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Substantial Property Transactions Notes

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Substantial Property Transactions (Civil Lit Chap. 7 pag. 148...)

What is an SPT?

Transaction...

If a D (or a connected person) buys from or sells to the company, consent must be obtained from the members by Ordinary Resolution ("OR") if it is a 'substantial non-cash asset'. Directors are always under a duty to:
? Promote the success of the company (s.172)
? Exercise independent judgement (s.173)?

Identify the proposed transaction E.g. X proposes to buy/sell shares from/to Company Ltd (a) One of the company's directors (s.190(1)(a)) (b) A person connectedto the company's directors (c) A director of the holding company (s.190(1)(b)) (d) A personconnectedto the director of the holding company

"Connected Persons" s.252(2)
? Spouse or civil partner; s.253(a);
? partner who lives with D in an enduring family relationship (and their
...Between the children or step-children)s.253(b);
? D's children or step-childrens.253(c); Company
? partner's children or step-children if they are under 18 and live with the and...
Ds.253(d);
? parentss.253(e)
? A corporate body connected to the D of which he ownsat least 20%of shares (s.254(2)(a)) or;
? D owns more than 20%of the voting sharesin that Co. (s.254(2)(b));or
? if the D and a person connected to the D own between them 20%i.e. D owns 15% and Connected person owns 10% (e.g. preparatory task WS 3
+ Task 1)
...of a NonCash Asset...s.191: o it must be worth at least PS5,000 o (2)(a): If it is between PS5,000-PS100,000 it will be substantial only if its value exceeds 10% of the company's net assets: (asset value / net assets) x 100 = more than 10% = substantial o (2)(b): If it's over PS100,000 it will always be substantialNote, where there is more than one non-cash asset being sold or purchased, you must aggregate them (s.190(4)(a))Value determined at date contract entered into (s.191(5)) Shareholders do not need to give approval if: (a) Company is a wholly owned subsidiary (s.190(4)(b)), but if D who is connected to D of Holding Co, the Holding Co must pass OR (s.190(2)) (b) The contract is between the company and a D, but that D is acting in his capacity as member of the company (subscribing for shares) (s.192(a)) (c) Contract is between a holding company and a subsidiary (s.192(b)(i)) (d) Contract is between two wholly owned subsidiaries of the same holding company (s.192(b)(i)(i)) (e) Company is in administration (s.193(1))...Which is Substantial

Exceptions (No S'holder approval needed)

s.1163(1): any interest other than cash (such as land, shares, machinery, property rights, fixed or floating charges, not a loan, etc.)

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