Corporate Insolvency and Governance Bill

Debate between Richard Fuller and Damian Collins

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

[Richard Fuller]

I am grateful for my hon. Friend’s clarification, but my concern—I may well have read the Bill incorrectly—is that we are talking not just about majority or minority, but about where the majority or minority lies. At the moment, the majority has to be within every class of creditors, and there might be a disabusing minority within those instances. Under this legislation, an entire class of creditors could become a minority, and even though they all agree that they do not like the arrangement, for example, they will be forced to accept it. I think that that is a difference of approach. If we are giving that power to the courts, it is important for us and for the Government to be clear about the pattern that is likely to emerge, because in that respect the provision is different and new.

I think that the Secretary of State has answered my next question, but I will ask it again if I may. Will the clauses that are designed to be temporary measures sunset automatically without a subsequent affirmative statutory instrument proceeding in the House? Will they be subject to the negative procedure, or continue without an SI to cancel them? I would be grateful if the Minister could clarify that at some point, perhaps in his closing remarks if he has the time.

It is relevant to raise the issue of companies and sectors that may take time to recover, beyond the relevant period. I think that is addressed in Opposition amendments 3 to 6. What if the directors themselves cannot reach a clear judgment that fully escapes the risks of wrongful trading? What is the position of someone on a directorship in this situation who reaches a dissenting opinion to the majority of directors on the important issue of whether the organisation is able to continue trading? That is another issue of detail that the Minister may wish to address in Committee.

The impact assessment for the Bill does not appear to address the cost of debt from these changes, essentially assuming that changing what has historically been a situation that favoured senior debt to one that is a little bit looser between different classes of debt would have no impact on how much that debt might be priced at in the future. But it is my understanding that increasing risk on an instrument might cause an increase in the price on it. That may have been considered in the impact assessment and have been negligible, but it would be interesting to see what the Government have to say.

I am interested in what happens in the circumstances that arise under the chapter 11 equivalent proceedings when the Government are a debtor or a shareholder in a business. Do the Government have a voice that is different from any other creditor? The contribution of my hon. Friend the Member for Wimbledon (Stephen Hammond) was interesting in this regard, as he highlighted the part of the Bill where HMRC becomes a preferred creditor. Well, those of us who have had to deal with HMRC as a creditor in the past would not mark it down as one of the most amenable of creditors when it comes to its own interests, and that is putting it lightly. In fact, as we are seeing in this Parliament already, HMRC is acting, both in the Treasury and in general, somewhat as a bovver boy in British industry. It does not seem to like people who are self-employed and it certainly does not like people who have a loan charge. Now it seems to want to have priority in the debt structures of our companies. Where will its ambitions end? Where will this Government’s facilitation of the taxman’s ambitions end? As a Conservative, I would have hoped that they would have ended some time ago. Perhaps I can tempt my hon. Friend the Minister to comment on that.

[Damian Collins]

I am following my hon. Friend’s remarks closely. Given his opening remarks, might it not be better, if we believe in backing British business, for us to have some skin in the game? We might not get our money back every time, but overall we probably would.

[Richard Fuller]

After my hon. Friend’s comments about association football, of which I have absolutely no understanding at all, I will bow to his better judgment on this topic too, but generally I am not really in favour of the Government having skin in the commercial game. When they get active in the economy, they tend to blunder around and probably, with the best of intentions, make things worse. I am not saying that they should not have their role; certainly, right now, many people will want the Government to have a role. Many Members have rightly looked at the measures the Government have put in place to support business and praised them.

Of course, people need not just take our word for that. Ask people around the world which country’s Government have responded best to the economic consequences of the virus and they will say that the United Kingdom Government are No. 1, with Japan, America and Germany in the United Kingdom’s wake. That is a tremendous credit to Ministers, but I would not like to encourage them to make that participation any longer than it needs to be.

On the guidance for going concern judgments, the Department will have spoken with auditors about how they are approaching their going concern judgments this audit season. Does the Bill have any impact on those judgments? Does the Department already think that it might need to bring forward any other measures based on the independent judgments of those auditors?

I raise that because in the 2007 crisis, there was a feeling that the rating agencies had been captured by their corporate clients and were giving ratings that perhaps did not reflect the true underlying status of businesses. We are fortunate in this country already to have embarked on reforms of accounting and on the separation of accounting and other activities to limit that risk, but I just caution that we ought be aware of that in a year’s time when we look at those going concern judgments. We would not like those to come back on our accounting firms, which are doing the best they can.

In Committee, the Minister would be wise to give a few more details about the role of the monitor—my hon. Friend the Member for Huntingdon (Mr Djanogly) raised that issue—and what role the Department will have in monitoring the monitors. Is any change expected to that?

