3 Background to the proposal
7. The background to the proposal lies in changes
to the law governing the form of deeds and the method of their
execution made by the Law of Property (Miscellaneous Provisions)
Act 1989 and the Companies Act 1989, although problems with these
enactments take place in the context of much longer-standing difficulties
with the law.[5]
8. The Companies Act 1989 introduced a new Section
36A into the Companies Act 1985 ("the 1985 Act") which
ended the requirement that every company must have a common seal,
and allowed companies to execute deeds by the signature of their
officers alone. It also sought to reflect changes in the law
relating to deeds generally made by the Law of Property (Miscellaneous
Provisions) Act 1989, in particular the requirement that to be
a deed, an instrument must make it clear on its face that the
parties to it intend that it be a deed (known as the "face-value"
requirement).
9. The ability of companies to execute deeds without
the use of a common seal was found to be useful. Notwithstanding
the useful freedom that it provided, section 36A of the 1985 Act
was nevertheless found to be complex and confusing, and there
seemed to be conflicts between its detailed provisions and other
statutes, especially section 74 of the Law of Property Act 1925
and Section 1 of the Law of Property (Miscellaneous Provisions)
Act 1989. The reforms in section 36A, while being helpful in
themselves, also left the legal framework for the execution of
deeds different as between companies and other types of corporations.[6]
Additionally, the reforms in the two Acts of 1989 had concerned
the execution of deeds and other documents by a company;
they had not addressed circumstances in which deeds and documents
were executed on behalf of a company by another person
(who might be either a natural person or a corporation).
10. In light of the views expressed concerning the
possible need for further reforms of the law, the Lord Chancellor
and the President of the Board of Trade acting jointly referred
the issue to the Law Commission, formally requesting that the
Commission "….review the law on the execution of deeds
and documents by and on behalf of all bodies corporate and to
make recommendations".[7]
Following consultations which had shown there was very clear
support for further legislative reform in this area, the Commission
published its report in August 1998. The Government's intention
to accept the recommendations in that report was announced in
the answer to a Parliamentary Question on 27 July 1999.
5 The Law Commission give the following definition
of a deed: "A deed may be defined as a written instrument
which is executed with the necessary formality, and by which an
interest, right or property passes or is confirmed, or an obligation
binding on some person is created or confirmed". An instrument
may be defined as a formal legal document in writing. Back
6
The section provided that companies did not need to keep a common
seal and that they could execute deeds by the signature of their
officers alone, while corporations must execute deeds by affixing
their seal and the attestation thereof by a director and company
secretary, or similar officer. There are also inconsistencies
as to what is necessary for a deed or document to be properly
executed (see paragraph 14 below). Back
7
The Execution of Deeds and Documents by or on behalf of Bodies
Corporate, paragraph 1.1. Back
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