Corporate Insolvency and Governance Bill — House of Lords, 2020-06-09
Topic: Mixed Topics
Christopher Fox (Liberal Democrats, Centre to centre-left): My Lords, I declare my interests as set out in the register. I thank the Minister for his introduction to the Bill, and for the time that he spent explaining it. I am gratified that we find ourselves in the Chamber; I just enjoyed a ceremonial fly-by by several moths, which made me feel that I am back at home The noble Lord, Lord Dobbs, seems to be missing the theatre. I read in Hansard the fast-tracked debate in the other place and, for all the drama of ministerial interventions, I absolutely believe that the issues raised today in your Lordships’ House outnumber the issues raised there. I thank the staff of the House who have enabled all Peers to contribute to this debate, no matter their age, their location or, indeed, their health. Insolvencies are an important issue, and this has been reflected in this debate. They will determine the fate of millions of jobs in this country, as your Lordships have set out. We on these Benches welcome the spirit of this Bill and its intentions, but of course, the purpose of your Lordships’ House is to avoid that phrase that has come from noble Lords’ mouths many times: "the unintended consequences of legislation" The Minister explained very fluently that the Bill is made up of two sorts of legislation, some temporary—emergency legislation, if you like—and some permanent. My noble friend Lady Bowles described that as "lumpy" and the noble Baroness, Lady Neville-Rolfe, described it as "cheeky" but, rather more severely, the noble Lords, Lord Blencathra and Lord Hodgson, called into play the probity of bringing in permanent legislation through a fast-tracked process. It is clear from many of your Lordships’ contributions today that there is considerable concern on all Benches about the way this legislation is being mixed. In the other place, my colleague, Sarah Olney, introduced some amendments that essentially introduced sunset clauses for the permanent elements of this legislation; those amendments may resurface next week, I dare say Turning to the moratorium, a key area of discussion has been the role of the monitor. Again, from all sides of the House, there is some concern as to what this role is and how this monitor fits into the various mechanisms of recovery. The interplay between the monitor and the directors is not clear. The directors clearly have a set of legal responsibilities to their owners, to their shareholders. How does the monitor’s role fit in? The directors are also required to make all the facts available when dealing with auditors and others. Does the monitor enjoy the same legal access to that company’s information that auditors enjoy? The noble Lord, Lord Stevenson, raised Carillion. The role of auditors, even with access to all that management information, is deeply flawed. The Minister probably does not have enough time to set out in detail today the role of the monitor, but for the Bill to carry on, it would be very helpful if he could do so in writing before Committee. It would very much enhance the quality of that debate if we had some bullet points on the monitor’s role and how it would do its job I turn now to the termination clauses. Many speakers, not least my noble friend Lady Bowles, have set out their deep concern about how these clauses could poison the supply chain within businesses. Again, I do not think it is the intention of the Bill to do that, but it is the Government’s role to set out how the supply chain will work. The Bill makes it clear that supplier companies have to keep supplying to businesses that they may suspect are beginning to go under I asked the following question of the Minister when we had our meeting, but obviously I asked the wrong question because I got the wrong answer. One of the signs that a business is starting to fail is when the trade credit insurance premiums go up. Supplier companies take out insurance against a customer of theirs defaulting on payment. The first thing that happens is the rate goes up and the second is that the business cannot take out trade credit insurance anymore. I was told that the Bill does not affect trade credit insurance, so we are in the rather poor situation where the supplier would be compelled to continue supplying its customer but would not have access to trade credit insurance because we are not in any sense changing that relationship. That issue needs to be cleared up I turn to restructuring, the third of the permanent elements. This introduces a cross-class cram down, which sounds rather like something the French do to geese, but is apparently a perfectly legitimate activity in this country. Indeed, the noble Viscount, Lord Trenchard, will be pleased to know that it is an EU rule as well. However, it looks like it will put a lot of onus on the courts. The noble and learned Lord, Lord Thomas, sounded the alarm about whether the courts would have the capacity or the time to run this. First, does the Minister agree that this will be very helpful to lawyers, who will be the beneficiaries? Secondly, can he confirm that the courts will have the capacity to handle what could be a great many of these wrangles We come now to the oft-repeated issue of the role of HMRC and its access to the debt. It is clear—I do not need to repeat all the arguments—that this is an absolutely central issue in the Bill, which needs to be cleared up before we go any further. I hope that the Minister will acknowledge that this is an issue, even if he cannot offer a solution A second key point concerns pensions, pension trustees and the PPF. Again, some authoritative interventions have been made by the likes of the noble Baronesses, Lady Drake, Lady Warwick and Lady Altmann, that absolutely sound the alarm bells on this. It is imperative that the Government should go back and rethink where the pension fund sits in the credit waterfall Moving to the emergency provisions, by the time the Bill reaches Royal Assent, I think it will have about three days left to run before it has to be extended, so I assume that it is the Government’s intention to extend. Given that, why do they not bring forward an amendment in Committee that would save the need to table an SI? I believe that the noble Lord, Lord Stevenson, suggested the date of 30 September, which would be acceptable to these Benches On the subject of the suspension of wrongful trading, this is essentially a beneficial measure and we support it. It is clear that it was one of the issues that stood in the way of people seeking CBILS loans early in the process in that banks were looking at businesses and their cash flows in the here and now, which was exactly why they were going for the loan, so the notion of suspending this is perfectly correct I have nothing much to say on winding-up petitions, other than that it was broached in the other place that there is a need for the creditor requesting a wind-up to indicate that a business’s inability to pay its debt was caused by something other than the Covid crisis. How the creditor is going to make that case will be an issue, and the Minister may have some comment on that Also on wind-ups, the noble Lord, Lord Mann, who is not in his place just now, mentioned football clubs. Of course, HMRC is the great winder-up of football clubs. When the process in the emergency legislation has been gone through, there will be tax bills outstanding for previous years and very low cash flow. Will the Minister undertake to talk to his colleagues in the Treasury and ask HMRC to restrain its natural tendency with regard to tax bills when it comes to winding up companies There are a number of curious issues. We will go away and look at Hansard, and mull over the mixing of emergency and permanent legislation. We will look at the credit waterfall, and in particular at some of the issues highlighted by my noble friend Lady Bowles. We will listen to what the Minister has to say about HMRC, and we will look to see how the Government intend to make sure that banks do not manipulate their position. We will of course also want to hear what the Minister has to say on pension funds. All these issues may resurface next week in Committee. The message from this debate is that the Bill is not without its problems, and I hope that the Minister takes these on board.