Plain simple English and the art of drafting legislation and agreements

Legal writing in England at least up until the twentieth century was shaped by the country’s long tradition. Draftsmen (or Drafters – for a gender neutral term) of legal documents particularly the legislation, would borrow words heavily from languages other than English (for example Latin) to drive home the intended message with more precision. Examples of Latin origin words were commonly used are “de facto, ad-hoc, prima-facie, mens rea, habeas corpus, inter-alia, pro bono, quid pro, and ultra vires” and the French one “force majeure”:

Influenced by the British legal system, the Indian drafting, of legislation or otherwise, is also a product of its time and generally retains the more formal, complex, and sometimes the archaic tone. The Victorian touch is quite evident in many pieces of the legislation. Archaic phrases and peppered with liberal dose of jargons, sentences can be long and convoluted.

However, towards the end of the 20^th century the Plain English campaigners in the UK were somewhat influential in getting the legal profession or at least the draftsmen, to recognise the importance of clear and concise communication in legal documents, and therefore, the use of plain simple English.

That, however, is not the case in India yet, where the English language used in legal documents still retains traces of the Victorian roots.

Here is a quick look at some striking differences in the Indian and UK legislation which may be of interest to company secretaries in India.

The Companies Act

As we all know, for an ordinary resolution to be a valid one, it requires a simple majority (that is more than 50%) of votes. Let us now look at how the UK Act of 2006 puts it:

      s.282: 

• An ordinary resolution of the members (or of a class of members) of a company means a resolution that is passed by a simple majority.

• A written resolution is passed by a simple majority if it is passed by members representing a simple majority of the total voting rights of eligible members (see Chapter 2). 

• A resolution passed at a meeting on a show of hands is passed by a simple majority if it is passed by [F1a simple majority of the votes cast by those entitled to vote] 

• A resolution passed on a poll taken at a meeting is passed by a simple majority if it is passed by members representing a simple majority of the total voting rights of members who (being entitled to do so) vote in person, by proxy or in advance (see section 322A) on the resolution.

Plain simple English: you don’t need to be a company secretary or a legal professional to interpret what this section says.

Now let us look at what the Indian Act of 2013 says of an ordinary resolution in s.114:

A resolution shall be an ordinary resolution if the notice required under this Act has been duly given and it is required to be passed by the votes cast, whether on a show of hands, or electronically or on a poll, as the case may be, in favour of the resolution, including the casting vote, if any, of the Chairman, by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy or by postal ballot, exceed the votes, if any, cast against the resolution by members, so entitled and voting.

Hmmm.. If that isn’t Victorian enough, compare the language used to define what constitutes a special resolution in the UK and in India:

The UK Act in s.283 says: a special resolution of the members (or of a class of members) of a company means a resolution passed by a majority of not less than 75%.

Nothing complicated about it. Pretty straightforward: 75% of the votes are required for a resolution to be a valid special resolution.

And what to make of the Indian Act in s.114?

A resolution shall be a special resolution when…. the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by postal ballot, are required to be not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting. 

It will take some reading and head scratching before one reaches the conclusion that this long sentence also means the same thing, albeit in a convoluted way: the votes cast in favour of the resolution, …………… are required to be not less than three times the number of the votes, if any, cast against the resolution.

Tax laws

Unlike in India where there is only one Act, the Indian Income Tax Act 1961, we have nearly a dozen pieces of primary tax legislation, followed by subsidiary and tertiary tax legislation to deal with in the UK.

There are three income tax Acts (ITA 2007, ITEPA 2003 and ITTOIA 2005) which deal with individuals, partnerships, sole traders and trusts’ tax affairs. Two corporation tax Acts of 2009 and 2010 to deal with companies’ affairs, a separate Act (TCGA 1992) to deal with capital gain tax affairs, IHTA 1984 to deal with inheritance tax affairs, CAA 2001 to deal with capital allowances (tax depreciation in India) and then TMA 1970 takes care of all the tax admin except for companies. International matters like foreign tax credit relief etc are dealt with in yet another piece called TIOPA 2010. The admin matters of companies are dealt with in a separate Schedule (18) of the Finance Act 1998. That’s by no means an exhaustive list of legislation at all. With over 20,000 tax codes in force, this small island of 68 million inhabitants has one of the most elaborate and complex tax systems in the world.

