Terms and Conditions of Employment

Debate between Gavin Newlands and Kevin Hollinrake

Tuesday 14th May 2024 Commons Chamber

[The Minister of State, Department for Business and Trade (Kevin Hollinrake)]

I beg to move,

That the draft Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024, which was laid before this House on 22 April, be approved.

The draft order will increase the deterrent effect of the code of practice on dismissal and re-engagement, which I will refer to as “the code” for the remainder of this debate. The Government have been clear that threats of dismissal and re-engagement should not be used as a negotiation tactic by employers. When the covid-19 pandemic led to cases of dismissal and re-engagement, the Government asked ACAS to conduct an evidence-gathering exercise to help us better understand this issue. The report was published in June 2021. The Government then asked ACAS to produce new guidance to ensure that employers are clear on their responsibilities when considering making changes to employment contracts. The guidance was published in November 2021. ACAS has also published guidance for employees.

The Government then went further to address the use of dismissal and re-engagement by bringing forward a draft code, aiming to ensure that the practice is only ever used as a last resort, and that employees are properly consulted and treated fairly. The code seeks to ensure that where an employer wants to make changes to employees’ terms and conditions, the employer engages in meaningful consultation with a view to reaching agreement with employees or their representatives in good faith.

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

I am grateful to the Minister for giving way. We discussed this issue upstairs in Committee. Can he confirm whether the motion, which puts the code into practice, would stop Willie Walsh from threatening to fire and rehire 10,000 air stewards, air stewardesses and others at British Airways, or the workers at British Gas—yes or no?

[Kevin Hollinrake]

It is wrong to talk about individual cases, because they are all different, with different circumstances. The order is about a financial deterrent against those kinds of actions. Different sanctions are available for the mistreatment of employees, such as civil or criminal investigation by the Insolvency Service. Different measures can be taken forward where rules are not complied with.

[Gavin Newlands]

I am grateful to the Minister for giving way again. He talked about the extra 25% putting off businesses and employers from going down that route. If it will save businesses a heck of a lot more money than the alternative, surely they will go down the same route. They will potentially price in the 25% if it will save them more money in the long run, particularly in a British Airways situation where it was dealing with legacy contracts and trying to save substantial amounts of money. Surely this is not enough of a disincentive.

[Kevin Hollinrake]

The hon. Gentleman raises an interesting point. Most employers treat their employees with dignity and respect. That is what we expect and what we see in the vast majority of cases. An economic environment in which we have virtually full employment means a competitive market for employees. That is the best protection against the kind of approach that some employers take and which we are trying mitigate. We believe the measures strike a fair balance. We believe there are situations where dismissal and re-engagement is appropriate—I can expand on that if he would like me to—so it is about trying to strike a balance, and we think we have struck that balance.

Draft Code of Practice on Dismissal and Re-Engagement

Debate between Gavin Newlands and Kevin Hollinrake

Monday 15th April 2024 General Committees

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

It is a pleasure to see you in the Chair, Sir Graham; I suspect that this Committee sitting is a lot more sedate than some others that you have chaired recently. It is also a pleasure to follow the Labour spokesperson, the hon. Member for Ellesmere Port and Neston, whose speech I agreed with in its entirety.

The Minister said that most employers want to do the right thing by their employees. I think most of us would probably agree, but too many employers do not. Sadly, that includes some of the UK’s biggest and best-known companies. The draft code is largely useless; it is a lamentable waste of parliamentary time, and I dread to think how many civil service hours were wasted on its drafting. Other than the possible—I stress “possible”—increase of up to 25% in any successful employment tribunal claim following an incident of fire and rehire, the 3,819 words in this document can be distilled to nine: “Please don’t fire and rehire…unless you have to.”

Further to the point that the Labour spokesperson made, paragraph 12 states:

“A failure to follow the Code does not, in itself, make a person or organisation liable to proceedings.”

All it does is potentially beef up the amount awarded to an employee when a tribunal finds that their employer acted outwith the law. That is no comfort whatever to someone who has just been brutally sacked, paid off and forced to claim the pittance of jobseeker’s allowance that the Government like to pretend is enough to live on.

