Office of Public Sector Information
PART 10 continued CHAPTER 2 continued
(2) The application of the general duties is not affected by the fact that the case also falls within Chapter 4 (transactions requiring approval of members), except that where that Chapter applies and—
(a) approval is given under that Chapter, or
(b) the matter is one as to which it is provided that approval is not needed,
it is not necessary also to comply with section 175 (duty to avoid conflicts of interest) or section 176 (duty not to accept benefits from third parties).
(3) Compliance with the general duties does not remove the need for approval under any applicable provision of Chapter 4 (transactions requiring approval of members).
(4) The general duties—
(a) have effect subject to any rule of law enabling the company to give authority, specifically or generally, for anything to be done (or omitted) by the directors, or any of them, that would otherwise be a breach of duty, and
(b) where the company’s articles contain provisions for dealing with conflicts of interest, are not infringed by anything done (or omitted) by the directors, or any of them, in accordance with those provisions.
(5) Otherwise, the general duties have effect (except as otherwise provided or the context otherwise requires) notwithstanding any enactment or rule of law.
(1) In their application to a company that is a charity, the provisions of this Chapter have effect subject to this section.
(2) Section 175 (duty to avoid conflicts of interest) has effect as if—
(a) for subsection (3) (which disapplies the duty to avoid conflicts of interest in the case of a transaction or arrangement with the company) there were substituted—
“(3) This duty does not apply to a conflict of interest arising in relation to a transaction or arrangement with the company if or to the extent that the company’s articles allow that duty to be so disapplied, which they may do only in relation to descriptions of transaction or arrangement specified in the company’s articles.”;
(b) for subsection (5) (which specifies how directors of a company may give authority under that section for a transaction or arrangement) there were substituted—
“(5) Authorisation may be given by the directors where the company’s constitution includes provision enabling them to authorise the matter, by the matter being proposed to and authorised by them in accordance with the constitution.”.
(3) Section 180(2)(b) (which disapplies certain duties under this Chapter in relation to cases excepted from requirement to obtain approval by members under Chapter 4) applies only if or to the extent that the company’s articles allow those duties to be so disapplied, which they may do only in relation to descriptions of transaction or arrangement specified in the company’s articles.
(4) After section 26(5) of the Charities Act 1993 (c. 10) (power of Charity Commission to authorise dealings with charity property etc) insert—
“(5A) In the case of a charity that is a company, an order under this section may authorise an act notwithstanding that it involves the breach of a duty imposed on a director of the company under Chapter 2 of Part 10 of the Companies Act 2006 (general duties of directors).”.
(5) This section does not extend to Scotland.
(1) Where a director of a company is in any way, directly or indirectly, interested in a transaction or arrangement that has been entered into by the company, he must declare the nature and extent of the interest to the other directors in accordance with this section.
This section does not apply if or to the extent that the interest has been declared under section 177 (duty to declare interest in proposed transaction or arrangement).
(2) The declaration must be made—
(a) at a meeting of the directors, or
(b) by notice in writing (see section 184), or
(c) by general notice (see section 185).
(3) If a declaration of interest under this section proves to be, or becomes, inaccurate or incomplete, a further declaration must be made.
(4) Any declaration required by this section must be made as soon as is reasonably practicable.
Failure to comply with this requirement does not affect the underlying duty to make the declaration.
(5) This section does not require a declaration of an interest of which the director is not aware or where the director is not aware of the transaction or arrangement in question.
For this purpose a director is treated as being aware of matters of which he ought reasonably to be aware.
(6) A director need not declare an interest under this section—
(a) if it cannot reasonably be regarded as likely to give rise to a conflict of interest;
(b) if, or to the extent that, the other directors are already aware of it (and for this purpose the other directors are treated as aware of anything of which they ought reasonably to be aware); or
(c) if, or to the extent that, it concerns terms of his service contract that have been or are to be considered—
(i) by a meeting of the directors, or
(ii) by a committee of the directors appointed for the purpose under the company’s constitution.
(1) A director who fails to comply with the requirements of section 182 (declaration of interest in existing transaction or arrangement) commits an offence.
(2) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(1) This section applies to a declaration of interest made by notice in writing.
(2) The director must send the notice to the other directors.
(3) The notice may be sent in hard copy form or, if the recipient has agreed to receive it in electronic form, in an agreed electronic form.
(4) The notice may be sent—
(a) by hand or by post, or
(b) if the recipient has agreed to receive it by electronic means, by agreed electronic means.
