Clause 40
Company Law Reform Bill [Lords]
5:45 pm
Quentin Davies (Grantham and Stamford, Conservative)
Again, on a point of elucidation, I refer the Committee to subsection (5):
“This clause does not affect any liability incurred by the directors, or any other person, by reason of the directors’ exceeding their powers.”
That returns to the ultra vires issue raised a few moments ago by the hon. Member for Cambridge. My problem is that the word “affect” seems slightly ambiguous. Does it mean that the subsection does not set aside any liability incurred by the directors? In other words, if the directors exceed their powers, can they be pursued by the members of the company who presumably will have suffered by the directors undertaking obligations that exceeded those powers? Or does it mean that the subsection does not give effect to any liability? In other words, does it not reinforce liability?
That is a big difference. The word “affect” covers a bundle of slightly opposite meanings. Again, my problem is with that word. Perhaps the Minister can explain whether she considers “affect” to be sufficiently precise for what is potentially a complex and dangerous area; we all know that ultra vires rules about directors have been the subject of much litigation.