Company Law Reform Bill [HL] (117-120)

House of Commons

Session 2005 - 06
Internet Publications
Other Bills before Parliament

Company Law Reform Bill [HL] (117-120)

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 9 — Supplementary provisions
117

Records of meetings of directors
248
Minutes of directors’ meetings
(1)
Every company must cause minutes of all proceedings at meetings of its
directors to be recorded.
(2)
The records must be kept for at least ten years from the date of the meeting.
5
(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
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
10
3 on the standard scale.
249
Minutes as evidence
(1)
Minutes recorded in accordance with section 248, if purporting to be
authenticated by the chairman of the meeting or by the chairman of the next
directors’ meeting, are evidence (in Scotland, sufficient evidence) of the
15
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—
(a)
the meeting is deemed duly held and convened,
(b)
all proceedings at the meeting are deemed to have duly taken place,
20
and
(c)
all appointments at the meeting are deemed valid.
Meaning of "director" and "shadow director"
250
“Director”

In the Companies Acts “director” includes any person occupying the position
25
of director, by whatever name called.
251
“Shadow director”
(1)
In the Companies Acts “shadow director”, in relation to a company, means a
person in accordance with whose directions or instructions the directors of the
company are accustomed to act.
30
(2)
A person is not to be regarded as a shadow director by reason only that the
directors act on advice given by him in a professional capacity.
(3)
A body corporate is not to be regarded as a shadow director of any of its
subsidiary companies for the purposes of—
Chapter 2 (general duties of directors),
35
Chapter 4 (transactions requiring members’ approval), or
Chapter 6 (contract with sole member who is also a director),

by reason only that the directors of the subsidiary are accustomed to act in
accordance with its directions or instructions.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 9 — Supplementary provisions
118

Other definitions
252
Persons connected with a director
(1)
This section defines what is meant by references in this Part to a person being
“connected” with a director of a company (or a director being “connected” with
a person).
5
(2)
The following persons (and only those persons) are connected with a director
of a company—
(a)
members of the director’s family (see section 253);
(b)
a body corporate with which the director is connected (as defined in
section 254);
10
(c)
a person acting in his capacity as trustee of a trust—
(i)
the beneficiaries of which include the director or a person who
by virtue of paragraph (a) or (b) is connected with him, or
(ii)
the terms of which confer a power on the trustees that may be
exercised for the benefit of the director or any such person,
15

other than a trust for the purposes of an employees’ share scheme or a
pension scheme;
(d)
a person acting in his capacity as partner—
(i)
of the director, or
(ii)
of a person who, by virtue of paragraph (a), (b) or (c), is
20
connected with that director;
(e)
a firm that is a legal person under the law by which it is governed and
in which—
(i)
the director is a partner,
(ii)
a partner is a person who, by virtue of paragraph (a), (b) or (c)
25
is connected with the director, or
(iii)
a partner is a firm in which the director is a partner or in which
there is a partner who, by virtue of paragraph (a), (b) or (c), is
connected with the director.
(3)
References in this Part to a person connected with a director of a company do
30
not include a person who is himself a director of the company.
253
Members of a director’s family
(1)
This section defines what is meant by references in this Part to members of a
director’s family.
(2)
For the purposes of this Part the members of a director’s family are—
35
(a)
the director’s spouse or civil partner;
(b)
any other person (whether of a different sex or the same sex) with
whom the director lives as partner in an enduring family relationship;
(c)
the director’s children or step-children;
(d)
any children or step-children of a person within paragraph (b) (and
40
who are not children or step-children of the director) who live with the
director and have not attained the age of 18;
(e)
the director’s parents.
(3)
Subsection (2)(b) does not apply if the other person is the director’s
grandparent or grandchild, sister, brother, aunt or uncle, or nephew or niece.
45

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 9 — Supplementary provisions
119

254
Director “connected with” a body corporate
(1)
This section defines what is meant by references in this Part to a director being
“connected with” a body corporate.
(2)
A director is connected with a body corporate if, but only if, he and the persons
connected with him together—
5
(a)
are interested in shares comprised in the equity share capital of that
body corporate of a nominal value equal to at least 20% of that share
capital, or
(b)
are entitled to exercise or control the exercise of more than 20% of the
voting power at any general meeting of that body.
10
(3)
The rules set out in Schedule 1 (references to interest in shares or debentures)
apply for the purposes of this section.
(4)
References in this section to voting power the exercise of which is controlled by
a director include voting power whose exercise is controlled by a body
corporate controlled by him.
15
(5)
Shares in a company held as treasury shares, and any voting rights attached to
such shares, are disregarded for the purposes of this section.
(6)
For the avoidance of circularity in the application of section 252 (meaning of
“connected person”) —
(a)
a body corporate with which a director is connected is not treated for
20
the purposes of this section as connected with him unless it is also
connected with him by virtue of subsection (2)(c) or (d) of that section
(connection as trustee or partner); and
(b)
a trustee of a trust the beneficiaries of which include (or may include) a
body corporate with which a director is connected is not treated for the
25
purposes of this section as connected with a director by reason only of
that fact.
255
Director “controlling” a body corporate
(1)
This section defines what is meant by references in this Part to a director
“controlling” a body corporate.
30
(2)
A director of a company is taken to control a body corporate if, but only if—
(a)
he or any person connected with him—
(i)
is interested in any part of the equity share capital of that body,
or
(ii)
is entitled to exercise or control the exercise of any part of the
35
voting power at any general meeting of that body, and
(b)
he, the persons connected with him and the other directors of that
company, together—
(i)
are interested in more than 50% of that share capital, or
(ii)
are entitled to exercise or control the exercise of more than 50%
40
of that voting power.
(3)
The rules set out in Schedule 1 (references to interest in shares or debentures)
apply for the purposes of this section.

Company Law Reform Bill [HL] (changed to Companies Bill [HL])
Part 10 — A company’s directors
Chapter 9 — Supplementary provisions
120

(4)
References in this section to voting power the exercise of which is controlled by
a director include voting power whose exercise is controlled by a body
corporate controlled by him.
(5)
Shares in a company held as treasury shares, and any voting rights attached to
such shares, are disregarded for the purposes of this section.
5
(6)
For the avoidance of circularity in the application of section 252 (meaning of
“connected person”)—
(a)
a body corporate with which a director is connected is not treated for
the purposes of this section as connected with him unless it is also
connected with him by virtue of subsection (2)(c) or (d) of that section
10
(connection as trustee or partner); and
(b)
a trustee of a trust the beneficiaries of which include (or may include) a
body corporate with which a director is connected is not treated for the
purposes of this section as connected with a director by reason only of
that fact.
15
256
Associated bodies corporate
(1)
For the purposes of this Part bodies corporate are associated if one is a
subsidiary of the other or both are subsidiaries of the same body corporate.
(2)
References to an “associated company” have a corresponding meaning.
257
References to company’s constitution
20
(1)
References in this Part to a company’s constitution include—
(a)
any resolution or other decision come to in accordance with the
constitution, and
(b)
any decision by the members of the company, or a class of members,
that is treated by virtue of any enactment or rule of law as equivalent to
25
a decision by the company.
(2)
This is in addition to the matters mentioned in section 17 (general provision as
to matters contained in company’s constitution).
General
258
Power to increase financial limits
30
(1)
The Secretary of State may by order substitute for any sum of money specified
in this Part a larger sum specified in the order.
(2)
An order under this section is subject to negative resolution procedure.
(3)
An order does not have effect in relation to anything done or not done before
it comes into force.
35

Accordingly, proceedings in respect of any liability incurred before that time
may be continued or instituted as if the order had not been made.