The Deed of Forfeiture bridge facility agreed between Government and British Steel Limited provides legal protections to give Government control of 2019 EU ETS allowances, even under the scenario of insolvency.

Under the Deed of Forfeiture agreed between the company and British Steel Limited, the company’s 2019 allowances will be assigned to the Government once issued, and the proceeds from selling these is expected to cover the costs of purchasing the allowances. Greybull are not party to this Deed of Forfeiture, and as a result of the liquidation, day-to-day control has passed to the liquidator of British Steel Limited.

The terms of the commercial agreement between Government and British Steel are set out in letters from the Permanent Secretary of the Department for Business, Energy and Industrial Strategy to the Chair of the Public Accounts Committee and the Comptroller & Auditor General, copies of which have been placed in the Libraries of both Houses.

The British Business Bank was not involved.

The immediate priority following the Official Receiver’s appointment as liquidator of British Steel Limited was to continue the safe operation of the sites while options are considered. To enable this, the Government has provided an indemnity to the Official Receiver, who is now responsible for the operations.

The Official Receiver is currently overseeing a sales process as they seek to sell the business. Trading will continue whilst a buyer is sought.

The Official Receiver was appointed liquidator of British Steel Limited. In his role as liquidator, the Official Receiver is under a statutory duty to investigate the cause of failure of the company and generally its business, dealings and affairs and has wide-ranging powers to obtain information, material, and explanations.

My rt. hon. Friend the Secretary of State wrote to the Insolvency Service on 22 May requesting that the Official Receiver’s investigation not only looks at the conduct of the directors immediately prior to and at insolvency, but also at the investments made in the company, value transferred out of the company and whether any action by directors has caused detriment to creditors or to the pension schemes.

Asset managers act as agents of investors in their funds. They are required to manage their funds in the best interests of all of their fund investors and to appropriately avoid, manage and disclose conflicts of interests that could, and do arise between different investor groups. This is a requirement of Markets in Financial Instruments Directive II (MiFID II).

Asset managers should have policies, procedures and governance in place to effectively manage any conflicts arising from their stewardship obligations.

The FCA has recently published a Policy Statement (PS 19/13) ‘Proposals to promote shareholder engagement: Feedback to CP 19/7 and final rules.’ This sets out final rules to implement requirements of the Revised Shareholder Rights Directive (SRD II). SRD II introduced new requirements to improve shareholder engagement and increase transparency around stewardship. The rules came into effect on 10 June 2019 requiring asset managers to disclose and make publicly available their policies on how they engage with the companies they invest in. They also require asset managers to provide certain information to institutional investors, including occupational pension schemes. The new rules are designed to foster stewardship, and better stewardship should lead to better decision making in relation to mergers and acquisitions.

The Secretary of State for Business, Energy and Industrial Strategy has not issued any Ministerial Directions in respect of British Steel.

This loan agreement was fully commercial and state aid compliant, valued at around £120m, under Section 7 of the Industrial Development Act 1982. Under the agreement the Government purchased emissions allowances on behalf of British Steel ensuring it met its 2018 ETS obligations. Failure to comply with its ETS obligations would have led to a fine of around £500m, on top of the costs of ETS compliance of around £120m.

In return, under a deed of forfeiture, the company’s 2019 allowances will be assigned to the Government once issued, and the proceeds from selling these is expected to cover the costs of purchasing allowances for British Steel. The Government’s view is that the 2019 allowances will still be issued to British Steel in insolvency.

The Government’s assessment is that the Deed of Forfeiture offered value for money to the taxpayer, with benefits exceeding the costs, predicated on the level of confidence around security, even in the event of insolvency.

This position was supported by the independent Industrial Development Advisory Board which assessed the proposal in their statutory role and agreed with the Government’s value for money assessment.

In 2018, the Government published detailed proposals to reform corporate insolvency laws including strengthening the powers available to insolvency office-holders to challenge transactions and take recovery action where value has been extracted from a company as it approaches insolvency. The Government remains committed to introduce these changes as soon as Parliamentary time allows.

I refer the Noble Lord to the answer I gave him on 4^th June 2019 to Question HL15896, and to letters from the Permanent Secretary to the Department for Business, Energy and Industrial Strategy to the Chair of the Public Accounts Committee and the Comptroller & Auditor General, placed in the Libraries of both Houses, outlining the terms of the Deed of Forfeiture bridge facility agreed between Government and British Steel.

The Deed of Forfeiture provides legal protections to give Government control of 2019 EU ETS allowances, even under the scenario of insolvency.

