My Lords, these regulations were laid before the House on 24 March this year. It is now over a year since the emergence of Covid-19, and the Government have consistently taken the swift action needed to save lives, limit the spread of the disease, protect the NHS and mitigate damage to the economy. The Government’s successful rollout of the vaccine programme and the implementation of their four-step road map out of lockdown are both reasons for cautious optimism that we will soon enjoy a return to normality. To date, in excess of 35 million people have had their first vaccination and more than 18 million have had their second dose—including me, yesterday. The British public have also risen to the challenge of suppressing the spread of the virus by sticking to the rules: staying at home; getting tested when appropriate; isolating when required; and following the “hands, face, space” and “letting fresh air in” guidance.
However, we are not out of the woods just yet, and the emergence of new strains of the virus mean that now is not the time to become complacent. The continuation of social distancing measures, introduced to limit the spread of the virus and help save lives, is crucial while we wait for everyone to be vaccinated, but this of course continues to have an effect on business. The Government recognise that, while most businesses have been able to reopen and many have received significant financial support, social distancing measures remain and some businesses continue to face uncertainty and financial difficulties, as they are still unable to open or are not yet able to trade at full capacity.
It is therefore crucial that the Government continue to support businesses by giving them every chance to survive, fully reopen and get through this period of uncertainty. This statutory instrument will do that by extending the temporary measures first introduced by the Corporate Insolvency and Governance Act 2020—which were due to expire variously at the end of March or April—by a further three-month period until the end of June 2021. The temporary measures being extended until 30 June 2021 are: first, the suspension on serving statutory demands and the restrictions on filing petitions to wind-up companies; secondly, the small supplier exemption from termination clause provisions; and, thirdly, the suspension of the wrongful trading provisions. In addition, modifications to the moratorium provisions and the temporary moratorium rules are extended until 30 September 2021.
The temporary suspension on serving statutory demands and restrictions on winding-up petitions continue to help many viable companies during these difficult trading conditions by removing the threat of aggressive creditor action at a time when many businesses remain
closed or are unable to operate at full capacity, particularly in the retail, hospitality and events sectors. Extending these measures further will give businesses the confidence and support they need while they are doing their best to reopen safely and return to as normal trading as they can in these unprecedented times.
Noble Lords will know that the Government have already extended the temporary suspension on the ability of commercial landlords to forfeit business tenancies. This will give further protection to tenants who have only recently been able to restart trading after the restrictions introduced because of the most recent lockdown.
Although these measures are intended to help companies that may be subject to aggressive creditor enforcement, the Government have been clear that they are not to be seen as a payment holiday. Where companies can pay their debts, they should of course do so. It is important to note that these measures aim to encourage forbearance and do not extinguish any existing creditor rights or interests. In addition to the protection that these measures give, they are also intended to give those companies with unavoidable accrued arrears caused by the pandemic time to take advice from restructuring professionals and to negotiate and reach agreements with their creditors wherever possible.
I know that many businesses and their business representatives will welcome the continued support that these regulations will give them during this extremely uncertain time. However, I also recognise that these measures will mean a further period of uncertainty for creditors where some of their rights to enforce the recovery of their debts are temporarily restricted. Although we believe that the extension of the statutory demand and winding-up provisions will be particularly welcomed by commercial tenants, it applies to all business sectors of the economy.
Noble Lords will be aware that wrongful trading proceedings are an action that may be taken by an insolvency office-holder against directors, which can lead to a director being held personally liable for losses to a company’s creditors where they allowed the company to continue to trade beyond the point at which it became inevitable that the company would enter formal insolvency proceedings. A successful action may lead to losses being recovered for the benefit of creditors but, more importantly, wrongful trading has a vital role in preventing reckless insolvent trading. The threat of personal liability is a strong deterrent against directors causing companies to continue to trade at the risk of creditors.
The suspension of liability for wrongful trading until 30 June 2021 will allow directors to take steps to save companies that would otherwise be viable but for the impact of the pandemic without the threat that they may be personally penalised for losses incurred during a period of great economic uncertainty if things did not improve and the company later had to enter insolvency proceedings. I should stress that suspending wrongful trading does not give a free pass to directors or allow them to act irresponsibly. Other vital protections for creditors when a company is facing insolvency remain in place, such as the directors’ duties set out in the Companies Act, fraudulent trading or misfeasance actions under the Insolvency Act, and disqualification from acting as a company director.
Finally, the new company moratorium introduced by the Act gives financially distressed companies protection from creditor enforcement while they seek a rescue. In normal economic conditions, the moratorium is intended to work with certain entry criteria that must be met before a company can enter into one. These criteria protect the integrity of the moratorium, which should be used only for those companies with a realistic prospect of rescue. Noble Lords will recall that it was recognised during the debates on the Corporate Insolvency and Governance Act that it would help fundamentally viable companies impacted by the pandemic to make use of the moratorium if these criteria were temporarily relaxed.
These regulations will extend some of those temporary relaxations to 30 September 2021. They include: allowing a company subject to a winding-up petition to access a moratorium simply by filing the relevant documents at court, rather than having to make an application to the court; and, secondly, disapplying the rule that prevents a company entering a moratorium if it has been subject to a company voluntary arrangement, been in administration or been in a previous moratorium within the last 12 months. These regulations will also extend the temporary administrative rules for the moratorium contained in Schedule 4 to the Corporate Insolvency and Governance Act, which enable it to operate.
The important package of temporary measures, first introduced by the Corporate Insolvency and Governance Act last year and by subsequent extensions, continues to be widely welcomed by businesses. We are told by business that these measures, alongside the availability of new permanent tools, have been essential in supporting continued trading, seeking a rescue or restructuring, and allowing many companies to trade without the threat of creditor action being taken against them.
In conclusion, the Government recognise that these measures represent a significant incursion into the normal operation of insolvency legislation, in particular to the rights of creditors, and as such it is right that they are not extended for longer than is absolutely necessary. These temporary measures will, therefore, continue to be kept under constant review. I beg to move.
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