Corporate Insolvency and Governance Bill — House of Lords, 2020-06-09
Topic: Domestic Commerce
David James Fletcher Hunt (Conservative, Centre-right): My Lords, I draw attention to my interests as set out in the register. I strongly welcome the Bill and wish it a safe passage, for it is timely, practical and much needed. The principal legislation in this field is of course the Insolvency Act 1986 but it has already been substantially amended by the Enterprise Act 2002. When that Enterprise Bill arrived in the House of Lords, our late and much-missed colleague Baroness Miller of Hendon said: "Perhaps a measure along the lines of the American Chapter 11, which has given many ailing companies a breathing space to recover from a temporary setback, is needed."—[Official Report, 2/7/02; col. 147.] As colleagues will know, I have advocated a similar approach for many years Chapter 11 of the United States Bankruptcy Code, as mentioned by the noble Baroness, Lady Blower, a few moments ago, enables a struggling company to stabilise itself by a number of means, including: renegotiating union and retiree obligations; authorising loans; and the rejection of executory contracts. In replacing Schedule 1 to the 1986 Act, the Enterprise Act 2002 went some way in a similar direction by introducing a new responsibility for an administrator of "rescuing the company as a going concern." I believe it is vital we should go with the grain of what we already know to work, here and abroad. We must also, despite the necessary alacrity, ensure that this Bill is fit for purpose In another place my own Member of Parliament, Stephen Hammond, raised a very valid concern about new Section A6(1)(e) of the Insolvency Act 1986 and I reiterate his point. Consideration of a struggling concern necessarily involves high-pressure and speedy consideration of the relevant facts—not unlike the passage of this legislation—so we must take care to get the thresholds right. That new section contains proposed criteria for "relevant documents" that a company might file with the court in seeking a moratorium. One would be a statement from the new monitor, to the effect that "in the … monitor’s view, it is likely that a moratorium for the company would result in the rescue of the company as a going concern." I suggest this might risk setting the qualifying threshold rather high. If the principle behind the Bill is to give every firm that might survive the crisis an opportunity to recover and consolidate, should not this legislation say just that; in other words, might not "would" in that new section be more effectively replaced with "could" I am also concerned that a monitor who is an insolvency practitioner might potentially have a perceived conflict of interest, unless the legislation states explicitly that they may not be appointed as administrator or liquidator if the rescue plan fails. I have had considerable involvement with the credit union sector and am concerned that the proposed moratorium will not apply there. Perhaps my noble friend the Minister might provide a few words of reassurance. These may be details but they go to the very heart of the legislation and the admirable motivating principles behind the Bill, which I so strongly support.