Select Committee on Regulatory Reform Fourteenth Report


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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Prepared 23 November 2004