Company Law Reform Bill

I apologise if I should have made this intervention before the noble and learned Lord spoke and I quite understand if he does not want to answer off the cuff. In a curious way, my question relates to the example given by my noble friend Lord Clinton-Davis. I have refrained from the bad habit of citing decided cases—except on this occasion. Let us take the most notorious and important precedent that we have in existing law, which, after all, the courts are going to have to look at to understand the meaning of all this. Regal (Hastings) Ltd v Gulliver was reported in 1942 in the All England Law Reports but escaped the official law reports until a note of 1967. Noble Lords addressing these questions will know the case very well. I will quote the way that the case has been described in one of the books:"““In that case the directors, who were also the majority shareholders, invested in a subsidiary which the company was establishing, and later sold their shares in the subsidiary at a profit. The House of Lords held that the opportunity to invest in the subsidiary had arisen out of and in the course of the discharge of their duties as directors of the parent, and so they were accountable for the profit””," because they had not reviewed it or had it approved by the shareholders. I think that it will be generally agreed that the judgments in that case, which I will not cite, diverge slightly in the way that they put the liability. Some stress the fact that this was a secret profit, which should have been approved, in that era, by the shareholders. Others, especially Lord Macmillan, used the phrase that is adopted in that description—that the profit had,"““arisen out of and in the course of the discharge of their duties as directors””." What I want to know is whether a similar analysis of the situation would be adopted today and whether the two different ways of approaching it would lead to two different routes for the directors involved to escape liability—or, if you like, to have the duty in relation to conflict of interest under Clause 159 made of little importance. If the Regal (Hastings) Ltd v Gulliver facts were analysed as the receipt of a benefit conferred by a third party—in this case, the subsidiary company—the matter would fall under Clause 160. Although subsection (4), which we have just been mentioning, speaks of ““a conflict of interest””, the clause does not include the approval of independent directors as a way out of the liability. When my noble friend Lord Clinton-Davis referred to the existing law, I think that he struck a chord with my questions. If those facts are analysed not primarily as a matter of conflict of interest of a director, although they obviously include such conflict, they would fall under Clause 160 and would not, it seems, be able to be avoided by the authorisation from independent members of the board. If the conflict of interest is the nub of the case, it might be argued that the facts more appropriately fall under Clause 159. I do not know at what stage to introduce the question and my noble and learned friend may wish to postpone giving a precise answer to a later stage. However, I think that there is a problem in the Bill surrounding that kind of case.