Corporate Insolvency and Governance Bill — House of Lords, 2020-06-09
Topic: Domestic Commerce
Hugh Trenchard (Conservative, Centre-right): My Lords, I thank my noble friend for introducing this Second Reading debate today with his usual clear and methodical approach. While declaring my interests as stated in the register, I am delighted to be able to speak from these Benches and believe it is important that we should revert as soon as possible to something nearer our normal ways of working, as the House of Commons has done. It may well be that the noble Baroness, Lady Jones of Moulsecoomb, and her noble friend have ample opportunities to hold the Government to account under this system, but I feel myself persuaded by my noble friend Lord Dobbs, who, employing his natural eloquence, made the case for our proper return very well The Bill seeks to address the perceived failings in our current arrangements. I was surprised to note that the UK languishes at 14th place in the World Bank corporate insolvency rankings, below, inter alia, Slovenia and Iceland. Japan, Finland and the US occupy the top three positions. As noble Lords will be aware, the Government intend to negotiate free trade agreements with Japan and the US this year, and it would be good if the UK’s ranking in the World Bank’s table in future approximated more closely to theirs I believe that the permanent measures included in the Bill should assist in achieving that. They enjoy the broad support of the legal profession, and the reforms on moratoriums, restructuring plans and termination clauses have been worked on for some time. I hope that the Minister will commit that the Government will review the new insolvency and restructuring arrangements within, say, three years, and make sure that they are working as well as intended. The justification for the fast-tracking of this Bill, however, is driven by the temporary provisions on wrongful trading and winding-up petitions. They are also retrospective in effect, which we rightly normally avoid in this country. I believe that noble Lords will applaud the Government’s intention, which is to support businesses which were viable immediately prior to the realisation of the onset of the Covid-19 pandemic, but whose future is now seriously threatened, especially companies operating in the entertainment and leisure sectors The Government have introduced several schemes to provide immediate financial relief to companies suffering from the effects of the pandemic, and those eligible to receive loans will be much less likely to need to avail themselves of the protections provided by this Bill. What progress are the Government making in persuading the European Commission to change its definition of "undertaking in difficulty" to permit companies financed through their growth period by shareholder loans to borrow, or to resolve to apply a better definition of viable companies? My understanding is that not all member states are as diligent as we are in applying the Commission’s definition, even though we are supposed to have left the EU. Creditors’ rights to make winding-up petitions are curtailed by the need to satisfy the coronavirus test. It is not clear whether this will lead to a view that "it just isn’t worth bringing a winding-up petition, so don’t bother because you will fail" or whether people will seek to use and satisfy the coronavirus test to bring petitions that might not otherwise have been brought. It is interesting that judges have already started to grant injunctions to restrain creditors from proceeding with winding-up petitions in cases where the Bill, once enacted, would mean that the petition was dismissed when heard because it would fail the test With this Bill, the Government add some useful tools to the toolbox without interfering too much with well-established principles. I welcome the Bill and trust that your Lordships’ House will support my noble friend in securing its enactment without undue delay.