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Company Law Reform Bill [Lords]

The problem is that there are about 650 ““other matters”” which have built up over time as considerations that guide the behaviour of directors. By picking out a mere six, the simplicity of the codification may make matters worse. It seems clear that directors will have to look, as the Secretary of State said, at both statute and case law to find out what their legal duties are, and perhaps at guidance as well. Yet more confusing is the lack of clarity about how the list of factors provided in clause 158 should be approached. Are they listed in order of precedence? If not, what happens when there is a conflict between them? Ministers have given assurances that decisions taken in good faith will not be subject to review by the courts. The Secretary of State stated that yesterday in the Financial Times. However, the Law Society and many leading lawyers think otherwise. If it is not the Government’s intention that decisions taken by directors in good faith should be hauled through the courts, we urge them to work with us to tackle a provision that we think will lead to confusion. After all, it is what is in the Bill that matters, not what Ministers say they meant by the Bill. Confusion in this area will inevitably lead to costly litigation. As Miles Templeman of the Institute of Directors cautioned,"““The Government has to make sure that the proposed legislation does not fundamentally change the current law. There is a danger that some of the drafting of the Bill could well have this effect, leaving confusion and uncertainty until the provisions are interpreted by the courts.””"