My Lords, I am pleased to introduce a statutory instrument laid before the House on 13 August. The Joint Committee on Statutory Instruments reported the regulations for unexpected use of the enabling powers due to an issue regarding inconsistency with regulations made by the Department for Work and Pensions. I shall discuss this in detail later in my speech. The Secondary Legislation Scrutiny Committee has not drawn the House’s attention to this instrument.
Before moving on to the detail of the instrument, I just take this opportunity to pay tribute to the role that charities all around our four nations have been playing in the national fight against coronavirus. They have been crucial in supporting communities, delivering food, combating loneliness and many other aspects, and we recognise that contribution.
The regulations we are discussing today make minor and technical modifications to the way that the Insolvency Act 1986 applies to charitable incorporated organisations,
via the Charitable Incorporated Organisations (Insolvency and Dissolution) Regulations 2012. They are necessary due to amendments to the Insolvency Act 1986 by the Corporate Insolvency and Governance Act 2020, which received Royal Assent on 25 June 2020.
The Corporate Insolvency and Governance Act 2020 delivered a package of measures, including an amendment to insolvency law allowing corporate bodies, including charitable incorporated organisations, to continue trading while exploring options for rescue and restructure to avoid insolvency; and to provide them with temporary flexibility to hold their annual general meetings online or postpone them. This is to ensure that such meetings are held safely, and in line with the restrictions on movement and gatherings.
A key measure in the Act is the introduction of a new, free-standing moratorium procedure intended to give corporate bodies, including charitable incorporated organisations, regulated breathing space to explore restructure options, free from creditor action. The new moratorium provisions were applied by adding a new Part A1 to the Insolvency Act 1986. The amendments to the Insolvency Act 1986 apply to charitable incorporated organisations. However, this instrument disapplies provisions of the moratorium procedure that are not applicable or relevant to CIOs. These ensure the effective application of the moratorium provisions to CIOs and avoid unnecessary complexity for those relying on them.
The regulations also contain a slightly more substantive provision, which is to ensure that a CIO cannot apply to the Charity Commission for solvent voluntary dissolution during a moratorium period during which it is protected from creditor action. The voluntary dissolution procedure is unique to CIOs. It allows a solvent CIO to apply to the commission for it to be wound up, subject to its remaining assets—after settling all liabilities—being passed to another charity with the same or similar purposes. We would expect a CIO to exit a moratorium before making an application for solvent, voluntary dissolution, and the regulations reflect this.
As I mentioned at the start of my speech, the Joint Committee on Statutory Instruments reported the regulations for unexpected use of the enabling powers. Our approach in applying the new moratorium procedure to CIOs was to simplify the moratorium regime. Therefore we disapplied provisions considered unnecessary or extremely unlikely to have any practical application to such organisations. This included disapplying Section A51 of the Insolvency Act 1986, which provides power to make provision in regulations in connection with pension schemes. However, on 6 July 2020, the DWP used this provision to enact secondary legislation to extend its Pension Protection Fund moratorium provisions to CIOs. DCMS considers the likelihood of the Pension Protection Fund needing to intervene in a moratorium of a CIO as extremely low. However, to ensure that all relevant corporate forms are covered by the provision, DCMS will bring forward legislation, when parliamentary time allows, to enable these provisions to apply to CIOs. In the meantime, we do not anticipate there being any practical impacts on stakeholders whatever.
The JCSI report asks what communication took place between DCMS and the Department for Work and Pensions before either this SI or the DWP SI were made. Due to the urgency with which both sets of regulations were being made, unfortunately only limited communication took place but we have already taken steps to ensure better co-ordination in the future.
I bring one further issue to the attention of the House. DCMS made an initial set of regulations on 6 July but, due to an administrative error, the draft submitted was not the final draft of the instrument and therefore it included inaccuracies. Once this error was identified, DCMS made correcting regulations—the ones we are discussing today—as quickly as possible on 12 August. The department does not believe that stakeholders suffered or were inconvenienced in any way due to this error as the amendments are minor and technical and it is extremely unlikely they will have been relied on within the relevant period. However, DCMS wrote to the Joint Committee on Statutory Instruments to apologise. Having corrected this error, these regulations will be of great benefit to CIOs that wish to use the moratorium procedure, and I commend them to the House. I beg to move.
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