Corporate Insolvency and Governance Bill

Lord Bates Excerpts

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

Again, I thank noble Lords for their contributions to the debate, for their amendments and for the interest that they have shown in this new procedure. I hope that they have found satisfactory my explanation and the information that I have shared with the Committee on amendments that we intend to table on Report. I hope, therefore, that the noble Lord will feel able to withdraw his amendment.

[The Deputy Chairman of Committees (Lord Bates) (Con)]

I have received a request to speak after the Minister from the noble Baroness, Lady Falkner of Margravine. After the noble Baroness, we will hear a response from the Minister.

[Baroness Falkner of Margravine (Non-Afl)]

My Lords, for clarity, I did not request to speak after the Minister; it was due to an inadvertent error that I ended up not being on the list to speak when I should have spoken. In fact, as I am speaking after the Minister, I will use the opportunity to make one or two general observations about this process that conform to what the noble Lord, Lord Hodgson of Astley Abbotts, and the noble Viscount, Lord Trenchard, have said.

This is the second Bill in which I am involved in legislative scrutiny. The first one was when we had a virtual House, and with this one we have a hybrid House. I can only concur with everything that has been said about how a hybrid House cannot work for any kind of complex or contentious piece of legislation.

These are pieces of legislation with implications that, as several noble Lords have said, go beyond the immediate health and economic emergencies. They should not be passed by this House unless and until we have the capacity to undertake proper scrutiny. Normally, my only excuse for speaking at this point would be if the Minister had said something on which I needed further clarification; I would then have spoken before he had sat down.

The idea that one is still continuing to speak to amendments in this manner is regrettable, but there is a broader point, also raised by the noble Lords, Lord Liddle and Lord Adonis: this is complex legislation, we do not know when we will revert to normal procedures, and a vaccine may not be found. I hope that this situation does not continue for very long, but it could continue for some time. In that case, do the usual channels deal with the legislation that is pertinent to the health and economic emergency that we face in this House through these proceedings, as a necessity, and therefore, park legislation that has very long-term implications for all kinds of governance in this country, until this is over? I do not blame the Government. They are trying their best to deal with an emergency facing the country. However, I wonder whether there is some level of complicity—I use that word with care—in the usual channels, that they so comfortably settle into these extraordinary arrangements. If people were truly aware of what was happening, of how we are passing legislation and how we are conducting scrutiny, even in terms of Oral Questions, they would be quite astonished.

Turning to the Bill, I am not going to use the notes that I would have used for this speech, but there are one or two things it is important to put on the record. I declare an interest as set out in the register, concerning the Bank of England, and that I am speaking in a personal capacity on this Bill. I have already spoken about the inappropriateness of doing this in this manner in Committee, but I also want to say a word or two about fast-track legislation. I sat on the Constitution Committee when it did a report on when and how Governments should use fast-track legislation. In all candour, and with the highest regard for the Minister, there are measures in this Bill that are simply inappropriate for fast-tracking through the Chamber in this way. These longer term and permanent changes should not be discussed today.

In light of that, I completely support Amendment 37 in the names of the noble Baronesses, Lady Bowles of Berkhamsted and Lady Altmann, for the Secretary of State to conduct a review of the provisions for a moratorium, and to lay a report before Parliament. They indicate that the review should be done in 18 months, which is a fair timescale.

I also support Amendments 2, 4, 8, 28 and 42, in the names of the noble Lords, Lord Stevenson, Lord Palmer, Lord Fox and Lord Hodgson, the noble and learned Lord, Lord Hope, the noble Baronesses, Lady Bowles and Lady Altmann, concerning all aspects of the independence of the monitor. The danger of the Bill not making clear the separation and independence of the monitor is a perception that there was a closeness between the directors of the company and a lack of transparency for creditors. I support those amendments essentially to assist the monitor, those insolvency practitioners. I hear what the Minister says about their own regulatory framework and the onus upon them to behave in an upright manner, but as he noted in his closing remarks, there are enough safeguards built into the regulation of insolvency practitioners whereby these amendments are otiose. I argue that by having them in this Bill—which is subject to review if Amendment 37 passes on Report—if they were entirely redundant, we could do away with them in 18 months. The Secretary of State could then lay before us the report that says that these amendments are redundant. I argue that this helps the monitor at this point, and on that basis, I intend to support them on Report.

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Clauses 5 to 9 agreed.

