Corporate Insolvency and Governance Bill

Lord Hodgson of Astley Abbotts Excerpts

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

[Lord Hodgson of Astley Abbotts (Con) [V]]

My Lords, I begin by thanking my noble friend for his explanation of the Bill’s proposals. Secondly, I draw the House’s attention to my entry in the register of interests as a director of several companies that would be affected by the Bill’s provisions. It has been made clear that the Bill has been brought forward because of the pandemic. I understand and support that. Nobody who has been a director of a limited company will be unaware of the dangers of trading while insolvent, and who can judge what is solvent in the present very confused circumstances? This aspect of the Bill has my support for a further reason: all the provisions are time-limited, so even if our inevitably rushed judgment proves faulty the sunset clauses will ride to our rescue.

Wearing another hat, I chair your Lordships’ House’s Secondary Legislation Scrutiny Committee, which has been looking at, examining and reporting to the House on a great number of coronavirus regulations. There has emerged a tendency of the Government to try to tack on to coronavirus regulations some permanent changes to our law. These may not be objectionable, but they pass through under the radar of the coronavirus regime. We have been drawing these to the attention of your Lordships’ House in our weekly reports. Mixed provisions in regulations, which are of a lower order of significance, are one thing; mixed provisions in primary legislation, leading to statute law, which is what we have here, are quite another. Under the guise of the requirements of the pandemic, the Government are rushing through—I use that word advisedly—permanent changes to the insolvency laws of this country.

Let me be clear: I am not opposed to changes and review of insolvency laws. Some 15 years ago, I sat where the noble Lord, Lord Stevenson, would be sitting if he was in the House, leading for the Conservative Party on what became the Companies Act 2006. We brought together every aspect of company law with two exceptions, one of which was insolvency law, because the complexities were too great for us to reconcile them there and then. So, 14 years later, I quite understand that the situation will not have improved, but it remains an immensely complex area, reconciling the irreconcilable. It is an area where unintended consequences, as the noble Baroness, Lady Bowles, pointed out, crop up with unhelpful frequency and where there are people who seek to exploit gaps with unattractive and unregulated behaviour.

What am I concerned about? My worries include the changes to the creditor position of HMRC; the ability of creditors to game the system where the banks and financial institutions are sufficiently bound into the new approach; the future role of the pre-pack watchdog; and provisions for appointing monitors and for ensuring that they are not conflicted. All these are no doubt answerable, but they are not properly answerable in a rush.

To conclude, I understand the need for this legislation to be passed speedily, but I deplore permanent changes to our laws being made under the guise of the pandemic. I hope that my noble friend will consider tabling amendments to apply sunset clauses to the whole Bill. The Government will get their Bill and we could then come back to these very knotty and conflicting issues in calmer times and with the benefit of some real-life experience. In his opening remarks, my noble friend referred to the R3 briefing from Scotland. The R3 briefing from England makes it clear that it is not clear about the detail yet. Indeed, the Minister’s own departmental website quotes Jennifer Marshall, a past president of the Insolvency Lawyers’ Association, as saying that she is looking forward to

“digesting the detail with interest.”

If these two people, with their great experience, are not able yet to understand the detail, surely we should not be rushing these provisions through now.