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Company Law Reform Bill [HL] (105-111)


Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 4 — Transactions with directors requiring approval of members

105

 

225     

Cases where approval is required under more than one provision

(1)   

Approval may be required under more than one provision of this Chapter.

(2)   

If so, the requirements of each applicable provision must be met.

(3)   

This does not require a separate resolution for the purposes of each provision.

226     

Requirement of consent of Charity Commission: companies that are charities

5

For section 66 of the Charities Act 1993 (c. 10) substitute—

“66     

Consent of Commission required for approval etc by members of

charitable companies

(1)   

Where a company is a charity—

(a)   

any approval given by the members of the company under any

10

provision of Chapter 4 of Part 10 of the Company Law Reform

Act 2006 (transactions with directors requiring approval by

members) listed in subsection (2) below, and

(b)   

any affirmation given by members of the company under

section 197 or 213 of that Act (affirmation of unapproved

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property transactions and loans),

   

is ineffective without the prior written consent of the Commission.

(2)   

The provisions are—

(a)   

section 189 (directors’ long-term service contracts);

(b)   

section 191 (substantial property transactions with directors

20

etc);

(c)   

section 198 (loans and quasi-loans to directors etc);

(d)   

section 200 (credit transactions for benefit of directors etc);

(e)   

section 202 (related arrangements);

(f)   

section 216 (payments to directors for loss of office);

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(g)   

section 217 (payments to directors for loss of office: transfer of

undertaking etc).

66A     

Consent of Commission required for certain acts of charitable

company

(1)   

A company that is a charity may not do an act to which this section

30

applies without the prior written consent of the Commission.

(2)   

This section applies to an act that—

(a)   

does not require approval under a listed provision of Chapter 4

of Part 10 of the Company Law Reform Act 2006 (transactions

with directors) by the members of the company, but

35

(b)   

would require such approval but for an exemption in the

provision in question that disapplies the need for approval on

the part of the members of a body corporate which is a wholly-

owned subsidiary of another body corporate.

(3)   

The reference to a listed provision is a reference to a provision listed in

40

section 66(2) above.

(4)   

If a company acts in contravention of this section, the exemption

referred to in subsection (2)(b) shall be treated as of no effect in relation

to the act.”.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 5 — Directors’ service contracts

106

 

Chapter 5

Directors’ service contracts

227     

Directors’ service contracts

(1)   

For the purposes of this Part a director’s “service contract”, in relation to a

company, means a contract under which—

5

(a)   

a director of the company undertakes personally to perform services (as

director or otherwise) for the company, or for a subsidiary of the

company, or

(b)   

services (as director or otherwise) that a director of the company

undertakes personally to perform are made available by a third party

10

to the company, or to a subsidiary of the company.

(2)   

The provisions of this Part relating to directors’ service contracts apply to the

terms of a person’s appointment as a director of a company.

   

They are not restricted to contracts for the performance of services outside the

scope of the ordinary duties of a director.

15

228     

Copy of contract or memorandum of terms to be available for inspection

(1)   

A company must keep available for inspection—

(a)   

a copy of every director’s service contract with the company or with a

subsidiary of the company, or

(b)   

if the contract is not in writing, a written memorandum setting out the

20

terms of the contract.

(2)   

All the copies and memoranda must be kept available for inspection at—

(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

25

(c)   

its principal place of business (if that is situated in the part of the United

Kingdom in which the company is registered).

(3)   

The copies and memoranda must be retained by the company for at least one

year from the date of termination or expiry of the contract and must be kept

available for inspection during that time.

30

(4)   

The company must give notice to the registrar—

(a)   

of the place at which the copies and memoranda are kept available for

inspection, and

(b)   

of any change in that place,

   

unless they have at all times been kept at the company’s registered office.

35

(5)   

If default is made in complying with subsection (1), (2) or (3), or default is made

for 14 days in complying with subsection (4), an offence is committed by every

officer of the company who is in default.

