Small Business, Enterprise and Employment Bill: Legislative Consent Motion

Executive Committee Business – in the Northern Ireland Assembly at 5:30 pm on 20 January 2015.

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Photo of Arlene Foster Arlene Foster DUP 5:30, 20 January 2015

I beg to move

That this Assembly endorses the principle of the extension to Northern Ireland of the provisions of the Small Business, Enterprise and Employment Bill, as amended in Committee in the House of Commons, dealing with assignment of receivables contained in clauses 1 and 2; business payment practices in clause 3; liability of bodies concerned with accounting standards in clause 37; and companies transparency, company filing requirements and directors' disqualification in Parts 7 to 9 and schedules 3 to 6 and 8.

The Small Business, Enterprise and Employment Bill was introduced to Parliament on 25 June 2014. It is an extensive Bill that has two fundamental purposes, one of which is to help small businesses to grow and succeed and the other is to ensure that the United Kingdom continues to be regarded as a trusted and fair place in which to do business.

The Bill covers a wide range of measures and includes matters that are not devolved. However, Assembly consent is required for amending clauses, which make changes to the Companies Act 2006, the Company Directors Disqualification (Northern Ireland) Order 2002 and the Insolvency (Northern Ireland) Order 1989.

The key measures in the Bill concerning company law arise partly from commitments made by the Prime Minister and his G8 counterparts at the G8 summit in County Fermanagh in 2013. Those commitments are aimed at improving transparency in how companies do business, helping to build trust and confidence in the conduct of companies, and protecting the interests of consumers and shareholders by strengthening safeguards against misconduct by company directors.

We need to ensure that companies in Northern Ireland are trusted and transparent so that they cannot conceal ownership or control and so that they engage in good corporate behaviour. Increased transparency of company control will help deter, identify and sanction those who hide their interest in companies to facilitate illegal activities, as well as create a more trusted business environment generally.

In keeping with the commitment to greater transparency, the Bill will create a requirement for a company to keep a register of the people who have significant control over that company and its beneficial owners and to provide that information to Companies House, where it will be publicly available.

In addition, the Bill will abolish the creation of bearer shares and provide a nine-month period for the conversion of existing shares to registered shares. Bearer shares are unregistered shares owned by whomever physically holds the share warrant. That makes them anonymous and easily transferable, which creates the potential for misuse for money laundering and tax evasion. The Bill will remove that potential facility for unethical or criminal activity and help ensure compliance with international standards.

The final element of the transparency agenda will create a requirement for all company directors to be natural persons. Previously, it was possible for entities such as companies or organisations as well as individuals to be appointed directors. The change will mean that only individual persons will be permitted to act as company directors. Again, that is aimed at creating greater openness and accountability by ensuring that individuals take responsibility for company governance.

It is vital that we have a company law framework that gives companies the flexibility to compete and grow effectively. It is also important to ensure that creditors, customers and suppliers have the information that they need to do business with a company with confidence. At the same time, it is important to ensure that we do not require companies to file unnecessary information and that the process for filing information is as simple as possible. For those reasons, a package of measures is included in the Bill that will amend the Companies Act 2006 to clarify the current requirements for companies when filing information with Companies House.

Existing arrangements for making annual returns will be simplified, removing duplication and undue complexity, as well as improving the accuracy and integrity of the public companies register. That will ease the burden on companies and thereby reduce unnecessary administration.

One of the key protective measures in company law is the directors' disqualification regime, which ensures that systems are in place to remove wrongdoers from company director positions and bar them from acting as directors for a period. Misconduct perpetrated by a minority of directors who do not play by the rules is damaging to consumers and to the majority of businesses that take their responsibilities seriously.

Currently, it is a criminal offence for a person subject to bankruptcy or a debt relief order made in Northern Ireland to act as an insolvency practitioner in Northern Ireland or, unless with permission from the Northern Ireland High Court, as a company director in Northern Ireland. However, no offence will be committed if the bankruptcy was declared in Great Britain or the debt relief order was made there. Reciprocal amendments to disqualification and insolvency legislation included in the Bill will correct that anomaly.

