Company Law Reform Bill

moved Amendment No. 217:"Page 91, line 23, at end insert—" ““(   )   In the case of a payment within both section 197 and section 198, or within both section 197 and section 199, subsection (2) above applies and not subsection (3).”” The noble Lord said: Amendment No. 217 explains the relationship between subsections (2) and (3) of Clause 200, which sets out exceptions to the rules requiring member approval for payments for loss of office. The exception includes payments made in good faith in discharge of certain existing legal obligations. Subsections (2) and (3) specify the existing legal obligations which fall within the exception. This varies depending on whether the payment for loss of office falls within Clauses 197, 198 or 199. Clause 197 requires member approval for payments for loss of office by a company to its director or to a director of its holding company, but Clause 200(2) contains an exception in this case for payments in discharge of existing legal obligations of the company or its subsidiaries. Clauses 198 and 199 require member approval for payments for loss of office made by any person to a director in connection with the transfer of the undertaking of the company or a subsidiary of the company, or the transfer of the shares of the company or a subsidiary of the company resulting from a takeover bid. In this case the exception for payments in discharge of existing legal obligations covers a narrower range of existing legal obligations. The payment must be in respect of a legal obligation of the person making the payment. This is set out in Clause 200(3). The reason for this is that Clauses 198 and 199 apply to payments by any person, not just the company. As a result, there is potentially room for uncertainty as to the position where a payment falls within both Clauses 197 and 198 or within both Clauses 197 and 199. Amendment No. 217 would provide certainty by explicitly stating that, where the payment falls within Clause 197, Clause 200(2) should apply, regardless of whether the payment also falls within Clauses 198 or 199. I beg to move.