HL Deb 07 November 1989 vol 512 cc693-4

141 Clause 98, page 96, leave out lines 20 to 44 and insert— '30B.—(1) Sections 35 and 35A of the Companies Act 1985 (capacity of a company not limited by its memorandum; power of directors to bind company) do not apply to the acts of a company which is a charity except in favour of a person who—

  1. (a) gives full consideration in money or money's worth in relation to the act in question, and
  2. (b) does not know that the act is not permitted by the company's memorandum or, as the case may be, is beyond the powers of the directors,
or who does not know at the time the act is done that the company is a charity. (2) However, where such a company purports to transfer or grant an interest in property, the fact that the act was not permitted by the company's memorandum or, as the case may be, that the directors in connection with the act exceeded any limitation on their powers under the company's constitution, does not affect the title of a person who subsequently acquires the property or any interest in it for full consideration without actual notice of any such circumstances affecting the validity of the company's act. (3) In any proceedings arising out of subsection (1) the burden of proving—
  1. (a) that a person knew that an act was not permitted by the company's memorandum or was beyond the powers of the directors, or
  2. (b) that a person knew that the company was a charity, lies on the person making that allegation.
 (4) Where a company is a charity, the ratification of an act under section 35(3) of the Companies Act 1985, or the ratification of a transaction to which section 322A of that Act applies (invalidity of certain transactions to which directors or their associates are parties), is ineffective without the prior written consent of the Commissioners.'.

142 Page 97, line 5, after 'company,' insert— '(cc) in all conveyances purporting to be executed by the company,'.

143 Page 97, line 7, at end insert— '(1A) In subsection (1)(cc) "conveyance" means any instrument creating, transferring, varying or extinguishing an interest in land.'.

144 Clause 99, page 97, line 35, leave out subsections (3) to (5) and insert— '(3) Sections 35 and 35A of the Companies Act 1985 (capacity of a company not limited by its memorandum; power of directors to bind company) do not apply to the acts of a company which is a charity except in favour of a person who—

  1. (a) gives full consideration in money or money's worth in relation to the act in question, and
  2. (b) does not know that the act is not permitted by the company's memorandum or, as the case may be, is beyond the powers of the directors,
or who does not know at the time the act is done that the company is a charity. (4) However, where such a company purports to transfer or grant an interest in property, the fact that the act was not permitted by the company's memorandum or, as the case may be, that the directors in connection with the act exceeded any limitation on their powers under the company's constitution, does not affect the title of a person who subsequently acquires the property or any interest in it for full consideration without actual notice of any such circumstances affecting the validity of the company's act. (5) In any proceedings arising out of subsection (3) the burden of proving—
  1. (a) that a person knew that an act was not permitted by the company's memorandum or was beyond the powers of the directors, or
  2. (b) that a person knew that the company was a charity, lies on the person making that allegation.'.

145 Page 98, line 14, after 'company,' insert— `(cc) in all conveyances purporting to be executed by the company,'.

146 Page 98, line 15, at end insert— '(6A) In subsection (6)(cc) "conveyance" means any document for the creation, transfer, variation or extinction of an interest in land.'.

Lord Fraser of Carmyllie

My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 141 to 146. Amendments Nos. 141 and 144 are as corrected. These amendments concern the special rules relating to charitable companies.

Like the previous group, Amendment Nos. 141 and 144 also have as their origin a desire to protect innocent third parties who might be affected by a transaction being void. Where a person dealing with a charitable company is protected under new Section 30B(1) or Clause 99(3), there is no difficulty for subsequent purchasers. The difficulty arises where the person dealing with the company is not protected—in which case he does not have a good title to pass on to subsequent purchasers. Amendments Nos. 141 and 144 therefore provide that in that case the title of a person who subsequently acquires the property or any interest in it is to be protected if he has given full consideration and had not had actual notice of any circumstance affecting the validity of the company's act. The burden of proving that he had such notice is to rest on the person alleging it in any proceedings.

Noble Lords may recall that I mentioned, in discussing the previous group of amendments, the liability which would arise for the Land Registry and the registers of Scotland if transactions affecting land were voided. Although, as I have said, the position of persons who subsequently acquire an interest in property is to be protected, under the amendments transactions with a charitable company which were ultra vires or otherwise outwith the authority of the directors will still be void unless the person concerned does not fall within the circumstances set out in new Section 30B(1) or Clause 99(3), as the case may be. In order to protect their own position, the land registries will be requiring charities to warrant that transactions are intra vires. To assist them in identifying charitable companies, the amendments add conveyances to the list of documents on which a charitable company which does not include the words "charity" or "charitable" in its name must disclose its charitable status.

Moved, That the House do agree with the Commons in the said amendments.—(Lord Fraser of Carmyllie.)

On Question, Motion agreed to.