Legislative update: The Corporate Insolvency and Governance Bill and the Finance Bill

22 June 2020

Two key Bills are currently approaching the end of their legislative journey: the Corporate Insolvency and Governance Bill, and the Finance Bill.

The former is already at the Lords stage of its route to the statute book, while the latter is still currently in the House of Commons. That said, once it has cleared the Commons, it can be expected to achieve Royal Assent soon after, as, by precedent, Peers are expected not to amend or vote down financial legislation.

The Corporate Insolvency and Governance Bill: Lords’ Committee Stage

Interest from Peers in this Bill and the issues it covered meant the Bill had a second day of debate at Committee Stage last week, instead of the one day it was originally allocated.

The reason? 120 amendments were tabled for discussion. Some were probing – to get a better idea as to why the monitor should be an IP, for example. Others were more focussed on addressing perceived practical issues. (For more detail on the proposed amendments and the discussions around them, read Tuesday’s debate’s Hansard entry here, and Wednesday’s here.)

We were pleased to see two amendments tabled which would have addressed concerns we had raised with parliamentarians in advance of the debate (lowering the threshold for monitors in terms of whether they think the moratorium would lead to the rescue of the company – changing this to ‘could’; and preventing creditors from being able to ‘game’ the moratorium and subsequent super-priority).

However, the Government’s desire for the Bill to move through the House speedily, coupled with the Opposition’s acquiescence to their request for this, meant not all proposed amendments were pushed to a vote and some were withdrawn.

Sadly, this fate befell both the amendments mentioned above, but the Government agreed to table its own amendment to give effect to the second (preventing creditors from gaming the moratorium).

Given the nature of the debate, we were particularly pleased to be mentioned. Baroness Kramer referenced R3 as part of her comments on the need to prevent creditors from “gaming the moratorium”, and Lord Hope of Craighead mentioned R3 in calling for an assurance of changes to the legislation, by regulation rather than primary legislation, to be made if required, once the measures in the Bill had been tested in practice.

There was also a substantial discussion during the second day’s debate on pre-packs and the situation facing the Pre-Pack Pool, where a number of Lords raised the issue of the Government not using its sunset clause power to make referral to the Pool mandatory. Interestingly, the Minister confirmed that Insolvency Service officials would be meeting Pool’s Oversight Group discuss this issue in more detail.

The next steps for this Bill are the Report Stage on Tuesday (23^rd), where the final Government amendments will be made before its final reading in the Commons. It could therefore receive Royal Assent as soon as the end of this week.

Finance Bill 2019-21 – Commons Committee Stage

Tuesday 16^th June also saw the Commons Committee Stage of the Finance Bill, which contains proposals to change HMRC’s insolvency creditor status. (For more on the discussion of all aspects of the Bill, read its entry in Hansard here.)

Our concerns around this proposal and its potential effects were raised by SNP MP Alison Thewliss when she spoke to introduce her tabled amendments to the Bill. Ms Thewliss ended her statement with the words: 

“It is important that the Government look at this matter very carefully and take on board the very substantial concerns that R3 has raised about the proposed policy, hence why we have tabled so many amendments. I would be grateful if the ministerial team could tell us exactly why this change is required and why it has been brought about.” 

Sadly, the Labour Party spoke against her proposals. This was unsurprising as the return of Crown Preference was a pledge in their 2017 tax manifesto but disappointing given the consequences the proposal will have on businesses, jobs and the economy.

As a result of this lack of support, Ms Thewliss did not press these amendments to a vote and withdrew them. 

The end of the chapter, but not the campaign

Given the position of the Opposition and the fact that, as noted above, Peers do not amend or vote down financial legislation, it is likely this Bill will move towards Royal Assent with the HMRC creditor status proposals unchanged.

However, we will continue to highlight the damage the policy will cause and continue to call for the policy to be reversed before and after it has finished its legislative journey.

Look out for further blog posts on both Bills when they receive Royal Assent in the coming weeks. In the meantime, if you would like to discuss either – or both – of them and the proposals they contain, please contact James Jeffreys, R3’s Senior Press, Policy and Public Affairs Manager.