According to the latest figures, it takes nearly a year from the employment tribunal receiving a claim to the first hearing. The 25% premium that breaching the code of practice might add to an award will be welcomed by a successful claimant, of course, but they will have had to wait longer than a year to get it. They will have been forced into alternative employment in the meantime, if they are lucky. It is toothless and a missed opportunity, to say the very least.

As the hon. Member for Ellesmere Port and Neston noted, paragraph 15 states:

“Where this Code states that a party ‘must’ or must not do something, this indicates that that party is subject to a legal requirement. Where this Code states that a party ‘should’ or should not do something, this indicates a recommendation”.

Other than in paragraph 15 itself, the word “must” is used 10 times in the code, of which nine uses reflect existing legal obligations; the only use of the word “must” in relation to the code itself is in the provision stating that tribunals must take the code into account in relevant proceedings. On the other hand, “should” is used another 38 times.

The truth is that the code is little more than a wish list—a tick-box exercise so that it can be said that something has been done about fire and rehire. Moreover, as has been alluded to, a code of practice will have little effect on the likes of P&O Ferries. It, and future employers, will simply factor in the 25% increase in employment tribunal awards into the costs of doing business.

I was at the joint meeting of the Select Committees on Transport and on Business, Energy and Industrial Strategy when we had the chief executive of P&O Ferries, Peter Hebblethwaite, in front of us. Many will remember his contemptible attitude to the law as it stood: he happily admitted that his company willingly and knowingly broke the law when it sacked 800 workers with no notice and no consultation. At the same time that P&O Ferries was evicting staff from ships and shoving their belongings into binbags on the quayside, its parent company DP World was forking over tens of millions to sponsor golf tournaments and was shoving $378 million into the pockets of shareholders, so the Minister will forgive me for being sceptical about the idea that a slightly beefed-up code of practice will make the next Peter Hebblethwaite think twice before dumping hundreds more workers in the skip to save the company a few bob.

When British Airways’ parent company, International Airlines Group, pulled the trigger on a fire and rehire action aimed at tens of thousands of staff in 2020, it could only do so in the UK. In Ireland and Spain, it was precluded from taking similar action because those countries have employee protections that stop employers treating their staff like chattels.

I welcome any action or progress that improves the lot of workers, particularly given the removal of so many of their bargaining rights over the past four and a half decades and the attempted defenestration of trades unions in this country—policies that have undoubtedly contributed to the UK falling further and further behind our European neighbours economically and socially—but the Government’s draft proposals are basically a sop to those of us across the House who have highlighted the egregious practices of fire and rehire and pushed for real action. This is not real action; it is a press release that will do nothing to stop the perpetrators carrying on as before.

Many of the provisions of the Trade Union and Labour Relations (Consolidation) Act 1992 that this draft code hangs on to provide for criminal offences where the Act is breached. Perhaps it is time to bring the actions of the likes of P&O Ferries and the issue detailed in the draft code under those kinds of auspices. After all, it seems only fair that employers should be subject to the same potential consequences as employees. Mr Hebblethwaite’s attitude a couple of years back may have been somewhat less arrogant and cocky if he knew that his actions would result in him facing some time at His Majesty’s pleasure in Belmarsh.

[Kevin Hollinrake]

I am aware that the hon. Gentleman has a private Member’s Bill that would ban fire and rehire—that is the position that he has adopted, and I respect it—but with P&O it was not fire and rehire; it was simply fire. What further measures is he suggesting that the Scottish Government or UK Government put in place to stop that happening in the future? P&O already broke the law. Is he proposing criminal sanctions connected to employment law?

[Gavin Newlands]

Of course I would suggest criminal sanctions to end such practices. The Minister is right to say that P&O did not use fire and rehire in the strictest sense, but there were elements relating to fire and rehire. In a sense, it was fire and replace. Those staff members were replaced by cheaper foreign workers. That is the truth: the jobs were not redundant. If I were to bring forward another law, I would ensure fire and replace were also made illegal in circumstances such as those at P&O. As it happens, fire and replace is not new; it was actually proposed back in 2002 by one Tony Blair during the firefighters’ pay dispute.

