BL - Directors - substantial property

Question 2

What section governs acquisition or disposal by a director/holding company director (or connected person) of a substantial non-cash asset to or from the company.

Answer 2

s.190

Question 3

What is required for a substantial property transaction?

Answer 3

Require shareholder approval by ordinary resolution

Question 4

What is a substantial asset?

Answer 4

• An asset worth £5,000 or less is not a substantial asset.
• An asset worth more than £100,000 is a substantial asset.
• An asset worth more than £5,000, but not more than £100,000 is a substantial asset only if it is worth more than 10% of the company’s NET asset value. A company’s net asset value is that shown in its most recent statutory accounts.

Question 5

What happens if there is a substantial property transaction with the comapny that should have sought approval but didn’t?

🏡

Answer 5

The transaction is voidable 🗑️ at the instance of the company unless:

(a) restitution is no longer possible, ❌
OR
(b) the company has been indemnified for the loss or damage suffered by it, 💰
OR
(c) rights acquired in good faith by third party would be affected by the avoidance. 😇

Question 6

When considering Substantial Property Transactions - What if the transaction is between the company and a director of the company’s holding company?

Answer 6

Holding company will require shareholder approval by ordinary resolution

Question 7

Substantial property transactions - What are the exceptions to requiring shareholder approval for wholly owned subsidiaries?

Answer 7

Approval is not required by the members of any company which is a wholly-owned subsidiary of another company

(Same as for long-term service contracts)

Question 8

Who is liable if there has been an unapproved substantial property transaction?
🏡

Answer 8

• directors involved 🎩
  AND
• those so connected 👯

are liable to account to the company for
- profits 🤑
- indemnify for loss 😭

Question 9

What happens if there is a substantial property transaction with the comapny that should have been approved but wasn’t and the company is OK with the transaction?

🏡

Answer 9

The arrangement can be affirmed by the shareholders of the company and the holding company (where relevant) by ordinary resolution within a reasonable period.

👍

Question 10

What are the defences to an unapproved substantial property transaction?

Answer 10

• The director took all reasonable steps to ensure the company’s compliance. 👣
• director/connected person had no knowledge of the circumstances constituting the contravention. 🧠

Question 11

What do directors need to disclose?

Answer 11

The nature and extent of their interest

Question 12

Can the director vote on the board resolution to approve the contract for an unapproved substantial property transaction and authorise a signatory?

Answer 12

No - not under the MA