Part 10

A company's directors
Chapter 4

Transactions with directors requiring approval of members

Substantial property transactions

Property transactions: civil consequences of contravention
195
1
This section applies where a company enters into an arrangement in contravention of section 190 (requirement of members' approval for substantial property transactions).
2
The arrangement, and any transaction entered into in pursuance of the arrangement (whether by the company or any other person), is voidable at the instance of the company, unless—
a
restitution of any money or other asset that was the subject matter of the arrangement or transaction is no longer possible,
b
the company has been indemnified in pursuance of this section by any other persons for the loss or damage suffered by it, or
c
rights acquired in good faith, for value and without actual notice of the contravention by a person who is not a party to the arrangement or transaction would be affected by the avoidance.
3
Whether or not the arrangement or any such transaction has been avoided, each of the persons specified in subsection (4) is liable—
a
to account to the company for any gain that he has made directly or indirectly by the arrangement or transaction, and
b
(jointly and severally with any other person so liable under this section) to indemnify the company for any loss or damage resulting from the arrangement or transaction.
4
The persons so liable are—
a
any director of the company or of its holding company with whom the company entered into the arrangement in contravention of section 190,
b
any person with whom the company entered into the arrangement in contravention of that section who is connected with a director of the company or of its holding company,
c
the director of the company or of its holding company with whom any such person is connected, and
d
any other director of the company who authorised the arrangement or any transaction entered into in pursuance of such an arrangement.
5
Subsections (3) and (4) are subject to the following two subsections.
6
In the case of an arrangement entered into by a company in contravention of section 190 with a person connected with a director of the company or of its holding company, that director is not liable by virtue of subsection (4)(c) if he shows that he took all reasonable steps to secure the company's compliance with that section.
7
In any case—
a
a person so connected is not liable by virtue of subsection (4)(b), and
b
a director is not liable by virtue of subsection (4)(d),
if he shows that, at the time the arrangement was entered into, he did not know the relevant circumstances constituting the contravention.
8
Nothing in this section shall be read as excluding the operation of any other enactment or rule of law by virtue of which the arrangement or transaction may be called in question or any liability to the company may arise.
S. 195 wholly in force at 1.10.2007; s. 195 not in force at Royal Assent see s. 1300; s. 195 in force at 1.10.2007 by S.I. 2007/2194, art. 2(1)(d) (with saving in art. 12 and subject to transitional adaptations specified in Sch. 1 and with transitional provisions and savings in Sch. 3)
Ss. 190-196 modified (9.30 a.m. on 7.10.2008) by The Heritable Bank plc Transfer of Certain Rights and Liabilities Order 2008 (S.I. 2008/2644), art. 26, Sch. 2 para. 2(h)
Ss. 190-196 modified (8.00 a.m. on 29.9.2008) by the The Bradford & Bingley plc Transfer of Securities and Property etc. Order 2008 (S.I. 2008/2546), art. 13(1)(3), Sch. 1 para. 2(h)
Ss. 190-196 modified (22.2.2008) by The Northern Rock plc Transfer Order 2008 (S.I. 2008/432), art. 17(1), Sch. para. 2(h)
Ss. 190-196 modified (retrospective to 30.3.2009 at 8.00 a.m.) by The Amendments to Law (Resolution of Dunfermline Building Society) Order 2009 (S.I. 2009/814), arts. 1(2), 7, Sch. para. 2(h)
Pts. 1-39 (except for Pt. 7 and ss. 662-669), 45-47 extended (12.5.2011) by The Companies Act 2006 (Consequential Amendments and Transitional Provisions) Order 2011 (S.I. 2011/1265), art. 5(1), Sch. 1 para. 2
Pts. 1-39 modified (31.12.2020) by Regulation (EC) No. 2157/2001, Art. AAA1(3) (as inserted by The European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2018 (S.I. 2018/1298), regs. 1, 97 (with regs. 140-145) (as amended by S.I. 2020/523, regs. 1(2), 5(a)-(f)); 2020 c. 1, Sch. 5 para. 1(1))
Ss. 190-196 modified (1.3.2016) by The NRAM plc (formerly Northern Rock plc) Consequential and Supplementary Provisions Order 2016 (S.I. 2016/114), arts. 1(1), 7(1), (3), Sch. para. 1(h)