Key government proposals emerge from select committee hearing on Carillion collapse

by DLA Piper
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DLA Piper

The Government has faced significant parliamentary and public pressure to make policy changes to demonstrate that lessons have been learnt and action taken since the collapse of Carillion.

During last month's parliamentary hearing, Greg Clark, Secretary of State for Business, Energy and Industrial Strategy ("BEIS") and Esther McVey the Secretary of State for Work and Pensions ("WP") set out a number of proposals that could have a significant impact on providers of outsourcing services to the Government and its agencies particularly in relation to the statutory and regulatory regimes governing pensions, corporate governance and insolvency. These include:

Pensions

  • Enhanced transparency obligations for companies dealing with pension schemes
  • Empowerment of The Pensions Regulator ("TPR") to intervene in the management of schemes under certain circumstances
  • New criminal and civil penalties for breach of directors' duties towards company pension schemes. Significantly, such penalties may be introduced with retrospective effect. TPR will be appropriately empowered to oversee such a regime.

The key pensions initiatives discussed during the session are outlined in DWP's March 2018 White Paper, Protecting Defined Benefit Pension Schemes. For most measures, primary legislation will be required. This is unlikely to be passed before the 2019-20 parliamentary session, at the earliest.

Payment Terms

  • Mandatory publication by signatories to the Prompt Payment Code ("PPC") of formal payment terms and leveraging of Government influence when acting as the procuring entity to ensure that subcontractors are paid promptly.
  • PPC could be buttressed to incentivise larger companies to prioritise payments to smaller suppliers

Corporate governance

  • Strengthening the role of the Financial Reporting Council ("FRC") and greater regulatory coordination between the FRC, the FCA and the Insolvency Service. A new memorandum of understanding between the three authorities will set out the basis for this cooperation.
  • Mandatory publication of pay data for the entire workforce and a requirement for remuneration committees to consider executive pay policy in the context of the company as a whole.
  • Review of discretionary clawback provisions to make it easier to clawback performance-related bonuses in insolvency.

It is yet to be determined how several of the proposed reforms will be implemented. We will keep our clients informed, as and when information becomes available.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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