Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) (No.2) Regulations 2020

Lord Bhatia Excerpts

Friday 9th October 2020 Lords Chamber

[Lord Bhatia (Non-Afl) [V]]

My Lords, I welcome the regulations because charities play a vital role in protecting communities, individuals and other not-for-profit organisations. The provision of a moratorium is therefore important and will protect charities from going under. Charities often have a short-term cash-flow problem; these regulations provide breathing space for them.

The regulations also provide for new elements of the moratorium for charitable organisations to facilitate their rescue from financial difficulties. They are somewhat similar to chapter 11 provisions in the US. In difficult times, such as the Covid pandemic, many charities that owe rent or the repayment of loans given to community organisations find themselves in difficulty and unable to pay their creditors. These regulations will stop creditors attempting to take legal action against charities with defined new funds or grants. It becomes a legal battlefield as each creditor or debtor tries to get its money back. Often, the lawyers are the ones who gain the most. Arbitration—[Inaudible]—to avoid the legal costs.

As I said, charities play a vital role in supporting communities and individuals. All assistance must therefore be given to protect them. Indeed, the Government should consider giving grants or loans to charities in difficulty.