[The Deputy Chairman of Committees (Lord Bates) (Con)]

We now come to the group of amendments beginning with Amendment 46. I remind noble Lords that anyone wishing to speak after the Minister should email the clerk during the debate. Anyone wishing to press this or any other amendment in the group to a Division should make that clear during the debate.

Clause 10: Suspension of liability for wrongful trading: Great Britain

Amendment 46

Moved by

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[Baroness Altmann [V]]

My Lords, I too will be brief in the interests of time. I echo the wise words of the noble Baroness, Lady Anelay, and I support her Amendment 143, but I particularly want to talk to my own Amendment 144. This amendment deals with an issue whereby the Bill has rightly removed barriers for those companies whose articles do not allow virtual AGMs to be held. It is clearly important to enable such meetings in the current environment, but Schedule 14 has some worrying implications for shareholder capitalism. I ask my noble friend the Minister to consider Amendment 144, and I thank the noble Baroness, Lady Bowles, for her support. The amendment would make a small change in respect of paragraph (b) of Schedule 14 (3)(6), which removes the right of shareholders to ask questions at AGMs and permits them only to vote.

That paragraph would clearly reduce shareholders’ ability to scrutinise, engage with and hold to account a company's management. As ShareAction has pointed out, it would also damage the UK’s reputation for protecting shareholder rights and the interests of both institutional and individual shareholders. My amendment would simply omit paragraph (b), so that ways can be found to allow shareholders to engage in dialogue and question their boards, as is already the case for US and European companies. I would also hope that, after these emergency measures expire, my noble friend might agree that there is a need to develop ways to modernise British AGMs to better reflect the era of modern stakeholder capitalism.

[The Deputy Chairman of Committees]

I now call the noble Earl, Lord Clancarty. No? I call the noble Lord, Lord Cormack.

[Lord Cormack (Con) [V]]

My Lords, today’s proceedings have illustrated how impossible it is for a virtual or a hybrid House to hold the Government adequately to account. I ask those who arrange our proceedings to ensure that time is fairly and evenly distributed. We started with no time limits on speeches, and we are now having to gallop through a great many important issues.

I give my total support to what my noble friend Lady Anelay said on her Amendment 143. These charities include some of the most notable in the country, and many of them are connected with heritage and the arts, which is why I was anxious to give my support. It really is crucial, especially when the Bill has not had any real scrutiny in the other place, that adequate time is given to consider the vital points that have been made in this very wide-ranging group of amendments. I would like to go on at much greater length but, in deference to others, I will not. However, I repeat my strong support for my noble friend Lady Anelay.

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I do not need to say any more about Amendment 144, in the name of the noble Baroness, Lady Altmann, other than that I wholeheartedly support it and have signed it.

[The Deputy Chairman of Committees]

I will now try the noble Earl, Lord Clancarty, again. No, that did not work, so we will go to the Minister, the noble Baroness, Lady Bloomfield.

[Baroness Bloomfield of Hinton Waldrist]

Can I correct for the record something that I said on the previous amendments? The money that will take precedence from HMRC includes VAT held on behalf of customers, as well as national insurance contributions. What it does not include is things such as corporation tax.

I thank noble Lords for their amendments on a range of important issues in this group. I will try to cover them all, as well as the Committee’s questions, as best I can in the time available. I thank the noble Lord, Lord Stevenson, for highlighting the important matter of directors’ duties under the Companies Act. These duties continue to apply during the period in which personal liability for wrongful trading is suspended. The purpose of this provision is to remove the deterrent of personal liability at the point at which the directors of the company are deciding whether it should continue to trade at a time of great economic uncertainty. At this time, it is important that directors can be certain that their decision to trade on will not result in personal liability.

I reassure the noble Lord that those directors’ duties he refers to in his amendment will continue to operate, including the duty to protect the interests of creditors. I add that directors have legal responsibilities under wider company law; for example, to exercise independent judgment with reasonable care, skill and diligence. These duties will remain in place, as will measures in insolvency law to penalise directors who abuse their position. Therefore, directors will still face the threat of fraudulent trading, coupled with director disqualification from a compensation regime where their conduct merits it.

On Amendment 67, regarding the general power to amend insolvency law, I thank the noble Baroness, Lady Bowles, for raising the matter of ensuring that temporary amendments made using the general powers in Clauses 18 and 26 remain relevant and necessary while in effect and will be removed when they are not needed. Full consideration must be given to the impact of temporary amendments on anybody likely to be affected by them, not just small or medium-sized companies and unsecured creditors, and this consideration must be given before the powers are used. The amendments must then be proportionate to the purpose of making them, which must be one of the purposes set out in Clauses 19 and 27. This might be reducing the number of entities having to use corporate insolvency proceedings or mitigating the impact of Covid-19 on those processes. Further, the powers in Clauses 18 and 26 may not be used to create a provision to impose or increase a fee.

