Clause 39
Company Law Reform Bill [Lords]
5:45 pm
David Howarth (Shadow Minister (Energy), Trade & Industry; Cambridge, Liberal Democrat)
I think that there is a fundamental distinction between clause 39 and clause 40. Clause 39 does not refer to good faith, and deliberately so. The point is that we should not go back to the bad old days of the ultra vires doctrine, under which disputes broke out in the context of contract litigation about whether the company had the power to make the contract in the first place and as either side of the contract might want to try to get out of the deal on the basis that the company lacked capacity to make it. The purpose of clause 39, and of its predecessor, is to end all such litigation and to ensure that nothing in the company’s constitution can be raised in litigation to undermine such a contract. Clause 40, on the other hand is about what happened—