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LPC Law Notes Business Law and Practice Notes

Substantial Property Transactions Notes

Updated Substantial Property Transactions Notes

Business Law and Practice Notes

Business Law and Practice

Approximately 649 pages

A collection of the best LPC BLP notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor".

In short these are what we believe to be the strongest set of Business Law and Practice notes available in the UK this year. This collection of notes is fully updat...

The following is a more accessible 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:

What is an SPT?

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)

Transaction…
  • Identify the proposed transaction

  • E.g. X proposes to buy/sell shares from/to Company Ltd

…Between the Company and…
  1. One of the company’s directors (s.190(1)(a))

  2. A person connectedto the company’s directors

  3. A director of the holding company (s.190(1)(b))

  4. A personconnectedto the director of the holding company

Connected Personss.252(2)

  • Spouse or civil partner; s.253(a);

  • partner who lives with D in an enduring family relationship (and their children or step-children)s.253(b);

  • D’s children or step-childrens.253(c);

  • partner’s children or step-children if they are under 18 and live with the 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 Non-Cash Asset…
  • s.1163(1): any interest other than cash (such as land, shares, machinery, property rights, fixed or floating charges, not a loan, etc.)

…Which is Substantial
  • s.191:

    • it must be worth at least 5,000

    • (2)(a): If it is between 5,000-100,000 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

  • (2)(b): If it’s over 100,000 it will always be substantial

  • Note, 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))

Exceptions

(No S’holder approval needed)

Shareholders do not need to give approval if:

  1. 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))

  2. 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))

  3. Contract is between a holding company and a subsidiary (s.192(b)(i))

  4. Contract is between two wholly owned subsidiaries of the same holding company (s.192(b)(i)(i))

  5. Company is in administration (s.193(1))

If it is an SPT
  • An OR from the members is necessary to allow the transaction (s.190(1))

Breach of s.190

If the requisite member authority is not obtained, then:

  • The contract is voidable by the company (s.195(2))

  • D who was party to the transaction and any other D who authorised it will be liable to indemnity for loss and/or account for the gains made (s.195(3))

  • Ratification: however, the transaction can be retrospectively ratified by the members by an OR in a reasonable amount of time (s.196)

It IS an SPT Template

[SALE/PURCHASE] of [PREMISES/BUSINESS]

The members need to pass an ordinary resolution (“OR”) before the board can complete the [SALE/PURCHASE] contract because the transaction is a substantial property transaction (“SPT”) under s.190(1)(a) Companies Act 2006.This is an SPT because:

  • [NAME OF COMPANY] (“The Company”) are involved in an arrangement under s.190 as they are entering into a contract to [PURCHASE/SELL] [LAND AND BUILDINGS/ANOTHER COMPANY]

  • The [LAND AND BUILDINGS, (“THE PREMISES)/NAME OF OTHER COMPANY (“ABBREVIATED NAME OF COMPANY”)] fall into the definition of non-cash asset under s.1163 as it is any property or interest in property other than cash

  • [THE PREMISES/ABBREV. NAME OF COMPANY] are of substantial value as they are worth [X], which:

    • is more than 100,000 (s.191(2)(b)); or

    • exceeds 5000 but is not more than 100,000 and exceeds 10% of the company’s asset value (I.E. ITS NETS ASSETS) (s.191(2)(a)). It is [X]% of the company’s asset value.

  • The [PURCHASER/SELLER] of [THE PREMISES/ABBREV. NAME OF COMPANY] [“NAME OF PURCHASER/SELLER”], is connected to a director of the Company (“NAME OF D”) because [“NAME OF PURCHASER/SELLER”] is (pick an option below)

    • a member of D’s family (s.252(1) and (2)(a) and s.253(2)(a-e)); or

    • a body corporate (s.252(1) and 2(b)) in which a member of D’s family (s.252(1) and (2)(a)and s.253(2)(a-e)) (“NAME OF MEMBER OF FAMILY”) owns at least 20% of voting shares (s.254(2)(b)) [AND/OR] share capital (s.254(2)(a)). (NAME OF MEMBER OF FAMILY”) owns [X]% of the voting shares [AND/OR] share capital ; or

    • a body corporate (s.252(1) and 2(b)) in which D owns at least 20% of voting shares (s.254(2)(b)) [AND/OR] share capital (s.254(2)(a)). D owns [X]% of the voting shares [AND/OR] share capital; or

    • a body corporate (s.252(1) and 2(b)) in which a member of D’s family (s.252(1) and (2)(a) and s.253(2)(a-e)) (“NAME OF MEMBER OF FAMILY”) and D collectively own at least 20% of voting shares (s.254(2)(b)) [AND/OR] share capital (s.254(2)(a)). (NAME OF MEMBER OF FAMILY”) owns [X]% of the voting shares [AND/OR] share capital and D owns [Y]% of the voting shares [AND/OR] share capital therefore collectively they own [X+Y]% of the voting shares [AND/OR] share capital.

  • None of the exceptions apply in CA apply.

    • NB if D who is connected is D of Holding Company, members of Holding Company need to pass OR to authorise transaction (s.190(2))

It is NOT an SPT Template

[SALE/PURCHASE] of [PREMISES/BUSINESS]

Prima Face, the members need to pass an ordinary resolution (“OR”) before the board...

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