Corporate Insolvency and Governance Bill

Lord Bourne of Aberystwyth Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Tuesday 9th June 2020 Lords Chamber

[Lord Bourne of Aberystwyth (Con) [V]]

My Lords, I thank my noble friend the Minister for very clearly and fairly setting out the Bill’s scope. It is a mixture of scheduled insolvency reform, which has been waiting for some time, as well as some urgent mitigation measures relating to the present crisis. Like other noble Lords who participated in the debate, I recognise that there is a much wider issue in looking at the political economy questions that the country will face as we come out of the crisis, but I will confine myself to the Bill we have at the moment.

I will first say something about the moratorium provisions, which, as I said, were very much on the stocks anyway and have been brought forward. This is in the vanguard of the first significant reform of insolvency law since those that enacted the Cork committee recommendations in the 1980s. I welcome them, but I have two significant concerns. The first relates to the seemingly open-ended nature of repeated moratoria, or at least an extension of the single moratorium, into the future ad infinitum. I would welcome the Minister’s reassurance that that is not envisaged and on how it can be prevented.

My second significant concern has been mentioned by others, such as my noble friends Lady McIntosh of Pickering and Lord Hunt of Wirral, and relates to the role of the monitor. We need to ensure that the monitor, although an insolvency practitioner as required under the Bill, is independent of the company. I would welcome the Minister’s reassurance that that will be the case.

I turn briefly to the wrongful trading provisions. I agree very much with the comments of the noble and learned Lord, Lord Hope. The Minister spoke of this as a suspension of wrongful trading. As drafted, it is not; it is a mitigation of wrongful trading because it allows for an assumption of the directors acting in relation to trading, rather than ensuring that it is not the case. In other words, as it stands it is rebuttable, not an actual suspension. I do not know whether that is the intention that needs to be looked at.

I very much welcome what is being done on company meetings. I would have provided for this on a long-term and indefinite, rather than limited, basis, allowing what is the position of common law: for meetings to be held remotely. The case of Byng v London Life Association in the 1990s established that the essence of an effective meeting is the ability to interact and participate, rather than physical presence one with another—something that I am sure we all recognise at the moment as being the way we are proceeding. Like my noble friend Lady Anelay, I would welcome an assurance that these provisions relate to all sorts of meetings. There is a fairly exhaustive list in the Bill, but I do not know whether it is totally exhaustive. It might be wise to provide a catch-all provision, or at least to allow the Secretary of State the power to extend it to other bodies. It seemingly covers trade unions, charities and so on, but it might be that something has been unintentionally missed out.

Subject to that, the provisions relating to meetings are very much to be welcomed. In broad terms, the Bill is something we should support and I certainly do so.

Corporate Insolvency and Governance Bill

Lord Bourne of Aberystwyth Excerpts

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

[Lord Bourne of Aberystwyth (Con) [V]]

My Lords, I refer the House to my interests as published in the register. I thank the Minister for introducing this legislation, which has many valuable facets to it. I also thank the Law Society for its helpful briefing. I will particularly talk about the amendments that relate to the independence of the monitor, which are extremely important. The point has been well made that this is a simple matter to put right, and I hope that the Minister has been listening. It is clearly right that the monitor should be independent of the company. That runs to the very heart of company law.

I also very much welcome the amendment of the noble and learned Lord, Lord Hope of Craighead, relating to the provision of a list of creditors from directors for a monitor to work from. That is necessary for ensuring that the moratorium process works effectively, and deserves our backing too. I also welcome Amendments 42 and 28, which again relate to the independence of the monitor and ensuring that there are no conflicts of interest—matters that are easily put right, and I hope that we can do that.

It has been a long debate on this group of amendments so I will not detain the Committee long, but I share with my noble friend Lord Hodgson of Astley Abbotts a concern about the two different halves to this legislation. There is the half—no doubt very important—relating to insolvency procedures, which centres on the moratorium and is very welcome, and then there is the other half, which has an urgency about it and which we need to push through very quickly to protect businesses during the Covid crisis. It is as if we have two halves of different cars welded together, as might have been the case with Del Boy and Rodney in “Only Fools and Horses”, with predictable consequences. That is not to say that it cannot be put right, but we need to push through some important amendments to ensure that this works effectively. I hope that the Minister has been listening and will take on board some of the important points made as we have progressed through this group and, no doubt, as we continue throughout the other groups.

