131 Clause 95, page 93, leave out lines 29 to 36 and insert—
'(2) A member of a company may bring proceedings to restrain the doing of an act which but for subsection (1) would be beyond the company's capacity; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.
(3) It remains the duty of the directors to observe any limitations on their powers flowing from the company's memorandum; and action by the directors which but for subsection (1) would be beyond the company's capacity may only be ratified by the company by special resolution.
A resolution ratifying such action shall not affect any liability incurred by the directors or any other person; relief from any such liability must be agreed to separately by special resolution.
(4) The operation of this section is restricted by section 30B(1) of the Charities Act 1960 and section 99(3) of the Companies Act 1989 in relation to companies which are charities; and section 322A below (invalidity of certain transactions to which directors or their associates are parties) has effect notwithstanding this section.'.
§ Lord Fraser of Carmyllie
My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 131. This amendment concerns the provisions on the objects of a company and its legal capacity. The amendment has several effects. It 675 expressly enacts the right of a shareholder to bring proceedings to restrain the committing of an ultra vires act, instead of merely saving it as at present. Secondly, it expressly enacts that it remains the duty of the directors to observe any limitation on their capacity flowing from the company's memorandum.
At present the Bill is expressed as preserving any such liability of the directors. For the similar reason of not wishing to exonerate directors from liability, the amendment also makes clear that ratification by the company of an ultra vires act which would otherwise not bind the company on the grounds of lack of authority of the directors, does not affect any liability incurred by the directors or any other person.
It is provided that the company may by special resolution provide relief, but this must be agreed to separately from the ratification of the act itself. That is to prevent directors only putting forward one resolution on the agenda thereby giving the shareholders—if they want to ratify the act and take advantage of it—no option other than to absolve the persons concerned of their liability for any loss suffered. I recall that at an earlier stage the noble Lord, Lord Wedderburn, indicated, as he did concerning an earlier matter, that he would give this point a welcome also.
§ On Question, Motion agreed to.