We have a real problem around employment rights in the UK. The balance has been tipped over the last four and a half decades far too far towards employers and away from ordinary women and men who need the protection of the law against what is thankfully the minority of unscrupulous employers. Forty-five years of continual assault on workers’ rights has left millions essentially at the mercy of bad bosses, or subject to the gig economy and classed as “contractors” by multinational corporations desperate to avoid taking any responsibility for them and their or anyone else’s welfare.

Those lost decades need to be reversed. Sooner or later, the UK parties have to realise that workers’ rights are a fundamental part of building a stronger economy. It is no coincidence that virtually every country in Europe has stronger workers’ rights and better protections for their workers, and also enjoys higher living standards and a more robust, more diverse economy and social infrastructure.

Unfortunately, I do not hold out much hope for an improvement after the next general election. I know that there are many, many good people in the Labour party—including in this room—but the Leader of the Opposition has shown little interest in workers’ rights. I am still waiting for a response to my letter asking for his support of my Bill to ban fire and rehire, and the slew of shadow Ministers proclaiming their admiration for Margaret Thatcher do not inspire much confidence that they will roll back her and her descendants’ attacks on workers’ rights.

--- Later in debate ---

[Kevin Hollinrake]

I thank the hon. Members for Ellesmere Port and Neston and for Paisley and Renfrewshire North for their contributions. I will start with P&O because that has dominated most of the debate, despite the fact that it was not a case of fire and rehire. It was a disgraceful case and it broke the law. I am interested to understand what Members are proposing when we already have a law against this. The SNP spokesperson, the hon. Member for Paisley and Renfrewshire North, said that he would criminalise employment law. His proposal to criminalise some of this stuff might send a shiver up the spine of many employers in this country.

P&O Ferries broke the law, dismissing its workers without warning, which is completely inappropriate, and brought in agency staff to replace them. We have taken action in response, including legislating through the Seafarers Wages Act 2023, and there is an ongoing live investigation by the Insolvency Service into P&O’s conduct.

[Gavin Newlands]

The Minister talks about criminalising employment law or being aghast at the potential for criminalising employment law. I think there are certainly aspects that perhaps should be. How would he describe a business leader who knowingly and willingly broke the law to sack 800 workers and said he would do so again? Does the Minister not think that that person should face a criminal sanction?

[Kevin Hollinrake]

What that business leader did was disgraceful. We impose criminal sanctions on employers very cautiously because we want people to invest in our economy. That is hugely important. We make changes in employment law at our peril. It needs to be balanced between the needs of employers and employees.

Oral Answers to Questions

Debate between Gavin Newlands and Kevin Hollinrake

Thursday 14th September 2023 Commons Chamber

[Gavin Newlands (Paisley and Renfrewshire North) (SNP)]

T7. We know that phoenixing, unpaid-for services rendered, puts a burden on legitimate SMEs, but it also puts a burden on the taxpayer through unpaid taxes. That is acutely felt by all hard-pressed local authorities which have significant unrecoverable debt owed. Given that the Minister did not accept my amendment to the Economic Crime and Transparency Bill, can he explain what the Government are actually doing to prevent this practice?

[Kevin Hollinrake]

I am happy to engage with the hon. Member. I missed the earliest part of his question, but we are providing an awful lot of support for small businesses in various ways. I cannot remember his amendment to the Bill, but I am happy to engage with him to see what we can do to help.

Economic Crime and Corporate Transparency Bill

Debate between Gavin Newlands and Kevin Hollinrake

Report stage
Tuesday 24th January 2023 Commons Chamber

[Kevin Hollinrake]

As the right hon. Lady knows, new clause 15, which we tabled today, is based on some of the debate we had and the ideas she brought forward in Committee. So I say to her that she should keep bringing forward the ideas, and we will certainly consider them.

The Companies Act already requires traded companies to maintain up-to-date lists of their shareholders and report any changes in shareholders above 5% on an annual basis.

New clause 37—and indeed amendment 112—on phoenixing, which was debated by the hon. Member for Paisley and Renfrewshire North (Gavin Newlands), requires the registrar to block the registration of companies that share common characteristics with more than three companies wound up in the preceding five-year period. Successive companies being wound up in this manner is known as phoenixing. We feel there are provisions that will be implemented through this Bill that will provide safeguards against such behaviour. Suitable coverage is already provided by the existing rules, and there are new powers in the Bill that give the registrar of companies a power to compel people to provide information in the context of the examination of information on the register, and to interrogate and share that data with other authorities.

