A company’s capacity and related matters

Invalidity of certain transactions involving directors

45.—(1) In Part XI of the Companies Order (enforcement of fair dealing by directors), after Article 330 insert—

Invalidity of certain transactions involving directors, etc.

330A.(1) This Article applies where a company enters into a transaction to which the parties include—

(a)a director of the company or of its holding company, or

(b)a person connected with such a director or a company with whom such a director is associated,

and the board of directors, in connection with the transaction, exceed any limitation on their powers under the company’s constitution.

(2) The transaction is voidable at the instance of the company.

(3) Whether or not it is avoided, any such party to the transaction as is mentioned in paragraph (1)(a) or (b), and any director of the company who authorised the transaction, is liable—

(a)to account to the company for any gain which he has made directly or indirectly by the transaction, and

(b)to indemnify the company for any loss or damage resulting from the transaction.

(4) Nothing in the above provisions shall be construed as excluding the operation of any other statutory provision or rule of law by virtue of which the transaction may be called in question or any liability to the company may arise.

(5) The transaction ceases to be voidable if—

(a)restitution of any money or other asset which was the subject-matter of the transaction is no longer possible, or

(b)the company is indemnified for any loss or damage resulting from the transaction, or

(c)rights acquired bona fide for value and without actual notice of the directors' exceeding their powers by a person who is not party to the transaction would be affected by the avoidance, or

(d)the transaction is ratified by the company in general meeting, by ordinary or special resolution or otherwise as the case may require.

(6) A person other than a director of the company is not liable under paragraph (3) if he shows that at the time the transaction was entered into he did not know that the directors were exceeding their powers.

(7) This Article does not affect the operation of Article 45A in relation to any party to the transaction not within paragraph (1)(a) or (b).

But where a transaction is voidable by virtue of this Article and valid by virtue of that Article in favour of such a person, the court may, on the application of that person or of the company, make such order affirming, severing or setting aside the transaction, on such terms, as appear to the court to be just.

(8) In this Article “transaction” includes any act; and the reference in paragraph (1) to limitations under the company’s constitution includes limitations deriving—

(a)from a resolution of the company in general meeting or a meeting of any class of shareholders, or

(b)from any agreement between the members of the company or of any class of shareholders..

(2) In Schedule 21 to the Companies Order (provisions applying to unregistered companies), in the entries relating to Part XI, insert—

Article 330A.Invalidity of certain transactions involving directors, etc.Subject to Article 667(3)..