One other concern I have is that facilitating businesses to continue trading at a time when the economy as a whole may be recovering and uncertain has a hint about it of creating some form of zombie businesses, where people are compelled to provide supply, as is required under the Bill, but there is the increasing sense that those businesses are not going to make it. I may be expressing a concern based on widespread use of the insolvency practice, which may not come to fruition—let us hope that for many people it does not—but I wonder what the Government’s thoughts are about the risk of businesses existing in name but not actually being able to create a long-term future for themselves or their employees.

I mentioned the Opposition’s amendment 1, on the voice of employees on obtaining a moratorium. If that were tweaked, it would be an interesting issue for the Government to consider. I also mentioned in an intervention the powers of the small business commissioner. The Secretary of State was right to say, “Hold on a minute; that’s something that we will come back to,” particularly as we are going through this in one day. It is probably not something that we would want to put through so fast. Similarly the calls by the Leader of the Opposition—[Interruption.] I did it again. I am so sorry. It is so hard to forget that time.

Public Confidence in the Media and Police

Debate between Richard Fuller and Damian Collins

Wednesday 20th July 2011 Commons Chamber

[Damian Collins (Folkestone and Hythe) (Con)]

It is a pleasure to follow the very thoughtful speech of the hon. Member for Rhondda (Chris Bryant) about the phone hacking scandal and the work he has done. I know that he took a strong interest in our Select Committee hearing yesterday.

Although he is not in his place, I also want to thank my hon. Friend the Member for Maldon (Mr Whittingdale), the Chairman of the Committee, for the great skill and care he showed in chairing yesterday’s very challenging Committee meeting. I thank also the Clerks of the Committee, who have done a huge amount of work in the past couple of weeks in preparation for that meeting.

The Prime Minister mentioned FIFA reform as an example of a story that has been generated by challenges to that organisation that have been made by the media and others outside it. I have taken a huge interest in that story, and I think it is absolutely right external pressure has been put on an organisation that would not otherwise reform itself. It does not have any kind of proper internal governance structure or other means for reporting and holding to account senior people within it. Although we might admire the kind of journalism that points the finger at organisations such as FIFA, media organisations have to learn from some of the internal governance structures and faults within such organisations. I wholeheartedly agree with the hon. Member for Rhondda that it is not acceptable to have a situation in which, when wrongdoing is discovered, proprietors can say that they had no idea what had been going on at one level, and neither did the relevant person in the newsroom. If we believe what we were told by Rebekah Brooks in the Committee yesterday, stories were going into the News of the World without the editor, the news editor or that newspaper’s lawyers having full knowledge of their source. That is clearly not acceptable.

It is also unacceptable, when an organisation’s employees are under police investigation, when some are being sent to prison and when millions of pounds of compensation are being paid out by that organisation, for people at a senior level not to be fully aware of the seriousness of what is going on, and to be unable to act. That is a serious issue because one would hope that when people at the top of a professional organisation became aware of wrongdoing, they would become the drivers for internal change and reform and be the ones who make sure that things happen. The report of the Select Committee on Home Affairs shows that there are great concerns about how the Metropolitan police pursued this case and about the fact that evidence lay unchecked and unresearched for a good amount of time, which might have delayed the investigation for some years.

There is also a big challenge for News Corporation. Whatever comes out of the inquiry that has been set up to look into the work of the media and the police inquiry, News Corporation should reform its corporate governance structures so that it has a mechanism to ensure that this never happens again, and that people at a senior level can take the appropriate action at the appropriate time or be held to account at the highest level for the failure of that action.

[Richard Fuller (Bedford) (Con)]

My hon. Friend is making a strong point, as the hon. Member for Rhondda (Chris Bryant) did, about corporate governance needing to be changed. That is absolutely correct. Would my hon. Friend not also say that the culture and the mindset within which executives, even those at the lowest levels of these organisations, are working needs to change? It is not enough not to know what people in an organisation are doing; they need to know what they should and should not be doing.

[Damian Collins]

My hon. Friend makes a very good point. The point I raised with Rupert Murdoch in the Committee yesterday was about where the boundaries of investigative journalism lie, and whether they are clearly understood. Most people who have worked with news organisations—particularly former employees of News International who have spoken out—would say there was tremendous pressure for scoops and news. Some former News of the World journalists, such as Dave Wooding, who was on “Newsnight” last night, would say that there was that pressure, but that does not mean that they broke the law to go and get stories; they just did their job very hard. There are allegations about other people in the organisation who might have broken the law to satisfy their paymasters, editors and proprietors.

There is clearly a great need for investigative journalism in this country. It gives us a transparent society, and there is a lot more to being a democracy than simply holding elections.