Clause 5 - Meaning of “trigger event” and “acquirer”

Part of National Security and Investment Bill – in a Public Bill Committee at 3:15 pm on 1st December 2020.

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Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Business, Energy and Industrial Strategy) 3:15 pm, 1st December 2020

Will the Minister expand on some of the provisions in schedule 1, particularly as they relate to what might be a UK version of the case that I mentioned earlier concerning the US company that Dr Lenihan mentioned in his evidence? A company that had gone bankrupt had its assets, patents and employees bought up by what might have been conceived to be a hostile company in the US, in this case Huawei. If we imagine that happening in the UK, some questions arise about how schedule 1 is worded.

That sort of action might happen in a number of ways. It could be that a potentially hostile company buys up a failed, bankrupt company with the intention of making that company work again but so that it has control of its activities thereafter. Alternatively, the hostile company or organisation might want to buy up elements of the company not to make it work but to make off with the things that it wanted and then push the company further into liquidation. The company would not work but its assets and intellectual property would have passed into the hands of the other organisation.

Parts of schedule 1 look like a GCSE maths test. Paragraph 6(2) states:

“rights that are exercisable by an administrator or by creditors while an entity is in relevant insolvency proceedings are not to be regarded as held by the administrator or creditors even while the entity is in those proceedings.”

The question is: who actually holds the rights in those circumstances? Is it the person or company that has gone bust? Are they held to hold the rights even though an administrator is acting, as we would ordinarily understand, in place of the company in, for example, trying to get the best price for the company on behalf of the creditors, and therefore has certain rights to act in place of the company, including allowing that company to trade for the time being? Is it the person who has gone bust who has the rights, or is it the company that may have taken over the rights but has dissolved the company, so that the company no longer exists, but the creditors or administrators do not have the rights either because the company is finally in liquidation and the other company has meanwhile made off with the assets? Does the Minister consider that the wording and arrangements in the schedule are sufficient to take account of those sorts of circumstances?