“Loans”, “Quasi Loans” To Directors By Company and “Credit Transactions Flashcards Preview

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Flashcards in “Loans”, “Quasi Loans” To Directors By Company and “Credit Transactions Deck (6)
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1
Q

What are the provisions concerned with this?

A

Ss 197 – 214 CA 2006

2
Q

What is the general prohibition?

A

Generally, a prohibition on ‘loans’, or ‘quasi-loans’, to directors by companies, or holding companies, except where there has been shareholder approval for:

(i) loans to a company’s director (or a director of that company’s parent company), or ‘a connected person’ (ss 197 and 200 CA 2006); or
(ii) ‘quasi-loans’ to a public company’s director (or a director of that company’s parent company), or ‘a connected person’ (ss 198-200 CA 2006); or
(iii) a ‘credit transaction’ between a public company and a director thereof (or a director of that company’s parent company), or ‘a connected person’ (ss 201-203 CA 2006)

3
Q

What are the remedies for breach?

A

Transaction can be avoided by the company, unless: (i) restitution impossible, or (ii) ‘the company has been indemnified’, or (iii) a bona fide third party for value without notice’s ‘rights’ would be harmed: s 213(2) CA 2006. However, there can still be personal remedies (eg, an account of profits, or an indemnity) against a ‘director’, or a ‘connected person’, or ‘connected director’, or ‘authorising director’: ss 213(3), (4) CA 2006.

There can also be a later ratification of an offending ‘loan’, ‘quasi-loan’ or ‘credit transaction’: s 214 CA 2006

  • Company can recover money lent: Currencies Direct Ltd v Ellis [2002] EWCA Civ 779, and Ciro Cittero Menswear Plc v Thakrar [2002] EWHC 897, [2002] 1 WLR 2217, [2002] 2 All ER 717, [2002] 1 BCLC 672 (old law).
4
Q

Currencies Direct Ltd v Ellis [2002] EWCA Civ 779

A

??

5
Q

Ciro Cittero Menswear Plc v Thakrar [2002] EWHC 897, [2002]

A

??

6
Q

What are the exceptions?

A

These are set out in ss 204-209.

The main ones relate to:

(i) ‘expenditure on company business’ (subject to £50,000 limit) (s 204 CA 2006); or
(ii) ‘minor and business transactions’ where there is a 10,000 limit for ‘loans’ and ‘quasi-loans’, and £15,000 for ‘credit transactions (s 207 CA 2006); or
(iii) ‘expenditure’ regarding ‘defending’ legal ‘proceedings’ or ‘regulatory action’ (ss 206 and 207 CA 2006); and
(iv) ‘intra-group transactions’ (s 208 CA 2006).