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Substantial property transaction checklist
Certain transactions between a company and its director cannot be entered into without the shareholders’ approval. Use our checklist to see whether you’re dealing with a substantial property transaction.
Definitions
A “substantial property transaction” is a particular category of contract or transaction entered into between a company and its director. For example, if a director purchased or leased land from their company, or sold or leased land to it, this would be a substantial property transaction (if the value of the transaction was over a certain amount). As these transactions may have a significant impact on the company’s finances, shareholder approval is required for them to go ahead.
The definition of a substantial property transaction has different elements. Use our checklist to find out whether your transaction falls within this category.
Next steps
If you have a substantial property transaction, you need to obtain shareholder approval (see our Written Resolution to Approve Substantial Property Transaction). This should be done in advance. If this is not possible, the transaction can be entered into as long as it is conditional upon the shareholders’ approval.
Failure to obtain consent leaves the transaction vulnerable to being declared void. The director in question and any other directors who allowed the transaction to proceed without consent could also be liable to account for any gain they made from the transaction and indemnify the company for any loss.
