Corporate Insolvency and Governance Bill — House of Lords, 2020-06-09
Topic: Domestic Commerce
Karan Bilimoria (Crossbench, Unknown): My Lords, the US has had chapter 11 for years. As Secretary of State Alok Sharma said, the Government now believe that "the package of measures that the Bill introduces will give businesses the best opportunity to survive the effects of the covid-19 crisis and lay the foundations for a bounce-back in the UK economy."—[Official Report, Commons, 3/6/20; col. 897.] Paul Scully, the Small Business Minister, said: "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."—[Official Report, Commons, 3/6/20; col. 952.] As the noble Lord the Minister said, businesses and practitioners of insolvency law have largely welcomed the Bill. For example, Kate Nicholls, CEO of UKHospitality, said: "This is a very important piece of legislation from the Government … The Bill should provide businesses with some very welcome respite from aggressive landlords and valuable breathing space to restructure their businesses." Jennifer Marshall, a partner at Allen & Overy, said that the Bill represents "the most significant insolvency reforms in the UK for a generation" The Institute of Chartered Accounts, where I am proud to be a fellow, said: "This is a pragmatic move and a useful addition to the government’s strategy to protect employment and … will definitely help some businesses survive, but we would encourage any directors with concerns about their company to seek professional advice at the earliest opportunity." The provisions of the Bill on company moratoriums, termination clauses, restructuring plans, the suspension of wrongful trading regulations, dealing with statutory demands and winding-up petitions, and flexibility around AGMs and filing requirements are all very welcome. As vice-president of the CBI, I can say that it supports the measures in the Bill, with our members widely welcoming the breathing space it will provide. The retrospective application of some of the measures is particularly important as firms continue to struggle with cash flow. Matthew Fell, one of our directors, said: "The CBI welcomes these interventions at a critical time for business. The temporary suspension of wrongful trading provisions, along with other measures, will give much needed headroom for company directors to enable otherwise viable businesses to use the government’s support package and weather this crisis." With the Government’s support packages tapering off in the coming months, the timely passage of this Bill will be crucial to provide headroom for management teams across the UK. For firms to understand the extent of their liability, and the options for and likelihood of avoiding insolvency and securing a rescue package, the Bill will be pivotal. At a time when firms are grappling with huge demand shocks, constrained cash flow, and an uncertain picture on domestic and international consumer demand, government support is widely welcomed Following the comprehensive financial support package provided by the Treasury, for which business is very grateful, this Bill will help to underpin the Government’s requirements for the next stage of our economic recovery in the coming months. We encourage the Government to ensure that businesses, and especially SMEs, which have the least capacity—I hope that the Minister agrees—have as much support as possible to retain jobs and livelihoods in the coming months The Minister said that the Bill is about maximising the chances of survival. It certainly helps to do that, but does he agree that, before companies have to resort to its measures, we should support them as much as possible? For example, look at the government loan guarantee scheme. We have 100% bounce-back loan schemes. The original CBIL scheme, from 23 March—two and a half months ago—has seen a 50% approval rate, to 47,000 businesses, with almost £10 billion lent. But under the bounce-back schemes, with a 100% guarantee from the Government, in just over a month £24 billion has been lent, to almost 800,000 businesses. Should not the Government consider matching what Switzerland and Germany are doing, and increase the limit for the 100% loans up to £500,000? That would help businesses, especially as measures are tapered off Finally, if we can reduce social distancing from two metres to one metre, that will mean four times as many people in pubs and restaurants: at two metres, there is 30% capacity; at one metre, there is 70% capacity. This could be the difference between opening or not, and between survival or not. Cinemas, theatres—everyone would be helped. France, Denmark, China, Singapore, Lithuania and Hong Kong are doing it—why are we not doing it, in line with what the WHO says? We need to get the economy back up and working as soon as possible, and safely.