Small Business, Enterprise and Employment Bill (HL Bill 91)

Part 1 Access to finance

Assignment of receivables

1 Power to invalidate certain restrictive terms of business contracts

(1) 5The appropriate authority may by regulations make provision for the purpose
of securing that any non-assignment of receivables term of a relevant
contract—

(a) has no effect;

(b) has no effect in relation to persons of a prescribed description;

(c) has effect in relation to persons of a prescribed description only for such
purposes as may be prescribed.

(2) A “non-assignment of receivables term” of a contract is a term which prohibits
5or imposes a condition, or other restriction, on the assignment (or, in Scotland,
assignation) by a party to the contract of the right to be paid any amount under
the contract or any other contract between the parties.

(3) A contract is a relevant contract if—

(a) it is a contract for goods, services or intangible assets (including
10intellectual property) which is not an excluded financial services
contract, and

(b) at least one of the parties has entered into it in connection with the
carrying on of a business.

(4) An “excluded financial services contract” is a contract which—

(a) 15is for financial services (see section 2) or is a regulated agreement
within the meaning of the Consumer Credit Act 1974 (see section 189 of
that Act); and

(b) is of a prescribed description.

(5) “Prescribed” means prescribed by the regulations.

(6) 20The “appropriate authority” means—

(a) in relation to contracts to which the law of Scotland applies, the Scottish
Ministers, and

(b) in relation to other contracts, the Secretary of State.

(7) The power of the Scottish Ministers to make regulations under this section
25includes power to make such provision as the Scottish Ministers consider
appropriate in consequence of the regulations.

(8) The power conferred by subsection (7) includes power—

(a) to make transitional, transitory or saving provision;

(b) to amend, repeal, revoke or otherwise modify any provision made by
30or under an enactment (including an enactment contained in this Act
and any enactment passed or made in the same Session as this Act).

(9) In subsection (8) “enactment” includes an Act of the Scottish Parliament.

(10) Regulations under this section—

(a) if made by the Scottish Ministers, are subject to the affirmative
35procedure;

(b) if made by the Secretary of State, are subject to affirmative resolution
procedure.

2 Section 1(4)(a): meaning of “financial services”

(1) In section 1(4)(a) “financial services” means any service of a financial nature,
40including (but not limited to)—

(a) insurance-related services consisting of—

(i) direct life assurance;

(ii) direct insurance other than life assurance;

(iii) reinsurance and retrocession;

(iv) insurance intermediation, such as brokerage and agency;

(v) services auxiliary to insurance, such as consultancy, actuarial,
risk assessment and claim settlement services;

(b) banking and other financial services consisting of—

(i) 5accepting deposits and other repayable funds;

(ii) lending (including consumer credit, mortgage credit, factoring
and financing of commercial transactions);

(iii) financial leasing;

(iv) payment and money transmission services (including credit,
10charge and debit cards, travellers’ cheques and bankers’ drafts);

(v) providing guarantees or commitments;

(vi) financial trading (as defined in subsection (2));

(vii) participating in issues of any kind of securities (including
underwriting and placement as an agent, whether publicly or
15privately) and providing services related to such issues;

(viii) money brokering;

(ix) asset management, such as cash or portfolio management, all
forms of collective investment management, pension fund
management, custodial, depository and trust services;

(x) 20settlement and clearing services for financial assets (including
securities, derivative products and other negotiable
instruments);

(xi) providing or transferring financial information, and financial
data processing or related software (but only by suppliers of
25other financial services);

(xii) providing advisory and other auxiliary financial services in
respect of any activity listed in sub-paragraphs (i) to (xi)
(including credit reference and analysis, investment and
portfolio research and advice, advice on acquisitions and on
30corporate restructuring and strategy).

(2) In subsection (1)(b)(vi) “financial trading” means trading for own account or
for account of customers, whether on an investment exchange, in an over-the-
counter market or otherwise, in—

(a) money market instruments (including cheques, bills and certificates of
35deposit);

(b) foreign exchange;

(c) derivative products (including futures and options);

(d) exchange rate and interest rate instruments (including products such as
swaps and forward rate agreements);

(e) 40transferable securities;

(f) other negotiable instruments and financial assets (including bullion).