A temporary amendment which causes financial harm to small and medium-sized companies and unsecured creditors is unlikely to meet one of the purposes for which the powers in Clauses 18 and 26 may be used. Temporary amendments must remain under review. In the unfortunate circumstances where an amendment caused unforeseen and unintended harm, this would be addressed during the ongoing review process.

A number of noble Lords mentioned the Small Business Commissioner in relation to Amendment 75. The noble Lords, Lord Stevenson and Lord Mendelsohn, are right to highlight the office of the commissioner as a force for good in resolving payment issues for the smallest businesses which, as we know, are least able to weather the storm of cash flow issues. The Government are completely focused on their manifesto commitment to clamp down on late payment to small businesses. The SBC’s intervention in late-payment disputes has recovered over £7 million in late or unpaid invoices for small businesses since it was created, and its work has been especially important in light of the cash flow issues all sizes of businesses have been facing in the current Covid situation. I hope this also goes some way to addressing the concerns of the noble Lord, Lord Palmer.

We have already pledged to consult on extending the powers of the SBC and we will bring forward that consultation as soon as we are able. The consultation period and engagement with interested parties will bring forward ideas for the extension of scope and powers and will be given consideration. I hope that noble Lords will understand our desire to consult carefully before making important decisions such as this one.

I turn to Amendment 48 on the Financial Reporting Council, tabled by the noble Lord, Lord Stevenson. The Government are committed to strengthening the UK’s corporate governance and audit regime. We are drawing up plans to replace the Financial Reporting Council with a new regulator, as part of a wider programme of audit reform. This programme covers the recommendations of three independent reviews by Sir John Kingman, Sir Donald Brydon and the Competition and Markets Authority. The Government are therefore already considering many, if not all, the specific issues highlighted by this amendment. Our intention is to set out our proposals in the coming months, seeking views on them where the Government have not already done so. The noble Lord will be aware that this Bill takes forward some of the corporate governance reforms related to his amendment, such as a freestanding moratorium and a new restructuring tool.

We were asked why we were not reforming Companies House. The consultation on reform received a significant number of responses. An official government response will be published in due course. We are considering a broad package of reforms to Companies House, to ensure that it is fit for the future and continues to contribute to the UK’s business environment. The proposals amount to the most significant reform of the UK’s company registration framework since the companies register was first introduced in 1844 and it is important to take the time to get it right.

Amendment 80, in the name of the noble Baroness, Lady Bowles, covers the role of the Registrar of Companies. The Government agree that there is a case for introducing further checks to verify the identities of individuals setting up, managing or controlling corporate entities. Last year’s consultation proposed that those with a key role in companies should have their identity verified, and that Companies House should have greater powers to query and seek corroboration on information before it is entered on the register and to remove inaccurate information.

I turn to Amendment 143 in the name of my noble friend Lady Anelay. I will try to allay her concerns, and those of my noble friend Lord Cormack. There have been extensive discussions with DCMS and the Charity Commission, which have been involved in all the measures in the Bill. My noble friend will be aware that a small number of charities is incorporated and regulated by an Act of Parliament or by royal charter. In the limited time available it was not considered proportionate to extend the measures in Schedule 14 to the Bill to this small group of charities. Extending the relevant provisions to these groups of charities in a way that would be effective and avoid unintended consequences would be complex.

In cases where charities are not covered by the Bill’s flexibility on AGMs, the Charity Commission has indicated in its published guidance that it will take a pragmatic and proportionate approach where members’ meetings need to be postponed or held virtually in order to comply with social distancing, even where this may appear to be contrary to the rules of the charity’s governing document.

I am grateful to my noble friend Lady Altmann and the noble Baroness, Lady Bowles, for tabling an amendment on shareholder representation that draws attention to the flexibilities offered regarding meetings of companies and other qualifying bodies. Given that, at present, public health measures preclude mass gatherings, it is right that the Government should temporarily suspend certain members’ rights, the most fundamental being the right to attend a meeting in person. The measures on AGMs and other meetings enable them to be held in a way that is consistent with the coronavirus regulations and the Government guidelines on social distancing. The new measures will not prevent shareholders exercising their right to vote. They will still have the ability to vote by proxy where available.

