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Select committee: Constitution Committee

7th Report - Corporate Insolvency and Governance Bill

Published 12 June 2020

Constitution Committee Corporate Insolvency and Governance Bill Report on parliament.uk ↗

At a glance4 recommendations · Government response published 19 June 2020 (deadline 12 August 2020)

The government's response

Summary written by Accountability Index from the government's response. It is not the government's own words.

The government agrees to limit the clause 18, clause 22 and clause 39 delegated powers, but does not change the permanent provisions or the retrospective measures, saying it considers the latter an "exceptional case".

  • On the clause 39 power to extend temporary provisions, the government agrees and "will add the condition recommended" so it can only be used to deal with the effects of COVID-19.
  • On the clause 18 power, it agrees that restrictions should be put in place, adding a condition that the Secretary of State "must be satisfied of the urgency of the situation" before it is exercised. For clause 22, it will add a limit so the expiry date cannot be extended beyond 2 years after Royal Assent.
  • On retrospective effect for wrongful trading, it does not amend the Bill as recommended, saying a retrospective presumption "would not cure the problem this measure seeks to address" and that the provisions "strike the right balance".
  • On paragraph 7 of Schedule 10, it does not consider affected creditors to have suffered as a result of retrospective application, and notes that any contribution will be at the court's discretion.

Read the government's response ↗ Report an error

Sources

Recommendations and conclusions 4

  1. 12
    We recommend the permanent provisions in the Bill are subject to a sunset clause in... Recommendation Recommendation (the committee's words)
    We recommend the permanent provisions in the Bill are subject to a sunset clause in line with the amended procedure for the temporary measures that we propose below.
  2. 24
    We recommend that the Bill be amended such that the retrospective effect of clause 10... Recommendation Recommendation (the committee's words)
    We recommend that the Bill be amended such that the retrospective effect of clause 10 does not completely protect the actions of company directors taken between 1 March 2020 and when the Act comes into force . Creditors should not be precluded from taking legal action against directors for wrongful trading during that period if they can discharge any burden of proving that the instance of wrongful trading has no connection to financial distress induced by the pandemic.
  3. 31
    We recommend the Government set out its justification for the retrospective application of provisions in... Recommendation Recommendation (the committee's words)
    We recommend the Government set out its justification for the retrospective application of provisions in the Bill, including an assessment of their compliance with the rule of law.
  4. 32
    We recommend that the Government considers measures to make the imposition of retrospective legislation strictly... Recommendation Recommendation (the committee's words)
    We recommend that the Government considers measures to make the imposition of retrospective legislation strictly proportionate to the Bill’s aims, rather than a form of punishment for those who exercised rights which were valid at the time. One option is to remove paragraph 7 of schedule 10. Another is to introduce powers enabling payment of compensation to those who suffered retrospectively imposed loss as a result of the Bill. Delegated powers