Companies Act 1985

F1 347H Exemption of directors from liability in respect of unauthorised donation or expenditure. E+W+S

(1) Where proceedings are brought against a director or former director of a company in respect of any liability arising under section 347F(2)(a) in connection with a donation or expenditure made or incurred by the company, it shall be a defence for that person to show that—

(a) the unauthorised amount has been repaid to the company, together with any interest on that amount due under section 347F(3);

(b) that repayment has been approved by the company in general meeting; and

(c) in the notice of the relevant resolution submitted to that meeting full disclosure was made—

(i) of the circumstances in which the donation or expenditure was made or incurred in contravention of section 347C or 347D, and

(ii) of the circumstances in which, and the person or persons by whom, the repayment was made.

(2) Where proceedings are brought against a director or former director of a holding company in respect of any liability arising under section 347F(2)(a) in connection with a donation or expenditure made or incurred by a subsidiary of the company, it shall be a defence for that person to show that—

(a) the unauthorised amount has been repaid either to the subsidiary or to the holding company, together with any interest on that amount due under section 347F(3);

(b) that repayment has been approved—

(i) (if made to the subsidiary) by both the subsidiary and the holding company in general meeting, or

(ii) (if made to the holding company) by the holding company in general meeting; and

(c) in the notice of the relevant resolution submitted to each of those meetings or (as the case may be) to that meeting, full disclosure was made—

(i) of the circumstances in which the donation or expenditure was made in contravention of section 347D, and

(ii) of the circumstances in which, and the person or persons by whom, the repayment was made.

(3) If the subsidiary is a wholly-owned subsidiary of the holding company, it is not necessary for the purposes of subsection (2) to show (where the repayment was made to the subsidiary) that the repayment has been approved by the subsidiary, and paragraphs (b) and (c) of that subsection shall apply accordingly.

(4) Where proceedings are brought against a director or former director of a holding company in respect of any liability arising under section 347F(2)(a) in connection with a donation or expenditure made or incurred by a subsidiary of the company which is not a wholly-owned subsidiary, then (subject to subsection (5)) it shall be a defence for that person to show that—

(a) proceedings have been instituted by the subsidiary against all or any of its directors in respect of the unauthorised amount; and

(b) those proceedings are being pursued with due diligence by the subsidiary.

(5) A person may not avail himself of the defence provided by subsection (4) except with the leave of the court; and on an application for leave under this subsection the court may make such order as it thinks fit, including an order adjourning, or sanctioning the continuation of, the proceedings against the applicant on such terms and conditions as it thinks fit.

(6) Where proceedings are brought against a director or former director of a company in respect of any liability arising under section 347F(2)(a) (as applied by virtue of section 347G) in connection with a donation or expenditure made or incurred by a subsidiary undertaking of the company, it shall be a defence for that person to show that—

(a) the unauthorised amount has been repaid to the subsidiary undertaking, together with any interest on that amount due under section 347F(3) (as so applied);

(b) that repayment has been approved by the company in general meeting; and

(c) in the notice of the relevant resolution submitted to that meeting full disclosure was made—

(i) of the circumstances in which the donation or expenditure was made without having been authorised as mentioned in section 347E(2), and

(ii) of the circumstances in which, and the person or persons by whom, the repayment was made.

(7) In this section “the unauthorised amount”, in relation to any donation or expenditure, means the amount of the donation or expenditure—

(a) which was made or incurred in contravention of section 347C or 347D, or

(b) which was not authorised as mentioned in section 347E(2),

as the case may be.

Textual Amendments

F1 Pt. XA (ss. 347A-347K) inserted (16.2.2001) by 2000 c. 41, s. 139, Sch. 19 (with s. 156(6), Sch. 3 para. 12); S.I. 2001/222, art. 2, Sch. 1 Pt. I (subject to transitional provisions in Sch. 1 Pt. II)