To minimise the impact of not being able to attend, we expect companies to engage with shareholders ahead of and following meetings, including responding to shareholders’ questions that are sent in by electronic and other means. We have issued guidance to industry that bodies which seek to make use of the range of meeting flexibilities that the Bill provides should explore all alternative avenues to ensure that their members are able to participate in AGMs and other meetings to as great an extent as is reasonably practical.

I turn now to the final point made by the noble Baroness, Lady Bowles, on the Financial Reporting Council UK audit reform in response to the review by Sir John Kingman of the FRC, Sir Donald Brydon’s review of audit and the Competition and Markets Authority’s study of competition in the statutory audit market. The Government have committed to bringing forward proposals for reform, including legislation to establish a new regulator in place of the FRC.

I would like to thank noble Lords for their insightful contributions. I have sought to offer reassurances regarding each of the issues raised, albeit in brevity given the range of issues in this group. I hope that the noble Lord will feel able to withdraw his amendment.

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[Lord Hendy [V]]

Could I ask the Deputy Chairman of Committees how long we have?

[The Deputy Chairman of Committees]

If the Government Chief Whip would like to make a short statement, he can at this point.

[Lord Ashton of Hyde]

We will finish this group and then we will have to do the remaining group as first business tomorrow.

Corporate Insolvency and Governance Bill

Lord Bates Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 23rd June 2020 Lords Chamber

Relevant document: 14th Report from the Delegated Powers Committee

[The Deputy Speaker (Lord Bates) (Con)]

My Lords, a limited number of Members are here in the Chamber, respecting social distancing, and if the capacity of the Chamber is exceeded I will immediately adjourn the House. Other Members will participate remotely, but all Members will be treated equally, wherever they are. For Members participating remotely, microphones will unmute shortly before they are due to speak—please accept any on-screen prompt to unmute. Microphones will be muted after each speech. I ask noble Lords to be patient if there are any short delays between physical and remote participants. I should remind the House that our normal courtesies in debate still very much apply in this new hybrid way of working.

I shall begin by setting out how these proceedings will work. A participants list for today’s proceedings has been published and is in my brief, which Members should have received. I also have lists of Members who have put their names to the amendments or who have expressed an interest in speaking on each group. I will call Members to speak in the order in which they are listed. Members’ microphones will be muted by the broadcasters, except when I call a Member to speak. Interventions during speeches or “before the noble Lord sits down” are not permitted, and uncalled speakers will not be heard. Other than the mover of an amendment or the Minister, Members may speak only once on each group. Short questions of elucidation after the Minister’s response are permitted but discouraged; a Member wishing to ask such a question, including Members in the Chamber, must email the clerk.

The groupings are binding and it will not be possible to degroup an amendment for separate debate. A Member intending to press an amendment already debated to a Division should give notice of that fact in the course of the debate. Leave should also be given to withdraw amendments. When putting the Question, I will collect voices in the Chamber only. If a Member taking part remotely intends to trigger a Division, they should make this clear when speaking on the group. We will now begin.

Clause 1: Moratoriums in Great Britain

Amendment 1

Moved by

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[The Deputy Speaker (Lord Bates) (Con)]

I call the noble Baroness, Lady Taylor. No? Then I call the noble Lord, Lord Pannick.

[Lord Pannick (CB) [V]]

My Lords, I am speaking to Amendments 103 and 106, which are in my name and in the names of three other members of your Lordships’ Constitution Committee: our esteemed chairman—the noble Baroness, Lady Taylor of Bolton—the noble Baroness, Lady Fookes, and the noble and learned Lord, Lord Wallace of Tankerness.

These amendments address aspects of the retrospective nature of provisions in the Bill. Paragraph 7 of Schedule 10 and paragraph 7 of Schedule 11 will render void a relevant winding-up order which was made by a court on or after 27 April this year but before the day on which the schedules come into force.

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[Lord Wallace of Tankerness [V]]

My Lords, in Committee I made the point that even during a crisis it is still important that we are vigilant in scrutinising legislation, particularly where basic rule of law issues are at stake. Specifically, I drew attention to the provisions in the Bill that raise the fundamental question of retrospective legislation. The noble Lord, Lord Pannick, one of my fellow members of the Constitution Committee, has just outlined why it is important that we closely scrutinise attempts by government to introduce retrospection in legislation.

I place on record my thanks to the noble Earl, Lord Howe, for his very prompt reply to some of the points I raised in Committee—echoed by the noble Lord, Lord Howarth of Newport, who is also on the Constitution Committee. As the noble Lord, Lord Pannick, indicated, we have now received the Government’s response to the Constitution Committee’s seventh report on the Bill—although, as he pointed out, the committee has not had a proper opportunity to consider that response.

