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Companies Bill [HL]

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 68. In speaking to this amendment I shall also speak to AmendmentsNos. 113 to 118, 120 to 155, 157, 159 to 170, 172 and 174. We now come to amendments to Part 10. This is clearly one of the most important parts of the Bill. The amendments to this part, agreed in another place, are relatively minor. I believe they also have cross-party support. I will look briefly at the main amendments, in amendment order. Amendments Nos. 68, 113, 115 and 118 ensure that a shadow director is treated as a director regarding potential liability for various offences, but not regarding their particulars being on the public record. Amendments Nos. 114, 116 and 117 to Clauses 150 and 152 ensure that the provisions for the protected record of directors’ residential addresses are effective. Amendment No. 172 to Clause 226 provides powers to make regulations, providing greater protection for some directors’ home addresses. Amendment No. 120 extends the provisions of Clause 167 to Northern Ireland. The effect of Clause 167 is to reverse the various relaxations to the strict no-conflict rule made by the Bill. Charitable companies will still be able to take advantage of the various relaxations, where their constitutions allow. That is the benefit of transparency. It will be clear from the charity’s constitution whether it is able to take advantage of a relaxation to the strict no-conflict rule. Turning to the rules on substantial property transactions, Clause 176 implements a recommendation of the Law Commissions that has been widely welcomed, by allowing companies to enter into agreements that are conditional on the approval of the members of the company being obtained. Amendment No. 122 goes one step further by allowing the agreement to be conditional upon approval from the members of its holding company as well, in those cases where the approval of the members of the holding company is required. The amendment responds to concerns that companies could be inconvenienced if they had to wait for member approvals before they could agree to a substantial property transaction. The Bill makes a major deregulatory change to the regime applying to loans and other similar transactions by a company for its directors. At the moment these are prohibited unless certain exceptions apply. The Bill replaces that with a requirement for member approval. At the same time, the Bill was drafted to implement the recommendation of the Law Commissions that all the rules on loans, quasi-loans and credit transactions for directors should extend to all companies. For most private companies that would mean an increase in regulation, because at the moment many of the rules only apply to relevant companies. In broad terms, relevant companies are public companies and private companies that are on the same group as a public company. Although this recommendation was endorsed by the Company Law Review, we have carried out further informal discussions in light of the discussion in another place. There was clear support from stakeholders for the proposal that the requirement currently only applying to relevant companies should not be extended to all private companies. Under the amendments, the Bill would therefore no longer apply the rules on credit transactions or quasi-loans to private companies, unless they were associated with a public company, or apply the rules on loans, quasi-loans and credit transactions with persons connected to a director to private companies, unless they were associated with a public company. Amendments Nos. 135 and 136 make it possible for a loan under the exceptions in Clauses 189 and 190 to be used by a director to fund their defence in proceedings relating not just to the company but for negligence relating to associated companies. This recognises that in a group situation it may be more convenient for the loan to be made by a different group in the company. Companies legislation requires prior authorisation by the members for certain transactions; for example, loans or payments for loss of office between the company and a director. Section 66 of the Charities Act 1993 renders prior authorisation by the members for transactions such as payments for loss of office invalid unless the Charity Commissioners have given their prior written consent. That reflects concerns that in some cases the members of a charitable company are not independent of the directors, and that requiring their approval would not provide sufficient protection for the charity. Chapter 4 of Part 10 makes various changes to the provisions on the requirements for prior shareholder authorisation. Amendment No. 157 inserts two new sections into the Charities Act 1993, in place of Section 66 of that Act, to reflect the changes made by the Bill. I turn finally to the amendments relating to the indemnification of the director of a company acting as a trustee of an occupational pension scheme. The amendments address concerns raised in this House and in another place. The point was made that such directors perform a vital role, often for very little direct financial reward, and that directors’ and officers’ liability insurance policies currently available afford limited protection. We made clear that the Government attach great importance to the work of such directors, and that we are aware it can sometimes be difficult to recruit high-quality directors for companies acting as a trustee of an occupational pension scheme. In view of that, and following consultation with key stakeholders, we tabled amendments to permit companies to indemnify the directors of associated companies acting as trustees of occupational pension schemes. Moved, That the House do agree with the Commons in their Amendment No. 68.—(Lord Sainsbury of Turville.)