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What is a non-cash asset in the context of a substantial property transaction?

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Last updated on 12/06/2019

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

  • What is a non-cash asset in the context of a substantial property transaction?

What is a non-cash asset in the context of a substantial property transaction?

Under the Companies Act 2006 (CA 2006), s 190 a company may not enter into an arrangement under which 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 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.

The phrase ‘non-cash asset’ is defined in CA 2006, s 1163 as ‘any property or interest in property, other than cash (where ‘cash’ includes foreign currency)’. Further, at section 1163(2), a reference to the transfer or acquisition of a non-cash asset includes (a) the creation or extinction of an estate or interest in, or a right over, any property, and (b) the discharge of a liability of any person, other than a liability for a liquidated sum.

The reason that the rule in CA 2006, s 190 specifically relates to non-cash assets is to create transparency of dealings. If a company decides to make a cash payment to one or more of its directors, that payment

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Substantial property transaction definition
What does Substantial property transaction mean?

CA 2006, s 190 provides that a company may not enter into an arrangement under which 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 the company acquires or is to acquire a substantial non-cash asset (directly or indirectly) from such a director or their connected persons, unless the arrangement has been approved by a resolution of the members of the company or is conditional on such approval being obtained. An asset is a substantial asset in relation to a company if its value exceeds 10% of the company's asset value and is more than £5,000, or, separately, exceeds £100,000.

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