Business payment practices

3 Companies: duty to publish report on payment practices

(1) The Secretary of State may by regulations impose a requirement, on such
45descriptions of companies as may be prescribed, to publish, at such intervals
and in such manner as may be prescribed, prescribed information about the

company’s payment practices and policies relating to relevant contracts of a
prescribed description.

(2) For the purposes of this section—

• “company” has the meaning given by section 1(1) of the Companies Act
  52006 (but see subsection (3));

• a contract is a “relevant contract” if—

  (a)

  it is a contract for goods, services or intangible assets (including
  intellectual property), and

  (b)

  the parties to the contract have entered into it in connection
  10with the carrying on of a business;

• “prescribed” means prescribed by the regulations.

(3) The regulations may not impose a requirement on a company in relation to any
time during which—

(a) it qualifies as a micro-entity for the purposes of section 384A of the
15Companies Act 2006,

(b) the small companies regime under that Act applies to it (see section 381
of that Act), or

(c) it qualifies as medium-sized for the purposes of section 465 or 466 of
that Act.

(4) 20“The company’s payment practices and policies” has such meaning as may be
prescribed and the information which may be prescribed may, in particular,
include information—

(a) about the standard payment terms of the company and whether these
are part of any code of conduct or code of ethics of the company,

(b) 25about payment terms of the company which are not standard,

(c) about the processing and payment of invoices,

(d) by reference to such codes of conduct or standards as may be
prescribed and as are applicable to companies generally or to
companies of a prescribed description,

(e) 30about disputes relating to the payment of invoices, including any
dispute resolution mechanism that the company uses,

(f) about payments incurred by the company due to late payment of
invoices.

(5) The regulations may require that information published in accordance with the
35regulations must be approved or signed by such description of person as may
be prescribed.

(6) The regulations may require such of the information required to be published
as may be prescribed to be given, in such form as may be prescribed, to
prescribed persons.

(7) 40The regulations may make provision for a prescribed breach by a prescribed
description of person of a requirement imposed by the regulations to be an
offence punishable on summary conviction—

(a) in England and Wales, by a fine;

(b) in Scotland or Northern Ireland, by a fine not exceeding level 5 on the
45standard scale.

(8) Until section 85(2) of the Legal Aid, Sentencing and Punishment of Offenders
Act 2012 comes into force, in subsection (7)(a), “a fine” is to be read as “a fine
not exceeding level 5 on the standard scale”.

(9) Before making regulations under this section the Secretary of State must
consult such persons as the Secretary of State considers appropriate.

(10) Regulations under this section are subject to affirmative resolution procedure.

Financial information about businesses

4 5Small and medium sized businesses: information to credit reference agencies

(1) The Treasury may make regulations that impose—

(a) a duty on designated banks to provide information about their small
and medium sized business customers to designated credit reference
agencies, and

(b) 10a duty on designated credit reference agencies to provide information
about small and medium sized businesses to finance providers.

(2) The regulations must provide that the duty in subsection (1)(a) only applies
where—

(a) a credit reference agency makes a request to a bank, and

(b) 15the business customer to whom the information relates has agreed to
the information being provided to a credit reference agency.

(3) The regulations must provide that the duty in subsection (1)(b) only applies
where—

(a) a finance provider makes a request to a credit reference agency, and

(b) 20the business to whom the information relates has agreed to the
information being provided to the finance provider.

(4) The regulations may provide that the duty in subsection (1)(b) only applies
where other conditions are met, such as the finance provider—

(a) complying with the credit reference agency’s terms and conditions, and

(b) 25providing information on its small and medium sized business
customers to the credit reference agency (subject to the agreement of
those customers).

(5) The regulations must describe the information—

(a) to which the duty in subsection (1)(a) applies;

(b) 30to which the duty in subsection (1)(b) applies;

(c) which may be required as mentioned in subsection (4)(b).

(6) The regulations may make provision about—

(a) how a request for information must be made by a credit reference
agency or finance provider;

(b) 35the time period within which information must be provided following
a request;

(c) the form in which information must be provided;

(d) how a business may indicate agreement for the purposes of subsection
(2)(b), (3)(b) or (4)(b) (and for the purposes of subsection (2)(b) this may
40include imposing an obligation on a designated bank to include an
appropriate term in its standard terms and conditions or to otherwise
seek agreement).