The support was provided to British Steel Limited in the form of a bridge facility. Under the terms of the commercial arrangement, the Government purchased the necessary allowances on behalf of British Steel Limited in the week leading up to 30 April and then surrendered them, via British Steel Limited's Operator Holding Account, to the EU Surrender Account. This occurred before the 30th April compliance deadline to surrender allowances for the 2018 reporting year, thus enabling British Steel Limited to meet its environmental obligations and avoid any penalties that would otherwise have resulted from non-compliance. In return, under a deed of forfeiture, the company’s 2019 allowances will be assigned to the Government once issued, and the proceeds from selling these is expected to cover the costs of purchasing the allowances.

The terms of the commercial agreement between the Government and British Steel are set out in letters from the Permanent Secretary of the Department for Business, Energy and Industrial Strategy to the Chair of the Public Accounts Committee and the Comptroller & Auditor General, copies of which have been placed in the Libraries of both Houses.

The Government sought commercial and legal advice from external independent advisers. Exact costs have not been finalised.

The Official Receiver is under a statutory duty to investigate the cause of failure of any company in compulsory liquidation and generally its business, dealings and affairs, which will include any actions taken which have been detrimental to creditors or pension schemes, and will do so in the case of British Steel. He has a duty to report any potential misconduct of directors to my rt. hon. Friend the Secretary of State for Business, Energy and Industrial Strategy.

In the case of British Steel, the Secretary of State has written to the Insolvency Service, specifically requesting that the investigation not only looks at the conduct of the directors immediately prior to and at insolvency, but also at the investments made in the company (noting previous commitments given in this regard) and the potential value transferred out of the company.

Over recent years, the Government has implemented statutory and non-statutory reforms to improve the whistleblowing framework in all sectors. This includes guidance for whistleblowers on how in practice to make disclosures while preserving their employment protections; and guidance for employers including a non-statutory code of practice.

We have fulfilled the commitment to keep the Prescribed Persons list up to date – these are individuals and bodies that a whistleblower can approach in order to make a disclosure. Guidance is in place for Prescribed Persons and we review the list annually.

The most recent reform was a new legislative requirement for most prescribed persons to produce an annual report on whistleblowing disclosures made to them by workers. Relevant prescribed persons were required to publish the first of these reports by the end of September 2018.

Whilst it is right and proper that Government reviews the whistleblowing framework, we believe that it would be premature to do so now. We need to allow the existing changes that we have introduced to embed and provide the necessary evidence of their impact over time that would support a meaningful review.

The agreement between the Government and British Steel regarding their EU Emissions Trading Scheme compliance was fully commercial and state aid compliant, under Section 7 of the Industrial Development Act 1982.

The terms of the commercial agreement are set out in letters from the Permanent Secretary to the Department for Business, Energy and Industrial Strategy to the Chair of the Public Accounts Committee and the Comptroller & Auditor General, copies of which have been placed in the libraries of both Houses.

The Government carried out all of the necessary checks and due diligence which a typical commercial lender would undertake in relation to the company before making a commercial offer, including working closely with legal and commercial advisors to scrutinise the terms of the transaction.

The Deed of Forfeiture contains the terms and conditions which would be required by a commercial lender.

The purchase of Ascoval was undertaken by the shareholder, and not by British Steel.

I refer the noble Lord to the answer I gave to him on 10 May 2019 to Question HL15469.

Through the British Business Bank, financial support to small businesses is facilitated via a number of delivery partners who provide a range of debt and equity finance.

The British Business Bank has a thorough due diligence process for its delivery partners which includes a robust review and assessment framework for how delivery partners award the finance, monitored through independent auditors. The British Business Bank also has a tax policy that is published in the transparency section of its website.

It is not uncommon for some investors to hold shares in both the bidder and target companies and rules mandated by the Financial Conduct Authority provide transparency to the market about share ownership. Takeover decisions are ultimately a matter for shareholders and the UK’s takeover rules require bidders to secure the approval of a majority of shareholders in the target company.

The terms of the commercial agreement between the Government and British Steel are set out in letters from the Permanent Secretary to the Department for Business, Energy and Industrial Strategy to the Chair of the Public Accounts Committee and the Comptroller & Auditor General, copies of which have been placed in the Libraries of both Houses.

The Government has been in regular communication with all EU ETS participants since November 2017 to notify of the risks associated with a no deal scenario. All UK installations met their 2018 obligations in full before the compliance deadline on the 30th April.

I refer the noble Lord to the statement made by my rt. hon. Friend the Secretary of State on 1^st May 2019, Official Report, Column 209-211, on British Steel: EU Emissions Trading Compliance.

Company Voluntary Arrangements (CVAs) are a valuable part of the restructuring framework and there are no plans to review their use at this time. The Government consulted on a wide-ranging package of reforms to corporate insolvency in 2018, to enhance rescue prospects and also to address poor corporate behaviour. Following this consultation, Government announced it will strengthen the powers available to insolvency practitioners to take recovery action where value has been extracted from a company prior to its insolvency, thereby increasing the protections already available to creditors. These proposals will be introduced when parliamentary time permits.