| Commentary

63 Requirement for shareholders’ approval

| Commentary

3: LOANS

63 Requirement for shareholders’ approval

The directors of a private limited company are in a position to benefit from loans or other credit facilities advanced to them by the company. Such transactions are common but are capable of being abused. Therefore, the Companies Act 2006 provides that a company may not make a loan to a director (including a shadow director) of the company or of its holding company unless the shareholders have approved the transaction by an ordinary resolution1. These provisions also prevent a company from giving a guarantee or providing collateral security for a loan made to

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