Corporate Insolvency and Governance Bill — House of Lords, 2020-06-16
Topic: Domestic Commerce
Howard Leigh (Conservative, Centre-right): I will speak to Amendments 12, 13, 17, 18, 30 and 31, all of which are mine. Essentially, they make the same point, but I had to table several amendments to the Bill to cover it. The point is to allow an extension of the moratorium where the rescue of the business, as opposed to the company, is likely. I draw the attention of your Lordship’s House to my register of interests, which includes being deputy chairman of finnCap, a stockbroker, and senior partner of Cavendish Corporate Finance, which specialises in selling businesses. Unusually, I am speaking to an area in which I have some limited expertise, particularly in selling businesses I add to the remarks of the noble Lord, Lord Hendy, that private equity firms, banks and others do spread their risk, and insolvency is a devastating experience for the owner of a business, who may have spent years building it up and invested all their family wealth into it. They too need as much protection as possible At the moment, there is constant reference throughout the Bill to "the company", but frequently, if not in the vast majority of cases, the actual limited company, or plc company, will not survive—there is simply no possibility—and there will be no return to the shareholders or equity at all. However, the actual business itself might well survive. For example, in the retail sector, many businesses trade from shops. The companies that have the leases with the landlords will disappear, but the businesses trading in those shops will, hopefully, carry on. Typically, they may be sold to a third party but, to do that, the directors or monitor will need time to negotiate a transaction that preserves the business and the jobs. I thank the noble Lord, Lord Mendelsohn, for inviting me to amplify the amendments, but what they are saying is pretty simple. In many instances, the business that is owned by the company is viable and likely to carry on, but there is no chance of the company so doing. The amendments in my name seek to address this Amendments 12 and 13 refer to the situation where a director wants to extend the moratorium with creditor consent, and Amendments 17 and 18 to where the directors apply to the courts. I share the concern of other noble Lords that the courts are going to be very busy as a result of the Bill, and I hope that sufficient resources will be given to them. Again, where the directors apply to the courts, the courts will see that the business may well carry on, even if the company is not able so to do. This will then allow the courts to instruct the directors to carry on the moratorium Amendments 30 and 31 refer to the circumstances where the monitor is in charge. I will make a few comments about the monitor in a minute. The Bill states that "the moratorium is no longer likely to result in the rescue of the company as a going concern" This ignores the possibility that the business might well be rescued as a going concern. It is particularly important that the monitor is a person who is able to see that viability and implement it. It would be tragic if the moratorium ends for all the wrong reasons I support the noble Lords, Lord Stevenson and Lord Hodgson of Astley Abbotts, in emphasising the importance of who the monitor is. The noble Lord, Lord Stevenson, quite rightly made the point that it need not necessarily be a chartered accountant or an insolvency practitioner. It would be great if the legislation allowed the flexibility for a turnaround professional to be appointed as a monitor, albeit with the appropriate protections, as they really do know what they are talking about in enabling a business to carry on afterwards. The story from the noble Lord, Lord Hodgson, about the investigating accountants telling the directors that they would be back on Monday to carry out receivership is chillingly true; I have seen it in practice. I have also seen much better examples, where the investigating accountants have been told by the bank that under no circumstances will they be appointed as the receiver, or in our case monitor. So they are truly independent and are working to try to ensure that the business carries on, as opposed investigative accountants being appointed, who know that they might be appointed as the receiver, with subsequent huge professional fees It is vital that we try to ensure that the monitor is independent not just at the time of appointment, as these amendments suggest, but subsequently, and is not appointed as a receiver without proper investigation that their actions have been in the interests of the business. I will not amplify this point any more but will simply quote from the Insolvency Practitioners Association, which has said: "Expanding the definition", as I have suggested, "will enable monitors to more broadly assist businesses, working with their owners, stakeholders and directors to give them a greater opportunity to survive the economic strictures of Covid-19 responses"— which is the purpose of the Bill. Without the amendments I have tabled, the Bill will be heavily emasculated.