Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) (No. 2) Regulations 2021

Sarah Champion Excerpts

Wednesday 27th October 2021 General Committees

[Paul Scully]

These are an extension of the existing provisions, which are specifically for covid-related debts.

The third and final criterion is that a company winding-up petition cannot be presented in respect of commercial rent until the end of March 2022. I should say that the point of the petition is not to stop companies that have accrued debt being wound up; it should be to allow the creditor the full rights to be able to do so. We are trying to give temporary relief to businesses that are otherwise hard-pressed, specifically because of the pandemic.

The Committee will be aware that the Department for Levelling Up, Housing and Communities has announced an extension of the moratorium on the forfeiture of commercial tenancies until 25 March 2022. That is to allow time for the implementation through primary legislation of a rent arbitration scheme to help industry deal with the significant amount of commercial rental debts that have accrued during the national restrictions period.

The restrictions in the commercial rent arrears recovery scheme have been similarly extended. That measure serves not to undermine the proposed rent arbitration scheme before it is implemented, so commercial landlords will continue to operate under the previous restrictions for petitioning to wind up a company in respect of debts until the end of March 2022. We recognise that that measure might mean a further period of uncertainty for commercial landlords, who themselves might be struggling as a result of the pandemic. However, the rent arbitration scheme will deliver certainty to both the landlord and the tenant, where an agreement to pay down lockdown rent arrears has been unachievable.

[Sarah Champion (Rotherham) (Lab)]

I am looking for clarity. I think the Minister said that this does not cover rent. Is that right? Could he give an example of the sort of debt that would be specific to this new extended legislation? Are we talking about a supplier not paying for goods that they have taken—that sort of thing? How is it proved that it is a covid-related debt under this legislation?

[Paul Scully]

I do not want to pre-empt deliberations on this, but if a business has been closed and is unable to trade, that would be more likely to be eligible. However, the commercial debt that was within the period that we have packaged and kept aside—effectively, from the beginning to the end of lockdown—has been bundled up and will be dealt with in the next set of legislation on mandatory arbitration, which we hope we will not need.

We hope that between now and completion of that legislation a lot of companies will be able to have those conversations between tenants and landlords, knowing that otherwise they will be forced into mandatory arbitration. We want people to be able to settle their own debts and have their own discussions. The rent debts that were accrued during lockdown are ring-fenced for the purpose of that arbitration scheme, but all commercial rents that are owed after 19 July 2021 should be paid in full, as and when they fall due.

In conclusion, these new targeted criteria demonstrate that the Government have listened to the concerns raised about the potential for a cliff edge for insolvencies, once the Government’s regulatory and fiscal support has ended. The new targeted criteria represent a balance between the rights of creditors and the further protections needed by the businesses most affected by the trading restrictions placed on them. The new criteria reinforce the Government’s clear message that discussion is absolutely crucial between creditors and the debtors, who should continue to negotiate where possible. If successful, those negotiations can result in both creditors and debtors achieving the same long-term goals of continued trading, repayment of debts and a return to profits, in turn bringing benefits to themselves, their employees and the wider economy. I commend the regulations to the Committee.

Question proposed,

That the Committee has considered the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10) (No. 2) Regulations 2021 (S.I. 2021, No. 1091).—(Paul Scully.)

--- Later in debate ---

[Sarah Champion]

I do not know about these sorts of courts. I know about all the other courts, which have a massive backlog at the moment. Has the Minister estimated how long it would actually take to take this to court, and therefore how realistic the timeframe of the instrument is?

[Paul Scully]

Not in terms of the court cases themselves, but it is about the issuing of winding up. If someone starts issuing demands and then winding-up petitions, that blows a hole in the confidence of other suppliers and customers for businesses. It is the process of the petition itself, which can be done with paperwork, rather than the court hearing, which may come some way down the line, that is really key in the protection here. That is why we need to get it operative very quickly. We have all highlighted the importance of tapering the effects of the instrument, and ensuring that businesses can trade with confidence, and the certainty that we are living with covid.