As we have heard, retrospective legislation prima facie offends the rule of law, although it is recognised that there will be occasions, when there is an urgent or compelling need, when it may be necessary. I will address the retrospection issues in Amendment 40 and its equivalent Northern Ireland provision, Amendment 42. They draw particular attention to the retrospective nature of Clauses 10 and 11, which suspend directors’ liability for wrongful trading in Great Britain and Northern Ireland.

Under insolvency legislation, the general rule is that a court may hold directors personally liable for allowing a company to continue trading beyond the point when insolvency appears inevitable. The provisions in Clauses 10 and 11 oblige the courts to assume that a director is not responsible for any worsening of the financial position of the company or its creditors that occurs during the “relevant period”, which starts on 1 March and—with reference to the amendment the Government have just moved—would conclude on 30 September this year.

Clearly, if that is the assumption the courts are obliged to make—there is no suggestion in the legislation that it is a rebuttable presumption—no one will go to court to challenge the behaviour of a director. Indeed, the rationale for the policy, set out in the Explanatory Notes and reiterated in the Government’s response to the Constitution Committee report, is that the deterrent to a company continuing to trade where there is a threat of insolvency is removed by these clauses. Pandemic-induced insolvencies can thus be avoided.

To use the words of the Explanatory Notes, I fully recognise the merit of helping

“to prevent businesses, which would be viable but for the impact of the pandemic, from closing.”

I suspect that most, if not all, of us would generally assent to that. However, I will point out two aspects of the Government’s arguments that need further clarification. As pointed out in the Constitution Committee’s seventh report, the removal of the so-called deterrent effect cannot credibly be said to have carried any weight in decisions taken by directors between 1 March and the date when the policy to suspend personal liability for wrongful trading was announced, 28 March, allowing almost four weeks of extra retrospective effect. Secondly, as the Government acknowledge in paragraph 225 of the Explanatory Notes:

“There is no requirement to show that the company’s worsening financial position was due to the COVID-19 pandemic.”


The amendments to which I am speaking seek to maintain the spirit of the concession on wrongful trading and would apply only if the courts are satisfied that on the underlying facts, creditors can discharge the burden of proving that the instance of wrongful trading was not attributable to the financial pressures of the pandemic.

The Constitution Committee’s seventh report says that

“measures with retrospective effect are exceptional and undesirable in principle, requiring the strongest possible justification. We do not think the Government has yet made the case for them”.

As we heard from the noble Lord, Lord Pannick, the Government have now responded. In fairness, in my reading of that response the Minister seeks to give some justification for the exceptional retrospective effect of these provisions in relation to wrongful trading. I echo the noble Lord, Lord Pannick: it would be helpful if the Government could set out on the record, on the Floor of the House, what these justifications are.

Furthermore, on page 4 of his reply the noble Lord, Lord Callanan, states that

“the temporary suspension of liability for wrongful trading is required to mitigate the effects of the COVID-19 emergency, and is a proportionate measure. There are safeguards against abuse in the form of other, unchanged elements of Company and Insolvency law. As I have also set out above, given the inevitable delay in drawing up legislation, it was essential to give public assurance that these provisions would have retrospective effect in order for them to be able to have their intended effect on directors’ confidence in continuing to keep their companies going.”

In conclusion, I have two questions for the Minister arising from that response. First, what is the rationale for the retrospection’s having effect from 1 March, rather than from a date when the Government were able to give the public assurance referred to by the noble Lord, Lord Callanan, given that ahead of the announcement, there could be no removal of the so-called deterrent effect? Secondly, can the Minister confirm that an announcement by the Government of their intention to change the law is not, by itself, sufficient justification for using retrospective legislation and should not become a regular practice? I look forward with interest to her reply.

[The Deputy Speaker]

Baroness Fookes? I call Lord Bourne.

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[Lord Stevenson of Balmacara [V]]

Briefly, the amendments on dates tabled in Committee that the noble Baroness, Lady Barker, mentioned were also in my name. I am therefore very grateful that the Government have decided to extend the initial period to September 2020. That does not seem to be contested by anybody.

My major point on the rest of the amendments concerns whether there should be retrospection in the Bill at all, but people seem to have broadly accepted that, with the condition that we expect the Minister to make a very full statement on it. In passing, I have received quite a lot of representations about the Bill in my position as the Labour Front-Bench spokesman, and the vast majority were on this particular aspect. Therefore, there is public sensibility about it and I am grateful that the Minister will deal with it when she responds.

