ICAEW BL · Chapter 10 · Question 4 of 10
Without obtaining members' approval, a director buys from her company a non-cash asset whose value exceeds the statutory threshold for a substantial property transaction. What are the consequences under the Companies Act 2006?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The transaction is voidable at the company's instance, and the director must account for any gain and indemnify the company for any loss
Explanation
Under s190, a substantial property transaction between a company and its director requires members' approval. Under s195, an unapproved transaction is voidable at the company's instance, unless restitution is impossible, third-party rights intervene, or the members affirm it within a reasonable time. The director must account for any gain and indemnify the company for any loss. Board approval is not enough. There is no automatic voidness, criminal offence or disqualification.
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