We will monitor information and feedback from stakeholders and the industry on the effectiveness of the new insolvency procedures generally. In due course, we are likely to want to commission a more formal evaluation of the impact, and a post-implementation review will be conducted in line with Better Regulation guidance. However, it will be important to ensure that the new measures have sufficient time to bed in before doing so.

Turning to Amendments 68, 69 and 74—which, I dare say, my noble friend Lady Neville-Rolfe would have introduced but the noble Lord, Lord Fox, has his name attached to them—I am grateful to both noble Lords for bringing up the matter of the sunsetting of the powers to make temporary changes to insolvency and related legislation in Clauses 18 and 26. As the Bill stands, those powers may not be used after 30 April 2021, but this expiry date may be extended. This would be for a period of no more than a year, although the power to extend can be used more than once. The amendments would either remove the powers to extend the expiry date, which would mean that the powers in Clauses 18 and 26 would sunset for ever on 30 April 2021, or would limit the power to extend so that it would expire two years after this Bill received Royal Assent at the latest.

I hope that it is helpful if I reassure the noble Lord and my noble friend in her absence that the purposes for which the Clause 18 and Clause 26 powers may be used are tightly circumscribed and very specifically set out in the Bill in the clauses that immediately follow in each case. These include helping to reduce the number of entities being forced to use corporate insolvency proceedings and mitigating the impact of Covid-19 on those proceedings, as well as the duties of persons with corporate responsibility.

The problem here is that we just do not know the long-term impact of this dreadful pandemic on business and insolvency, and we need to be able to move quickly to meet as yet unknown and unidentified challenges. Some of these may not become apparent for several months, so for the power to be most effective it must be capable of being extended.

Extension of the expiry date of 30 April 2021 may be made only after proper consideration and scrutiny by Parliament using the affirmative procedure. I hope that the noble Lord will agree that the existence of that parliamentary hurdle is not insignificant and will prevent the power continuing indefinitely if it is no longer needed.

So, for the reasons I have set out, I am not able to accept this group of amendments. I therefore hope that the noble Lord, Lord Fox, will agree to withdraw Amendment 38 and in due course will not press the other amendments in the group.

[Lord Fox]

I thank the Minister for his response. I did not expect the Government to accept the amendments, but there is an element of cake-and-eat-it here. On the one hand, the Government are saying that there needs to be certainty within the restructuring industry to make this happen; on the other hand, they are taking upon themselves the ability to change everything. It is quite clear that the Government expect to make changes, but they then say, “Well, after two years, Parliament will have had time to produce a replacement piece of legislation, which will have built on the legislation that we are seeing in front of us.” I do not accept the idea that the amendment somehow creates uncertainty because there is enough uncertainty already; it does not make that much difference.

The Government are running this through emergency process. By definition, an emergency has an end. The process of forever renewing things, which is essentially what is there, leaves a bad taste in most people’s mouths. I shall read the debate in more detail in Hansard tomorrow. In the meantime, I beg leave to withdraw Amendment 38.

--- Later in debate ---

[Earl Howe]

My Lords, I am most grateful to noble Lords for these amendments, which seek to extend the period of time that the range of temporary measures contained in the Bill will continue to operate. The temporary measures contained in the Bill are all necessary to ensure that otherwise viable companies are given the space to recover, if that is possible. I entirely understand noble Lords’ desire to ensure that the measures continue for as long as they are needed. As I am sure they appreciate, the Bill contains provisions enabling these temporary measures to be extended, and I can reassure them that the Government have every intention of making use of this provision if the protections are needed beyond their present expiry date.

The temporary measures all have significant impacts on the normal working of various parts of insolvency legislation and the business community. The point that needs to be made here, though, is that the term of extension for one measure may not be desirable, or needed, for another. We therefore think it is right that any consideration of an extension, and for how long, should be done on an individual basis rather than in the round, taking into account all the circumstances and potential impacts.

My noble friend Lord Hodgson’s amendment is slightly different from the other amendments in this group, in that it would extend backwards the period to which restrictions on winding-up petitions and orders apply, to include circumstances where petitions were filed after 23 March 2020, when lockdown began. As currently drafted, the restriction on winding-up petitions applies retrospectively from when the Government announced their intention to legislate. It seeks to avoid unfairness by ensuring that the restriction on winding-up petitions applies only in cases where the person presenting the petition would have known of the Government’s intention to legislate in this area. I hope my noble friend will agree, on reflection, that it would not be appropriate to place such a requirement on anyone before they could have known about it. That is why we have chosen to apply the provisions in respect of windings up from 27 April 2020—the next working day following the Government’s announcement of the change in policy.

I will write to the noble and learned Lord, Lord Wallace of Tankerness, and the noble Lord, Lord Howarth, in answer to their questions on retrospection, but for the reasons I have set out, I am not able to accept these amendments. I therefore hope that the noble Baroness, Lady Barker, will feel able to withdraw her Amendment 47 and that, in due course, the other amendments in the group will not be moved.

[Baroness Barker]

My Lords, in view of the hour I will simply say that I am not surprised by the noble Earl’s answer. There is something to be said about the winding-up provision specifically running longer than 30 June, but at this hour I will withdraw my amendment.