Company Law Reform Bill

moved Amendment No. 192:"Page 81, line 37, leave out ““subsidiary of the company”” and insert ““body corporate associated with it””" The noble Lord said: Amendment No. 192 is intended to correct an unintended change from Section 330(7) of the 1985 Act. It is concerned with Clause 184, which is derived from Section 330(6) and (7), but is rather different because the prohibition on quasi-loans and credit transactions has been replaced with a requirement for member approval. Clause 184 is an anti-avoidance provision. It prevents a company from evading the requirement for member approval by entering into an arrangement whereby another person gives the director a loan, quasi-loan or credit transaction, and in return that person obtains a benefit from a company or from a subsidiary of the company. Section 330(7) of the Companies Act contains a similar provision that goes slightly further than Clause 184. It includes an arrangement not only where the benefit is given by the company or subsidiary of the company but also where the benefit is given by the company’s holding company or any subsidiaries of the company’s holding company. Amendment No. 192 amends Clause 184 accordingly. Amendment No. 216 is concerned with Clause 200, which creates an exception from the requirement for member approval of payments for loss of office. The exception is for payments made in discharge of certain legal obligations. Clause 197 requires member approval of payments by a company to its director or to a director of its holding company for loss of office. However, Clause 200(2) provides that approval is not required under Clause 197 if the payment is made in good faith in discharge of an existing legal obligation of the company or any of its subsidiaries, as long as the obligation was not entered into in connection with or as a consequence of the event giving rise to the payment for loss of office. The amendment expands this exception to include payments in discharge of existing legal obligations of any body corporate associated with the company making the payment. This will enable the subsidiary to make a payment to a director in respect of a legal obligation of its holding company without the need for member approval under Clause 197. I beg to move.