A director’s loan will either be a loan to the company or a loan from the company.
It is perfectly legitimate, subject to any amendment to the company’s constitution or otherwise, for a director to loan money to a company provided there are no undeclared preferential terms or no other conflict of interest.
However, a loan to a director (or any other company s/he may have an interest in) is not permissible unless it has been authorised by a majority of shareholders.
- there are of course certain statutory exceptions to this rule, but generally directors must obtain the consent of shareholders to draw money from the company by way of a loan.
- exceptions relate to the amount of the loan, the purpose of the loan and whether the loan is in pure monetary terms.
This rule also applies to other “substantial” property transactions which involve directors.
If you would like to discuss any aspects of these changes (or any other changes introduced by the Act as mentioned in the previous blogs), please do not hesitate to contact me or my colleagues at Francis Wilks & Jones.