(5) Where a director declares an interest by notice in writing in accordance with this section—
(a) the making of the declaration is deemed to form part of the proceedings at the next meeting of the directors after the notice is given, and
(b) the provisions of section 248 (minutes of meetings of directors) apply as if the declaration had been made at that meeting.
(1) General notice in accordance with this section is a sufficient declaration of interest in relation to the matters to which it relates.
(2) General notice is notice given to the directors of a company to the effect that the director—
(a) has an interest (as member, officer, employee or otherwise) in a specified body corporate or firm and is to be regarded as interested in any transaction or arrangement that may, after the date of the notice, be made with that body corporate or firm, or
(b) is connected with a specified person (other than a body corporate or firm) and is to be regarded as interested in any transaction or arrangement that may, after the date of the notice, be made with that person.
(3) The notice must state the nature and extent of the director’s interest in the body corporate or firm or, as the case may be, the nature of his connection with the person.
(4) General notice is not effective unless—
(a) it is given at a meeting of the directors, or
(b) the director takes reasonable steps to secure that it is brought up and read at the next meeting of the directors after it is given.
(1) Where a declaration of interest under section 182 (duty to declare interest in existing transaction or arrangement) is required of a sole director of a company that is required to have more than one director—
(a) the declaration must be recorded in writing,
(b) the making of the declaration is deemed to form part of the proceedings at the next meeting of the directors after the notice is given, and
(c) the provisions of section 248 (minutes of meetings of directors) apply as if the declaration had been made at that meeting.
(2) Nothing in this section affects the operation of section 231 (contract with sole member who is also a director: terms to be set out in writing or recorded in minutes).
(1) The provisions of this Chapter relating to the duty under section 182 (duty to declare interest in existing transaction or arrangement) apply to a shadow director as to a director, but with the following adaptations.
(2) Subsection (2)(a) of that section (declaration at meeting of directors) does not apply.
(3) In section 185 (general notice treated as sufficient declaration), subsection (4) (notice to be given at or brought up and read at meeting of directors) does not apply.
(4) General notice by a shadow director is not effective unless given by notice in writing in accordance with section 184.
(1) This section applies to provision under which the guaranteed term of a director’s employment—
(a) with the company of which he is a director, or
(b) where he is the director of a holding company, within the group consisting of that company and its subsidiaries,
is, or may be, longer than two years.
(2) A company may not agree to such provision unless it has been approved—
(a) by resolution of the members of the company, and
(b) in the case of a director of a holding company, by resolution of the members of that company.
(3) The guaranteed term of a director’s employment is—
(a) the period (if any) during which the director’s employment—
(i) is to continue, or may be continued otherwise than at the instance of the company (whether under the original agreement or under a new agreement entered into in pursuance of it), and
(ii) cannot be terminated by the company by notice, or can be so terminated only in specified circumstances, or
(b) in the case of employment terminable by the company by notice, the period of notice required to be given,
or, in the case of employment having a period within paragraph (a) and a period within paragraph (b), the aggregate of those periods.
(4) If more than six months before the end of the guaranteed term of a director’s employment the company enters into a further service contract (otherwise than in pursuance of a right conferred, by or under the original contract, on the other party to it), this section applies as if there were added to the guaranteed term of the new contract the unexpired period of the guaranteed term of the original contract.
(5) A resolution approving provision to which this section applies must not be passed unless a memorandum setting out the proposed contract incorporating the provision is made available to members—
(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both—
(i) at the company’s registered office for not less than 15 days ending with the date of the meeting, and
(ii) at the meeting itself.
(6) No approval is required under this section on the part of the members of a body corporate that—
(a) is not a UK-registered company, or
(b) is a wholly-owned subsidiary of another body corporate.
(7) In this section “employment” means any employment under a director’s service contract.
If a company agrees to provision in contravention of section 188 (directors' long-term service contracts: requirement of members' approval)—
(a) the provision is void, to the extent of the contravention, and
(b) the contract is deemed to contain a term entitling the company to terminate it at any time by the giving of reasonable notice.
(1) A company may not enter into an arrangement under which—
(a) a director of the company or of its holding company, or a person connected with such a director, acquires or is to acquire from the company (directly or indirectly) a substantial non-cash asset, or
(b) the company acquires or is to acquire a substantial non-cash asset (directly or indirectly) from such a director or a person so connected,
unless the arrangement has been approved by a resolution of the members of the company or is conditional on such approval being obtained.
For the meaning of “substantial non-cash asset” see section 191.
(2) If the director or connected person is a director of the company’s holding company or a person connected with such a director, the arrangement must also have been approved by a resolution of the members of the holding company or be conditional on such approval being obtained.
