A more recent version of these Loans To Directors notes – written by Cambridge And Oxilp And College Of Law students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our Business Law and Practice Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Loans to Directors Company and Transaction 1 Identify whether the company is a Plc, a Ltd, or a Ltd connected with a Plc.
1. Identify the nature of the transaction: is it a loan, quasi-loan, guarantee, security or credit transaction.
2. Identify who benefits from the transaction: a director, a director of a holding company or a person connected to one of the above (s.252 & s.253)
Shareholder Approval Shareholder approval is required whenever a loan is made from a company to its director (s.197(1)(a)); in addition approval is required for loans made to the director of a holding company (s.197(2)). The following restrictions only apply to Plcs or Ltds connected with a Plc. Shareholder approval is required whenever a loan is made to a connected person to a director (s.200(2)(a)); approval is required for loans made to a connected person of a director of a holding company (s.200(3)). No approval is required where a holding company gives a loan to a connected person of the Ltd company's director. The Ltd company will not need to give any approval if they are exempt under s.197(5) or s.200(6) if they are a wholly owned subsidiary. In this case only the holding company will need to give approval (s.197(2) & s.200(3)). These rules also apply to credit transactions (s.201(2)(a)) and quasi-loans (s.198(2)(a) & s.199(1)).
Shareholder Resolution Shareholder approval must be completed using an ordinary resolution (s.281(3)) before a company can do the above. The resolution must not be passed until a memo containing information relating to the amount, purpose and nature of the transaction is detailed (s.197(4)). The memorandum of the term of the loan must be available for 15 days before the meeting (s.197(3)(a)-(b)). The resolution can be passed by a written resolution as long as the proposed terms of the loan is attached to the resolution (s.197(3)(a)-(b)).
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