I rise to talk about this clause, which comes at a strange place in the Bill. We did actually discuss much of this in the Small Business, Enterprise and Employment Bill, and I made the probably too political point then that we have not seen much of insolvencies recently, but that does not mean that we will not—we will, because the cycle will turn round and there will be more insolvencies. So now is a good time to think about how to avoid some of the mistakes that were made last time round.
I had not realised that this report had been published today. I think it might be the Teresa Graham report. Teresa Graham has come up with some extremely helpful ideas, which we discussed during the Small Business, Enterprise and Employment Bill. The best ideas included having a panel appointed to approve any pre-pack and that panel comprising people either of the R3 Group or the Turnaround Management Association or some such other organisation. I think there is a need for a panel. The other suggestion was that a review needs to be undertaken by an independent third party to assess the viability of any business going through a pre-pack.
I think there are not that many pre-packs in number, but they can be extremely helpful. I declare an interest as I am on the board of a retailer—not that my business has done this. For many retailers, they are particularly helpful because of the peculiar nature of
UK property law, which is that people get stuck in these long-term contracts under different conditions and the only way they can get out of these contracts is to use a pre-pack. Therefore, they have a purpose and they have a role.
If I can help, because I shared the confusion of my noble friend Lord Hodgson, I think what is meant in Amendment 52ZA by “the owners” is the majority owners, the shareholders, who must approach the minority investors. In the absence of the noble Lord, Lord Mendelsohn—if I can read his mind—that clearly makes sense but, of course, it is going to be extremely difficult where public companies go through a pre-pack, which does happen, for them to contact all the investors. In paragraph (b), where it says,
“any personnel advising on pre-pack proceedings”,
I am not sure whether that is meant to include accountancy firms, and whether personnel means internal or external. I have argued for many years that there should be much greater investigation into the role of accountancy firms in insolvency situations. They are often called in by the banks to investigate a company, but they have an incentive for their report to recommend an insolvency procedure because they are immediately subsequently appointed as the administrator, receiver or liquidator. I can see the economic argument for and benefit of that, but I have also seen instances where, frankly, the accountancy firm concerned has just pushed a perfectly good company into administration and extracted millions of pounds of fees—I do not exaggerate—through that insolvency procedure.
These amendments are welcome to the extent that they raise these questions. There is a particular problem with the interaction between current insolvency legislation and the current employment legislation, which leads to the sort of situation discussed earlier. There needs to be a much more holistic approach to both employment and insolvency law because people in such circumstances are often under extreme pressure of all sorts. It is difficult for them to clarify their legal position at extreme speed. We must try to find a way to assist people.
I particularly welcome and am interested in Amendment 52ZD, which seems to have its roots in Chapter 11. That is a proposal that merits further discussion and reflection, perhaps on another Bill at another time, but it is good to see it raised in a Bill that has the title “Enterprise”.
6.45 pm