Section 201 | Credit transactions: requirement of members' approval

(1)This section applies to a company if it is—

(a)a public company, or

(b)a company associated with a public company.

(2)A company to which this section applies may not—

(a)enter into a credit transaction as creditor for the benefit of a director of the company or of its holding company, or a person connected with such a director, or

(b)give a guarantee or provide security in connection with a credit transaction entered into by any person for the benefit of such a director, or a person connected with such a director,

unless the transaction (that is, the credit transaction, the giving of the guarantee or the provision of security, as the case may be) has been approved by a resolution of the members of the company.

(3)If the director or connected person is a director of its holding company or a person connected with such a director, the transaction must also have been approved by a resolution of the members of the holding company.

(4)A resolution approving a transaction to which this section applies must not be passed unless a memorandum setting out the matters mentioned in subsection (5) is made available to members—

(a)in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;

(b)in the case of a resolution at a meeting, by being made available for inspection by members of the company both—

(i)at the company's registered office for not less than 15 days ending with the date of the meeting, and

(ii)at the meeting itself.

(5)The matters to be disclosed are—

(a)the nature of the transaction,

(b)the value of the credit transaction and the purpose for which the land, goods or services sold or otherwise disposed of, leased, hired or supplied under the credit transaction are required, and

(c)the extent of the company's liability under any transaction connected with the credit transaction.

(6)No approval is required under this section on the part of the members of a body corporate that—

(a)is not a UK-registered company, or

(b)is a wholly-owned subsidiary of another body corporate.