Company Law Reform Bill

moved Amendment No. 190:"Page 78, line 17, leave out subsections (2) to (7) and insert—" ““(2)   The arrangement, and any transaction entered into in pursuance of the arrangement (whether by the company or any other person), is voidable at the instance of the company, unless— (a)   restitution of any money or other asset that was the subject-matter of the arrangement or transaction is no longer possible, (b)   the company has been indemnified in pursuance of this section by any other persons for the loss or damage suffered by it, or (c)   rights acquired in good faith, for value and without actual notice of the contravention by a person who is not a party to the arrangement or transaction would be affected by the avoidance. (3)   Whether or not the arrangement or any such transaction has been avoided, each of the persons specified in subsection (4) is liable— (a)   to account to the company for any gain that he has made directly or indirectly by the arrangement or transaction, and (b)   (jointly and severally with any other person so liable under this section) to indemnify the company for any loss or damage resulting from the arrangement or transaction. (4)   The persons so liable are— (a)   any director of the company or of its holding company with whom the company entered into the arrangement in contravention of section 173, (b)   any person with whom the company entered into the arrangement in contravention of that section who is connected with a director of the company or of its holding company, (c)   the director of the company or of its holding company with whom any such person is connected, and (d)   any other director of the company who authorised the arrangement or any transaction entered into in pursuance of such an arrangement. (5)   Subsections (3) and (4) are subject to the following two subsections. (6)   In the case of an arrangement entered into by a company in contravention of section 173 with a person connected with a director of the company or of its holding company, that director is not liable by virtue of subsection (4)(c) if he shows that he took all reasonable steps to secure the company’s compliance with that section. (7)   In any case— (a)   a person so connected is not liable by virtue of subsection (4)(b), and (b)   a director is not liable by virtue of subsection (4)(d), if he shows that, at the time the arrangement was entered into, he did not know the relevant circumstances constituting the contravention. (8)   Nothing in this section shall be read as excluding the operation of any other enactment or rule of law by virtue of which the arrangement or transaction may be called in question or any liability to the company may arise.”” The noble Lord said: This group of technical amendments is concerned with ensuring that where provisions of the Companies Act 1985 are being restated there is no substantive change in the effect, and that terminology is applied consistently throughout the Bill. The first amendment in this group, Amendment No. 190, is to Clause 178, which sets out the consequences if a company enters into a substantial property transaction in breach of the requirement in Clause 173 to obtain the approval of the members. This provision is derived from Section 322 of the Companies Act 1985 and is not intended to make any substantive change save in respect of Section 322(2)(c) of that Act, which is replaced by Clause 179. The amendment corrects a departure between this clause and Section 322 of the Act. Clause 178(4)(a) as currently drafted makes liable any director of the company, any director of its holding company or any person connected with the director, but only if they are the person with whom the company entered into the substantial property transaction in breach of Clause 173. However, under Section 322(3) of the Act, a director will be liable for a substantial property transaction entered into with a person connected to him, even if he was not himself a party to the transaction in breach of the Act. The amendment therefore brings the Bill in line with the Companies Act 1985 in this respect. It also makes clear that the clause applies to transactions entered into in pursuance of arrangements requiring approval under Clause 173, once again ensuring consistency with Section 322 of the 1985 Act. Amendments Nos. 193 to 195 make minor changes to Clause 184 to improve the drafting. Amendments Nos. 201 to 208 and 210 to 212 amend Clauses 193 and 194 by expanding references to transactions to include arrangements. This ensures consistency with the approach taken elsewhere in the group of clauses. It is also consistent with the approach taken in Section 341 of the Companies Act 1985, from which Clause 193 is derived. Amendment No. 209 makes the same correction as Amendment No. 190. Subsections (4) to (6) restate the equivalent parts of Section 341 of the 1985 Act without making any substantive changes to their operation. I beg to move.