HL Deb 23 October 1985 vol 467 c1236

210 Clause 84, page 65, line 44, at end insert— '(2A) The court shall not make an order under this section in respect of a transaction at an undervalue if it is satisfied—

  1. (a) that the company which entered into the transaction did so in good faith and in the ordinary course of its business; and
  2. (b) that at the time it did so there were reasonable grounds for believing that the transaction would benefit the company.'.

Lord Lucas of Chilworth

My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 210. This amendment was made in order to provide a defence in circumstances where a transaction was at an undervalue but was nevertheless in the best interests of the company. For instance, as part of a rescue operation a company might sell off surplus stock more cheaply than usual because it is more important to the company at that time to obtain cash quickly than to realise the maximum price over an extended period.

We have received representations from the Law Society that, notwithstanding the amendments, genuine transactions for the benefit of the company, such as in the example I have given, might still fall foul of the undervalue transaction provisions, because the courts might construe the term "ordinary course of business" as meaning only normal day-to-day transactions and not as extending to one-off transactions in special circumstances. The noble Lord Lord Mishcon, was kind enough to discuss this matter quite briefly a short while ago and I am most grateful to him for drawing the matter to my attention. He will be speaking, no doubt, to his own amendment a little later, but pehaps I may mention Amendment 210A.