[Gavin Newlands]

Will the Minister give way briefly?

[Kevin Hollinrake]

I am sorry, but I must conclude. I do apologise.

To conclude there, I thank all the Members who have spoken in today’s debate for their insights, and I am sorry if I have not spoken to their points directly. I call on the House to support the Government amendments, and I hope that the explanations I have given provide reassurance that their amendments are not needed to make the Bill and the implementation of the reforms effective.

Question put and agreed to.

New clause 8 accordingly read a Second time, and added to the Bill.

New Clause 9

Disqualification on summary conviction: GB

“(1) Section 5 of the Company Directors Disqualification Act 1986 (disqualification on summary conviction) is amended as follows.

(2) In subsection (1), for the words from ‘provision of the companies legislation’ to ‘the registrar of companies’ substitute ‘of the relevant provisions of the companies legislation’.

(3) For subsection (3) substitute—

‘(3) Those circumstances are that, during the 5 years ending with the date of the conviction, there have been no fewer than 3 relevant findings of guilt in relation to the person.

(3A) For these purposes, there is a relevant finding of guilt in relation to the person if —

(a) the person is convicted of an offence counting for the purposes of this section (including the offence of which the person is convicted as mentioned in subsection (2) and any other offence of which the person is convicted on the same occasion),

(b) a financial penalty of the kind mentioned in section 3(3)(aa) is imposed on the person, or

(c) a default order within the meaning of section 3(3)(b) is made against the person.’

(4) In subsection (4), omit paragraph (b) and the ‘and’ before it.

(5) For subsection (4A) substitute—

‘(4A) In this section “relevant provisions of the companies legislation” has the meaning given by section 3(3B).’”—(Kevin Hollinrake.)

This new clause replicates the effect of the amendments made by clauses 41(3) and 102(3) (which are left out by Amendments 7 and 15). The restructuring of the material is in consequence of NC8.

Brought up, read the First and Second time, and added to the Bill.

New Clause 10

Disqualification for persistent breaches of companies legislation: NI

“(1) The Company Directors Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4)) is amended as follows.

(2) In Article 6 (disqualification for persistent breaches of companies legislation)—

(a) in paragraph (1), for the words from ‘provisions of the companies legislation’ to the end substitute ‘relevant provisions of the companies legislation (see paragraph (3ZA))’;

(b) in paragraph (2), for ‘such provisions as are mentioned in paragraph (1)’ substitute ‘relevant provisions of the companies legislation’;

(c) in paragraph (3), after sub-paragraph (a) (but before the ‘or’ at the end of that sub-paragraph) insert—

‘(aa) a financial penalty is imposed on the person by the registrar in respect of such an offence by virtue of regulations under—

section 1132A of the Companies Act 2006, or

section 39 of the Economic Crime (Transparency and Enforcement) Act 2022,’;

(d) after paragraph (3) insert—

‘(3ZA) In this Article “relevant provisions of the companies legislation” means—

(a) any provision of the companies legislation requiring any return, account or other document to be filed with, delivered or sent, or notice of any matter to be given, to the registrar,

(b) sections 167M and 167N of the Companies Act 2006 (prohibitions on acting as director where identity not verified or where there has been a failure to notify a directorship), and

(c) sections 790LM and 790LN of the Companies Act 2006 (persons with significant control: ongoing duties in relation to identity verification).’;

(e) for paragraph (3A) substitute—

‘(3A) In this Article “the companies legislation” means—

(a) the Companies Acts,

(b) Parts 1A to 7 of the Insolvency (Northern Ireland) Order 1989 (company insolvency and winding up), and

(c) Part 1 of the Economic Crime (Transparency and Enforcement) Act 2022 (registration of overseas entities).’

(3) In Article 25A (application of Order to registered societies), in paragraph (2)(c), for ‘Articles 6(1) and 8(1)’ substitute ‘Article 6(3ZA)(a)’.

