Part 10A company's directors

Chapter 4Transactions with directors requiring approval of members

Loans, quasi-loans and credit transactions

197Loans to directors: requirement of members' approval

(1)

A company may not—

(a)

make a loan to a director of the company or of its holding company, or

(b)

give a guarantee or provide security in connection with a loan made by any person to such a director,

unless the transaction has been approved by a resolution of the members of the company.

(2)

If the director is a director of the company's holding company, the transaction must also have been approved by a resolution of the members of the holding company.

(3)

A resolution approving a transaction to which this section applies must not be passed unless a memorandum setting out the matters mentioned in subsection (4) is made available to members—

(a)

in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;

(b)

in the case of a resolution at a meeting, by being made available for inspection by members of the company both—

(i)

at the company's registered office for not less than 15 days ending with the date of the meeting, and

(ii)

at the meeting itself.

(4)

The matters to be disclosed are—

(a)

the nature of the transaction,

(b)

the amount of the loan and the purpose for which it is required, and

(c)

the extent of the company's liability under any transaction connected with the loan.

(5)

No approval is required under this section on the part of the members of a body corporate that—

(a)

is not a UK-registered company, or

(b)

is a wholly-owned subsidiary of another body corporate.