Company Law Reform Bill [HL]

moved Amendment No. 105:"Page 99, line 25, leave out from second ““resolution”” to end of line 26 and insert ““neither the director (if a member of the company) nor any member connected with him is an eligible member.””" The noble and learned Lord said: My Lords, this topic came up in Grand Committee. Clause 217 ensures that the present law on ratification continues to apply, with the changes brought about by this clause. Ratification must be by ordinary resolution of the members, disregarding the votes of certain persons, subject to anything in the company’s articles requiring a higher majority or unanimity. At the moment the clause disregards the votes in favour by those members with a personal interest, direct or indirect, in the ratification. The noble Lord, Lord Sharman, drew attention to the potential problems of that definition. The first five government amendments in this group—Amendments Nos. 105 to 109—replace that with a more precise and narrow test. The amendments disregard only the votes in favour by the director whose conduct is being ratified and any persons connected to that director. The connected person test is already used in the Companies Acts and is widely used in the rest of this part of the Bill. It is one with which all directors will already need to be familiar. We consider this to be a measured solution. It seeks to exclude the votes of the wrongdoer and those persons most likely to be biased in favour of the director or under his influence—namely, the persons connected with him—and makes it easier to identify those persons when the votes are counted. The final government amendment in the group has been tabled in response to concerns raised by the Law Society—we do listen to its concerns—that subsection (7) might be interpreted as preserving a separate ratification regime under the common law, which could cause confusion. Amendment No. 110 makes it clearer that the requirements of this clause are additional and not alternative to any other requirements as to ratification imposed by statute or under the common law, and I believe that it will meet the Law Society’s concerns. I beg to move.