Clause 25

Except as provided in section 160B, a company shall not enter into an arrangement —

whereby a director of the company or its holding company, or a person connected with such a director, acquires or is to acquire one or more non-cash assets of the requisite value from the company; or

whereby the company acquires or is to acquire one or more non-cash assets of the requisite value from such a director or a person so connected,unless the arrangement is first approved by a resolution of the company in general meeting and, if the director or connected person is a director of its holding company or a person connected with such a director, by a resolution in general meeting of the holding company.(2) For this purpose a non-cash asset is of the requisite value if at the time the arrangement in question is entered into its value is not less than $5,000 but (subject to that) exceeds $200,000 or 10% of the company’s asset value, that is —

except in a case falling within paragraph (b) below, the value of the company’s net assets determined by reference to the accounts prepared and laid under Division I of Part VI in respect of the last preceding financial year in respect of which such accounts were so laid; and

where no accounts have been so prepared and laid before that time, the amount of the company’s called-up share capital.Exceptions from section 160A160B.—

No approval shall be required to be given under section 160A by any body corporate unless it is a company within the meaning of this Act, or if it is a wholly-owned subsidiary of any body corporate, wherever incorporated.(2) Section 160A(1) shall not apply to an arrangement for the acquisition of a non-cash asset —

if the asset is to be acquired by a holding company from any of its wholly-owned subsidiaries or from a holding company by any of its wholly-owned subsidiaries, or by one wholly-owned subsidiary of a holding company from another wholly-owned subsidiary of that same holding company; or

if the arrangement is entered into by a company which is being wound up, unless the winding up is a members’ voluntary winding up.(3) Section 160A(1)(a) shall not apply to an arrangement whereby a person is to acquire an asset from a company of which he is a member, if the arrangement is made with that person in his character as a member.Liability arising from contravention of section 160A160C.—

An arrangement entered into by a company in contravention of section 160A, and any transaction entered into in pursuance of the arrangement (whether by the company or any other person) shall be voidable at the instance of the company unless one or more of the conditions specified in subsection (2) is satisfied.(2) Those conditions are that —

restitution of any money or other asset which is the subject-matter of the arrangement or transaction is no longer possible or the company has been indemnified in pursuance of this section by any other person for the loss or damage suffered by it; or

any rights acquired bona fide for value and without actual notice of the contravention by any person who is not a party to the arrangement or transaction would be affected by its avoidance; or

the arrangement is, within a reasonable period, affirmed by the company in general meeting and, if it is an arrangement for the transfer of an asset to or by a director of its holding company or a person who is connected with such a director, is so affirmed with the approval of the holding company given by a resolution in general meeting.(3) If an arrangement is entered into with a company by a director of the company or its holding company or a person connected with him in contravention of section 160A, that director and the person so connected, and any other director of the company who authorised the arrangement or any transaction entered into in pursuance of such an arrangement, is liable —

to account to the company for any gain which he has made directly or indirectly by the arrangement or transaction; and

(jointly and severally with any other person liable under this subsection) to indemnify the company.(4) Subsection (3) is without prejudice to any liability imposed otherwise than by that subsection, and is subject to subsections (5) and (6); and the liability under subsection (3) arises whether or not the arrangement or transaction entered into has been avoided in pursuance of subsection (1).(5) If an arrangement is entered into by a company and a person connected with a director of the company or its holding company in contravention of section 160A that director is not liable under subsection (3) if he shows that he took all reasonable steps to secure the company’s compliance with that section.(6) In any case, a person so connected and any such other director as is mentioned in subsection (3) is not so liable if he shows that, at the time the arrangement was entered into, he did not know the relevant circumstance constituting the contravention.Interpretation160D.—

In section 160A, “called-up share capital”, in relation to a company, means so much of its share capital as equals the aggregate amount of the calls made on its shares (whether or not those calls have been paid), together with any share capital paid up without being called and any share capital to be paid on a specified future date under the articles, the terms of allotment of the relevant shares or any other arrangements for payment of those shares.(2) For the purposes of sections 160A, 160B and 160C, a person is connected with a director of a company if, but only if, he is —

that director’s spouse, child or stepchild; or

except where the context otherwise requires, a body corporate with which the director is associated; or

a person acting in his capacity as the trustee (other than as trustee under an employees’ share scheme or a pension scheme) of any trust the beneficiaries of which include the director, his spouse or any of his children or step-children or a body corporate with which he is associated or the terms of which confer a power on the trustees that may be exercised for the benefit of the director, his spouse or any of his children or step-children or any such body corporate; or

a person acting in his capacity as partner of that director or of any person who, by virtue of paragraph (a), (b) or (c) above, is connected with that director,unless that person is also a director of the company.(3) For the purposes of subsection (2) —

a director of a company is associated with a body corporate if, but only if, he and the persons connected with him, together, are interested in shares comprised in the equity share capital of that body corporate of a nominal value equal to at least one-fifth of that share capital or are entitled to exercise or control the exercise of more than one-fifth of the voting power at any general meeting of that body; and

a director of a company shall be deemed to control a body corporate if, but only if —

he or a person connected with him is interested in any part of the equity share capital of that body or is entitled to exercise or control the exercise of any part of the voting power at any general meeting of that body; and

that director, the persons connected with him and the other directors of that company, together, are interested in more than one-half of that share capital or are entitled to exercise or control the exercise of more than one-half of that voting power.For the purposes of this subsection, a body corporate with which a director is associated and a trustee of a trust the beneficiary of which is or may be such a body corporate shall be regarded as if they were not connected with that director.(4) Section 7 (interest in shares) shall have effect for the purposes of subsection (3) except that the words “more than one-half” shall be substituted for the words “not less than 15%” in subsection (4)(c) of that section; and in this subsection —

“equity share capital” has the same meaning as in section 69B; and

references to voting power the exercise of which is controlled by a director shall, without prejudice to the other provisions of that subsection, include references to voting power the exercise of which is controlled by a body corporate controlled by that director.”.