Corporate Insolvency and Governance Bill

Lord Leigh of Hurley Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Tuesday 9th June 2020 Lords Chamber

[Lord Leigh of Hurley (Con) [V]]

My Lords, I refer to my registered interests. I welcome the Bill, which contains many measures I called for the Government to enact in our Budget debate in this House on 18 March, when it was becoming clear that urgent action was required on insolvency. I thank the Minister and his officials for taking time to meet me and Jon Moulton regarding this Bill, following my interventions on Part 10 of the then Small Business, Enterprise and Employment Bill in earlier years. Given the time restrictions, I will make a few overall comments which impact on the core of the Bill, which, although a very commendable piece of legislation, has for reasons we all understand had to be rushed through Parliament.

First, can we all agree that the prime objective is to save businesses and jobs? This is not the same as saving companies. The actual Ltd or plc companies which could get into trouble are not important here. If they go into the moratorium, most will certainly fail; the weak ones will not even be able to go into it because of the restrictions. However, the businesses of those companies and the jobs pertaining to them might well be saved, and the Bill as currently drafted does not really differentiate between the two. I am told that when the Enterprise Bill was being debated in 2002, many MPs—though I am sure not my noble friend Lord Hunt—could at times not really appreciate the difference between a company and an enterprise. Let us not make that mistake again, because it is crucial.

Secondly, there is no proper US Chapter 11-type proposal in this Bill. I appreciate that the Government are not yet ready to promote this route, but there has not been a proper, informed debate on whether it is a good idea. There are literally trillions of dollars globally looking for a place to invest right now. Perhaps we should allow debtor in possession-type financing so that rescue finance, of course under court approval, could provide an essential lifeline to viable businesses. It must rank at the top of the waterfall and be obtained very early, with some protection for people such as super-senior lenders and others. If there were ever a moment to promote a rescue financing scheme in the UK, this is it.

My last major issue concerns companies that have issued traded bonds of over £10 billion. Under the Bill, they are not eligible for the moratorium. It is important that large companies should be able to access the new proposals. Would my noble friend the Minister reconsider this point? The argument against advancing one of these in the past has been that they do not want to interfere with the proper functioning of the market—a very laudable reason—but when large companies restructure there is often a de facto moratorium. The current drafting catches companies with common security structures and makes them ineligible. This cannot have been the Government’s intention, which is for the moratorium to apply to all companies except financial ones, so let us have the drafting make sure that only financial companies are excluded.

Before I virtually sit down, I have two requests on matters not in the Bill. First, have the Government considered whether it is healthy that the same firm of accountants can be appointed by the bankers to determine the state of a company’s finances and then subsequently be appointed as the administrator or liquidator? I have raised this before; the phrase has been used that it is a bit like seeking medical advice from the undertaker. It is not right and should be stopped. Secondly, I add my voice for the Government to reconsider the Finance Bill’s provisions; making HMRC a preferential creditor right now could be a hammer-blow to businesses, rescue and lending across the UK.