Company Law Reform Bill

Clause 216 preserves the current law on the ratification of acts by directors, but with one significant change: any decision by a company to ratify conduct by a director that would amount to negligence; default breach of duty; or a breach of trust in relation to the company must be taken by the members, without reliance on the votes of those members with a personal interest in the ratification. Later amendments concern new provision. As I understand my noble friend’s amendment, it raises the question of whether ratification should be able to apply to a breach of duty that amounts to market abuse. It seems to me that whether or not the decision was ratified would not affect the question of whether the action was unlawful. The members could not make the action lawful by ratifying it if it was unlawful under the Financial Services and Markets Act 2000, or indeed any other legislation. For example, they could not, by somehow ratifying insider dealing, prevent that from being a wrongful act. It does not seem necessary to us to make some specific exclusion of unlawful acts, either under the Financial Services and Markets Act or otherwise under the clause. I hope that I have answered the question that my noble friend put to me, but I will hear that in a moment.