Company Law Reform Bill

moved Amendment No. 198:"Page 84, line 42, leave out subsection (3) and insert" ““(3)   The condition specified in subsection (1)(b) does not of itself prevent a company from making a home loan— (a)   to a director of the company or of its holding company, or (b)   to an employee of the company, if loans of that description are ordinarily made by the company to its employees and the terms of the loan in question are no more favourable than those on which such loans are ordinarily made. (4)   For the purposes of subsection (3) a ““home loan”” means a loan— (a)   for the purpose of facilitating the purchase, for use as the only or main residence of the person to whom the loan is made, of the whole or part of any dwelling-house together with any land to be occupied and enjoyed with it, (b)   for the purpose of improving a dwelling-house or part of a dwelling-house so used or any land occupied and enjoyed with it, or (c)   in substitution for any loan made by any person and falling within paragraph (a) or (b) above.”” The noble Lord said: Clause 189 contains various exceptions for money-lending companies from the requirements for member approval of loans and quasi-loans under Clause 180. Subsection (3) contains a particular exception enabling money-lending companies to make home loans to directors. The purpose of this exception is to allow directors to take advantage of any employee home loan schemes operated by the money-lending company on the same terms as are offered to employees. This exception is derived from Section 338(6) of the Companies Act 1985. In a change from that section, the £100,000 limit has not been retained. However, as in that section, the money-lending company can take advantage of the exception only if the loan is for the purpose of facilitating the purchase, for use as the director’s only or main residence, of the whole or part of any dwelling-house. This means that in practice only a director can take advantage of the exception. The exception is not available in the case of a home loan to a person connected to a director, even if that person happens to be an employee of the company. We consider that preventing employees from taking advantage of an employee home loan scheme operated by the company simply because they happen to be connected to a director of the company while that director is not similarly prevented from taking advantage of the scheme, is unfair. Amendment No. 198 will rectify this situation by amending Clause 189(3) so that the exception also applies to home loans to connected persons, as long as they are employees of the company making the loan. I beg to move.