[The Deputy Speaker]

Just before I call the Minister, I am going to see whether we can try the noble Baroness, Lady Taylor, again. No? I call the Minister.

[Baroness Bloomfield of Hinton Waldrist]

I thank my noble friend Lady Fookes, the noble Baroness, Lady Taylor of Bolton, the noble and learned Lord, Lord Wallace of Tankerness, and the noble Lord, Lord Pannick, for the issues they raised concerning the suspension of wrongful trading and restrictions on winding-up petitions.

I turn first to Amendments 40 and 42, which seek to remove the suspension of wrongful trading in cases where a company’s financial problems are unrelated to the coronavirus. Noble Lords will recall that the purpose of this measure is to remove the potential for wrongful trading liability at a time when many directors have been, and still are, making difficult decisions about the future of their companies. The suspension does not mean that a struggling company could just carry on trading without any regard for the consequences, but that, if it unfortunately enters insolvency, the directors will not face personal liability for using their best endeavours and trading while the pandemic is having such an impact on businesses.

Amendments 40 and 42 would disapply the suspension of wrongful trading if it can be shown that the underlying causes of the problems are unrelated to Covid-19. While this is a laudable aim, I fear that at this uncertain time it would be very difficult for directors to disentangle the various reasons for their company’s woes. Asking them to be 100% certain that those difficulties are related exclusively to Covid-19 before continuing to trade may be a test too far. Moreover, they would want to be 100% certain. The threat of personal liability is a very effective deterrent and directors do not want to put themselves in a position where they could lose their house if they took the risk of trying to save a struggling company. The stakes here are high: if there is any doubt—and in most situations there surely will be—directors would be likely to cease trading and the objective of this measure will not be achieved.

We understand noble Lords’ concerns about a blanket suspension of liability, but other protections for creditors and the wider business community will continue to apply. For example, directors’ duties under the Companies Act 2006 and directors disqualification actions are not affected. For it to be successful in its objective to save otherwise viable businesses, the blanket suspension given by Clauses 10 and 11 is necessary.

The noble and learned Lord, Lord Wallace, and the noble Lord, Lord Pannick, asked why we are suspending trading from 1 March, as indeed did my noble friend Lord Bourne. Wrongful trading does not in itself affect normal business; rather it is the recovery action that may be made retrospectively by an insolvency officeholder against the company’s directors after the company enters insolvency proceedings. Suspension of the wrongful trading liability will not interfere with normal relationships between a business and its customers.

I turn next to Amendments 103 and 106, which would remove the retrospective provision in Schedules 10 and 11 regarding the making of winding-up orders. We understand the concerns of noble Lords regarding retrospection. This is not a step to be taken lightly and, if it is misapplied, retrospective legislation could indeed lead to significant injustice. We do not dispute the conclusion of the Constitution Committee that such measures should be based on need rather than on desirability. However, the need for retrospection in the context of this measure has been amply demonstrated, and I believe that there has been an especially compelling justification for these provisions.

Certain creditors have shown that they will pursue their debts despite government requests for pragmatism or forbearance, regardless of whether such action is in the interest of the survival of other businesses and irrespective of the impact on the economy as a whole. It is because the evidence demonstrates that the restraint required in the current circumstances can be guaranteed only through legislation that the Government have brought forward this widely supported measure.

However, its purpose would be wholly undermined if the protection it gives against certain types of undesirable creditor behaviour were to begin only after Royal Assent. That approach could have led only to an immediate rush to court by creditors urgently seeking winding-up orders in order to beat the deadline. That would have defeated the legislation even before it reached this House. It is right that creditors who have obtained winding-up orders specifically to frustrate Parliament’s legislative intention should not benefit from that behaviour. That is particularly so when the behaviour has caused potentially significant harm to a company that was the subject of a petition.

The noble Lord, Lord Pannick, and the noble and learned Lord, Lord Wallace, also asked how anyone could tell whether an order made between 27 April and the Bill coming into force is void. It is possible that a small number of creditors may not have acted responsibly and have brought winding-up petitions on the basis of the current law despite the Government’s previous announcement that this will not be allowed. The official receiver, or in Scotland the interim liquidator, will be required to bring any such circumstances to the attention of the court so that it can take appropriate measures.

I hope that noble Lords will understand why we are not able to accept Amendments 40, 42, 103 and 106, and that they will agree not to press them.