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If an individual is a director/shareholder of both a seller company and a buyer company, but the seller company will enter administration and the assets bought by way of a pre-pack, would this constitute a substantial property transaction?

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Published on LexisPSL on 28/09/2020

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • If an individual is a director/shareholder of both a seller company and a buyer company, but the seller company will enter administration and the assets bought by way of a pre-pack, would this constitute a substantial property transaction?

If an individual is a director/shareholder of both a seller company and a buyer company, but the seller company will enter administration and the assets bought by way of a pre-pack, would this constitute a substantial property transaction?

As to whether the administration sale is a substantial property transaction (SPT), see Practice Note: Substantial property transactions—requirement to obtain members’ approval. As stated in the Practice Note, one of the circumstances when an SPT may arise is where a substantial non-cash asset is acquired or is to be acquired (directly or indirectly) from a company by a director of that company or by a person connected with a director of that company. For the definition of what is meant by ‘persons connected with a director’, see sections 252–254 of the Companies Act 2006 (CA 2006). However, as also stated in the Practice Note, (see section: Exceptions to the requirement to obtain approval of a substantial property transaction), no SPT approval is required from the members of a company that is in administration within the meaning of specified legislation, namely:

  1. a company that is being wound up (unless the winding up is a members' voluntary winding up), or

  2. a company that is in administration within the meaning of Schedule B1 to the Insolvency Act 1986

If the transaction

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