Company Law Reform Bill [HL]

House of Commons

Session 2005 - 06
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Other Bills before Parliament

Company Law Reform Bill [HL]

Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 7 — Directors’ liabilities
100

(2)
If when a directors’ report is approved any qualifying third party indemnity
provision (whether made by the company or otherwise) is in force for the
benefit of one or more directors of the company, the report must state that such
provision is in force.
(3)
If at any time during the financial year to which a directors’ report relates any
5
such provision was in force for the benefit of one or more persons who were
then directors of the company, the report must state that such provision was in
force.
(4)
If when a directors’ report is approved qualifying third party indemnity
provision made by the company is in force for the benefit of one or more
10
directors of an associated company, the report must state that such provision
is in force.
(5)
If at any time during the financial year to which a directors’ report relates any
such provision was in force for the benefit of one or more persons who were
then directors of an associated company, the report must state that such
15
provision was in force.
220
Copy of qualifying third party indemnity provision to be available for
inspection
(1)
This section has effect where qualifying third party indemnity provision is
made for a director of a company, and applies—
20
(a)
to the company of which he is a director (whether the provision is made
by that company or an associated company), and
(b)
where the provision is made by an associated company, to that
company.
(2)
That company or, as the case may be, each of them must keep available for
25
inspection—
(a)
a copy of the qualifying third party indemnity provision, or
(b)
if the provision is not in writing, a written memorandum setting out its
terms.
(3)
The copy or memorandum must be kept available for inspection at—
30
(a)
the company’s registered office;
(b)
the place where its register of members is kept available for inspection
(if not at its registered office); or
(c)
its principal place of business (if that is situated in the part of the United
Kingdom in which the company is registered).
35
(4)
The copy or memorandum must be retained by the company for at least one
year from the date of termination or expiry of the provision and must be kept
available for inspection during that time.
(5)
The company must give notice to the registrar—
(a)
of the place at which the copy or memorandum is kept available for
40
inspection, and
(b)
of any change in that place,

unless it has at all times been kept at the company’s registered office.
(6)
If default is made in complying with subsection (2), (3) or (4), or default is made
for 14 days in complying with subsection (5), an offence is committed by every
45
officer of the company who is in default.

Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 7 — Directors’ liabilities
101

(7)
A person guilty of an offence under this section is liable on summary
conviction to a fine not exceeding level 3 on the standard scale and, for
continued contravention, a daily default fine not exceeding one-tenth of level
3 on the standard scale.
(8)
The provisions of this section apply to a variation of a qualifying third party
5
indemnity provision as they apply to the original provision.
221
Right of member to inspect and request copy
(1)
Every copy or memorandum required to be kept by a company under section
220 must be open to inspection by any member of the company without charge.
(2)
Any member of the company is entitled, on request and on payment of such
10
fee as may be prescribed, to be provided with a copy of any such copy or
memorandum.

The copy must be provided within seven days after the request is received by
the company.
(3)
If an inspection required under subsection (1) is refused, or default is made in
15
complying with subsection (2), an offence is committed by every officer of the
company who is in default.
(4)
A person guilty of an offence under this section is liable on summary
conviction to a fine not exceeding level 3 on the standard scale and, for
continued contravention, a daily default fine not exceeding one-tenth of level
20
3 on the standard scale.
(5)
In the case of any such refusal or default the court may by order compel an
immediate inspection or, as the case may be, direct that the copy required be
sent to the person requiring it.
Ratification of acts giving rise to liability
25
222
Ratification of acts of directors
(1)
This section applies to the ratification by a company of conduct by a director
amounting to negligence, default, breach of duty or breach of trust in relation
to the company.
(2)
The decision of the company to ratify such conduct—
30
(a)
must be taken by the members, and
(b)
may be taken by ordinary resolution, subject to anything in the
company’s articles requiring a higher majority (or unanimity).
(3)
Where the resolution is proposed as a written resolution neither the director (if
a member of the company) nor any member connected with him is an eligible
35
member.
(4)
Where the resolution is proposed at a meeting, it is passed only if the necessary
majority is obtained disregarding votes in favour of the resolution by the
director (if a member of the company) and any member connected with him.

