Company Law Reform Bill [HL]

moved Amendment No. 174:"Page 151, line 36, at end insert—" ““(a) by a resolution of the board of directors of the company; or”” The noble Lord said: My Lords, in moving Amendment No. 174, I shall speak also to Amendments Nos. 180 and 181. The amendments are to Clauses 344, 345 and 346, which concern the authorisation required for donations or expenditure under Part 14 of the Bill in connection with political activities, and relate to the procedure which needs to be followed by companies where they wish to make such donations or incur such expenditure. The Bill currently provides that political donations or expenditure must be authorised by resolution of all the members of the company. The amendments we have tabled would enable authorisation by a resolution of the board of directors. This would save the time and expense required to seek the permission of all the members. Much of our debate yesterday centred on the responsibilities and liabilities of directors, a matter addressed by my noble friend Lord Freeman. The new codification of duties, which the Government achieved after a Division yesterday, imposes new statutory responsibilities on directors and the new statutory derivative claim which expand the grounds upon which members can claim against directors on behalf of the company. All these new obligations appear to be designed to ensure that directors follow the correct procedures and take into consideration the correct influences when making decisions for the company. They will also allow for greater scrutiny of these processes and greater activism to chase up errant boards and errant directors. So, bearing that in mind, we are unconvinced by the comments of the noble Lord, Lord McKenzie, in Grand Committee that such political donations,"““might be seen to reflect the director’s personal viewpoint rather than the interests of the company””." He went on to state:"““That is the nuisance that we are seeking to avoid, and the requirement for member authorisation is needed to achieve that””." If that really is the case, then what purposes do the newly codified directors’ duties achieve? It is strange that the Government should have so little confidence already in the effectiveness of the newly codified duties that they have fought so hard to introduce to this Bill. Therefore, if the Government have faith in their new reforms to directors’ duties, we see no reason why it should not be appropriate for boards of directors to authorise political donations and expenditure. The noble Lord, Lord McKenzie, also spoke about what he perceives as the parity between trade unions and companies when it comes to donations. He said:"““It is also right that trades unions have to go to their members to be able to set up a political front””.—[Official Report, 1/3/06; GC 147.]" I do not think he meant ““front””, but that is what is recorded in Hansard—I think he meant ““fund””. This is somewhat misleading; as I understand it, trades unions merely ballot their members over the setting up of a political fund once, and then every 10 years subsequently to maintain the fund. A company, however, will be required to do so every time it makes a donation. To compare the two, and to say that all is balanced, strains the bounds of credibility. Our amendments seek to redress the balance a little. Companies would still be able to make donations or expenditure of a political nature where it is in the best interests of the company. In fact, under these amendments, it would probably have to be even more clearly in the interests of the company as the directors have a duty to so act while the members, acting in their personal capacity, have no such duty and may well be swayed by their own political inclinations, despite any benefit the company in which they are invested may obtain. Companies would be able to do so with a minimum of administrative effort and expense, unlike the proposed mechanism in the Bill. Shareholders would retain their ability to be in overall control through the various checks and balances that already regulate directors’ conduct and those that the Bill introduces or amends. I beg to move.