Corporate Insolvency and Governance Bill

Lord Palmer of Childs Hill 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.

[Baroness McIntosh of Pickering (Con) [V]]

My Lords, I support the sentiments expressed by the noble and learned Lord, Lord Hope, in moving his Amendment 1, and I thank the Minister for his letter, which has been shared with us.

The duty of the monitor to notify creditors extends only to those creditors of whom the monitor is aware. What is welcome about Amendment 1 is the fact that it strengthens that. At the moment, there is no express duty to seek information about creditors from the company, and I feel that there is a very strong need for Amendment 1 to enable the monitor to do their work, given the time constraints regarding the moratorium under which they are working.

I was pleased to support the amendment in Committee. I noticed that in the Minister’s reply setting out why, in his view, Amendment 1 is not necessary, he regrets that he did not have time to respond fully to the points made in Committee. That raises a broader point about parliamentary scrutiny. I hope that the normal channels will take note of this and that we allocate sufficient time to ensure full and proper scrutiny of a major piece of company law, albeit that for the most part it is time barred. It takes longer to correct a bad law than to make a good law in the first place.

If we do not adopt Amendment 1 today, I believe that that will make the monitor’s position more difficult and that the position of creditors will remain very weak. I support the remarks of my noble friend Lord Bourne. In Committee I made similar points about the desirability of enhancing the independence of the monitor and there is no need to rehearse them today, but I stand by those comments.

Finally, I turn to the Minister’s explanatory statement on government Amendment 3. Generally, I welcome the government amendments, which are preferable to the original Henry VIII clauses, although I am mindful of the remarks of my noble friends Lord Leigh and Lord Trenchard in this regard. However, I question the Minister’s justification of Amendment 3, which would leave out the definition of “the relevant documents” and replace it with the words

“adding to the list of documents”.

The statement says:

“The power could subsequently be re-exercised so as to remove anything added.”


That seems slightly peculiar, and I would welcome the Minister explaining it in more detail when he replies to this debate.

--- Later in debate ---

[Baroness Neville-Rolfe [V]]

My Lords, I thank the Minister very warmly for accepting the amendment on pre-packs that I put down in Committee, on which I had the help of the British Property Federation. The amendment was designed to restore the power in the Small Business, Enterprise and Employment Act. Amendments 37 and 38 have been drafted by parliamentary counsel and use a much more elegant formula to amend the original Insolvency Act, but to the same effect and with the same deadline of June 2021. I would like an assurance from my noble friend the Minister that that power will be used and that it will be able to deal with some of the pre-pack issues.

I would like to thank my noble friend Lord Hodgson, who has demonstrated his admirable virtuosity—he is not merely an expert on pubs and demography, as the House knows, but on insolvency, as well as many other things. I also support the thrust of his amendment. I should add that, without his oratory and argument last week, we would not have made the progress that we have.

[Lord Palmer of Childs Hill [V]]

My Lords, I support wholeheartedly the amendment from the noble Lord, Lord Hodgson. It seems sensible, and I hope that the Government will accept it. Having heard a previous speaker do so, I must declare my interest as a chartered accountant.

Many speakers in today’s debate have drawn a difference between selling or transferring a business and selling a company. The idea of a pool was meant to be a sort of bridge between the two, so that the business can survive—but there is of course a danger that it can be taken advantage of. When Vince Cable set out this principle, on the advice of Teresa Graham, it was to set up a pool. It might perhaps be useful to read into the debate the members of the oversight group, which comprises representatives of the founding parties of the pool: R3, the Association of Business Recovery Professionals; the Association of Chartered Certified Accountants; the British Property Federation; the British Printing Industries Federation; the Chartered Accountants Regulatory Board; the Chartered Institute of Credit Management; and the Institute of Chartered Accountants. It is a long, long list.

To ask that one member of the pre-pack pool should say that the transaction is not unreasonable seems a sensible move to deal with what we believe will be a tsunami of liquidations and business problems, and it shows another way of skinning the cat rather than just using a monitor or going straight into liquidation. So I heartily support the amendment in the name of the noble Lord, Lord Hodgson.