This does not prevent the director or any such member from attending, being
40
counted towards the quorum and taking part in the proceedings at any
meeting at which the decision is considered.
(5)
For the purposes of this section—

Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 8 — Directors’ residential addresses: protection from disclosure
102

(a)
“conduct” includes acts and omissions;
(b)
“director” includes a former director;
(c)
a shadow director is treated as a director; and
(d)
in section 235 (meaning of “connected person”), subsection (3) does not
apply (exclusion of person who is himself a director).
5
(6)
Nothing in this section affects—
(a)
the validity of a decision taken by unanimous consent of the members
of the company, or
(b)
any power of the directors to agree not to sue, or to settle or release a
claim made by them on behalf of the company.
10
(7)
This section does not affect any other enactment or rule of law imposing
additional requirements for valid ratification or any rule of law as to acts that
are incapable of being ratified by the company.
Chapter 8
Directors’ residential addresses: protection from disclosure
15
223
Protected information
(1)
This Chapter makes provision for protecting, in the case of a company director
who is an individual—
(a)
information as to his usual residential address;
(b)
the information that his service address is his usual residential address.
20
(2)
That information is referred to in this Chapter as “protected information”.
(3)
Information does not cease to be protected information on the individual
ceasing to be a director of the company.

References in this Chapter to a director include, to that extent, a former
director.
25
224
Protected information: restriction on use or disclosure by company
(1)
A company must not use or disclose protected information about any of its
directors, except—
(a)
for communicating with the director concerned,
(b)
in order to comply with any requirement of the Companies Acts as to
30
particulars to be sent to the registrar, or
(c)
in accordance with section 227 (disclosure under court order).
(2)
Subsection (1) does not prohibit any use or disclosure of protected information
with the consent of the director concerned.
225
Protected information: restriction on use or disclosure by registrar
35
(1)
The registrar must omit protected information from the material on the register
that is available for inspection where—
(a)
it is contained in a document delivered to him in which such
information is required to be stated, and

Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 8 — Directors’ residential addresses: protection from disclosure
103

(b)
in the case of a document having more than one part, it is contained in
a part of the document in which such information is required to be
stated.
(2)
The registrar is not obliged—
(a)
to check other documents or (as the case may be) other parts of the
5
document to ensure the absence of protected information, or
(b)
to omit from the material that is available for public inspection
anything registered before this Chapter comes into force.
(3)
The registrar must not use or disclose protected information except—
(a)
as permitted by section 226 (permitted use or disclosure by registrar),
10
or
(b)
in accordance with section 227 (disclosure under court order).
226
Permitted use or disclosure by the registrar
(1)
The registrar may use protected information for communicating with the
director in question.
15
(2)
The registrar may disclose protected information—
(a)
to a public authority specified for the purposes of this section by
regulations made by the Secretary of State, or
(b)
to a credit reference agency.
(3)
The Secretary of State may make provision by regulations—
20
(a)
specifying conditions for the disclosure of protected information in
accordance with this section, and
(b)
providing for the charging of fees.
(4)
In this section—
“credit reference agency” means a person carrying on a business
25
comprising the furnishing of information relevant to the financial
standing of individuals, being information collected by the agency for
that purpose; and
“public authority” includes any person or body having functions of a
public nature.
30
(5)
Regulations under this section are subject to negative resolution procedure.
227
Disclosure under court order
(1)
The court may make an order for the disclosure of protected information by the
company or by the registrar if—
(a)
there is evidence that service of documents at a service address other
35
than the director’s usual residential address is not effective to bring
them to the notice of the director, or
(b)
it is necessary or expedient for the information to be provided in
connection with the enforcement of an order or decree of the court,

and the court is otherwise satisfied that it is appropriate to make the order.
40
(2)
An order for disclosure by the registrar is to be made only if the company—
(a)
does not have the director’s usual residential address, or
(b)
has been dissolved.

Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 8 — Directors’ residential addresses: protection from disclosure
104

(3)
The order may be made on the application of a liquidator, creditor or member
of the company, or any other person appearing to the court to have a sufficient
interest.
(4)
The order must specify the persons to whom, and purposes for which,
disclosure is authorised.
5
228
Circumstances in which registrar may put address on the public record
(1)
The registrar may put a director’s usual residential address on the public
record if—
(a)
communications sent by the registrar to the director and requiring a
response within a specified period remain unanswered, or
10
(b)
there is evidence that service of documents at a service address
provided in place of the director’s usual residential address is not
effective to bring them to the notice of the director.
(2)
The registrar must give notice of the proposal—
(a)
to the director, and
15
(b)
to every company of which the registrar has been notified that the
individual is a director.
(3)
The notice must—
(a)
state the grounds on which it is proposed to put the director’s usual
residential address on the public record, and
20
(b)
specify a period within which representations may be made before that
is done.
(4)
It must be sent to the director at his usual residential address, unless it appears
to the registrar that service at that address may be ineffective to bring it to the
individual’s notice, in which case it may be sent to any service address
25
provided in place of that address.
(5)
The registrar must take account of any representations received within the
specified period.
(6)
What is meant by putting the address on the public record is explained in
section 229.
30
229
Putting the address on the public record
(1)
The registrar, on deciding in accordance with section 228 that a director’s usual
residential address is to be put on the public record, shall proceed as if notice
of a change of registered particulars had been given—
(a)
stating that address as the director’s service address, and
35
(b)
stating that the director’s usual residential address is the same as his
service address.
(2)
The registrar must give notice of having done so—
(a)
to the director, and
(b)
to the company.
40
(3)
On receipt of the notice the company must—
(a)
enter the director’s usual residential address in its register of directors
as his service address, and

Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 9 — Supplementary provisions
105

(b)
state in its register of directors’ residential addresses that his usual
residential address is the same as his service address.
(4)
If the company has been notified by the director in question of a more recent
address as his usual residential address, it must—
(a)
enter that address in its register of directors as the director’s service
5
address, and
(b)
give notice to the registrar as on a change of registered particulars.
(5)
If a company fails to comply with subsection (3) or (4), an offence is committed
by—
(a)
the company, and
10
(b)
every officer of the company who is in default.
(6)
A person guilty of an offence under subsection (5) is liable on summary
conviction to a fine not exceeding level 5 on the standard scale and, for
continued contravention, a daily default fine not exceeding one-tenth of level
5 on the standard scale.
15
(7)
A director whose usual residential address has been put on the public record
by the registrar under this section may not register a service address other than
his usual residential address for a period of five years from the date of the
registrar’s decision.
Chapter 9
20
Supplementary provisions
Provision for employees on cessation or transfer of business
230
Power to make provision for employees on cessation or transfer of business
(1)
The powers of the directors of a company include (if they would not otherwise
do so) power to make provision for the benefit of persons employed or
25
formerly employed by the company, or any of its subsidiaries, in connection
with the cessation or the transfer to any person of the whole or part of the
undertaking of the company or that subsidiary.
(2)
This power is exercisable notwithstanding the general duty imposed by section
158 (duty to promote the success of the company).
30
(3)
In the case of a company that is a charity it is exercisable notwithstanding any
restrictions on the directors’ powers (or the company’s capacity) flowing from
the objects of the company.
(4)
The power may only be exercised if sanctioned—
(a)
by a resolution of the company, or
35
(b)
by a resolution of the directors,

in accordance with the following provisions.
(5)
The resolution of the company required is an ordinary resolution, subject to
anything in the company’s articles requiring a higher majority (or unanimity).
(6)
A resolution of the directors—
40
(a)
must be authorised by the company’s articles, and

Company Law Reform Bill [HL]
Part 10 — Company directors
Chapter 9 — Supplementary provisions
106

(b)
is not sufficient sanction for payments to or for the benefit of directors,
former directors or shadow directors.
(7)
Any other requirements of the company’s articles as to the exercise of the
power conferred by this section must be complied with.
(8)
Any payment under this section must be made—
5
(a)
before the commencement of any winding up of the company, and
(b)
out of profits of the company that are available for dividend.
Records of meetings of directors
231
Minutes of directors’ meetings
(1)
Every company must cause minutes of all proceedings at meetings of its
10
directors to be recorded.
(2)
The records must be kept for at least ten years from the date of the meeting.
(3)
If a company fails to comply with this section, an offence is committed by every
officer of the company who is in default.
(4)
A person guilty of an offence under this section is liable on summary
15
conviction to a fine not exceeding level 3 on the standard scale and, for
continued contravention, a daily default fine not exceeding one-tenth of level
3 on the standard scale.
232
Minutes as evidence
(1)
Minutes recorded in accordance with section 231, if purporting to be
20
authenticated by the chairman of the meeting or by the chairman of the next
directors’ meeting, are evidence (in Scotland, sufficient evidence) of the
proceedings at the meeting.
(2)
Where minutes have been made in accordance with that section of the
proceedings of a meeting of directors, then, until the contrary is proved—
25
(a)
the meeting is deemed duly held and convened,
(b)
all proceedings at the meeting are deemed to have duly taken place,
and
(c)
all appointments at the meeting are deemed valid.
Meaning of "director" and "shadow director"
30
233
“Director”

In the Companies Acts “director” includes any person occupying the position
of director, by whatever name called.
234
“Shadow director”
(1)
In the Companies Acts “shadow director”, in relation to a company, means a
35
person in accordance with whose directions or instructions the directors of the
company are accustomed to act.