HL Deb 09 November 1989 vol 512 cc995-7

158 Leave out Clause 106 and insert —

`Company contracts and execution of documents by

companies.

. —(1) In Chapter III of Part I of the Companies Act 1985 (a company's capacity; the formalities of carrying on business), for section 36 (form of company contracts) substitute —

"Company contracts: England and Wales

36. Under the law of England and Wales a contract may be made —

  1. (a) by a company, by writing under its common seal, or
  2. (b) on behalf of a company, by any person acting under its authority, express or implied;
and any formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of a company.".

(2) After that section insert—

"Execution of documents: England and Wales

36A. —(1) Under the law of England and Wales the following provisions have effect with respect to the execution of documents by a company.

(2) A document is executed by a company by the affixing of its common seal.

(3) A company need not have a common seal, however, and the following subsections apply whether it does or not.

(4) A document signed by a director and the secretary of a company, or by two directors of a company, and expressed (in whatever form of words) to be executed by the company has the same effect as if executed under the common seal of the company.

(5) A document executed by a company which makes it clear on its face that it is intended by the person or persons making it to be a deed has effect, upon delivery, as a deed; and it shall be presumed, unless a contrary intention is proved, to be delivered upon its being so executed.

(6) In favour of a purchaser a document shall be deemed to have been duly executed by a company if it purports to be signed by a director and the secretary of the company, or by two directors of the company, and, where it makes it clear on its face that it is intended by the person or persons making it to be a deed, to have been delivered upon its being executed.

A "purchaser" means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.".

(3) After the section inserted by subsection (2) insert —

"Execution of documents: Scotland.

36B. —(1) Under the law of Scotland the following provisions have effect with respect to the execution of documents by a company.

(2) A document—

  1. (a) is signed by a company if it is signed on its behalf by a director, or by the secretary, of the company or by a person authorised to sign the document on its behalf, and
  2. (b) is subscribed by a company if it is subscribed on its behalf by being signed in accordance with the provisions of paragraph (a) at the end of the last page.

(3) A document shall be presumed, unless the contrary is shown, to have been subscribed by a company in accordance with subsection (2) if —

  1. (a) it bears to have been subscribed on behalf of the company by a director, or by the secretary, of the company or by a person bearing to have been authorised to subscribe the document on its behalf; and
  2. (b) it bears —
    1. (i) to have been signed by a person as a witness of the subscription of the director, secretary or other person subscribing on behalf of the company; or
    2. (ii) (if the subscription is not so witnessed) to have been sealed with the common seal of the company.

(4) A presumption under subsection (3) as to subscription of a document does not include a presumption

  1. (a) that a person bearing to subscribe the document as a director or the secretary of the company was such director or secretary; or
  2. (b) that a person subscribing the document on behalf-of the company bearing to have been authorised to do so was authorised to do so.

(5) Notwithstanding subsection (3)(b)(ii), a company need not have a common seal.

(6) Any reference in any enactment (including an enactment contained in a subordinate instrument) to a probative document shall, in relation to a document executed by a company after the commencement of section (Company contracts and execution of documents by companies) of the Companies Act 1989, be construed as a reference to a document which is presumed under subsection (3) above to be subscribed by the company.

(7) Subsections (1) to (4) above do not apply where an enactment (including an enactment contained in a subordinate instrument) provides otherwise.".

(4) After the section inserted by subsection (3) insert —

"Pre-incorporation contracts, deeds and obligations

36C. —(1) A contract which purports to be made by or on behalf of a company at a time when the company has not been formed has effect, subject to any agreement to the contrary, as one made with the person purporting to act for the company or as agent for it, and he is personally liable on the contract accordingly.

(2) Subsection (I) applies —

  1. (a) to the making of a deed under the law of England and Wales, and
  2. (b) to the undertaking of an obligation under the law of Scotland,
as it applies to the making of a contract".

(5) In Schedule 22 of the Companies Act 1985 (provisions applying to unregistered companies), at the appropriate place insert—

"Section 36 Company contracts Subject to section 718(3).
Sections 36A and 36B Execution of documents. Subject to section 718(3).
Section 36C Pre-incorporation contracts, deeds and obligations. Subject to section 718(3).".

(6) The Secretary of State may make provision by regulations applying sections 36 to 36C of the Companies Act 1985 (company contracts' execution of documents; pre-incorporation contracts, deeds and obligations) to companies incorporated outside Great Britain, subject to such exceptions, adaptations or modifications as may be specified in the regulations.

Regulations under this subsection shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(7) Schedule (Company contracts, seals, &c: further provisions) contains further minor and consequential amendments relating to company contracts, the execution of documents by companies and related matters.'.

Lord Fraser of Carmyllie

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 158. I speak also to the new schedule contained in Amendment No. 453. The new clause and new schedule replace and revise the provisions in the present Clause 106 dealing with the execution of documents by companies.

The present clause permits companies to dispense with the requirement to have a company seal and makes alternative provision for executing documents. The revised provisions incorporate, first, reforms proposed by the Scottish Law Commission on the execution of documents by companies under Scottish law. Secondly the provisions incorporate proposals made in this House that to execute documents other than by sealing, two directors or a director and the secretary should be permitted to sign instead of just a director and the secretary as at first proposed. Thirdly, the provisions incorporate amendments aimed at clarifying and improving the proposals in the present Clause 106 in respect of companies executing documents in England and Wales; and, fourthly, they incorporate provisions with respect to the execution of documents by companies incorporated outside Great Britain.

In all these changes we are grateful to the comments of several professional bodies in both Scotland and England. I should add that in respect of Scotland it had originally been intended that the provisions would be included in a separate Private Member's Bill which originally emanated from the work of the Scottish Law Commission on requirements of writings. Unfortunately, that Bill failed to gain a Second Reading—as is often the case with such Bills—and it is in that context that we now pick up those provisions affecting companies.

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