[Lord Fox (LD)]

My Lords, I draw noble Lords’ attention to my interests as set out in the register. The noble Lord, Lord Stevenson, in his understated way, called this a wide group of amendments and we have heard a wide and knowledgeable group of Peers speaking to it. I agree with the noble Viscount, Lord Trenchard, that we need proper scrutiny of this Bill. Whether we are here virtually or physically, cramming so many amendments into one group is symptomatic of trying to rush this Bill through. That will have unintended consequences, whether the noble Baroness, Lady Neville-Rolfe, believes it or otherwise. We are suffering from undue haste in trying to do in one day what should have been done over at least two or three days.

I will speak to a small number of amendments. On Amendment 10, the noble Lord, Lord Stevenson, queried 20 days and suggested 30 days. My question for the Minister is: why 20? What was the science and evidence that suggested that 20 was correct? The noble Lord, Lord Leigh, spoke about the courts being busy. Well, one way of relieving the courts of work would be to have a slightly longer period, because that would mean that the monitor would not have to go back to the courts so often to renew the process. Why 20 days and why not 30, or indeed some other number of days?

Amendment 2, to some extent Amendment 1 and certainly Amendment 28 ask the perfectly reasonable question of what the monitor’s role is. What is the correct qualification for the monitor? It is perfectly reasonable in a Bill such as this, with the role of monitor so central to this process, that we understand what that monitor is and who it might be. I look forward to the Minister’s comments on that.

This group, among others, contains a whole load of amendments that address what I call the creditor waterfall. Amendment 21 and, in different ways, Amendments 25 and 40, talk about the role of the banks and financial institutions and seek to restrain the advantage that those institutions can get from their special position within the creditor landscape. It is not in the Government’s interests to continue to allow these organisations the freedom of the remaining resources of a failing business. What was going through the mind of the Government when those decisions were made to set out this level of access and give financial institutions the run that they seem to get from the Bill?

My noble friends Lady Kramer and Lady Bowles and others talked about the role of small and medium-sized businesses, and Amendment 22 adds small entities to the list of those with preferential treatments. Amendments 37 and 40 call for a review after 18 months of how a moratorium is dealing with SMEs. This is an entirely different review from the other reviews that crop up on later groups. It is very much about how this is really affecting businesses. I am proud to put my name to Amendments 98 and 99, proposed by my colleague and noble friend Lady Bowles, which makes wages and salaries rank alongside continuing supplier and not below them. That seems entirely reasonable and I thought that she set that out very well.

All these issues set up the central point: the Bill is not a fully formed piece of legislation. The Government have recognised that, as my noble friend Lady Bowles pointed out, by granting themselves an almost unprecedented ability to rewrite it. They know that it is not the finished article. We will have an opportunity in later groups of amendments to discuss a better way of doing that and a way of giving Parliament the power to assess and possibly rewrite the rules, but I look forward to the Minister’s reply.

Corporate Insolvency and Governance Bill

Lord Bourne of Aberystwyth Excerpts

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

[Lord Bourne of Aberystwyth (Con) [V]]

My Lords, I refer noble Lords to my interests as listed in the register and the published declarations therein.

I want to speak to Amendment 1, proposed by the noble and learned Lord, Lord Hope of Craighead, which relates to the directors supplying a list of creditors to the monitor. I supported this amendment in Committee. I have had the advantage of seeing the letter, shared with me by the noble and learned Lord, Lord Hope, and can see that my noble friend the Minister has gone some considerable way to allaying concerns by setting out proposals about inquiries that the monitor must make and the policing of the whole procedure by the Insolvency Service. I thank him very much for that. I think that that will be effective, and the letter was indeed very helpful. Like the noble and learned Lord, Lord Hope, I hope that it is shared with other noble Lords by placing a copy of it in the Library.

