Company Law Reform Bill

In the interests of clarity, I shall treat the amendments in reverse order. On Amendment No. 212B, Clauses 195 to 202, which replace Sections 312 to 316 of the Companies Act 1985, require member approval for payments for loss of office. Those are payments made to a director or former director to compensate them for ceasing to be a director or losing any other office or employment with the company or with a subsidiary of the company. In the case of a loss of office other than as director or loss of employment, the clauses will apply only if that office or employment is connected with the management of the affairs of the company or subsidiary. Payments made in connection with retirement as director or retirement from any other office or employment connected with the management of the affairs of the company or the subsidiary are also included. However, payments are included only if the person is a director of the company at the time that the office or employment ceases or if the retirement or loss occurs in connection with the director ceasing to be a director. It does not matter if the director ceased to be a director at the time that the payment is made. What matters is the reason for payment. Therefore, the provision of Amendment No. 212B is made already by the opening words to Clause 195(1). It is not possible to evade the provisions simply by the device of resignation prior to payment. As the Law Commission pointed out, it would expect the court to treat the resignation and the payment as part of a single operation. I turn to Amendment No. 212A. The drafting in line 34 of Clause 195 follows paragraph 2(b) of Schedule 6 of the Companies Act 1985. I do not think there is any legal uncertainty associated with that wording and the amendment is therefore unnecessary.