Substantial property transactions—requirement to obtain members’ approval
Substantial property transactions—requirement to obtain members’ approval

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Substantial property transactions—requirement to obtain members’ approval
  • Approval of a substantial property transaction
  • Exceptions to the requirement to obtain approval of a substantial property transaction
  • Consequences of a failure to obtain members’ approval of a substantial property transaction

The Companies Act 2006 (CA 2006) contains provisions that restrict and control substantial property transactions entered into between a company and its directors.

Approval is required for such transactions as they involve directors (or their connected persons) and are considered to be particularly open to abuse. The relationship between the statutory provisions requiring approval of such a transaction and the general duties of a director that are set out in statute is discussed in Practice Note: Directors' duties—scope, nature, interpretation and application.

There are also statutory provisions relating to the consequences of a company entering into a substantial property transaction without obtaining any required members’ approval or without it being conditional upon any such required approval being obtained (see Practice Note: Substantial property transactions—consequences of a failure to obtain members’ approval).

One of the general duties of directors set out in statute is the duty to declare if he is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company of which he is a director, and the nature and extent of that interest, to the other directors.

In relation to:

  1. a director’s obligation to declare an interest in a transaction or arrangement with the company of which he is a director see Practice Note: Declaration of a director's interests—the statutory provisions, and

  2. a director’s ability to participate, either