When it was published in June this year there were hopes that the new bill would address some key issues that have affected small businesses; access to finance, fair payment and reducing bureaucracy. Barrister, Professor Rudi Klein casts his eye over the Small Business, Enterprise and Employment Bill recently introduced in the House of Commons.
The Small Business, Enterprise and Employment Bill(the Bill) was introduced in the House of Commons on 25 June 2014. The Bill was widely expected to introduce mandatory 30-day payments for supply chains selling to the public sector and a standardised approach to prequalification. The government’s publication Small Business: Great Ambition (launched on 7 December 2013) had indicated that both measures would be the subject of forthcoming legislation; unfortunately neither measure has been incorporated in the Bill.
The Bill contains a plethora of measures ranging from mandatory reporting by large companies on payment practices and reducing red tape in certain areas such as company filing requirements to introducing a Pubs Code Adjudicator and making exclusivity terms unenforceable in zero hours contracts. As is now the norm regulations will be introduced to put the ‘meat’ on the statutory framework.
For present purposes the following measures are of interest:
- mandatory reporting by large companies on payment performance
- provision of credit information on SMEs
- improvements to handling of bad practice complaints in the public sector
- register of people with significant control of their companies.
Mandatory reporting by large companies on payment performance
Under clause 3 regulations may be introduced to require large companies to regularly publish information about their payment practices in business contracts. The regulations will not apply to microbusinesses and SMEs. Although not specifically stated it is assumed that the regulations will apply to construction contracts.
Clause 3 lists possible matters on which there will be a requirement to report:
- information about the payment terms used by the company
- information about the company’s actual performance
- average time taken to pay after receipt of invoices.
There may be a requirement to make the information available to new suppliers. Failure to provide the information could result in a fine. Regulations on this topic are likely to be preceded by a consultation. The key question is whether the statutory requirement to make public a company’s payment performance will result in improvement to that performance. It has to be said that this is unlikely unless consequences flow from poor performance. One such consequence could be that public bodies may decide to remove a large company from their tender lists for continual poor performance. Another issue is who will check whether the information provided is truthful?
Provision of credit information on SMEs
The government perceives that SME access to finance is being obstructed by failure of the banks to share with other potential lenders current information they hold on the creditworthiness of their SME customers. Clause 4 in the Bill gives the Treasury power to make regulations requiring banks to provide information about their SME customers to designated credit reference agencies. The agencies will then be required to forward
this information to prospective finance providers.
It’s difficult to estimate whether this measure will improve access to finance for SMEs. For construction SMEs the greater problem is being able to demonstrate to the bank that one has a certain and reliable throughput of cash.
Improvements to handling of bad practice complaints in the public sector
Clause 34 puts the Mystery Shopper scheme on a statutory footing by giving the Minister for the Cabinet Office power to request from contracting authorities information or documents relating to matters being complained of; they should also provide reasonable assistance in any investigation. The information required could relate to the tendering malpractices or timeliness of supply chain payments.It is interesting to note that the duty is placed on contracting authorities and not on those suppliers who were the subject of the complaint from their supply
Also regulations are likely to be introduced to impose duties on contracting authorities relating to their procurement functions including duties to exercise procurement functions in an efficient and timely manner and duties relating to the process by which contracts are entered into.
Clause 34 is very welcome. The Cabinet Office’s Mystery Shopper scheme deals with complaints from firms about bad practice on public sector work.
The complaint could be against the public body or an upstream supplier. The scheme seeks to preserve anonymity and does fully investigate all complaints.
Register of people with significant control of their companies
A trawl through other parts of the Bill reveals an interesting requirement at clause 70. The 2006 Companies Act will be amended to require companies to keep a register of people having a significant control over the company. How significant control will be defined remains to be seen.
For small businesses in construction this Bill is unlikely to make a lot of difference. I referred earlier to the fact that the Bill omitted requirements for 30-day payment periods and standardised prequalification in the public sector.
It now appears that both these measures could be addressed in regulations that will implement the revisions to the EU Public Procurement Directives. The regulations are likely to be introduced before the end of this year. Watch this space.