4. Relief from Liability
4.1 Ratification
Section 239 preserves the previous law on ratification of acts of directors, but with a significant change. Any decision by a company to ratify conduct by a director amounting to negligence, default, breach of duty or breach of trust in relation to the company must be taken by the members without reliance on the votes in favour by the director or any connected person. A member connected with the director will include certain family members (section 252) and may include fellow directors (section 239(5)(d)).
Ratification will bar the bringing of a derivative claim. Even if the conduct has not been ratified, where a court is determining whether to permit a claimant to continue a derivative claim, it must consider whether the conduct could be, and is likely to be, ratified by the company.
4.2 Power of the court to grant relief
Section 1157 substantially restates section 727 of the 1985 Act and provides that where proceedings for negligence, default, breach of duty or breach of trust are brought against a director, the court may relieve him from liability if it considers both that:
• He has acted honestly and reasonably.
• Considering all the circumstances of the case, he ought fairly to be excused.
A director may also apply to the court for relief where he has reason to expect that a claim may be made against him.
If you have any question on any of those matters, or on any of the matters covered below, whether now or in the future, you should contact David Heys at Lawson-West on 0116 212 1027 or by email at dheys@lawson-west.co.uk.
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