(4) In Article 25B (application of Order to credit unions), in paragraph (3)(b), for ‘Articles 6(1) and 8(1) references’ substitute ‘Article 6(3ZA)(a) the reference’.”—(Kevin Hollinrake.)

This new clause replicates the effect of the amendments made by clauses 42(2) and 103(2) (which are left out by Amendments 8 and 16) and contains changes to ensure that a person can be disqualified for breaches of obligations under Part 1 of the Economic Crime (Transparency and Enforcement) Act 2022 etc.

Brought up, read the First and Second time, and added to the Bill.

New Clause 11

Disqualification on summary conviction: NI

“(1) Article 8 of the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4)) (disqualification on summary conviction) is amended as follows.

(2) In paragraph (1), for the words from ‘provision of the companies legislation’ to ‘the registrar’ substitute ‘of the relevant provisions of the companies legislation’.

(3) For paragraph (3) substitute—

‘(3) Those circumstances are that, during the 5 years ending with the date of the conviction, there have been no fewer than 3 relevant findings of guilt in relation to the person.

(3A) For these purposes, there is a relevant finding of guilt in relation to the person if —

(a) the person is convicted of an offence counting for the purposes of this Article (including the offence of which the person is convicted as mentioned in paragraph (2) and any other offence of which the person is convicted on the same occasion),

(b) a financial penalty of the kind mentioned in Article 6(3)(aa) is imposed on the person, or

(c) a default order within the meaning of Article 6(3)(b) is made against the person.’

(4) Omit paragraph (4).

(5) For paragraph (4A) substitute—

‘(4A) In this Article “relevant provisions of the companies legislation” has the meaning given by Article 6(3ZA).’”—(Kevin Hollinrake.)

This new clause replicates the effect of the amendments made by clauses 42(3) and 103(3) (which are left out by Amendments 8 and 16). The restructuring of the material is in consequence of NC10.

Brought up, read the First and Second time, and added to the Bill.

New Clause 12

A limited partnership’s registered office: consequential amendments

“(1) Regulation 2 of the Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773) (interpretation) is amended as follows.

(2) In paragraph (1)—

(a) at the end of paragraph (a) of the definition of ‘EEA AIF’ insert ‘(but see paragraph (1A) if the AIF is a limited partnership)’;

(b) at the end of the definition of ‘Gibraltar AIF’ insert ‘(but see paragraph (1A) if the AIF is a limited partnership)’;

(c) at the end of paragraph (b) of the definition of ‘UK AIF’ insert ‘(but see paragraph (1A) if the AIF is a limited partnership)’;

(d) at the appropriate places insert—

‘“established”: a reference to the place where an AIF is established (however expressed) is, in relation to an AIF that is a limited partnership, a reference to—

(a) the country in which the AIF is authorised or registered, or

(b) if the AIF is not authorised or registered, the country in which it has its principal place of business;’;

‘“limited partnership” means a limited partnership registered under the Limited Partnerships Act 1907;’.

(3) After paragraph (1) insert—

‘(1A) In the application of the definition of “EEA AIF”, “Gibraltar AIF” and “UK AIF” to an AIF that is a limited partnership, a reference to the AIF’s registered office is to be read as a reference to its principal place of business.’”—(Kevin Hollinrake.)

This new clause would mean that whether or not a limited partnership is an EEA AIF, Gibraltar AIF, UK AIF or established in the UK does not change solely because it complies with the new requirement introduced by clause 112 of the Bill to have a registered office in the UK.

Brought up, read the First and Second time, and added to the Bill.

New Clause 13

Removal of limited partnership from index of names

“After section 26 of the Limited Partnerships Act 1907 (inserted by section 138 of this Act) insert—

‘26A Removal of limited partnership from index of names

(1) The registrar must remove a limited partnership from the index of names as soon as reasonably practicable if the registrar—

(a) becomes aware that the limited partnership is dissolved (whether on the receipt of a notice under section 18, the publication of a dissolution notice under section 19(6) or otherwise), or

(b) publishes a deregistration notice under section 26 in respect of the limited partnership.

(2) If the registrar removes a limited partnership from the index of names, the registrar must include a note in the register of limited partnerships stating either—

(a) that the limited partnership has been removed from the index of names because of its dissolution, or

(b) that the limited partnership has been removed from the index of names because of its deregistration under section 26.