(6)   

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

40

continued contravention, a daily default fine not exceeding one-tenth of level

3 on the standard scale.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 6 — Contracts with sole members who are directors

107

 

(7)   

The provisions of this section apply to a variation of a director’s service

contract as they apply to the original contract.

229     

Right of member to inspect and request copy

(1)   

Every copy or memorandum required to be kept under section 228 must be

open to inspection by any member of the company without charge.

5

(2)   

Any member of the company is entitled, on request and on payment of such

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.

10

(3)   

If an inspection required under subsection (1) is refused, or default is made in

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

15

continued contravention, a daily default fine not exceeding one-tenth of level

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.

20

230     

Directors’ service contracts: application of provisions to shadow directors

   

A shadow director is treated as a director for the purposes of the provisions of

this Chapter.

Chapter 6

Contracts with sole members who are directors

25

231     

Contract with sole member who is also a director

(1)   

This section applies where—

(a)   

a limited company having only one member enters into a contract with

the sole member,

(b)   

the sole member is also a director of the company, and

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(c)   

the contract is not entered into in the ordinary course of the company’s

business.

(2)   

The company must, unless the contract is in writing, ensure that the terms of

the contract are either—

(a)   

set out in a written memorandum, or

35

(b)   

recorded in the minutes of the first meeting of the directors of the

company following the making of the contract.

(3)   

If a company fails to comply with this section an offence is committed by every

officer of the company who is in default.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 7 — Directors’ liabilities

108

 

(4)   

A person guilty of an offence under this section is liable on summary

conviction to a fine not exceeding level 5 on the standard scale.

(5)   

For the purposes of this section a shadow director is treated as a director.

(6)   

Failure to comply with this section in relation to a contract does not affect the

validity of the contract.

5

(7)   

Nothing in this section shall be read as excluding the operation of any other

enactment or rule of law applying to contracts between a company and a

director of the company.

Chapter 7

Directors’ liabilities

10

Provision protecting directors from liability

232     

Provisions protecting directors from liability

(1)   

Any provision that purports to exempt a director of a company (to any extent)

from any liability that would otherwise attach to him in connection with any

negligence, default, breach of duty or breach of trust in relation to the company

15

is void.

(2)   

Any provision by which a company directly or indirectly provides an

indemnity (to any extent) for a director of the company, or of an associated

company, against any liability attaching to him in connection with any

negligence, default, breach of duty or breach of trust in relation to the company

20

of which he is a director is void, except as permitted by—

(a)   

section 233 (provision of insurance),

(b)   

section 234 (qualifying third party indemnity provision),

(c)   

section 235 (qualifying pension scheme indemnity provision).

(3)   

This section applies to any provision, whether contained in a company’s

25

articles or in any contract with the company or otherwise.

(4)   

Nothing in this section prevents a company’s articles from making such

provision as has previously been lawful for dealing with conflicts of interest.

233     

Provision of insurance

   

Section 232(2) (voidness of provisions for indemnifying directors) does not

30

prevent a company from purchasing and maintaining for a director of the

company, or of an associated company, insurance against any such liability as

is mentioned in that subsection.

234     

Qualifying third party indemnity provision

(1)   

Section 232(2) (voidness of provisions for indemnifying directors) does not

35

apply to qualifying third party indemnity provision.

(2)   

Third party indemnity provision means provision for indemnity against

liability incurred by the director to a person other than the company or an

associated company.

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 7 — Directors’ liabilities

109

 

   

Such provision is qualifying third party indemnity provision if the following

requirements are met.

(3)   

The provision must not provide any indemnity against—

(a)   

any liability of the director to pay—

(i)   

a fine imposed in criminal proceedings, or

5

(ii)   

a sum payable to a regulatory authority by way of a penalty in

respect of non-compliance with any requirement of a regulatory

nature (however arising); or

(b)   

any liability incurred by the director—

(i)   

in defending criminal proceedings in which he is convicted, or

10

(ii)   

in defending civil proceedings brought by the company, or an

associated company, in which judgment is given against him, or

(iii)   

in connection with an application for relief (see subsection (6))

in which the court refuses to grant him relief.

