The clause deals with the declaration of interest in existing transactions or arrangements and ties in with section 317 of the 1985 Act. Rather than go over all the debates in the Lords, I shall identify one particular point. Subsection (5) states that a director must declare matters
“of which he ought reasonably to be aware.”
There is no corresponding requirement in section 317.
The Law Society stated that the requirement to declare matters of which directors ought reasonably to be aware is particularly onerous and should be left out. The Solicitor-General will note that I have not tabled an amendment to that effect, but I would be grateful for his views on subsection (5) and reasonable awareness.
The Government take the view that directors have some substantial obligations and that they ought to declare those things about which they should reasonably have been aware. That is an objective test applied to directors concerned. So it will take into account any relevant circumstances relating to that director; it will focus on the individual director. This is the question that will be asked: whatis it reasonable to expect a director in those circumstances to have been aware of? For example, a non-executive director might be expected generally to be less aware of the individual transactions or arrangements entered into by a company.
I repeat that directors are not expected to disclose things that they do not know. One of the purposes of the clause is to ensure that the board is aware of anything that might influence a director’s decision. The director can disclose only what he is aware of, and if he is aware of it, he ought to declare it. The clause therefore will be clear enough, but anyone who wants clarification can read the notes on the clause or, on the basis of Pepper v. Hart, read my comments in Hansard.
I was desperately trying to keep up with the Solicitor-General there, but I think that I failed, so I shall have to do exactly that and read his comments later. I might possibly return to the matter at a later stage, but I thank him for his clarification.