The Bill includes a number of fresh provisions. It increases from two years to three the time limit for bringing procedures to have a director disqualified. It will enable individuals convicted by an overseas court of an offence relating to a company to be disqualified from acting as a company director, and it will make it possible for directors who have been disqualified to be ordered to pay compensation for the benefit of creditors who have suffered loss as a result of their misconduct.

The Bill removes restrictions on the use of reports from regulators as a basis for bringing disqualification proceedings, and updates the schedule of matters to be taken into account by the courts in deciding if a director should be disqualified. It is anticipated that these improvements will help to increase public confidence in the directors' disqualification regime, strengthen existing measures and add transparency to the type of conduct that can lead to disqualification.

In addition to company law, the Small Business, Enterprise and Employment Bill will introduce a range of measures to open up new opportunities for small businesses to innovate, compete and get finance to create jobs and growth. The specific measures we are considering here relate to removing legal barriers to invoice finance and incentivising businesses to improve their payment policies and practices.

(Mr Speaker in the Chair)

Access to finance remains a pressing issue for Northern Ireland businesses, and the Bill will make significant improvements in this area. It will remove barriers to invoice finance, particularly for smaller companies, thus allowing companies to raise money on the strength of moneys owed to them for goods and services they have supplied. While there is no specific evidence of the nature and scale of the problem for Northern Ireland’s small and medium-sized enterprises, on balance, there are merits in extending this proposal to Northern Ireland as it removes an unnecessary impediment to SMEs accessing appropriate and affordable finance and will ensure consistency of approach across the United Kingdom. Where we can identify new initiatives to support business in this way or remove barriers preventing them from obtaining the finance they need, we should do so.

The other measure to support access to finance is the issue of prompt payment practices. Late payments can be used by companies to improve their working capital at the expense of their suppliers. This provision will place an obligation on large companies to report on payment policies and practices. This reporting information on payment performance will provide useful information to those who are contemplating entering into trading relationships with companies.

The final measure under consideration today concerns exemption from liability for bodies concerned with setting accounting standards and investigating cases where the standards are breached. The scope of the exemption will remain the same. However, the Bill will create a power to make secondary legislation specifying those bodies that are exempt from liability.

In conclusion, I urge Members to support the motion and, by doing so, ensure that companies and consumers continue to benefit from a transparent, modern and effective legal framework. By supporting the motion, Members will be giving a clear signal that the Assembly is committed to improving the transparency of how our local companies do business. It will also underline our commitment to removing unnecessary and outdated laws and enable local businesses to compete with their counterparts in Great Britain and abroad on a level playing field. I commend the motion to the Assembly and thank Members for their support.

Photo of Patsy McGlone Patsy McGlone Social Democratic and Labour Party 5:45, 20 January 2015

Go raibh maith agat, a Cheann Comhairle. Gabhaim buíochas leis an Aire chomh maith. I thank the Minister as well.

The purpose of the Small Business, Enterprise and Employment Bill is to introduce a wide range of measures designed to help fulfil the Westminster Government's commitments on transparency and trust made at the G8 Summit in 2013. The Minister has already covered quite a bit of this in her speech. In addressing these commitments, the Bill contains a number of provisions relating to company filing requirements, shareholding, transparency of ownership, company directors' conduct and insolvency.

The Bill provides for opportunities for small businesses to innovate and grow by introducing tougher rules to tackle misconduct by company directors and ensures a strong regulatory regime for those who administer insolvencies. The Committee sought and received clarification from the Department on two matters relating to the Bill during an oral briefing from officials on 2 December 2014. I thank those officials for their helpfulness to the Committee on this and related matters.

First, in response to a query regarding whether it would be more appropriate to include these proposed measures in the Insolvency (Amendment) Bill, which is currently at Committee Stage in the Assembly, officials confirmed that the Department could not have used the Insolvency (Amendment) Bill to make these types of amendments. This is because the scope of that Bill is limited to amending only the Insolvency (Northern Ireland) Order 1989.

Secondly, as the matter was raised during the Second Stage of the Insolvency (Amendment) Bill, members questioned officials on the reasons why the legislative consent memorandum does not contain provisions to legislate for the statutory regulation of insolvency practitioners in Northern Ireland. The Department informed the Committee that, as the Bill has already entered the House of Lords, it considered it too late to make a major amendment at this stage. Departmental officials, however, stated that they were actively looking at the possibility of including the provisions required in the Insolvency (Amendment) Bill by way of an amendment to that Bill at Consideration Stage. The Minister subsequently wrote to the Committee on 12 December to confirm her intention to proceed with the amendment. The Committee is in agreement with that proposal.