(4)   

The references in subsection (3)(b) to a conviction, judgment or refusal of relief

15

are to the final decision in the proceedings.

(5)   

For this purpose—

(a)   

a conviction, judgment or refusal of relief becomes final—

(i)   

if not appealed against, at the end of the period for bringing an

appeal, or

20

(ii)   

if appealed against, at the time when the appeal (or any further

appeal) is disposed of; and

(b)   

an appeal is disposed of—

(i)   

if it is determined and the period for bringing any further

appeal has ended, or

25

(ii)   

if it is abandoned or otherwise ceases to have effect.

(6)   

The reference in subsection (3)(b)(iii) to an application for relief is to an

application for relief under—

section 1123 (general power of court to grant relief in case of honest and

reasonable conduct), or

30

section 144(3) or (4) of the Companies Act 1985 (c. 6) (power of court to

grant relief in case of acquisition of shares by innocent nominee).

235     

Qualifying pension scheme indemnity provision

(1)   

Section 232(2) (voidness of provisions for indemnifying directors) does not

apply to qualifying pension scheme indemnity provision.

35

(2)   

Pension scheme indemnity provision means provision indemnifying a director

of a company that is a trustee of an occupational pension scheme against

liability incurred in connection with the company’s activities as trustee of the

scheme.

   

Such provision is qualifying pension scheme indemnity provision if the

40

following requirements are met.

(3)   

The provision must not provide any indemnity against—

(a)   

any liability of the director to pay—

(i)   

a fine imposed in criminal proceedings, or

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 7 — Directors’ liabilities

110

 

(ii)   

a sum payable to a regulatory authority by way of a penalty in

respect of non-compliance with any requirement of a regulatory

nature (however arising); or

(b)   

any liability incurred by the director in defending criminal proceedings

in which he is convicted.

5

(4)   

The reference in subsection (3)(b) to a conviction is to the final decision in the

proceedings.

(5)   

For this purpose—

(a)   

a conviction becomes final—

(i)   

if not appealed against, at the end of the period for bringing an

10

appeal, or

(ii)   

if appealed against, at the time when the appeal (or any further

appeal) is disposed of; and

(b)   

an appeal is disposed of—

(i)   

if it is determined and the period for bringing any further

15

appeal has ended, or

(ii)   

if it is abandoned or otherwise ceases to have effect.

(6)   

In this section “occupational pension scheme” means an occupational pension

scheme as defined in section 150(5) of the Finance Act 2004 (c. 12) that is

established under a trust.

20

236     

Qualifying indemnity provision to be disclosed in directors’ report

(1)   

This section requires disclosure in the directors’ report of—

(a)   

qualifying third party indemnity provision, and

(b)   

qualifying pension scheme indemnity provision.

   

Such provision is referred to in this section as “qualifying indemnity

25

provision”.

(2)   

If when a directors’ report is approved any qualifying 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.

30

(3)   

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 the company, the report must state that such provision was in

force.

(4)   

If when a directors’ report is approved qualifying indemnity provision made

35

by the company is in force for the benefit of one or more 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

40

provision was in force.

237     

Copy of qualifying indemnity provision to be available for inspection

(1)   

This section has effect where qualifying indemnity provision is made for a

director of a company, and applies—

 
 

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 7 — Directors’ liabilities

111

 

(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

5

inspection—

(a)   

a copy of the qualifying 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—

10

(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).

15

(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

20

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

25

officer of the company who is in default.

(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.

30

(8)   

The provisions of this section apply to a variation of a qualifying indemnity

provision as they apply to the original provision.

(9)   

In this section “qualifying indemnity provision” means—

(a)   

qualifying third party indemnity provision, and

(b)   

qualifying pension scheme indemnity provision.

35

238     

Right of member to inspect and request copy

(1)   

Every copy or memorandum required to be kept by a company under section

237 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

fee as may be prescribed, to be provided with a copy of any such copy or

40

memorandum.

   

The copy must be provided within seven days after the request is received by

the company.

 
 

 
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