Company Decisions with Shareholder Involvement

Question 1

What are the 4 key restrictions on Director’s powers that require the involvement of shareholders?

Answer 1

(1) Substantial property transactions (SPT)
(2) Director’s service contracts
(3) Loans / Security to directors
(4) Loss of office payments

Question 2

How must a ‘substantial property transaction’ be approved and by whom?

Answer 2

Shareholders by Ordinary Resolution (OR)

Question 3

To be a ‘substantial property transaction’, 4 criteria have to be met. What are these?

Answer 3

(1) Acquisition / disposal of a non-cash asset
(2) Between the company and director OR a connected person
(3)
(a) Transaction must be worth > £100,000 OR
(b) > £5,000 AND > 10% of company’s net asset value

Question 4

To be a ‘substantial property transaction’ the property must be worth more than £5,000 and be….?

Answer 4

Worth > 10% of company’s net asset value

Question 5

To be a ‘substantial property transaction’, the transaction must be between (a) AND (b) OR (c)?

Answer 5

(a) Company
(b) Director
(c) Connected person

Question 6

What are the two types of ‘connected people’ in a ‘substantial property transaction’?

Answer 6

(1) Family
(2) Body corporate

Question 7

‘Family’ can be a ‘connected person’ in a ‘substantial property transaction’.

(1) Name 3 groups treated as ‘Family’?
(2) Name 1 group NOT treated as’Family’?

Answer 7

(1)
(a) Spouse / CP
(b) Children & Step-children
(c) Parents

(2) Siblings

Question 8

A ‘body corporate’ can be a ‘connected person’ in a ‘substantial property transaction’. What does ‘body corporate’ mean?

Answer 8

Company where a
(a) Director OR
(b) Persons connected with a director own MIN 20% of the voting rights

Question 9

If a ‘substantial property transaction’ is made without obtaining the necessary approval (OR by shareholders), what will occur?

Answer 9

Transaction will be VOIDABLE

Question 10

A Director’s ‘service contract’ will need shareholder approval if there is a fixed term of what length?

Answer 10

Fixed term > 2 years

Question 11

If a Director’s ‘service contract’ with a fixed term > 2 years is made without shareholder approval, will the service contract be terminable?

Answer 11

YES - service contract terminable on REASONABLE notice

Question 12

(1) What is the general rule on whether shareholder approval is needed for LOANS / SECURITY given to a Director by the Company?
(2) What are the 3 exceptions to this?

Answer 12

(1) YES - shareholder approval by OR
(2)
(a) Loan £10,000 or less
(b) Used to meet COMPANY EXPENDITURE (MAX £50,000)
(c) Loan to Director in SAME GROUP

Question 13

(1) What is the general rule on whether shareholder approval is needed for ‘loss of office payments’ given to a Director?
(2) What are the 3 exceptions to this?

Answer 13

(1) YES - shareholder approval by OR
(2)
(a) <£200
(b) Existing contractual obligation
(c) Employment tribunal damages