DIRECTORS’ DUTIES III

Question 1

Directors’ long-term service contracts,
shareholder approval required by ordinary resolution

Answer 1

Companies Act 2006) s188-189

Question 2

Substantial property transactions

Answer 2

s190-196

Question 3

Substantial property transactions-
Connected persons

Answer 3

s252-254

Question 4

Loans to directors

Answer 4

s197-214

Question 5

“Loan” = “a sum of money lent for a period of time, to be returned in money or money’s worth”

– Whether a payment made to a director is a loan or remuneration = question of fact

Answer 5

Champagne Perrier-
Jouet SA v HH Finch Ltd (1982)

Question 6

Defendant was a shareholder and director of the claimant company, who received sums in cash or payment by way of expenses incurred by him. After he was excluded from the management of the company, the company sought to recover £253,000 from him on the basis that this money had been loaned to the director. Held: the company could only recover £43,117 as the rest of the money had been remuneration rather than a loan. It was held that remuneration is consideration for work done or to be done and may take diferent forms, not only the direct payment of a regular wage.

Answer 6

Currencies Direct Ltd v Ellis

Question 7

Exceptions for loans to directors-
Expenditure on company business (up to a maximum of £50,000)

Answer 7

s204

Question 8

Exceptions for loans to directors-

Loans for defending proceedings brought against a director

Answer 8

s205

Question 9

Exceptions for loans to directors-

Loans for defending regulatory actions or investigations

Answer 9

s206

Question 10

Exceptions for loans to directors-

Minor and business transactions – loans of up to £10,000 do not require shareholder approval

Answer 10

s207

Question 11

Exceptions for loans to directors-
s208: Intra group transactions

Answer 11

s208

Question 12

Exceptions for loans to directors-
Money lending companies (where the loan is made in the ordinary course of the business of the company)

Answer 12

s209

Question 13

Payments for loss of office

Answer 13

s215-222

Question 14

any payment for loss of office to a director needs approval by shareholders by way of an ordinary resolution.

Answer 14

s217

Question 15

two exceptions of s217,

(a) in the discharge of an existing legal obligation
(b) by way of damages for breach of such an obligation,
(c) by way of settlement/compromise of any claim arising in connection with the termination of a person’s office or employment
(d) by way of pension in respect of past services.

Answer 15

s220

Question 16

no shareholder approval is needed if the payment is less than 200 pounds

Answer 16

s221

Question 17

if shareholder approval is not obtained- the director holds the payment on trust for the company and any director who authorised the payment is jointly and severally liable to the company for any resulting loss

Answer 17

s222