Corporate Insolvency and Governance Bill

Paul Scully Excerpts

2nd reading & 2nd reading: House of Commons
Wednesday 3rd June 2020 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

May I first welcome the hon. Member for Manchester Central (Lucy Powell) to her place? I thank her and the shadow Secretary of State, the right hon. Member for Doncaster North (Edward Miliband), for the engaging way in which they have spoken to officials. That has expedited the passage of this legislation, and our discussions—including with the SNP spokesman, the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) —have been particularly fruitful.

Unfortunately, I cannot respond to every question in the short time available to me now, but I hope that we will pick up some of these discussions during the next stages of the Bill. I thank all right hon. and hon. Members who have spoken for their contributions to the debate, not least, as has been mentioned, the excellent maiden speech of my hon. Friend the Member for Heywood and Middleton (Chris Clarkson). May I add my happy birthday regards to Win Page? My hon. Friend talked about the fact that the general election seemed a long time ago, and made the point about the Olde Boar’s Head—and a haircut for me as well—so congratulations.

As was mentioned by my hon. Friend the Member for Rugby (Mark Pawsey), the Institute of Directors and the Federation of Small Businesses have been incredibly supportive of the measures in this Bill. We welcome that support. It will help businesses that are struggling with the effects of the covid-19 crisis and lay the foundations for economic recovery in the UK. The insolvency reforms in the Bill will provide vital and urgent support for businesses to help them through the period of instability and to help them recover from the impact of covid-19 as the economy fully emerges from this crisis.

[Chris Bryant (Rhondda) (Lab)]

On a point of order, Madam Deputy Speaker.

--- Later in debate ---

[Madam Deputy Speaker]

I am guessing that it could well be timely, but the Minister has a very limited time in which to speak, and he should finish his speech first. Then I will take the hon. Gentleman’s point of order.

[Paul Scully]

Thank you, Madam Deputy Speaker.

The corporate restructuring package in particular will be of immediate help to companies in financial distress, which need further regulatory tools to help them recover. This Bill provides that. It will enable UK companies undergoing a rescue or restructuring process to continue trading, giving them breathing space that could help them avoid insolvency. I want to reassure right hon. and hon. Members that the temporary changes to insolvency law that are necessary to help businesses get through this unprecedented period will consider very carefully any case for further extensions to these powers, and they will be subject to the full scrutiny of the House.

The temporary prohibition on creditors filing statutory demands and winding-up petitions for covid-19-related debts will support the Government’s programme to help companies survive the covid-19 emergency. It will temporarily remove the threat of statutory demands and winding-up petitions being issued against otherwise viable companies by creditors not following the Government’s advice to show forbearance at this time.

Furthermore, temporarily removing the threat of personal liability for wrongful trading from directors who tried to keep their companies afloat throughout this emergency will encourage directors to continue to use their best efforts to trade during this uncertain time. The governance measures will provide temporary flexibilities on meetings and filings at a time when businesses are coping with reduced resources and restrictions due to social distancing measures.

Let me quickly address a couple of points made by the right hon. Member for Doncaster North. First, he is completely correct to say that, although there will be a temporary suspension of wrongful trading liability, directors will still have legal duties under wider company law. Those duties will remain in place, as will measures under insolvency law to penalise directors who abuse their position. I understand the suggestion of the right hon. Gentleman and the hon. Member for Inverness, Nairn, Badenoch and Strathspey that the temporary insolvency measures should be extended to 30 September 2020. At present, all the temporary insolvency measures will automatically sunset a month after Royal Assent. I can reassure them, though, that the Bill contains provisions enabling those temporary measures to be extended by statutory instrument where appropriate. The Government have every intention of making use of those provisions if the protections are needed beyond their present expiry date. It is a truly fluid situation and we do not want provisions to be in place for longer than is necessary.

The temporary measures all have significant impacts on the normal working of the business community, and the case for extending the measures will need to be considered against those impacts. Any extension should rightly be scrutinised by Parliament, but the Government will not hesitate to extend if that is required.

