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Lord Sainsbury of Turville moved Amendments Nos. 8 to 10:
"REGISTER OF MEMBERS: RESPONSE TO REQUEST FOR INSPECTION OR COPY
(1) Where a company receives a request under section 115 (register of members: right to inspect and require copy), it must within five working days either—
(a) comply with the request, or
(b) apply to the court.
(2) If it applies to the court it must notify the person making the request.
(3) If on an application under this section the court is satisfied that the inspection or copy is not sought for a proper purpose—
(a) it shall direct the company not to comply with the request, and
(b) it may further order that the company's costs (in Scotland, expenses) on the application be paid in whole or in part by the person who made the request, even if he is not a party to the application.
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(4) If the court makes such a direction and it appears to the court that the company is or may be subject to other requests made for a similar purpose (whether made by the same person or different persons), it may direct that the company is not to comply with any such request.
The order must contain such provision as appears to the court appropriate to identify the requests to which it applies.
(5) If on an application under this section the court does not direct the company not to comply with the request, the company must comply with the request immediately upon the court giving its decision or, as the case may be, the proceedings being discontinued."
After Clause 115, insert the following new clause—
"REGISTER OF MEMBERS: REFUSAL OF INSPECTION OR DEFAULT IN PROVIDING COPY
(1) If an inspection required under section 115 (register of members: right to inspect and require copy) is refused or default is made in providing a copy required under that section, otherwise than in accordance with an order of the court, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(2) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(3) In the case of any such refusal or default the court may by order compel an immediate inspection or, as the case may be, direct that the copy required be sent to the person requesting it."
After Clause 115, insert the following new clause—
"REGISTER OF MEMBERS: OFFENCES IN CONNECTION WITH REQUEST FOR OR DISCLOSURE OF INFORMATION
(1) It is an offence for a person knowingly or recklessly to make in a request under section 115 (register of members: right to inspect or require copy) a statement that is misleading, false or deceptive in a material particular.
(2) It is an offence for a person in possession of information obtained by exercise of either of the rights conferred by that section—
(a) to do anything that results in the information being disclosed to another person, or
(b) to fail to do anything with the result that the information is disclosed to another person,
knowing or having reason to suspect that person may use the information for a purpose that is not a proper purpose.
(3) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both)."
On Question, amendments agreed to.
Clause 158 [Duty to avoid conflicts of interest]:
Lord Freeman moved Amendment No. 11:
(c) if the matter has been lawfully authorised by the company's constitution."
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The noble Lord said: In moving Amendment No. 11 in my name and that of my noble friend Lord Hodgson of Astley Abbotts, I shall also speak to Amendments Nos. 12 and 13.
The purpose of Amendment No. 11 is to enable the articles of a company to authorise a matter that would otherwise give rise to a breach of duty under the clause in so far as it is permitted by law. The matter has been raised by the Law Society, and there have been constructive discussions for which I am very grateful. I shall therefore be briefer than I would otherwise be because I am anticipating government Amendments Nos. 14 and 15.
On Report, we tabled an amendment to the then Clause 159(4) that was designed to enable the company's articles of association to authorise a matter that otherwise would constitute a conflict of interest, provided it did not contravene a common law rule or equitable principle. The noble and learned Lord the Attorney-General said on Report at col. 866 that the Government would consider the general point made at that stage.
The amendment to Clause 158(4) is narrower, but it is again designed to achieve a similar objective by enabling a company's articles of association to authorise a matter which otherwise would constitute a conflict of interest provided that it is lawful.
On Report, the Minister acknowledged that this was a difficult area. He also acknowledged that because old Clauses 159 and 160 characterised the obligations contained in those clauses as duties, the analysis in the Movitex case, to which the noble and learned Lord the Attorney-General referred, might no longer be available. The Minister objected to our amendment on Report because in his view it appeared to permit the company's constitution to provide a very wide exemption from liability, with the result that the only limits when it would not be possible to exempt directors' liability would be when actual fraud or dishonesty were involved.
However, the Minister stated that the point raised was one that ought to be considered and that the Government would consider it further before Third Reading. On that basis the amendment was withdrawn. I note government Amendments Nos. 14 and 15, to which the Minister will speak shortly. I ask him to confirm my understanding that those amendments refer to new Clauses 158 and 159. I beg to move.
Lord Sainsbury of Turville: My Lords, my noble and learned friend the Attorney-General set out our approach to this important but technically complex issue on Report. Two major principles have guided our approach. The first is that we cannot agree to return to the pre-1928 position, under which companies were able to include widely drafted exemption clauses in their articles. The current law sets the balance. It is acceptable for the articles to exempt directors from liability for certain conflicts. But for the necessary protection of the company, it is not acceptable for articles to exempt the directors from others.
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The second principle is that we do not want to prevent the articles doing what they can now do in relation to these matters, which fall within Clauses 158 or 159. Clause 163(4) already enables companies to give authorisation in all the ways that they may do so at the moment. Our amendment to this provision expands it to make clear that the company's articles may authorise conflicts of interest. The articles may contain provisions for dealing with conflicts of interest, and the directors will not be in breach of duty if they act in accordance with those provisions. Examples might include arrangements whereby the directors withdraw from any board meeting at which the matters relating to conflict of interest are discussed. Clause 213 imposes limits on what the articles may do. Our amendment ensures that the articles are not prevented from doing anything currently possible in relation to conflicts of interest.
The result of these two government amendments is that everything that may currently be done in the articles for authorising or dealing with conflicts of interest will remain valid and can continue to be done in the future. The Bill will leave the law unchanged in this area. Our amendments will allow all the normal, perfectly acceptable, lawful ways in which companies and their directors deal with conflicts of interest through their articles to continue.
We accept that these issues are extremely difficult and delicate. We are prepared to continue to look with stakeholders to see whether more can be done to achieve greater clarity without opening up the possibility of widely drafted exemption clauses in companies' constitutions. We hope, on the basis of our amendments, that the noble Lord will feel able to withdraw his. It is also true that the amendments apply to Clauses 158 and 159.
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