Corporate Insolvency and Governance Bill — House of Lords, 2020-06-09
Topic: Domestic Commerce
Rosalind Altmann (Conservative, Centre-right): My Lords, I declare my interests as set out in the register. I thank my noble friend for his excellent introduction to this Bill, which I welcome. It is clearly in the public interest to support potentially viable businesses that have been affected by the pandemic and give their owners time to explore rescue options and bridge the hopefully temporary disappearance of demand. This Bill introduces the largest reforms to the UK’s insolvency framework for nearly 20 years, alongside emergency temporary changes for the current exceptional circumstances, so it does need proper scrutiny I agree with the helpful briefing from the Law Society, which recommends introducing more checks and limitations to reduce the risk of the moratorium being abused, such as ensuring the independence of the monitor, limiting the number of extensions and limits on related-party restructurings I share the concerns of many other noble Lords, including my noble friends Lady Neville-Rolfe and Lord Leigh of Hurley, about the reintroduction of HMRC’s preferential creditor status on insolvency. Indeed, as the noble Lord, Lord Palmer, alluded to, this seems inconsistent with spending so much public money to help firms through the current time. The success of emergency public funding could be undermined by the sudden leap-frogging of HMRC claims on corporate resources, even though I recognise that corporation tax, employer NICs and others will remain as unsecured debt I also have concerns about the banking sector being able to take advantage of super-priority status, such as the new provisions in paragraph 13 of Schedule 3, which inserts new Section 174A, and paragraph 31 of Schedule 3, which amends Schedule B1. If the firm fails within 12 weeks, bank overdrafts could enjoy super-priority, catapulting them above a pension fund or other preferential creditors This leads me to echo the comments from the noble Baronesses, Lady Drake and Lady Warwick, the noble Lord, Lord Hain, and my noble friend Lord Balfe, among many others, regarding the position of workers’ rights, especially protection of the rights of underfunded DB pension schemes and the Pension Protection Fund in the event of employer distress or insolvency. By granting super-priority status to unsecured finance debt and HMRC, among others, the position of the PPF will be significantly weakened I recognise that full Section 75 debt, in the light of exceptionally low gilt yields influenced by the central bank’s QE policies, could swamp all other creditors, but perhaps the Government could support measures to ensure that the pension fund is not sidelined in amendments to this Bill in Committee. If not full Section 75 debt, there could be super-priority for Section 179 debt or, at the very least, for technical provisions, so that the Pension Protection Fund is not gamed on insolvency by banks or even by HMRC Will the Minister consider, as suggested by the PLSA, ensuring that unsecured finance debt is given only the same status as a defined benefit pension scheme sponsored by the employer, and ensure that the PPF will have creditor rights to give it a seat at the table for key creditor discussions?