Business: Coronavirus

Treasury written question – answered on 17th September 2020.

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Photo of Anneliese Dodds Anneliese Dodds Shadow Chancellor of the Exchequer

To ask the Chancellor of the Exchequer, what conditions on (a) environmental performance, (b) treatment of employees, (c) continuation as a going concern, (d) tax practices, (e) corporate behaviour including the use of share buybacks and dividend payments and (f) executive remuneration are imposed on companies receiving support through the (a) Coronavirus Job Retention scheme, (b) Coronavirus Business Interruption Loan scheme, c) Coronavirus Large Business Interruption Loan scheme and (d) COVID-19 Corporate Financing Facility.

Photo of Kemi Badenoch Kemi Badenoch The Exchequer Secretary

The Government support measures are well-targeted at businesses most in need, bearing in mind the need to act very quickly to deliver this unprecedented package. The OBR has said that that the positive actions the Government have taken “should…help to limit any long-term economic ‘scarring’, by keeping workers attached to firms and helping otherwise viable firms stay in business.”. The Coronavirus Job Retention Scheme in particular, has supported more than 1.2 million firms to furlough 9.6 million jobs. We expect everyone to act responsibly and in the spirit of these packages, and only claim and use support as intended. In addition:

Under the Coronavirus Large Business Interruption Loan Scheme (CLBILS), borrowers are required to restrict dividend payments, which means they are only allowed to make dividends payments which were a) declared before the CLBILS loan was taken out, b) are in keeping with similar dividends payments made in the preceding 12 months, and c) do not have a material negative impact on the borrower’s ability to repay the loan. In addition to restrictions on dividends payments, firms borrowing more than £50m will be required to agree to not make dividend payments or share buybacks, and to restrictions on pay and bonuses for senior management. These restrictions remain in place until the loan has been repaid.

Issuers participating in the Covid Corporate Financing Facility (CCFF) are required to commit to restraint on their capital distributions (including dividends and share buybacks) and on senior pay. This applies to all commercial paper (CP) maturing after 19 May 2021. Issuers will be required to provide a letter of commitment to HM Treasury in relation to this if a) an increase in an issuer's CCFF limit, over and above that suggested by the issuer’s investment rating, is requested and approved, and/or b) a CCFF transaction is entered into which involves CP maturing on or after 19 May 2021. HM Treasury reserves the right to publish this letter, should it become aware that the terms of the letter have not been complied with.

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