UK Gaap pp 1303-1341 | Cite as

Directors’ and officers’ loans and transactions

  • Mike Davies
  • Ron Paterson
  • Allister Wilson

Abstract

Company directors are treated as fiduciaries1 and as such must not permit their personal interests and their duty to the company to conflict. In order to avoid such conflicts or potential conflicts arising, transactions between a company and its directors are restricted. Such transactions are regulated in a number of ways, in particular, by means of statutory prohibition, corporate approval and disclosure in the statutory accounts. In this chapter, attention is focused on the Companies Act requirements for disclosure in a company’s financial statements of transactions involving directors (except for those relating to directors’ remuneration which are dealt with in Chapter 26). The provisions determining the legality or otherwise of such transactions are discussed in outline in the Appendix to this chapter.

Keywords

Expense Crest Stake 

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References

  1. 1.
    A person who holds anything in trust. A fiduciary relationship arises where a person has rights and powers which he is bound to exercise for the benefit of another. Hence he is not allowed to derive any profit or advantage from the relationship between them, except with the knowledge and consent of the other person: J. Burke, Jowitt’s Dictionary of English Law, Volume I A–K, p. 788. If a director breaches this duty, a range of remedies are available to the company. The company may, inter alia, seek an injunction, claim damages or compensation, require the director to account for profits made or rescind contracts entered into with him.Google Scholar
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Appendix

  1. 125.
    CA 85, ss 317, 320, 330–346.Google Scholar
  2. 126.
    Ibid., ss 317(8), 320(3), 330(5).Google Scholar
  3. 127.
    Ibid., s 330(2).Google Scholar
  4. 128.
    Ibid., s 331(6).Google Scholar
  5. 129.
    Ibid., s 330(2)(b).Google Scholar
  6. 130.
    This includes indemnities: ibid., s 331(2).Google Scholar
  7. 131.
    Ibid., s 330(2)(b).Google Scholar
  8. 132.
    Ibid., s 330(3)(c).Google Scholar
  9. 133.
    Ibid., ss 330(3)(a),(b), 330(4)(a).Google Scholar
  10. 134.
    Ibid., ss 330(3)(c), 330(4)(b).Google Scholar
  11. 135.
    Ibid., s 330(6).Google Scholar
  12. 136.
    Ibid., s 330(7).Google Scholar
  13. 137.
    Ibid., s 334. S. 138 of CA 89 increased the limit from £2,500 to £5,000 with effect from 31 July 1990. S 339 determines how the threshold is to be calculated.Google Scholar
  14. 138.
    Ibid., ss 334, 339.Google Scholar
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    Ibid., s 332. S. 138 of CA 89 increased the limit from £1,000 to £5,000 with effect from 31 July 1990.Google Scholar
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    Ibid., s 335(1). See also s 339. The Companies (Fair Dealing by Directors) (Increase in Financial Limits) Order (SI 1990/1393) made under s 345 of the Companies Act 1985 increased this limit from £5,000 to £10,000 with effect from 31 July 1990.Google Scholar
  17. 141.
    Ibid., s 335(2).Google Scholar
  18. 142.
    Ibid., s 333.Google Scholar
  19. 143.
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  21. 145.
    Ibid., s 337(3).Google Scholar
  22. 146.
    Ibid., s 337(3). See also s 339. The Companies (Fair Dealing by Directors) (Increase in Financial Limits) Order (SI 1990/1393) made under s 345 of the Companies Act 1985 increased this limit from £10,000 to £20,000 with effect from 31 July 1990.Google Scholar
  23. 147.
    Ibid., s 338(2).Google Scholar
  24. 148.
    Ibid., s 338(1).Google Scholar
  25. 149.
    Ibid., s 38(3).Google Scholar
  26. 150.
    Ibid., s 338(4). S. 138 of CA 89 increased the limit from £50,000 to £100,000 with effect from 31 July 1990. See also s 339.Google Scholar
  27. 151.
    Ibid., s 338(6). S. 138 of CA 89 increased the limit from £50,000 to £100,000 with effect from 31 July 1990.Google Scholar
  28. 152.
    If the pre-consolidation legislation is to be reproduced accurately, the reference in s 339(1) to s 338(4) should actually be a reference to s 338(1).Google Scholar
  29. 153.
    The legislation applies to companies; that is, an entity formed and registered under the various Companies Acts: ibid., s 735. This definition applies unless the contrary intention appears: ibid., s 735(4). Since no contrary intention is expressed, a body incorporated overseas is not a company for the purposes of the directors’ transactions provisions.Google Scholar
  30. 154.
    Ibid., s 341(1)(a).Google Scholar
  31. 155.
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    Ibid., s 341(1)(b).Google Scholar
  33. 157.
    Ibid., s 341(2).Google Scholar
  34. 158.
    Ibid., s 341(4).Google Scholar
  35. 159.
    Ibid., s 341(5).Google Scholar
  36. 160.
    Ibid., s 342(1).Google Scholar
  37. 161.
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  38. 162.
    Ibid., s 342(5).Google Scholar
  39. 163.
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  40. 164.
    Ibid., s 317(7).Google Scholar
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    Ibid., s 317(1).Google Scholar
  42. 166.
    Ibid., s 317(6).Google Scholar
  43. 167.
    Ibid., s 317(2).Google Scholar
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    [1988] 1 W.L.R. 863.Google Scholar
  45. 169.
    CA 85, s 317(2).Google Scholar
  46. 170.
    Ibid., s 317(3).Google Scholar
  47. 171.
    Ibid., s 317(8).Google Scholar
  48. 172.
    The Companies (Tables A–F) Regulations 1985, op. cit, Article 85.Google Scholar
  49. 173.
    CA 85, s 739(1).Google Scholar
  50. 174.
    Ibid., s 320(1).Google Scholar
  51. 175.
  52. 176.
    Ibid., s 320(2). The Companies (Fair Dealing by Directors) (Increase in Financial Limits) Order (SI 1990/1393) made under s 345 of the Companies Act 1985 increased this limit from £50,000 to £100,000 with effect from 31 July 1990.Google Scholar
  53. 177.
    Ibid. The Companies (Fair Dealing by Directors) (Increase in Financial Limits) Order (SI 1990/1393) made under s 345 of the Companies Act 1985 increased this limit from £1,000 to £2,000 with effect from 31 July 1990.Google Scholar
  54. 178.
    Ibid., s 321.Google Scholar
  55. 179.
    Ibid., s 321(1).Google Scholar
  56. 180.
    Ibid., s 321(3).Google Scholar
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  63. 187.
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  64. 188.
    Ibid., s 322(5).Google Scholar
  65. 189.
    Ibid., s 322(6).Google Scholar
  66. 190.
    The Companies (Tables A–F) Regulations 1985, op. cit.Google Scholar

Copyright information

© Ernst & Young 1992

Authors and Affiliations

  • Mike Davies
    • 1
  • Ron Paterson
    • 1
  • Allister Wilson
    • 1
  1. 1.Ernst & YoungUSA

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