(3) The registrar must also publish a notice of the removal in the Gazette if the limited partnership is removed from the index of names other than following the publication of a dissolution notice under section 19 or a deregistration notice under section 26.

(4) Notes included in the register of limited partnerships in accordance with subsection (2) are part of the register of limited partnerships.

(5) A note may be removed if it no longer serves any useful purpose.

(6) In this section “the index of names” means the index kept by the registrar under section 1099 of the Companies Act 2006.’”—(Kevin Hollinrake.)

This new clause requires the registrar to remove a limited partnership from the index of names as soon as practicable following dissolution or deregistration. The registrar must place a note in the register when a limited partnership is so removed and publish a notice in the Gazette in certain circumstances.

Brought up, read the First and Second time, and added to the Bill.

New Clause 15

Reports on the implementation and operation of Parts 1 to 3

“(1) The Secretary of State must—

(a) prepare reports on the implementation and operation of Parts 1 to 3, and

(b) lay a copy of each report before Parliament.

(2) The first report must be laid within the period of 6 months beginning with the day on which this Act is passed.

(3) Each subsequent report must be laid within the period of 12 months beginning with the day on which the previous report was laid.

(4) But the duty to prepare and lay reports under subsection (1) ceases with the laying of the first report on or after 1 January 2030.” —(Kevin Hollinrake.)

This new clause imposes a duty on the Secretary of State to prepare and lay before Parliament reports about the implementation and operation of Parts 1 to 3.

Brought up, read the First and Second time, and added to the Bill.

New Clause 22

Person convicted under National Minimum Wage Act not to be appointed as director

‘(1) The Company Directors Disqualification Act 1986 is amended as follows.

(2) After Clause 5A (Disqualification for certain convictions abroad) insert—

“5B Person convicted under National Minimum Wage Act not to be appointed as director

(1) A person may not be appointed a director of a company if the person is convicted of a criminal offence under section 31 of the National Minimum Wage Act 1998 on or after the day on which section 32(2) of the Economic Crime and Corporate Transparency Act 2022 comes fully into force.

(2) It is an offence for such a person to act as director of a company or directly or indirectly to take part in or be concerned in the promotion, formation or management of a company, without the leave of the High Court.

(3) An appointment made in contravention of this section is void.”’—(Seema Malhotra.)

This new clause would disqualify any individual convicted of an offence for a serious breach of the National Minimum Wage Act 1998, such as a deliberate refusal to pay National Minimum Wage, from serving as a company director.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Economic Crime and Corporate Transparency Bill (Nineteenth sitting)

Debate between Gavin Newlands and Kevin Hollinrake

Committee stage
Tuesday 29th November 2022 Public Bill Committees

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Robertson, and to follow the hon. Member for Paisley and Renfrewshire North, who made a very important speech. New clause 69 would introduce new provisions to prevent the continued trading of companies repeatedly declared insolvent and the practice of phoenixing, which the hon. Member outlined. It states:

“A company may not be registered under the Companies Act 2006 if, in the opinion of the registrar of companies, it is substantially similar to a company which has been subject to winding up procedures under the Insolvency Act 1986 on more than three occasions in the preceding ten years.”

A company may be “substantially similar” to previous companies in terms of its name, registered office, proposed officers and so on. This would mean that there is more scrutiny, and questions are raised about whether a company should be able to continue trading.

It is very important, for the reasons we have outlined in Committee, to seek to protect the public and other businesses from unscrupulous operators effectively carrying on their business activity and going through the same cycle of building up debts, which leads to consumer issues, and simply disappearing and starting again. We must deal with that behaviour, which is a route through which economic crime takes place, and that is why we support the new clause. We will listen closely to the Minister’s response on how the Government propose to tackle the issue of phoenixing.

I note the similarity between the intentions of this new clause and new clauses 28 and 46, tabled by my hon. Friend the Member for Aberavon and I, which we have discussed. In different ways, all those new clauses would tighten up glaring loopholes around strike-off, insolvency and phoenixing that enable those who are participating in economic crime to avoid scrutiny. We welcome the new clause, and we look forward to the Minister’s response.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)]

It is a pleasure to serve with you in the Chair, Mr Robertson. I appreciate the spirit of the amendment, and I also appreciate the hon. Member for Paisley and Renfrewshire North describing this as an excellent Bill—a very constructive point—but one that needs tightening up; I understand his points and applaud the efforts made by him and other Opposition Members to do so.

