Company Law Reform Bill

As this is a clause stand part debate, I ought to say a word about the purpose of the clause, which is to impose on a director a duty not to accept benefits from third parties. It applies only to benefits conferred because the director is a director of the company or because of something that the director does or does not do as director. The word ““benefit””, for the purpose of the clause, includes benefits of any description, including non-financial benefits. So the answer to the second question put to me by the noble Lord is, yes, it includes non-financial benefits. Under current law, any profit acquired by a director through holding the office of director must, as a matter of law, be accounted for to the company, unless the director has disclosed the profit and the circumstances in which he acquired it to the company in a general meeting and his retention of it has been sanctioned by the company. My noble friend Lord Wedderburn said something about that earlier. There is a long-standing rule. I do not need to put on the record the citation of the well known case law that sets it out. The clause codifies that long-standing rule, prohibiting the exploitation of the position of director for personal benefit. It does not apply to benefits that the director receives from the company, or from any associated company, or from a person acting on behalf of any of those companies. Obviously, it excludes benefits such as the payment of remuneration by the company. If the director’s services are provided to the company by another person, benefits received by the director from that other person are also excluded from this clause—for example, if the director provides his services through his own company, which is not an uncommon event. I also draw attention to the fact that benefits are prohibited by the duty only if their acceptance is regarded as likely to give rise to a conflict of interest. That is in Clause 160(4):"““This duty is not infringed if the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest””." In answer to the first question, whether an indemnity given to a director by a third party would constitute a benefit from a third party, I would prefer not to give an unqualified answer on my feet. Given that the record is, rightly, being closely studied by others—