The right hon. Member for Doncaster North also raised a fair point on the need for employees to be protected in regard to restructuring plans. That point was also raised by my hon. Friend the Member for North East Bedfordshire (Richard Fuller). The aim of these measures is to restore the viability of struggling companies, thereby boosting the economy, saving jobs and protecting long-term investment. Yes, employees could find themselves as creditors in a restructuring plan, but in those circumstances, they will benefit from the same protections that are in place for other creditors and members. This will include the provision that they must be no worse off through the plan than they would otherwise be in the next most likely plan, and it will, of course, take into account their entitlement under employment legislation.

Importantly, a court can refuse to sanction a plan if it is not fair and it is equitable to do so. When making this assessment, one would expect the court to be mindful of the interests of employees in any pension schemes affected by that plan. If a restructuring plan is not agreed, it is worth remembering that the company might enter an insolvency proceeding, which would almost certainly produce a worse outcome overall for all involved. The company might stop trading altogether, which would put all employees at risk of losing their jobs. The Government are in the business of protecting jobs.

The right hon. Member for Doncaster North also raised concerns about CBILS and CLBILS, as well as the bounce-back loans. The Government have listened to helpful feedback on the business interruption loan schemes in recent weeks. That feedback has also shown that the smallest SMEs, some of which have perhaps not used finance in the past, are struggling to get their finance applications approved as quickly as they need, as we heard earlier. That is why the bounce-back loan schemes, which are fast for lenders to process and for businesses to access, have been launched.

On 27 April, the Chancellor announced the new bounce-back loan scheme, which will ensure that the smallest businesses can access up to £50,000 of loans in a matter of days. The scheme went live on 4 May. Businesses can complete a short, simple online application in up to a few hours. Under the scheme, there is no need for lenders to ask for complicated cash-flow forecasts or ask difficult questions about the future, which means those applications can be submitted and processed rapidly. Almost 700,000 have been have already been approved.

I thank my hon. Friends the Members for Wimbledon (Stephen Hammond), for Rugby and for Huntingdon (Mr Djanogly) and the hon. Members for Inverness, Nairn, Badenoch and Strathspey, for Bristol North West (Darren Jones), for Aberavon (Stephen Kinnock) and for North Antrim (Ian Paisley) for their contributions. I should say to my hon. Friend the Member for Wimbledon that the Charity Commission has confirmed that it will look favourably on charities that have been unable to hold their AGMs in the normal way, but asks that they write down their decisions to prove that they have done due diligence in holding a virtual AGM or delaying their AGM.

I applaud the passion of my hon. Friend the Member for North East Bedfordshire in standing up for businesses being able to come out of the recovery, as we motor through, changing gears. We will not go back immediately to how things were in January; we have to work with business and listen to business. I am grateful to all other Members who have spoken today.

These new measures complement the Government’s existing far-reaching economic support package for businesses and workers through this emergency. Today’s debate on these measures reinforces the importance of responding to the concerns of UK businesses and providing them with much-needed support during this difficult time. We are in the midst of a global emergency, in which otherwise economically viable businesses are facing the risk of insolvency because of covid-19. We must protect them as best we can. It is imperative that we act now to support our businesses and do what we can to ensure that they survive, preserve jobs and support future growth. Clearly, our first priority is to protect lives, but restoring livelihoods, protecting businesses and getting the economy motoring is also essential. That is why it is imperative that we act now. The measures in the Bill will provide businesses with the flexibility and breathing space they need to continue trading during this difficult time and support the nation’s economic recovery.

Question put and agreed to.

Bill accordingly read a Second time.

[Chris Bryant]

On a point of order, Madam Deputy Speaker. I apologise to the Minister; it was not my intention to be rude to him by interrupting him earlier.

We have gone past seven o’clock, as you will have noticed, Madam Deputy Speaker, which means that the motion in the name of the Leader of the House that pertains to virtual participation in proceedings during the pandemic will—I think this is the Government’s intention—be a “nod or nothing” measure. There can be no debate, and if it is opposed, it therefore falls. I have tabled an amendment and I have no intention of withdrawing it. I would want to contest the motion, and I understand that the amendment would be selected by the Speaker if it were to proceed. It is my understanding that it cannot now proceed. Nobody needs to object; it simply cannot now proceed because it is opposed business. Is that your understanding as well?