Company Law Reform Bill

These amendments would all in their different ways make changes to the definition of ““connected persons”” in respect of those people who have a close family link to the directors such that their activities are brought within the ambit of the regulatory requirements elsewhere in this part of the Bill. It may be useful if I set out the background. The current law in the Companies Act 1985 defines ““connected persons”” within the director’s family to be the spouse, civil partner, child or step-child. In considering these provisions, the Law Commission recommended an extension so as to bring further categories of family members within the definition of ““connected persons””. These clauses largely implement the recommendations made by the Law Commission. One of the commission’s central recommendations was that all cohabiting partners, including same-sex partners, should be covered, and not just married partners. Since its report, the law has been changed to enable same-sex partners to enter into formal civil partnerships. The Bill reflects this by including both spouses and civil partners, and if we accepted Amendment No. 240, that is where the matter would rest. But the Law Commission’s recommendation related to all cohabiting partners, many of whom will not have entered into the formal arrangements of marriage or civil partnership. I believe it is right that such people should be covered. There are clearly persons very closely connected to the director where questions of mutual influence and a nexus of interests may easily arise. The clause therefore covers them by referring to people who are in ““an enduring family relationship””, a formulation found elsewhere in law to define what in lay terms one would call a person’s partner. However, I acknowledge that in certain circumstances that may be difficult to establish, but those are matters for the courts. Amendment No. 241 would exclude from the definition of connected persons the director’s own children once they were over the age of 18. I was asked whether that marks a change. I am advised that Section 346 of the 1985 Act currently includes the definition ““infant son or infant daughter””. Amendment No. 242 would exclude the director’s parents. I am not sure that this would be right. Children, even adult children, and parents again seem very much the sorts of people where questions of commonality of interest can arise. The Law Commission thought so and made the recommendation that they should be covered, and it was supported on consultation. On one point, we have departed from the Law Commission; namely, on whether a director’s siblings should be covered. Amendments Nos. 243 and 244 suggest that they should be, although I accept that they are probing in nature. There can clearly be different views on this, and I do not say it is a precise science. However, it is reasonable to assume that the relationship between siblings may be less close than between parents and children and that directors are less likely to be in touch with the business activities of their brothers or sisters. Ultimately, this is a question of balance—one needs to draw the line somewhere. We take the view that an extension of the provisions to siblings would be unnecessarily regulatory.