Perhaps I may touch briefly on something else that I spoke about in Committee. I voiced concern at the lack of any express provision in the Bill requiring the monitor to be independent of the company. The monitor is an officer of the court and is required to be a qualified person, defined as an “insolvency practitioner”. That is reassuring up to a point but there is no express condition that the monitor should be independent of the directors of the company who appoint the monitor; nor is there any provision in the legislation for challenge of an appointment. Perhaps the Minister can put on the record today, or in a letter subsequently, how he sees the professional bodies policing the independence requirement, in the same helpful way as he wrote to the noble and learned Lord, Lord Hope of Craighead, on the inquiries relating to the requirement for the listing of assets and liabilities.

Subject to that, I very much welcome the moves that the Government have made between Committee and Report. They have gone some considerable way to allaying concerns expressed in Committee.

[Lord Palmer of Childs Hill (LD) [V]]

My Lords, this Bill, when enacted, will be the guide—even the bible—of the monitor. I agree with Amendment 14 and shall speak on it very briefly. My noble friends Lady Bowles and Lady Kramer have explained in detail the reasons for supporting and promoting the amendment, which, to remind noble Lords, would place a restriction on enforcement and legal proceeding, stating that banks and other financial creditors must not have an advantage.

My concern goes back to the philosopher Thucydides, who said something along the lines of “Words change their meaning”. What are “financial creditors”? What is “not having an advantage”? Sometimes the meaning is in the eye of the beholder or in the minute printing of the 240 pages of the Bill.

If Amendment 14 is agreed, as I hope it will be, I shall welcome the Minister’s assurance, at least for the record, that HMRC’s VAT debt, about which I spoke at least twice in earlier proceedings, will not be viewed as the debt of a financial creditor seeking yet more preferential terms. The Finance Bill 2019-21, which we have put aside and hardly mentioned during these debates, seeks to give preference to HMRC for VAT. This undermines the whole principle of this legislation, which I believe is, as the noble Lord, Lord Hodgson, said, based on the idea that “We are all in it together”. If, even unintentionally, the banks or HMRC are given preference in the Finance Bill 2019-21, we will not all be in it together; some will be more equal than others.

--- Later in debate ---

[Lord Bourne of Aberystwyth [V]]

My Lords, I support Amendment 40 in the names of the noble and learned Lord, Lord Wallace of Tankerness, the noble Baroness, Lady Taylor of Bolton, the noble Lord, Lord Pannick, and my noble friend Baroness Fookes. I share the concern about the retrospective nature of some of the amendments. I accept that in extremis, in rare situations, retrospective legislation may be justifiable, but I would welcome the Minister addressing why it is felt to be appropriate here.

At Second Reading I expressed my concern that the offence of wrongful trading is being disregarded in relation to matters that are not Covid-19-related. It is quite reasonable, as the noble and learned Lord, Lord Wallace of Tankerness, has just indicated, that there should be some mitigation of the provisions in relation to Covid-19-related deaths. However, if the insolvency is not due to Covid-19, it is hard to see why the provision should be suspended. This provision, brought in as a result of the recommendations of the Cork committee in the 1980s, was widely welcomed as tackling conduct by directors acting—or in some cases, failing to act—with malfeasance, resulting in companies having substantial debts and doing damage to employees and shareholders. I can see why that may need to be suspended for Covid-19-related deaths, but this goes further. That is why I support this amendment, which would minimise the effect of the suspension of wrongful trading. It would be suspended not in relation to broader activities but only to those concerning Covid-19-related deaths.

However, of greater concern, as we have just heard, is the retrospective nature of this part of the Bill. I would welcome the Minister addressing these points. In any event, the Government have gone further on wrongful trading than they should have. They are seeking to punish creditors who have debts that could well be enforced, as they have nothing to do with the Covid-19 emergency.

[Baroness Barker]

My Lords, I thank the noble Lord, Lord Callanan, for listening to what was clearly a compelling speech by me in Committee and bringing forward Amendment 39, which extends from 30 June to 30 September the period during which the relaxation of judgment in relation to wrongful trading will apply. I say this not because of any wish to encourage wrongful trading or to see people who trade wrongfully not properly held to account by a court, but because I know from experience of helping companies trying to get through periods of instability—charities, in my case—that they simply may not know at this point whether they will be wrongfully trading next month.