(7) The regulations must make provision for the designation of banks and credit
reference agencies by the Treasury, and the regulations may in particular
provide for—

(a) conditions that must be met for a bank or credit reference agency to be
5designated;

(b) considerations that the Treasury may take into account before deciding
whether to designate a bank or credit reference agency;

(c) the Treasury to consider the advice of another person before making a
designation;

(d) 10the procedure for designating a bank or credit reference agency;

(e) how the list of designated banks and credit reference agencies must be
published;

(f) the revocation of a designation.

5 Small and medium sized businesses: information to finance platforms

(1) 15Where—

(a) a small or medium sized business has applied to a designated bank for
a loan or other credit facility, and

(b) the application has been unsuccessful,

the Treasury may by regulations impose a duty on the bank to provide
20specified information about the business to designated finance platforms.

(2) The regulations—

(a) must provide that the duty only applies where the business to which
the information relates agrees to its information being provided to the
designated finance platforms;

(b) 25may require a bank—

(i) to seek the agreement of a business for the purposes of
paragraph (a);

(ii) to ask the business for any of the specified information that the
bank does not already have;

(iii) 30to provide the information to the finance platforms within a
specified time period.

(3) The regulations may make further provision about the duty in subsection (1),
which may in particular include provision about—

(a) the types of loans and credit facilities that trigger the duty,

(b) 35the circumstances in which an application is to be considered
unsuccessful, and

(c) the finance platforms to which information must be provided.

(4) Where a finance platform has received information by virtue of subsection (1),
the Treasury may by regulations—

(a) 40impose a duty on the finance platform to provide specified information
to all finance providers requesting access to the information, and

(b) impose a duty on the finance platform to provide specified information
about a particular business to a finance provider where—

(i) the finance provider has requested information about the
45business, and

(ii) the business has agreed to its information being provided to the
finance provider.

(5) Information specified for the purposes of subsection (4)(a) must be in such a
form that no individual business, and no person associated with the business,
can be identified.

(6) The regulations may provide that the duty in subsection (4)(a) or (b) does not
5apply unless—

(a) the finance provider or business agrees to the finance platform’s terms
and conditions;

(b) the finance provider complies with specified requirements about the
use and disclosure of the information.

(7) 10The regulations may make further provision about the duties in subsection
(4)(a) and (b), including in particular provision—

(a) requiring the finance platform to provide the information within a
specified time period;

(b) setting out how a request by a finance provider must be made to a
15finance platform;

(c) setting out how a business may indicate agreement for the purposes of
subsection (4)(b)(ii);

(d) about the time period for which information must be kept by the
finance platform;

(e) 20about the removal of information from the finance platform.

(8) The regulations may make provision—

(a) prohibiting finance platforms from charging fees to small and medium
sized businesses, or

(b) permitting finance platforms to charge fees to small and medium sized
25businesses.

(9) The regulations must make provision for the designation of banks and finance
platforms by the Treasury, and the regulations may in particular provide for—

(a) conditions that must be met for a bank or finance platform to be
designated;

(b) 30considerations that the Treasury may take into account before deciding
whether to designate a bank or finance platform;

(c) the Treasury to consider the advice of another person before making a
designation;

(d) the procedure for designating a bank or finance platform;

(e) 35how the list of designated banks and finance platforms must be
published;

(f) the revocation of a designation.

(10) In this section “specified” means specified or described in the regulations.

6 Sections 4 and 5: supplementary

(1) 40Regulations under sections 4 and 5 may make provision enabling the Financial
Conduct Authority to take action for monitoring and enforcing compliance
with the regulations.

(2) The regulations may apply, or make provision corresponding to, any of the
provisions of the Financial Services and Markets Act 2000 or subordinate
45legislation made under that Act, with or without modification.

(3) Those provisions include in particular—

(a) provisions about investigations, including powers of entry and search
and criminal offences;

(b) provisions for the grant of an injunction (or, in Scotland, an interdict) in
relation to a contravention or anticipated contravention;

(c) 5provisions giving the Financial Conduct Authority powers to impose
disciplinary measures (including financial penalties) or to give
directions;

(d) provisions giving a Minister of the Crown (within the meaning of the
Ministers of the Crown Act 1975) or the Financial Conduct Authority
10powers to make subordinate legislation;

(e) provisions for the Financial Conduct Authority to charge fees.

