Joint Committee On Human Rights Seventeenth Report

Private Members' Bills

3 Company Directors' Performance and Compensation Bill
Date introduced to the House of Commons

Date introduced to the House of Lords

Current Bill Number

Previous Reports

11 December 2002

House of Commons 22


3.1 The Bill would amend the Companies Act 1986 by inserting a new section 316A and a new paragraph 6(5) of Schedule 7A to the Act. The combined effect would be to limit any compensation or payment payable to a director for termination of his or her office or employment to 'such amount as is…fair and reasonable having regard to any failure by the director in the performance of his duties either in his office as director or as an employee or both'. That would apply, 'Notwithstanding anything contained in a company's articles, or in any contract …': see proposed new section 316A(1).

3.2 This would appear to make it possible to deny payment of money legally due to a director, interfering with the director's right to peaceful enjoyment of possessions and depriving the director of property protected by Article 1 of Protocol No. 1 to the ECHR.

3.3 We are concerned about the possibility that this might be incompatible with two sets of rights under that Article: first, the right of the director to money legally due to him or her; secondly, the right of the company to use its property and enter into contracts as seems best to it. Under Article 1, compensation for a deprivation of property in the public interest is required save in exceptional circumstances, and any control on the use of property must strike a fair balance between the rights of property owners and the general public interest (which may itself demand compensation in some circumstances). Our Chair has written to Mr. Archie Norman MP, the Member responsible for the Bill, to draw his attention to our concern. The letter is printed as an appendix to this Report.

3.4 We draw this matter to the attention of each House.

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