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"( ) The general duties
(a) have effect subject to any rule of law enabling the company to give authority, specifically or generally, for anything to be done (or omitted) by the directors, or any of them, that would otherwise be a breach of duty, and
(b) where the company's articles contain provisions for dealing with conflicts of interest, are not infringed by anything done (or omitted) by the directors, or any of them, in accordance with those provisions."
"( ) This section does not apply to a provision made by a company ("Company A") in respect of a director of an associated company of Company A
(a) if the associated company is a wholly owned subsidiary of Company A, or
(b) to the extent that the associated company is acting or, otherwise than in bad faith, purporting to act as a trustee of an occupational pension scheme."
The noble Lord said: My Lords, this amendment brings back an issue which we discussed, on which the Government indicated that further consultation would be required. It stems from concerns of the Confederation of British Industry and others.
The amendment was previously tabled in Grand Committee, and seeks to meet concerns that the Bill goes too far in preventing parent companies indemnifying directors of their subsidiary companies and, in particular, employing companies indemnifying the directors of corporate trustees of their occupational pension schemes. The problem is particularly acute given the limited protection afforded to such employee directors by directors and officers' liability insurance policies currently available.
The amendment will aid recruitment of and provide appropriate protection for employee directors of subsidiary companies, including company secretaries, who frequently act as directors of subsidiary companies to aid company administration and compliance requirements, and for employees who agree to act as directors of pension trustee subsidiary or associated companies. In Grand Committee, at Hansard cols. GC 366 and GC 367 on 9 February, the noble and learned Lord the Attorney-General seemed sympathetic to my amendment, and sought further consultations on the problems highlighted.
While my amendment may require some further development in due course, we are keen to see the Government accept the principle that parent companies and subsidiary parent undertakings are able to indemnify the directors of subsidiary companies. We do not see any issue as to the possible scope for abuse in providing such an indemnity, which has apparently been one of the Government's concerns. We look forward to the Government addressing companies' concerns in this area. I am
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therefore sure that your Lordships would appreciate a progress report from Government on where consultation has got to. I beg to move.
Lord Sainsbury of Turville: My Lords, this amendment deals with two distinct issues: first, exempting or excluding from these provisions the case of an indemnity by a parent company to directors of its wholly owned subsidiaries; and secondly, dealing with pension trustees. I will deal with these separately.
As my noble and learned friend the Attorney-General explained in Grand Committee, the Companies (Audit, Investigations and Community Enterprise) Act 2004 closed an important loophole concerning the indemnification of directors by third parties. It used to be the practice in some groups of companies for one group company to indemnify a director of another company in the same group. That is not acceptable. If one company in the group is not permitted to provide indemnification, we do not think it is right for another group company to do so.
It is also important to remember that, at the same time as the loophole was closed, important reforms were introduced that permit all companies to indemnify directors against third-party claims, subject to the requirements in Clause 215. Although we agree that indemnification by a parent company of the directors of its wholly owned subsidiaries is less likely to result in attempts at circumvention of the prohibition than indemnification by a wholly owned subsidiary company of the director of a holding company, we still believe there is scope for potential mischief. We cannot, therefore, accept this aspect of the amendment.
The amendment also raises the possibility of indemnification by an associated company of a director of a company acting as a trustee of an occupational pension scheme. We made clear in Committee that the Government attach great importance to the work of such directors, and that we are aware that it can sometimes be difficult to recruit high-quality directors for such companies. In view of that, we said that we would look further at the issue, and we have sought the views of key stakeholders.
The responses were broadly supportive. It was, for example, suggested that there is only a limited market for indemnity insurance in this area, which in turn is expensive. It was also argued that, in principle, there is no reason to prevent indemnification of trustees by reason of the structure adopted for the trust vehicle. In the light of the comments that we have received, we accept that indemnification of trustees is not otherwise a controversial practice and that there are reasonable grounds for concluding that there are concerns that deserve to be addressed. We are, therefore, willing to accept in principle this aspect of the amendment. We will, however, need to consider the drafting of the amendment carefully. I invite the noble Lord, Lord Freeman, to withdraw the amendment with a view to the Government tabling their own in another place.
Lord Freeman: My Lords, I am grateful to the Minister for addressing the second part of the
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amendment. I accept entirely what he says and I am grateful to him and the Government for considering the point. I think we must beg to differ on the first point, but this is not the time or place to press my amendment. My colleagues may wish to discuss it again in another place. In the mean time, I beg leave to withdraw my amendment.
"( ) Information does not cease to be protected information on the individual ceasing to be a director of the company.
References in this Chapter to a director include, to that extent, a former director."
The noble Lord said: My Lords, the amendment ensures that the Bill's protection of directors' home addresses will continue when an individual ceases to be a director. I am grateful to the noble Lord, Lord Jenkin, for prompting us to check that the protection does not end with employment. I beg to move.
Lord Jenkin of Roding: My Lords, I am very grateful that the noble Lord has taken the point made in an amendment that I moved on Report. There is a related problem that I hope may be addressed: if a director of a company that is likely to be targeted by animal terrorists is also a director of other companies, those companies are obliged to disclose his address unless the court has made an order. Terrorists could get hold of a director's address through that avenue. Can a director of an entirely independent company apply to the court for his address to be withheld? Many people are directors of a number of companies and are all the more valuable for it. Can a director say that he does not want his address to be disclosed, not because of anything that that company may be doingit may have nothing to do with animal researchbut to prevent harassment and intimidation of him via his family? Will that be open to a director in the circumstances that I have envisaged?
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