Corporate Insolvency and Governance Bill

Debate between Jerome Mayhew and Mark Pawsey

2nd reading & 2nd reading: House of Commons
Wednesday 3rd June 2020 Commons Chamber

[Mark Pawsey]

That is a good point, and I hope that the Minister will consider that, because in many cases a contract has been entered into on the basis of a certain volume of business. Many businesses have contracted, so a purchasing company may not be buying the same volume. Does that provide the ability to keep the price at the original position? Price and volume go hand in hand, and there may be additional economies of scale. There are concerns, and I know that the Minister will respond.

My hon. Friend the Member for Huntingdon (Mr Djanogly) raised the issue of debts accruing because of extended payment terms. Buyers are often more interested in payment terms than the price of the product. A buyer does a great job if he manages to screw 60 or 90-day payment terms out of a supplier, rather than a particularly good deal on the product. If we can move our culture away from extended credit many of the provisions in the Bill would be rather less necessary than they are. The Minister will deal with those issues, and it is entirely right that in the Bill he guarantees that supplies that are made during the moratorium are exempt—the supplier is guaranteed to be paid once the monitor has agreed that they will continue to trade. That goes some way towards providing substantial confidence to the supplier. I am also happy with the exemption from the provisions for small companies. As the Secretary of State has said at the Dispatch Box, the usual criteria on size apply.

I want to conclude with the temporary suspension of the rules on wrongful trading, which I entirely support. Right now, business directors around the country are pretty worried about the financial viability of their businesses and their liabilities if they continue to trade, particularly if the trade position continues to worsen. The current rules are that they could be liable personally if they do not bring their business to a conclusion, even though the challenges facing those businesses are not of their making. Relaxation of those wrongful trading provisions will enable many directors across the country to sleep rather more soundly at night.

[Jerome Mayhew (Broadland) (Con)]

Could I just come back on that interesting point about the risk of personal liability hanging over directors? I declare an interest, as I am a director of a trading business. It fits very well, does my hon. Friend not agree, with the development of the CBIL scheme? Originally, that scheme was not very popular, because many banks insisted on personal liability for businesses and for the directors of businesses to stand behind the loans that they were giving. The current scheme removes the risk of personal liability for directors via the scheme.

[Mark Pawsey]

My hon. Friend makes a good point, and we must provide every support to business owners and directors at this challenging time, to allow them to make decisions that will enable their businesses to continue to survive.