Chapter 3 Business Law and Practice

Not complete - just one section

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3.22.1 Controls on Directors - Substantial Property Transactions

• A substantial Property Transaction (SPT) is where:

  • A director, in their personal capacity, or someone connected with a director

  • Buys from or sells to the company

  • A non-cash asset

  • of substantial value

• If a business wants to enter into an SPT - this requires consent from shareholders through ordinary resolution

• If the director or connected person is also a director at the company’s holding company then they will also need consent from ordinary resolution of the parent company

Who is a person connected with a director?

• Either family

  • Spouse or civil partner,

  • Child or stepchild

  • Parents

  • Any person with an enduring relationship as their partner

  • Any child of the person with an enduring relationship

• Or A company in which the director or person connected:

  • owns at least 20% of the company’s shares or

  • is able to exercise control via more than 20% voting power in a general meeting at the company

What is a non-cash asset?

• Property or interest in property other than cash

What is classed as substantial?

• An asset is substantial:

  • Automatically if its value is over £100,000

  • If worth more than £5000 and more than 10% of the company’s net asset value

3.22.1 Controls on Directors - Breach regarding Substantial Property Transactions

Effect of Breach

• If a company proceeds with SPT without getting consent - the transaction is voidable

• AND the following individuals may be ordered to give the money they have made to the company and indemnify the company for any loss or damages incurred:

  • Any director of the company who entered into the agreement

  • Any person with whom the company entered into the agreement with

  • Any other director who authorised the arrangement, or any that led up to the SPT transaction