(3) A company shall not be subject to any liability by reason of a failure to obtain approval required by this section.
(4) No approval is required under this section on the part of the members of a body corporate that—
(a) is not a UK-registered company, or
(b) is a wholly-owned subsidiary of another body corporate.
(5) For the purposes of this section—
(a) an arrangement involving more than one non-cash asset, or
(b) an arrangement that is one of a series involving non-cash assets,
shall be treated as if they involved a non-cash asset of a value equal to the aggregate value of all the non-cash assets involved in the arrangement or, as the case may be, the series.
(6) This section does not apply to a transaction so far as it relates—
(a) to anything to which a director of a company is entitled under his service contract, or
(b) to payment for loss of office as defined in section 215 (payments requiring members' approval).
(1) This section explains what is meant in section 190 (requirement of approval for substantial property transactions) by a “substantial” non-cash asset.
(2) An asset is a substantial asset in relation to a company if its value—
(a) exceeds 10% of the company’s asset value and is more than £5,000, or
(b) exceeds £100,000.
(3) For this purpose a company’s “asset value” at any time is—
(a) the value of the company’s net assets determined by reference to its most recent statutory accounts, or
(b) if no statutory accounts have been prepared, the amount of the company’s called-up share capital.
(4) A company’s “statutory accounts” means its annual accounts prepared in accordance with Part 15, and its “most recent” statutory accounts means those in relation to which the time for sending them out to members (see section 424) is most recent.
(5) Whether an asset is a substantial asset shall be determined as at the time the arrangement is entered into.
Approval is not required under section 190 (requirement of members' approval for substantial property transactions)—
(a) for a transaction between a company and a person in his character as a member of that company, or
(b) for a transaction between—
(i) a holding company and its wholly-owned subsidiary, or
(ii) two wholly-owned subsidiaries of the same holding company.
(1) This section applies to a company—
(a) that is being wound up (unless the winding up is a members' voluntary winding up), or
(b) that is in administration within the meaning of Schedule B1 to the Insolvency Act 1986 (c. 45) or the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).
(2) Approval is not required under section 190 (requirement of members' approval for substantial property transactions)—
(a) on the part of the members of a company to which this section applies, or
(b) for an arrangement entered into by a company to which this section applies.
(1) Approval is not required under section 190 (requirement of members' approval for substantial property transactions) for a transaction on a recognised investment exchange effected by a director, or a person connected with him, through the agency of a person who in relation to the transaction acts as an independent broker.
(2) For this purpose—
(a) “independent broker” means a person who, independently of the director or any person connected with him, selects the person with whom the transaction is to be effected; and
(b) “recognised investment exchange” has the same meaning as in Part 18 of the Financial Services and Markets Act 2000 (c. 8).
(1) This section applies where a company enters into an arrangement in contravention of section 190 (requirement of members' approval for substantial property transactions).
(2) The arrangement, and any transaction entered into in pursuance of the arrangement (whether by the company or any other person), is voidable at the instance of the company, unless—
(a) restitution of any money or other asset that was the subject matter of the arrangement or transaction is no longer possible,
(b) the company has been indemnified in pursuance of this section by any other persons for the loss or damage suffered by it, or
(c) rights acquired in good faith, for value and without actual notice of the contravention by a person who is not a party to the arrangement or transaction would be affected by the avoidance.
(3) Whether or not the arrangement or any such transaction has been avoided, each of the persons specified in subsection (4) is liable—
(a) to account to the company for any gain that he has made directly or indirectly by the arrangement or transaction, and
(b) (jointly and severally with any other person so liable under this section) to indemnify the company for any loss or damage resulting from the arrangement or transaction.
(4) The persons so liable are—
(a) any director of the company or of its holding company with whom the company entered into the arrangement in contravention of section 190,
(b) any person with whom the company entered into the arrangement in contravention of that section who is connected with a director of the company or of its holding company,
(c) the director of the company or of its holding company with whom any such person is connected, and
(d) any other director of the company who authorised the arrangement or any transaction entered into in pursuance of such an arrangement.
(5) Subsections (3) and (4) are subject to the following two subsections.
(6) In the case of an arrangement entered into by a company in contravention of section 190 with a person connected with a director of the company or of its holding company, that director is not liable by virtue of subsection (4)(c) if he shows that he took all reasonable steps to secure the company’s compliance with that section.
(7) In any case—
(a) a person so connected is not liable by virtue of subsection (4)(b), and
(b) a director is not liable by virtue of subsection (4)(d),
if he shows that, at the time the arrangement was entered into, he did not know the relevant circumstances constituting the contravention.
