Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) (No.2) Regulations 2020 — House of Lords, 2020-10-09
Topic: Domestic Commerce
Diana Barran (Conservative, Centre-right): My Lords, debating these regulations this afternoon has been a pleasure, and I appreciate the constructive tone brought to the debate very much. I will try to answer the points raised by your Lordships in the next few minutes. I think all noble Lords recognised the great and important impact of the voluntary sector, particularly during the Covid-19 pandemic Reference was made to the amount of funding needed by the sector. I remind your Lordships that the first sector-specific package announced by this Government was for the voluntary sector, to the tune of £750 million. Because I meet the sector very regularly, I know that there were a lot of concerns at the outset about the applicability of the coronavirus job retention scheme but, actually, billions of pounds have gone into the sector through the use of that scheme. We are delighted that we have been able to improve the resilience of the sector in that way The noble Lord, Lord Foulkes, asked about some creditors being prevented from taking enforcement action. Some of the restrictions that we have looked at are in relation to financial services and claims where proceedings are brought before an employment tribunal. He also asked whether 20 days was long enough. There is a mechanism whereby that can be extended once for the same amount of time without the involvement of the courts, and it can then be extended further with their approval The noble Baroness, Lady Bowles, and the noble Lord, Lord Stevenson of Balmacara, raised important points and I commend them both on their persistence in going through the SI in so much detail. It certainly was not the most user-friendly that I have ever tried to work my way through. She asked for some examples of the "minor and technical modifications". For example, modifications were made to the instrument to remove references to Scotland, Northern Ireland and overseas companies, none of which is relevant to CIOs as, unlike companies, they can exist only in England and Wales Another example, which the noble Baroness referred to and was also explained in the Explanatory Memorandum, was the transitional provision to ensure that any moratorium period entered prior to the commencement of the Corporate Insolvency and Governance Act continues under the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations, as they were made prior to the amendment of the Act. I hope that those are satisfactory examples The noble Baroness also asked about special tailoring for CIOs. Our aim in bringing forward these regulations is to create a level playing field with charities for CIOs. Many charities are registered with Companies House, and this will put both governance structures on a level footing The noble Lord, Lord Stevenson, asked, as did the noble Baroness, Lady Bowles, about the Pension Protection Fund provisions and the likelihood of those being needed. We genuinely believe that the likelihood is extremely low, but perhaps I may run through the situation where they might be. The CIO would need to be in a position of severe financial distress, but with the realistic prospect of financial rescue, in order to enter a moratorium in the first place. The CIO would also need to employ staff who are participating in a defined benefit pension scheme, and since CIOs have been in existence only since 2012, we believe that very few would offer staff participation in a DB scheme. Once those two hurdles had been cleared, we would naturally expect trustees of a CIO in a moratorium to act reasonably and responsibly, and not in such a way as to undermine the rights of members of their pension scheme or impact on the Pension Protection Fund. I hope noble Lords agree that those are significant gates which they would have to pass through. This remains a theoretical possibility, so to ensure a level playing field, we will bring forward legislation when parliamentary time allows to reapply Section 51A to CIOs My noble friend Lord Kirkhope asked about the status of insolvency practitioners. My understanding is that they have to be qualified practitioners and that the details of the workings are set out in the Corporate Insolvency and Governance Act The noble Baroness, Lady Scott of Needham Market, asked about the delay in writing to the Speakers. I can assure her that we have made every effort to get those letters out as quickly as possible, and I can only apologise for the delay. I share her recognition of the importance of the accuracy of the legislation that we bring forward These regulations will help CIOs that need a protective breathing space to consider their options or to pursue a restructuring plan and, as such, I commend them to the House.