Having carefully considered the proposals, the Committee is of the view that this legislative consent motion (LCM) is the most appropriate means of legislating in this area and that it will ensure that relevant law is updated in the North simultaneously with that in Britain, avoiding potential disparity between companies in Northern Ireland and Britain. It will also ensure that potential loopholes and inequalities will be avoided to prevent Northern Ireland from lagging behind in company legislation.

The Committee, therefore, supports the Department in seeking the Assembly’s endorsement of the LCM.

Photo of Gordon Dunne Gordon Dunne DUP

I, too, support the legislative consent motion that the Minister has brought before us. It aims to bring greater trust and transparency to the small business sector in Northern Ireland. I believe that it is the most appropriate means of legislating in this area, as it will help to avoid any disparity between NI and GB companies and will ensure that Northern Ireland is not lagging behind the rest of the UK in company legislation.

The main things in the LCM relate to ownership and control of companies, company filing requirements, insolvency measures, company directors, and financial access. Those are all designed to boost productivity and business growth in our SME sector. That is so vital, as we want to see our economy here in Northern Ireland grow. I welcome the motion, and I am content to commend it to the House.

Photo of Danny Kinahan Danny Kinahan UUP

I, too, am very pleased to see the Bill here, and I support the motion. It is excellent to see a Bill coming into place that keeps us in line with everything else that is happening in the United Kingdom. We see that it changes the legislation to ensure that employees are not disadvantaged by unacceptable practices, be they exclusivity clauses in zero-hours contracts or underpayment of the national minimum wage. We also welcome it because it ensures that companies are trusted and transparent so that they cannot conceal ownership or control and engage in good corporate behaviour.

The Bill will help small businesses to get access to the finance that they need to grow, export, compete in public-sector procurement and address some of the issues on late payment. It is good to see that it supports and brings us in line with the Government's regulatory reform agenda, ensuring that ineffective, out-of-date and burdensome regulation does not hold back businesses.

As we know, all parties here support small to medium-sized enterprises, and it is good to see the Bill coming here, although it is sad to see that so few seem to have taken part in debates on it when it was in Westminster. I think that there was one two-sentence intervention and one speech. Some MPs voted on Opposition amendments, but, on the whole, most MPs were not there.

I am pleased to hear that the Department is dealing with this, and I congratulate it on the work that it is doing to go through everything in the Bill. I think that it is absolutely right that we work in line with Westminster and keep ourselves updated so that we are totally in line and there are no legislative gaps or loopholes.

I therefore support the Bill and look forward to seeing it go through.

Photo of Arlene Foster Arlene Foster DUP

I am grateful to the couple of Members who spoke on the legislative consent motion. The Bill is wide-ranging in its scope, and, as Members have seen, it deals with a number of matters for which the Department is responsible. It will have a direct impact on the lives of people in Northern Ireland. I know that the relevant measures in the Bill, which we have considered today through the legislative consent motion, will be of benefit to the public at large, who have felt the impact of issues addressed by those aspects of the Bill that I outlined.

I thank the Chair and the Committee members for their consideration. I also thank the officials who have worked on the Bill.

In relation to another matter, at the end of Question Time, I was made aware that Mr Kinahan was not in the Chamber during the earlier statement on Tourism NI, because he was at a funeral. I want to apologise to him. I did not realise that at the time, and he knows that I spoke to him after Question Time and apologised in person. I have to say that it was remiss of his party leader not to inform him of the content of the tourism strategy, but that is a matter for internal party politics.

I commend the motion to the House and ask for its support.

Question put and agreed to. Resolved:

That this Assembly endorses the principle of the extension to Northern Ireland of the provisions of the Small Business, Enterprise and Employment Bill, as amended in Committee in the House of Commons, dealing with assignment of receivables contained in clauses 1 and 2; business payment practices in clause 3; liability of bodies concerned with accounting standards in clause 37; and companies transparency, company filing requirements and directors' disqualification in Parts 7 to 9 and schedules 3 to 6 and 8.