Appendix 3: Company Directors' Performance
and Compensation Bill
Letter from the Chair to Mr Archie Norman MP
As part of its function to consider human rights
in the United Kingdom, the Joint Committee on Human Rights examines
all bills introduced to either House with a view to reporting
to each House on their compatibility with Convention rights under
the Human Rights Act 1998, and with other rights which arise in
international law under human rights instruments by which the
United Kingdom is bound. The Committee is currently considering
the human rights implications of the Company Directors' Performance
and Compensation Bill, which you introduced to the House of Commons.
As you know, the Bill would amend the Companies Act
1986 by inserting a new section 316A and a new paragraph 6(5)
of Schedule 7A to the Act. The combined effect would be to limit
any compensation or payment payable to a director for termination
of his or her office or employment to 'such amount as is …
fair and reasonable having regard to any failure by the director
in the performance of his duties either in his office as director
or as an employee or both.' That would apply, 'Notwithstanding
anything contained in a company's articles, or in any contract…':
proposed new section 316A(1).
This appears to make it possible to deny payment
of money legally due to a director, interfering with the director's
right to peaceful enjoyment of possessions and depriving the director
of property protected by Article 1 of Protocol No. 1 to the ECHR.
The Committee is concerned about the possibility that this might
be incompatible with two sets of rights under that Article: first,
the right of the director to money legally due to him or her;
secondly, the right of the company to use its property and enter
into contracts as seems best to it. Under Article 1, compensation
for a deprivation of property in the public interest is required
save in exceptional circumstances, and any control on the use
of property must strike a fair balance between the rights of property
owners and the general public interest (which may itself demand
compensation in some circumstances).
In the light of this, the Committee is considering
whether to draw the attention of each House to the human rights
implications of the Bill. The Committee understands the difficulties
which the sponsors of private members' bills, with limited resources,
often face in responding to questions from the Committee about
the human rights implications of their bills. Nevertheless, without
suggesting that you are under any obligation to respond to its
concerns, the Committee would of course give full weight to any
representations which you might wish to put before it.
The Committee is likely to be deciding on 17 November
2003 whether, and if so how, to report to each House on the Bill,
and so would be unable to take account of representations received
after 14 November 2003.
5 November 2003
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