However, this discussion is about the use of plain simple English in tax legislation, so, let us stay on topic and look at some differences in the tax legislation.

For income tax purposes the charging sections in the Income Tax Acts in the UK say, for example:

• 5 ITTOIA 2005 – income tax is charged on the profits of a trade, profession or vocation.
• 1 ITEPA 2003 – this Act imposes charges to income tax on (a) employment income (see Parts 2 to 7A),

(b) pension income (see Part 9), and (c) social security income [see Chapters 1 to 7 of Part 10].

Contrast this with the Victorian touch evident in the language used in s.4 of the Indian Act:

• Income-tax for any tax year shall be charged as per the provisions of this Act at the rate or rates which are enacted by a Central Act for such tax year.
• The charge of income-tax under sub-section (1) shall be on the total income of the tax year of every person as per the provisions of this Act.
• Income-tax shall also include any additional income-tax, by whatever name called, levied under this Act.

For another example of how the Indian Act can be notorious for long-winded sentences, look no further than s.10(10D) of the Indian Income Tax Act 1961: 

“Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than …………………………….

This subsection has about 600 words packed into four sub-clauses, nine provisos and four explanations without a full stop!

Drafting agreements

Legal professionals and company secretaries drafting agreements also follow the traditional format full of archaic phrases and obscure jargons.

A 21^st century loan agreement in the UK would read something like this:

      This agreement is made on the 01st day of August 2025.

      PARTIES: 

1. Lender Limited, a company (Number 123456729) incorporated in England & Wales whose registered address is at 100, St. Paul Street, London, England, WC0X0 2YY (in this agreement called “the lender”) 

2. Borrower Limited, a company (Number 987654321) incorporated in England & Wales whose registered address is at 500, St. Paul Street, London, England, WC0X0 2YY (in this agreement called “the borrower”)

      BACKGROUND: 

1. The borrower is in need of financial assistance in order to commence trading and to carry on with its trade in the early months of trading; and 
2. The lender has agreed to the lend the borrower a sum of money as loan on the terms and conditions hereinafter agreed

Contrast this with the traditional way Indian agreements are drafted.

SHARE PURCHASE AGREEMENT

This share purchase agreement (this “Agreement”) is entered into on the Second Day of Month, 2025, (“Completion Date”) by and among (i) Seller Private Limited, a company incorporated in India having their registered office at ………. (hereinafter referred to as the “Seller”) and (ii) Borrower Private Limited, a private limited company also incorporated in India having their registered office is at ……………………(hereinafter referred to as the buyer)(individually  “Seller” and “buyer” and collectively, the “Sellers” and “buyers” (details of which are as more particularly set out in Schedule 1).  The Buyer, the Company and the Sellers are referred to herein individually as a “Party” and collectively as the “Parties”. 

RECITALS

WHEREAS, the Sellers are the sole legal and beneficial owners of all of the outstanding shares of Company Capital Stock and there are no other Company Equity Securities outstanding, and if there are any then they shall stand cancelled; and 

WHEREAS, upon the terms and subject to the conditions set forth herein and relying on the representations and warranties extended by the Company and the Sellers ……………. 

NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, covenants and agreements herein contained, the Parties agree as follows.

This is not to suggest that every piece of the legislation found in England is written in plain and simple English. Far from it. Here is a vintage piece from s.75(3) of the Equality Act 2010:

If a relevant term does not treat time when the woman is on maternity leave as it treats time when she is not, the term is modified so as to treat time when she is on maternity leave as time when she is not.

Only the draftsman would know what exactly they meant by putting these words together. However, going through the explanatory notes, it appears that what the draftsman is trying to say is that any period when a woman is on maternity leave should be treated as if she was not on maternity leave. This is in the context of entitlement to certain benefits so that the woman in question being on maternity leave is not unduly disadvantaged by being on maternity leave: basically the equality of it!.

Watch this space for more insights into how the Indian tax and other regulatory landscape differs from the very system it was born out of.

The author is a UK tax specialist and director of Tax Partners, an advisory firm based in London.