Amendment tabled, rebuttal encouraged: Peers speak on the profession’s behalf

26 November 2021

This month, the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill continued its journey through parliament with a Committee Stage debate in the House of Lords.

We’ve outlined our views around this proposed piece of legislation in an earlier blog, but a key feature of this debate was the tabling of an amendment to the Bill by Lord Fox, Liberal Democrat Spokesperson for Business, Energy and Industrial Strategy.

His amendment sought to reflect some of the concerns we have also expressed about the legislation: that it may be used to mainly benefit the Government as a creditor, rather than the body of creditors as a whole; and that the Insolvency Service may need additional funding to investigate and take action on the additional cases it will deal with as a result of the legislation.

It would have required the Government to do two things. Firstly, it would need to report how much money has been returned to creditors from investigations carried out under this legislation – a report which would include a breakdown of the proportion of returns to the Government and therefore the amount returned to other creditors.

Secondly, the Secretary of State would be required to report on the resources and the powers available to the Department for Business, Energy and Industrial Strategy, and the Insolvency Service, in relation to this Act.

Heard, but not passed

Although the amendment was not moved, the issues it highlighted were raised by both Lord Fox and Lord Leigh.

Lord Fox raised our point that “the Government are in danger of not dealing with the loophole to deter fraudulent behaviour because this legislation is so tightly focused on bounce-back loan fraud” where it is the major creditor. He asked the Minister to confirm that dissolved companies will be put through an insolvency process to ensure that returns to creditors can be made.

Lord Fox also highlighted that there are many other creditors in fraud cases and that “this Bill risks becoming a missed opportunity to help this wider body of individuals and business if it is used to recoup government money only.”

Lord Leigh emphasised that “the acid point we really need to be told is how much money is recovered from directors through this route for creditors other than HM Government.”

In response, Lord Callanan, the Insolvency Minister, said in response that: “Each disqualification case is assessed on public interest grounds, and the impact on government—and other—creditors will of course always be included in that assessment.”

Lord Leigh also queried whether the legislation around Compensation Orders will be widened to benefit other creditors, and whether dissolved companies with culpable directors will be restored to the Companies Register and then put through an insolvency process, in order to identify other frauds and opportunities to seek redress for the whole body of creditors.

Lord Callanan replied that the court can order that compensation be paid to more than one creditor and highlighted that publicised Compensation Order applications will act as a deterrent. We hope that these points will be debated in more depth at the Bill’s Report Stage.

A rebuttal opportunity

A significant feature of the debate saw Lord Fox and Lord Leigh rebut criticisms of the profession made by Lord Sikka in previous debates on the Bill.

Lord Fox noted that Lord Sikka’s speech “characterised the whole insolvency and restructuring profession in a universally negative way” but that although “there are always examples of bad behaviour, I put on record that that is not my experience.”

We were also pleased to see Lord Leigh state that there should be “a right of reply for the insolvency profession…on some of the very serious accusations” made by Lord Sikka.

This is the first time we have seen parliamentarians call for the profession to have a fair hearing and to have an opportunity to further respond to Lord Sikka’s remarks.

We will continue to engage with parliamentarians to secure this right of reply and to promote the profession and its interests as new legislation is proposed, debated and passed into law.