Company Law Reform Bill

Clause 206 replaces Section 318 of the Companies Act 1985. Under that section, companies are already required to keep a written memorandum setting out the terms of any director’s contract of service with the company or with a subsidiary of the company, if that contract is not in writing. The written memorandum must be open to inspection by members. This seems to be an obvious anti-avoidance provision. Without it, the disclosure requirements imposed by this clause could be avoided simply by the director having an unwritten service contract. Section 318 of the Companies Act 1985 was considered by the Law Commissioners, and they did not note any difficulty with this particular requirement. A memorandum is nothing more than a proper written record of the terms of the contract or agreement.