Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020

Baroness Bowles of Berkhamsted Excerpts

Thursday 17th December 2020 Lords Chamber

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, I declare my interests as in the register as a company director. This is a simple statutory instrument and, for once, I have not been made more confused by the Explanatory Memorandum than I was before reading it. I welcome, in particular, the extension of the flexibility around the conduct of AGMs.

Like others in this debate, I am a veteran of the Corporate Insolvency and Governance Act and I recall our discussion on its Section 12. I can summarise by saying that it was not an ideal solution, but there was not really any other readily available solution. It is the same again now.

There are only three points on which I would like to comment. The first was raised in the report from the Joint Committee on Statutory Instruments and concerns whether all causes of downturns are excluded or just those relating to Covid. I recollect the comment by the Minister, which was quoted by the noble Baroness, Lady Altmann, about the suspension not meaning that a struggling company could just carry on trading without any regard for the consequences. I remember thinking at the time that the provision was nevertheless a blanket one when it came to insolvency. I am sure that it is possible to write legislation that distinguishes one way or another. Unless I dreamt it, I seem to recall that the debate covered that such an approach might generate many problems of trying to analyse root causes, undermine the certainty intended and even risk overloading the courts. The conclusion was that it was a least-bad option and I have to accept that we are in that position again.

My second point is about the period between 30 September and 26 November, which appears to go under the normal rules. It might have been useful to have some comment about that in the Explanatory Memorandum. I made the presumption that the hope was that things were getting back to normal and that this was why the Government did not extend the provision before it expired. There is perhaps a question as to why it is not being retrospectively extended, given that there were surely still specific businesses under restrictions and some areas of the country that went into local lockdowns, if not straightaway then pretty soon within that period. Was any thought given to a retrospective extension to cover that period? What is the effect of those two months not being covered? Do the Government think that there is protection from the two periods on either side, because it would be hard to pin things down to those exact two months?

Thirdly, how long can this go on for? I recognise that, in allowing the measure to lapse, the Government showed some keenness for it not to hang around overly long. I was going to ask if this was likely to be the last time that the measure is considered, but the Minister has told us that the Government will hold it under review, which obviously implies that there may well need to be another extension. At some point, there must be a limit to how long it goes on for. While the balance may be in favour of giving certainty to the company directors for short periods of time, the longer it goes on, the longer the concerns already expressed by the noble Baroness, Lady Altmann, begin to come to the fore and dominate. It will be very difficult for companies to know who they can and cannot supply and, ultimately, that would cause everything to grind to a halt through other uncertainty.

As I have said, this is the least-worst option, and perhaps it shows again that director liability provisions in company law could do with a more general overhaul for catching bad and unconscionable behaviours. It can be rather difficult to enforce the other measures around directors’ duties and so on, but I accept that that is for another day. For now, I will not object to this statutory instrument, but I would like to have some updates as we go along on the question of how long this goes on for. I do not really want to be here in September discovering that we are in for the extension after next.