(4) Regulations under sections 4 and 5 may make provision that enables
complaints about the activities of designated credit reference agencies or
designated finance platforms to be dealt with under the scheme established by
15Part 16 of the Financial Services and Markets Act 2000 (financial ombudsman
scheme), and for that purpose the regulations may—

(a) apply, or make provision corresponding to, any of the provisions of
that Part or rules made under that Part (with or without modifications);

(b) impose obligations on—

(i) 20the Financial Conduct Authority;

(ii) the scheme operator (within the meaning of that Part);

(iii) an ombudsman (within the meaning of that Part).

(5) Regulations under section 4 may impose a duty on designated credit reference
agencies to provide information received by virtue of section 4(1)(a) or (4)(b) to
25the Bank of England, and may allow or require the Bank of England to share
that information with persons or for purposes specified or described in the
regulations; but the regulations must include provision protecting the
confidentiality of information so provided.

(6) Regulations under section 4 may provide that a failure to comply with a duty
30imposed by virtue of section 4(1) may be actionable at the suit of a person who
has suffered loss as a result of it (subject to the defences and other incidents
applying to actions for breach of statutory duty).

(7) Regulations under section 4 may provide that the following provisions apply
to designated credit reference agencies in the same way as they apply to credit
35reference agencies within the meaning of those provisions—

(a) sections 157 to 160 of the Consumer Credit Act 1974 (duties to disclose
and correct information) and regulations made under those sections;

(b) section 7 of the Data Protection Act 1998 (right of access to personal
data) and regulations made under that section;

(c) 40section 9 of the Data Protection Act 1998 (right of access to personal
data where data controller is credit reference agency) and regulations
made under that section.

(8) Regulations under section 4 may provide a small or medium sized business
with the right to apply to a court for an order to rectify, block, erase or destroy
45data held about the business by a designated credit reference agency.

(9) Regulations under section 5 may impose a duty on designated finance
platforms to provide statistical information to the Treasury.

(10) Regulations under section 4 or 5 are subject to affirmative resolution
procedure.

7 Sections 4 to 6: interpretation

(1) For the purposes of sections 4 to 6, a business is a small or medium sized
5business if—

(a) it has an annual turnover of less than £25 million,

(b) it carries out commercial activities,

(c) it does not carry out regulated activities as its principal activity, and

(d) it is not owned or controlled by a public authority.

10Regulations under those sections may make further provision for the purposes
of determining which businesses they apply to (including provision about the
calculation of turnover and the determination of control).

(2) In sections 4 to 6 and this section—

• “designated bank” means a bank that has been designated by the Treasury
  15by virtue of section 4(7) or 5(9);

• “designated credit reference agency” means a credit reference agency that
  has been designated by the Treasury by virtue of section 4(7);

• “designated finance platform” means a finance platform that has been
  designated by the Treasury by virtue of section 5(9);

• 20“finance platform” means a person that provides a service for the
  exchange of information between finance providers and businesses
  that require finance;

• “finance provider” means—

  (a)

  a body corporate that lends money or provides credit in the
  25course of a business,

  (b)

  arranges or facilitates the provision of debt or equity finance, in
  the course of a business, or

  (c)

  provides, arranges or facilitates invoice discounting or factoring
  in the course of a business, (and regulations under sections 4
  30and 5 may make further provision for the purpose of
  determining which finance providers they apply to);

• “public authority” has the same meaning as in the Freedom of
  Information Act 2000 (see section 3 of that Act);

• “regulated activities” has the same meaning as in the Financial Services
  35and Markets Act 2000 (see section 22 of that Act);

• “subordinate legislation” has the same meaning as in the Interpretation
  Act 1978 (see section 21 of that Act).

(3) The Treasury may by regulations change the figure for the time being specified
in subsection (1)(a).

(4) 40Before making regulations under subsection (3) the Treasury must consult
such persons as they consider appropriate.

(5) Regulations under subsection (3) are subject to affirmative resolution
procedure.