Company Law Reform Bill [HL]

moved Amendment No. 170:"Page 150, line 22, leave out subsection (4)." The noble Lord said: My Lords, in moving Amendment No. 170, I shall also speak to Amendments Nos. 171 to 173, 175 to 179, and 183 to 187. These amendments are concerned with Part 14 of the Bill—political donations. Although they address a number of different issues, I will speak to them together for efficiency because, apart from one minor correction, they address concerns that have been raised by noble Lords in Committee. The first couple of amendments, those to Clauses 341 and 343, simply correct a drafting inconsistency between the definitions of political expenditure that appear in these clauses. I am grateful to the noble Lord, Lord Razzall, for highlighting this inconsistency in Committee. I turn now to the proposed amendment to Clause 342. This clause refers to the definition of ““political donation”” set out in the Political Parties, Elections and Referendums Act 2000. Changes to this definition have recently been agreed by way of amendments to the Electoral Administration Bill in this House relating to loans made to political parties. The amendment to Clause 342 ensures that the scope of this provision is not altered by the changes to the Political Parties, Elections and Referendums Act 2000 made by the Electoral Administration Bill. In other words, Part 14 of this Bill will continue to apply only to political donations, which are defined as including loans at a non-commercial rate. It remains the case that Part 14 does not apply to loans at a commercial rate. The next set of amendments in this group concerns Clause 345. The amendments respond to an issue raised by the noble Lords, Lord Hodgson and Lord Razzall, in Committee regarding whether it should be necessary for a holding company to name each of its subsidiaries when passing a resolution that gives approval for a political donation. I accept that the requirements of this clause should not be overly restrictive when a holding company passes a resolution in relation to its subsidiaries. Accordingly, Amendments Nos. 175 to 179 make it clear that a holding company does not need to refer to each of its subsidiaries in the circumstances specified. The amendments to Clause 348 are concerned with the liability of directors of a holding company in the case of unauthorised political expenditure or an unauthorised political donation by a subsidiary. I hope that it will be helpful to noble Lords, and for the record, if I describe the mechanics of the amendment in a little detail, as I know that this was a point of particular concern during the discussions in Committee, and we believe that these amendments go a long way towards addressing it. First, Amendments Nos. 183 and 184 adjust the terminology, replacing ““responsible directors”” with ““directors in default””. This makes it clearer, for the avoidance of doubt, that a director may apply for relief under Clause 769, which refers to proceedings for default. Secondly, Amendment No. 185 addresses the particular concern that the directors of a holding company could be liable for a political donation made by a subsidiary over which they have no control or of which they have no knowledge. It is worth emphasising at this point that the liability of such a director of a holding company is already limited by the definition of ““subsidiary”” in Section 736 of the 1985 Act. Essentially, that section defines a subsidiary as being a company controlled by a holding company by virtue of the fact that the holding company controls a majority of its voting rights or has the right to appoint or remove a majority of its board of directors. Therefore, in many cases the directors of a holding company will control the voting rights that the subsidiary needs to pass a resolution approving a political donation. We recognise that there may be cases where directors of a holding company are not aware of a political donation made by a subsidiary or are powerless to prevent it. The amendment provides that the directors of a holding company will be liable only if they have failed to take all reasonable steps to prevent the donation from being made by the subsidiary. Accordingly, the directors of the holding company will not be liable for an unauthorised political donation by a subsidiary if, having taken all reasonable steps, they are unaware of the donation or are powerless to prevent it. However, if, for example, the directors of a holding company use the controlling voting rights that they have in a subsidiary to pass a resolution authorising the subsidiary to make a political donation without an authorising resolution from the members of the holding company, then the directors of the holding company would be liable. I note that Amendment No. 186, tabled by the noble Lords, Lord Sharman and Lord Razzall, addresses the same point. In the light of my explanation, I hope that they will be able to withdraw it. I turn finally in this group to the amendment to Clause 356, Amendment No. 187. This is a minor correction to the drafting. I beg to move.