Podcast
Questions and Answers
What constitutes a substantial non-cash asset according to S 191(2)?
What constitutes a substantial non-cash asset according to S 191(2)?
- An asset valued at 10% of the company’s asset value with a minimum of 5k. (correct)
- An asset valued over 5k that does not meet the company asset value percentage.
- Any asset greater than 10% of company’s assets, but less than 100k.
- An asset valued over 100k regardless of the company's total asset value.
Under what circumstance is shareholder approval NOT required for the acquisition of a substantial non-cash asset?
Under what circumstance is shareholder approval NOT required for the acquisition of a substantial non-cash asset?
- The transaction falls under federal jurisdiction.
- The company is a wholly owned subsidiary. (correct)
- The company is involved in a merger.
- The transaction involves a private shareholder agreement.
What are the civil consequences outlined in S 195(2) if shareholder approval is not obtained when required?
What are the civil consequences outlined in S 195(2) if shareholder approval is not obtained when required?
- The directors are automatically relieved of liability.
- The contract becomes valid upon board approval.
- The contract is voidable by the company. (correct)
- The shareholder must pay a fine to the company.
Which of the following is NOT listed as an exception for requiring shareholder approval?
Which of the following is NOT listed as an exception for requiring shareholder approval?
Who may be liable to indemnify the company for any loss it has suffered if shareholder approval was not obtained?
Who may be liable to indemnify the company for any loss it has suffered if shareholder approval was not obtained?
What is the definition of a non-cash asset as per S 1163?
What is the definition of a non-cash asset as per S 1163?
What is the minimum value for a non-cash asset to be considered substantial if it does not exceed 10% of the company's asset value?
What is the minimum value for a non-cash asset to be considered substantial if it does not exceed 10% of the company's asset value?
Which action is NOT a requirement for certain transactions involving directors?
Which action is NOT a requirement for certain transactions involving directors?
Flashcards
What does section 190(1) of the Companies Act 2006 cover?
What does section 190(1) of the Companies Act 2006 cover?
A director or person connected to a director acquiring a substantial non-cash asset from the company, or the company acquiring such an asset from a director or connected person.
Define 'non-cash asset' under section 1163.
Define 'non-cash asset' under section 1163.
Any property or interest in property other than cash.
What are the criteria for a substantial non-cash asset under section 191(2)?
What are the criteria for a substantial non-cash asset under section 191(2)?
A non-cash asset is substantial if its value exceeds 10% of the company's asset value and is more than £5,000, or if its value exceeds £100,000.
What are some exceptions to needing shareholder approval for transactions under section 190(1)?
What are some exceptions to needing shareholder approval for transactions under section 190(1)?
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What are the civil consequences of not obtaining shareholder approval under section 195(2)?
What are the civil consequences of not obtaining shareholder approval under section 195(2)?
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What are the potential liabilities for directors involved in transactions without shareholder approval under section 195(3)?
What are the potential liabilities for directors involved in transactions without shareholder approval under section 195(3)?
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Study Notes
Director and Company Transactions Requiring Shareholder Approval
- Shareholder approval required for specific transactions involving directors or their connections.
- Two key scenarios:
- Director acquiring substantial non-cash asset from the company.
- Company acquiring substantial non-cash asset from a director or connected person.
- Non-cash asset defined as any property or interest in property, excluding cash (s 1163).
- Substantial asset determined by value:
- Exceeds 10% of company asset value AND more than £5,000.
- Exceeds £100,000.
- Exceptions to shareholder approval requirement:
- Company not UK registered.
- Company is a wholly owned subsidiary.
- Transaction within director's service contract entitlements.
- Transaction related to director's shareholder capacity.
Civil Consequences of Non-Compliance
- Voidable contract if shareholder approval is not obtained when required (s 195(2)).
- The contract can be voided by the company unless specific conditions are met, such as when restitution is impossible.
- Director liability for company losses and gains:
- Directors involved in the transaction, connected persons, and authorizing directors potentially liable to compensate the company for any losses or gains (s 195(3)).
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