Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020

Lord Bourne of Aberystwyth Excerpts

Tuesday 27th October 2020 Grand Committee

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

My Lords, it is a great pleasure to follow the noble Lord, Lord Blunkett, and particularly to agree with points he made about the challenges of the north and areas that he knows extremely well. I thank the Minister for outlining the position with regard to the Corporate Insolvency and Governance Act 2020. It is, of course, a mixture of permanent provisions—in particular, the creation of the concept of the moratorium—and temporary provisions, or possibly, as we are beginning to see, semi-permanent ones. The moratorium of course represents a very substantive change in relation to the law on insolvency, perhaps the most material change since the changes brought about after the recommendations of the Cork committee in the 1980s.

I have several questions for the Minister in relation to points that are being presented to us, although, like the noble Lord, Lord Blunkett, I certainly support the Minister’s position. First, why do we have different dates for the extension? Why is it not all being extended, for example, to 30 March? Why is there a different date for the extension in restricting the use of statutory demands and the supplier exemption from the scope of the prohibition on termination clauses in supply contracts? I cannot quite see why that should be. In the same area, can the Minister say something about why the restriction on the use of wrongful trading is being ended totally? That is not being extended and I wonder why.

No consultation has been carried out in relation to this legislation, and I understand that that is because it is on a temporary or semi-temporary basis, as it has been going for less than a year. Given that it can be extended seemingly indefinitely, I wonder whether, if it is extended beyond a year, we will have formal consultation and a proper impact assessment.

In fairness, the memorandum refers to there being some discussion with companies and says in paragraph 7.9 that

“some 120 companies would be negatively impacted should the extension not be granted.”

I found that a little surprising in that it seemed a relatively precise figure—although it does say “some” 120, to be fair—and a very small number, considering that we have more than 4,200,000 companies registered. It is some 0.0025%; surely there must be other companies that would be impacted as well. What are these 120 companies? Are they all the same genre? Are they all small companies, medium companies, large companies? I quite understand that the Minister will not want to name them, but how is it that just 120 companies seem to be negatively impacted? How were they identified and why, seemingly, so few?

The Explanatory Memorandum also asserts that there is support for an extension of the temporary provisions of the Act, which I do not doubt, but from a range of shareholder representative groups. Can the Minister say a bit more about that? Who are these groups and what, precisely, did they say? I thank the Association of Business Recovery Professionals—R3, as it is known in common parlance—for a briefing on this. While supporting the measures in a general sense, it notes, correctly in my view, a point that the noble Lord, Lord Blunkett, also made: that the measures cannot be prolonged indefinitely. What is the Government’s view on this? I appreciate that it is a fast-moving situation, but some clarity on the Government’s approach to the making and extending of these rules would be useful, particularly given the level of corporate debt in the economy.

I also mentioned the lack of consultation on an impact assessment. I would be grateful if my noble friend the Minister could say something on that, should the regulations keep being extended.

Perhaps I may refer lastly to something that the Minister touched on, which is the position on meetings. I very much support and welcome that; it is perhaps long overdue. I do not know why this is not being done on a permanent basis because, in the Zoom world in which we live, we now know that many corporate meetings will be held like this anyway. Why can we not facilitate it on a permanent basis, as other countries have done? In the common law of our country, the Byng v London Life Association case allows company meetings to be held without one person being in the physical presence of another. We would need to put that on a statutory basis to replace some of our current requirements in legislation. Can my noble friend say something on that, too? However, I am very content with the general position in relation to the legislation. I just have those points and questions to put to him.