Fast-track legislation
78 The Government intends to ask Parliament to expedite the parliamentary progress of this Bill. In their report on Fast-track Legislation: Constitutional Implications and Safeguards, 1 the House of Lords Select Committee on the Constitution recommended that the Government should provide more information as to why a piece of legislation should be fast-tracked. 2
Why is fast-tracking necessary?
79 The Government has carefully considered the implications of using the fast-track process for the passage of this Bill. Due to the COVID-19 pandemic, many UK companies face the threat of insolvency owing to significant trading difficulties brought on by this crisis. Consequently, the measures in this Bill need to be brought in as soon as possible to provide businesses with the flexibility and breathing space they need to continue trading during this difficult time.
. W hat is the justification for fast-tracking each element of the bill?
80 All of the provisions in this Bill are aimed at supporting UK companies by creating an environment where companies are supported to survive the COVID-19 emergency and able to continue as going concern. It is therefore important the entire Bill is fast-tracked.
Insolvency framework measures: moratorium, arrangements and reconstructions for companies in financial difficulty (restructuring plan), termination clauses in supply contracts
81 The financial shock caused by COVID-19 is expected to result in more companies facing insolvency. This rescue reform package requires accelerated introduction to give companies the best chance of surviving during the COVID-19 pandemic and beyond.
Suspension of Wrongful Trading Liability
82 This temporary suspension of wrongful trading liability will give company directors assurance that they will not be held personally liable for using their best efforts to continue to trade the company during this emergency, should the company ultimately fail. By doing this, directors of companies that would be viable but for the uncertainty caused by COVID-19 will be more likely to continue a company’s trading. If legislation is not brought forward as soon as possible, it may trigger a wave of unnecessary insolvencies.
Statutory Demands and Winding-up petitions
83 There is evidence that the winding-up process is already being used by some landlords as a debt collection mechanism against companies affected by the pandemic. It is important to extend protection to tenant companies in particular as soon as possible in order to prevent such actions from negating the intent of the measures contained within the Coronavirus Act 2020 to protect tenants at a time when they cannot trade.
Meetings and filing requirements
84 To support companies and other bodies in a timely manner at a time when businesses are under significant pressure as a consequence of COVID-19 so that companies can focus their resources on keeping their businesses going in this uncertain time. To ensure companies and other bodies can hold AGMs and other meetings in a manner consistent with the need to limit the spread of coronavirus and in compliance with statutory requirements and their constitutional arrangements.
What efforts have been made to ensure the amount of time made available for parliamentary scrutiny has been maximised?
85 In order for the measures included in this Bill to be as effective as possible in supporting UK companies, Royal Assent needs to be secured as soon as possible. Consequently, the Government will ask Parliament to expedite the parliamentary progress of this Bill. Discussions have been held with Opposition parties to inform them of the content of the Bill and a draft of the Bill was sent to, amongst others, the Shadow Secretary of State for Business, Energy and Industrial Strategy, and the Convenor of the Crossbench Peers in the Lords.
To what extent have interested parties and outside groups been given an opportunity to influence the policy proposal?
86 The Government has discussed the policy proposals of the Bill with Opposition parties.
Insolvency framework measures: moratorium, arrangements and reconstructions for companies in financial difficulty (restructuring plan), termination clauses in supply contracts
87 The Government previously consulted on changes to the corporate insolvency regime. 93 responses were received. The Government announced plans to introduce new insolvency rescue and restructuring procedures in August 2018. 3 This Bill will implement these reforms but with the addition of time limited provisions to cater for the immediate economic impact of the COVID-19 pandemic.
88 The Government announced its intention to introduce legislation to reform the insolvency framework in an announcement by the Secretary of State for BEIS on 28 March 2020.
Suspension of wrongful trading liability
89 This is a temporary measure to support company directors to continue to trade companies during the COVID-19 crisis, without the threat of personal liability. The Government announced its intention to introduce this legislation on 28 March 2020.
Statutory Demands and Winding-up petitions
90 As advance knowledge of this measure could have led to some creditors bringing forward winding-up petitions to avoid being caught by the restriction and therefore undermining the policy objective of protecting businesses, it was not possible to undertake consultation prior to its announcement.
Meetings and filing requirements
91 Relevant stakeholders in the corporate and legal fields have been consulted on this policy and it has been developed in close collaboration with Companies House, the Financial Conduct Authority (in relation to mutual societies and registered branches) and the Charity Commission (in relation to charitable incorporated organisations).
Does the bill include a sunset clause (as well as any appropriate renewal procedure)? If not, why does the Government judge that their inclusion is not appropriate?
92 The company law measures, suspension of wrongful trading liability, and statutory demands and winding-up petitions measures are all are time limited measures introduced to support UK companies during the COVID-19 crisis. The suspension of wrongful trading liability, and statutory demands and winding-up petitions measures will expire on 30 June 2020 or one month after the coming into force of this Bill, whichever is the later. The AGM measures will expire on 30 September 2020 and the filing requirements measure will expire on 5 April 2021. Some of these provisions will be extendable and it will be possible to extend some provisions of the Bill while letting others expire if they are deemed no longer necessary.
93 The insolvency framework measures (i.e. moratorium, arrangements and reconstructions for companies in financial difficulty (restructuring plan), and termination clauses in supply contracts) are all permanent measures. They have previously been consulted on, in August 2018, the government announced plans to introduce new insolvency restructuring procedures. Additional time-limited measures will be introduced to support business during the COVID-19 pandemic.
Are mechanisms for effective post-legislative scrutiny and review in place? If not, why does the Government judge their inclusion is not appropriate?
94 The company law measures, suspension of wrong trading liability, and statutory demands and winding-up petitions measures are all temporary measures. The permanent measures will be reviewed as and when appropriate.
Has an assessment been made as to whether existing legislation is sufficient to deal with any or all of the issues in question?
95 An impact assessment has been carried out on both the permanent measures and the temporary measures to confirm that existing legislation is not sufficient to deal with the issues this Bill addresses. The impact assessment on the permanent measures can be found published alongside this document. The economic assessment and regulatory impact of the temporary measures can be found in Annex B.
Has the relevant parliamentary committee been given the opportunity to scrutinise the legislation?
96 The chair of BEIS Select Committee was engaged prior to the introduction of this legislation.