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Wednesday, 13 May 1981
Page: 2333


Mr JACOBI(8.18) —I want some clarification of clause 229. I have discussed it with the Minister for Business and Consumer Affairs (Mr Moore) who had the courtesy to allow me to discuss it with his ministerial advisers. We disagreed, but I would like to put the matter on the record for future reference. I raised the position of receivers appointed out of court under clauses 229 (5) and 535 (4) as distinct from receiver managers. Subject to clause 229 they cannot seek relief from the court under clause 535. I can anticipate the answer from the Minister that the word 'officer' in the definition clause as well as in clause 535 (4) has a broader meaning than the definition under clause 5 (1). I do not accept that. However, I suggest to the Minister that he return to the drawing board and introduce an appropriate amendment which I will indicate later.

Under clause 535, the court has the power to grant relief to certain persons in connection with civil proceedings brought against them for negligence, default, breach of trust or a breach of duty. Breaches of clause 229 would be within clause 535 to the extent that a company has a civil right to claim loss or damage sustained as a result of a breach of clause 229 (6). The persons who can seek relief under clause 535 are set out in clause 535 (4). They are (a) an officer of a corporation; (b) an auditor of a corporation; (c) an expert; or (d) a receiver, receiver and manager, liquidator or other person appointed or directed by the court to carry out any duty under this Act in relation to a corporation. The question which I pose is: Are previously appointed receivers entitled to seek relief under clause 535? Rather anomalously the answer would appear, in my view, to be no.

The reference to 'officer' in clause 535 (4) (a) seems to be a reference to 'officer' as defined in clause 5 (1)-that is, the definition clause-rather than 'officer' as defined in clause 229. That this seems so is clear by the reference in clause 535 (4) (d) to court appointed receivers and receivers and managers. This provision would be unnecessary if 'officer' was intended to be covered by the definition in clause 229 because that definition clearly embraces court appointed receivers and receivers and managers, whereas the clause 5 (1) definition expressly excludes them. Clause 535 (4) should be amended so that it covers all persons, and in particular privately appointed receivers, who come within the clause 229 definition of 'officer'. I suggest to the Minister that we ought to amend that clause as follows:

Clause 535, by adding to sub-clause (e) 'a receiver of the property or any part of the property of the corporation appointed under a power contained in an instrument'.

That would overcome what is in fact, in my view, a clear oversight.

I will now deal with the question of clause 237. I believe the clause should be amended. Again, the word 'officer' as defined in clause 237 (1) would apply only to those persons within the clause 5 (1) definition of 'officer'. Consequently, clause 237 (1) would not catch exemption or indemnification provisions relating to privately appointed receivers and court appointed receivers, receivers and managers and liquidators. All of these classes of persons are subject to clause 229 which refers to duties in favour of the company. It follows that 'officer' in clause 227 should have the same meaning as it has in clause 229. The same amendment should be inserted as in clause 229. I also suggest to the Minister that he take back to the Ministerial Council the suggestion that we add a new sub-clause to clause 229 which deals with the protection of shareholders. Such a provision is contained in the Swedish Act and it highlights in effect the total inadequacy of the current provision. I seek leave to incorporate in Hansard an extract of the Swedish Companies Act. I refer to chapter 9, section 3 of the 1975 Act.

Leave granted.

The section read as follows-

Nobody may vote for more than one fifth of the total number of votes attributable to the shares represented at the meeting, unless otherwise provided in the articles of association.

A shareholder may not take part in a vote personally or by proxy, with respect to

1. any legal action against himself,

2. his release from liability for damages or other obligations towards the company, or

3. any legal action against others or their release from liability if, in respect to such matters, he has a material interest which may be contrary to that of the company.

Paragraphs one and two shall be correspondingly applicable to a shareholder's representative.


Mr JACOBI —I thank the Committee. I hope that the Minister will take this provision on board.


Mr Moore —I have so much now that I am almost going under.


Mr JACOBI —Well, I think it might be helpful if we refer the matter to some of our good friends in the States. Section 3 of the Swedish Act, which has been incorporated in Hansard, states:

Nobody may vote for more than one fifth of the total number of votes attributable to the shares represented at the meeting, unless otherwise provided in the articles of association.

A shareholder may not take part in a vote personally or by proxy, with respect to

1. any legal action against himself,

2. his release from liability for damages or other obligations towards the company, or

3. any legal action against others or their release from liability if, in respect to such matters, he has a material interest which may be contrary to that of the company.

Paragraphs one and two shall be correspondingly applicable to a shareholder's representative.

Section 7 of the Act states:

A shareholder is entitled to have a matter dealt with at a general meeting of shareholders provided that the board of directors has received a request therefor early enough to include the matter in the notice convening the meeting.

No such provision is contained in the Companies Bill. There is a total absence of any such clause. It is a very vital provision and I would suggest that it is a matter that ought to be referred to the Ministerial Council for consideration.