Company Law Reform Bill

moved Amendment No. 187:"Page 75, line 12, leave out ““five”” and insert ““two””" The noble Lord said: This amendment is partly probing in nature, but also in part a statement of principle. Corporate practice has moved on in recent years, particularly in relation to the length of directors’ contracts. It is now standard practice, certainly in large professional firms as opposed to companies, for contracts to be annual. My amendment leaves out five years as the maximum term and would reduce it to two years. It is a compromise. Clause 171 provides that a director may not be guaranteed a service contract longer than five years without a resolution of the members. The Explanatory Notes say simply that long-term service contracts are contracts under which a director is guaranteed at least five years of employment with the company of which he is a director, or with any subsidiary of that company. Although substantially reworded, this clause appears to be no more than a continuation of Section 319 of the 1985 Act. We suggest that current thinking concludes that five years is too long and that our suggestion of two years is more appropriate. I am particularly grateful to the UK Share Association, which feels quite strongly about this for companies both large and small, and I must say that I agree. I beg to move.