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Risky Transactions Notes

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A more recent version of these Risky Transactions notes – written by Oxford students – is available here.

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Risky Transactions 1 There are additional controls on directors in relation to particular transactions which are seen as especially risky.

Directors long term service contracts Any service contract entered into between the company and a director must be authorised by an ordinary resolution of the members if the contract is longer than 2 years. (CA2006 s.188) If a resolution is not obtained then the additional period is void and the contract may be terminated by the company giving reasonable notice at any time. (CA2006 s.189)

Substantial property transactions A company may not enter an agreement whereby either:

1. A director or a person connected with a director acquires or is to acquire from the company (directly or indirectly) a substantial non cash asset. Or

2. The company acquires or is to acquire a substantial non cash asset (either directly or indirectly) from such a director or such a person connected to such a director. Unless the arrangement has been approved by a members resolution as is conditional upon such approval being obtained. A substantial non cash asset nears an asset which either: has a value of over PS5000 and more than 10% of the company's asset value or an asset which has a value over PS100000. A company's asset value is the net assets according to the most recent accounts or, in the absence of accounts, the amount of called up share capital. (CA2006 s.191) A noncash asset includes any property or interest in property other than cash. The transfer or acquisition would include the discharge of a liability or the creation or extinction of any interest in property. (CA2006 s.1163) A person connected with a director includes:

1. Members of the directors family

2. A corporate body with which the director is connected

3. A trustee whose beneficiaries fall within either 1 or 2 other than a other than a pension or employee share scheme trustee.

4. A person in a partnership with the director This list is exhaustive. (CA2006 s.252) Members of the directors family means a spouse or other enduring partner, children of the director, other children who live with the director, the directors parents. (CA2006s.253)

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