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Company Law Reform Bill [HL]

moved Amendment No. 169:"Page 70, line 2, leave out from ““must”” to ““have”” and insert ““not””" The noble Lord said: In moving Amendment No. 169, I shall speak to Amendment No. 170 as well. Amendment No. 169 is important; it has concerned a number of organisations that we consulted, including the CBI and the Institute of Directors. I shall read out what is in the Bill and then show the effect Amendment No. 169 would have. Clause 159(1) states:"““A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company””." If my amendment were accepted, the provision would read as follows: ““A director of a company must not have a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company””. The purpose of the amendment is to remove the uncertainty—the difficulty—that directors might have in contemplating precisely what that future conflict of interest might be, as contained in the words,"““in which he has, or can have, a direct or indirect interest””." It is difficult to imagine or forecast a circumstance in which a director might find himself. Unless this provision is amended, we will find it difficult to recruit directors serving on more than one board, certainly in one industry, and even across industry sectors. That is because, while it may not be possible in concrete terms where a conflict might arise, such a director would be put off by reading the text of the Act, as it will become, and will therefore decline to serve on other boards, when that expertise may be of great value. And indeed, I believe that there is a value in it; my noble friends Lord Hodgson, Lady Noakes and Lord MacGregor have served on many boards and they know that the transfer of experience between boards is often of great value. I fear greatly that unless we amend this clause, we shall prevent directors from considering serving on other boards.       On Amendment No. 170, it will be hard for directors to comply with the absolute obligation to avoid positions of conflict imposed on them by Clause 159. A requirement to take all reasonable steps to do so will in practice offer as much protection to the company as an absolute obligation, while being a more practical approach from the director’s point of view. Amendment No. 170 represents an alternative to Amendment No. 169 and, because it is a probing amendment, I should appreciate the Minister’s view on it. I beg to move.