The Corporate Insolvency and Governance Bill: House of Commons debate
04 June 2020
The Corporate Insolvency and Governance Bill had all of its House of Commons stages on 3 June - an unusual step, as Parliamentary scrutiny of new legislation is typically more drawn-out. However, it is a measure of how urgently the Government wishes to introduce the proposals contained in the Bill, which we have called "the biggest change to the UK's insolvency and restructuring framework for almost twenty years", that its progress through Parliament is being undertaken so rapidly.
The measures within the Bill are set out in more detail here; in short, they aim to amend the UK's corporate insolvency framework to give struggling businesses more options to restructure themselves, continue to trade, and find new finance. R3 has long campaigned for many of the new tools within the Bill - once introduced, they should help the UK to improve its spot in the World Bank's 'resolving insolvency' rankings, and, more concretely, they should help the insolvency and restructuring profession as it works to rescue businesses reeling in the wake of the COVID-19 pandemic.
The full transcript of the Corporate Insolvency and Governance Bill debate can be read here.
R3 mentioned in Parliament
There were a wide range of comments from MPs during the debate yesterday - some on the detail of the Bill and how the moratorium and restructuring plan would work, with other more general comments on the importance of supporting specific industries through the current economic crisis. Positively, almost every MP who took part in the debate appeared to support the measures in the Bill, with only question marks around some of the detail.
R3 was mentioned by name in the opening remarks by Business Secretary Alok Sharma MP, alongside other organisations supporting the Bill, including the Federation of Small Businesses, the Institute of Directors, the CBI, the British Chambers of Commerce, and the Trades Union Congress.
HMRC preferential status: Undermining the Bill's effects
We were pleased to see comments from two MPs, Stephen Hammond and Drew Hendry, raising an issue of great concern to the insolvency and restructuring profession: The proposals contained within the Finance Bill, which will grant secondary preferential status to HMRC ('Crown preference') as of 1 December 2020. The insolvency and restructuring profession is overall strongly of the opinion that giving preference to certain kinds of tax debts will damage the UK's business rescue culture, and hamper companies' ability to access floating charge finance such as stocking finance, vital to healthy cashflows and to overall solvency for many businesses. At a time when the Government has put in place substantial measures to support businesses and employment, choosing to undermine its own efforts by placing HMRC further up the queue seems counterproductive and illogical.
Stephen Hammond MP spoke in some detail about our concerns on Crown preference, mentioning R3 by name:
"That leads directly to my next point, which is that the Bill reintroduces the concept of making HMRC a preferential creditor. I am very concerned that all the good work that my right hon. Friend the Secretary of State is doing in this Bill could be unwound by doing that. It could have a really negative impact on business rescuing and lending across the UK. Do not take my word for it: R3, the industry insolvency practitioner, directly makes that point. It goes against a policy, which has encouraged lending to small businesses, that has been in place for some 18 years."
Drew Hendry MP, the SNP Business Spokesperson, opened his remarks by referring to both the Crown preference issue and the 'tax abuse using company insolvencies' measures which R3 has campaigned against extensively. This follows on from his colleague Alison Thewliss MP's tabling of an amendment to the Finance Bill which would limit the extent of HMRC's preferential status, earlier this week (see number 17 on this list).
Having cleared its Commons Stages, the Bill now heads to the Lords for its Second Reading debate next week (Tuesday 9 June). The Lords Committee Stage may then commence the week after - but the Bill could take a few weeks to get through the Lords, as peers will want to go through the Bill line-by-line as they would for any other piece of legislation.
We welcome the anticipated scrutiny of the Bill, and will do our best to convey the views of the insolvency and restructuring profession to interested members of the upper chamber, to make sure that the legislation will, once it hits the statute book, be ready for immediate use in rescuing businesses.
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