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Directors
Approval of directors’ actions
Certain matters require the approval of the members in a general meeting in order to
be valid. For example:
Service contracts (s.188)
Substantial property
transactions (s.190)
Loans to directors (s.197)
 Approval is required if the contract is for a
guaranteed period of two years or more.
 If not approved, the contract is deemed to
include a term allowing the company to
terminate it by reasonable notice at any time.
 This is where a director acquires from the
company (or vice versa) a substantial non-cash
asset.
 An asset is ‘substantial’ if its value either
exceeds £100,000 or exceeds 10% of the
company’s asset value and is more than £5,000.
 Failure to obtain the members’ approval results
in the following consequences:
– the transaction is voidable by the
company, unless the members give
approval within a reasonable period
– The director is liable to account to the
company for any gain or indemnify it
against any loss.
 Any loan by a company to a director or for any
guarantee or security by a company in
connection with a loan made by another party to
a director.
 A written memorandum setting out the details of
the transaction proposed must be given to the
members
 Failure to obtain the members’ approval results
in the following consequences:
– the transaction is voidable by the
company, unless the members give
approval within a reasonable period; and
– The director is liable to account to the
company for any gain or indemnify it
against any loss.
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