I am fully aware of the devastating consequences that such issues have on businesses, suppliers, supply chains and our constituents. I have a case of a gentleman called Scott Robinson who repeatedly closed his investment business down. It was called TBO Investments at one point and then became Mount Sterling Wealth. He effectively took his clients with him, and people lost huge amounts of money. They had provided money for him to invest based on supposedly low-risk investments, but he was actually gambling that money in very high-risk investments, and he did that time and again. I really sympathise with the spirit of the amendment, and I am keen to look at not just phoenixing but other types of situation where people deliberately take risks like that that have devastating consequences for consumers and businesses in our constituencies.

[Gavin Newlands]

The Minister says he will look at this and is sympathetic to the issue. For clarity, does that mean a later stage beyond the Bill or at a later stage of the Bill?

[Kevin Hollinrake]

In my view, it needs further work rather than just plonking the new clause in the Bill. There is a wider issue here and I am pleased to see that he seems to acknowledge that. Certainly, a piece of work is needed to look at this in detail. There are some measures in place already—just the pre-pack arrangements subject to Committee scrutiny. I will come on to that in a second.

There are existing provisions in the Bill that provide safeguards against the fraudulent phoenixing behaviour that the new clause targets. Section 216 of the Insolvency Act 1986 makes provision for restriction and prohibition on the re-use of a company name when new companies are formed, which is an intrinsic feature of phoenixing and one that the hon. Gentleman addresses in his new clause. That provision will be complemented by the new powers contained in the Bill. For instance, the registrar may choose to exercise the power to compel the production of information to help her determine whether an application to incorporate a company complies with the proper delivery requirements. They will include that those named as prospective directors can lawfully act as such, which would not be the case if they were barred under the 1986 Act from acting as a director of a company using a prohibited name, and the registrar would be empowered to reject the incorporation application. Furthermore, the registrar will have greater power to direct companies to change their names if they deliberately mislead in their purpose. Such powers provide the registrar with a powerful tool when considering new company registrations.

The registrar will be able to examine and interrogate information already held and share data with law enforcement partners and other authorities. That will allow other key characteristics such as verified identities, the registered office, proposed officers and business activities to be critically assessed with intelligence received to spot patterns of phoenixing.

If adopted, the new clause would be largely duplicative of provisions already in place or those introduced by the Bill. It would also erode the registrar’s discretion in the application of their powers as envisaged. There will be some instances when companies are captured by the new clause and are not culpable, but are merely victims of a legitimate business failure trying to start their enterprise. For instance, the new clause mentions companies that have

“been subject to winding up procedures”.

In that situation, they may be companies that have not necessarily gone into liquidation. There might be other legitimate reasons that those procedures have taken place, which may not be reflective of something that might be considered phoenixing. So, the registrar must be allowed to apply their powers according to the facts and information available. As I have said, I am keen to look at that, including the pre-pack rules, to see where we can tighten up on the matter to make sure those instances are minimised. For all those reasons, I hope the hon. Member will withdraw his new clause.

[Gavin Newlands]

I thank the Minister for his response. The new clause was very much a probing amendment and the Minister points out one weakness. It is a small new clause for dealing with quite a big problem and I may look to table a much more rounded amendment on Report. With that, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 70

Bar on directors in breach of duties receiving public funds

“(1) A company with a director or directors which are in breach of the general duties outlined in Chapter 2 of the Companies Act 2006, or who have been found to have committed statutory breaches of employment law, may not receive Government provided funds or financial support, unless subsection (2) applies.

(2) A company whose director or directors meet the criteria outlined in subsection (1) may receive Government provided funds or financial support if such funds or support are provided solely and specifically for the direct benefit of the company’s employees.”—(Gavin Newlands.)

This new clause seeks to prevent directors who fail to comply with their duties as a company director or with employment law provisions from being able to access funds in instances where these funds are for the benefit of the company and not the company’s employees.

Brought up, and read the First time.