(8) Nothing in this section shall be read as excluding the operation of any other enactment or rule of law by virtue of which the arrangement or transaction may be called in question or any liability to the company may arise.
Where a transaction or arrangement is entered into by a company in contravention of section 190 (requirement of members' approval) but, within a reasonable period, it is affirmed—
(a) in the case of a contravention of subsection (1) of that section, by resolution of the members of the company, and
(b) in the case of a contravention of subsection (2) of that section, by resolution of the members of the holding company,
the transaction or arrangement may no longer be avoided under section 195.
(1) A company may not—
(a) make a loan to a director of the company or of its holding company, or
(b) give a guarantee or provide security in connection with a loan made by any person to such a director,
unless the transaction has been approved by a resolution of the members of the company.
(2) If the director is a director of the company’s holding company, the transaction must also have been approved by a resolution of the members of the holding company.
(3) A resolution approving a transaction to which this section applies must not be passed unless a memorandum setting out the matters mentioned in subsection (4) is made available to members—
(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both—
(i) at the company’s registered office for not less than 15 days ending with the date of the meeting, and
(ii) at the meeting itself.
(4) The matters to be disclosed are—
(a) the nature of the transaction,
(b) the amount of the loan and the purpose for which it is required, and
(c) the extent of the company’s liability under any transaction connected with the loan.
(5) No approval is required under this section on the part of the members of a body corporate that—
(a) is not a UK-registered company, or
(b) is a wholly-owned subsidiary of another body corporate.
(1) This section applies to a company if it is—
(a) a public company, or
(b) a company associated with a public company.
(2) A company to which this section applies may not—
(a) make a quasi-loan to a director of the company or of its holding company, or
(b) give a guarantee or provide security in connection with a quasi-loan made by any person to such a director,
unless the transaction has been approved by a resolution of the members of the company.
(3) If the director is a director of the company’s holding company, the transaction must also have been approved by a resolution of the members of the holding company.
(4) A resolution approving a transaction to which this section applies must not be passed unless a memorandum setting out the matters mentioned in subsection (5) is made available to members—
(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both—
(i) at the company’s registered office for not less than 15 days ending with the date of the meeting, and
(ii) at the meeting itself.
(5) The matters to be disclosed are—
(a) the nature of the transaction,
(b) the amount of the quasi-loan and the purpose for which it is required, and
(c) the extent of the company’s liability under any transaction connected with the quasi-loan.
(6) No approval is required under this section on the part of the members of a body corporate that—
(a) is not a UK-registered company, or
(b) is a wholly-owned subsidiary of another body corporate.
(1) A “quasi-loan” is a transaction under which one party (“the creditor”) agrees to pay, or pays otherwise than in pursuance of an agreement, a sum for another (“the borrower”) or agrees to reimburse, or reimburses otherwise than in pursuance of an agreement, expenditure incurred by another party for another (“the borrower”)—
(a) on terms that the borrower (or a person on his behalf) will reimburse the creditor; or
(b) in circumstances giving rise to a liability on the borrower to reimburse the creditor.
(2) Any reference to the person to whom a quasi-loan is made is a reference to the borrower.
(3) The liabilities of the borrower under a quasi-loan include the liabilities of any person who has agreed to reimburse the creditor on behalf of the borrower.
(1) This section applies to a company if it is—
(a) a public company, or
(b) a company associated with a public company.
(2) A company to which this section applies may not—
(a) make a loan or quasi-loan to a person connected with a director of the company or of its holding company, or
(b) give a guarantee or provide security in connection with a loan or quasi-loan made by any person to a person connected with such a director,
unless the transaction has been approved by a resolution of the members of the company.
(3) If the connected person is a person connected with a director of the company’s holding company, the transaction must also have been approved by a resolution of the members of the holding company.
(4) A resolution approving a transaction to which this section applies must not be passed unless a memorandum setting out the matters mentioned in subsection (5) is made available to members—
(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both—
(i) at the company’s registered office for not less than 15 days ending with the date of the meeting, and
(ii) at the meeting itself.
(5) The matters to be disclosed are—
(a) the nature of the transaction,
(b) the amount of the loan or quasi-loan and the purpose for which it is required, and
(c) the extent of the company’s liability under any transaction connected with the loan or quasi-loan.
(6) No approval is required under this section on the part of the members of a body corporate that—
(a) is not a UK-registered company, or
(b) is a wholly-owned subsidiary of another body corporate.
Companies Act 2006