UK: England and Wales: substantial property transactions and the meaning of 'non-cash asset'

The Court of Appeal gave judgment last month in Granada Group Ltd v The Law Debenture Pension Trust Corporation Plc [2016] EWCA Civ 1289 and affirmed the first instance decision ([2015] EWHC 1499 (Ch)). A summary of the court's decision has been published by the ICLR: see [2016] WLR(D) 686.

The case concerned the operation of the rules requiring shareholder approval for certain transactions between companies and their directors (or those connected with the directors) involving non-cash assets . The meaning of "non-cash asset" was central and, in this regard, the court held (to quote the opening sentences from the ICLR summary):

As established by the authorities, section 739(2) of the Companies Act 1985 [now section 1163 of the Companies Act 2006, which defines "non-cash asset"] extended to rights that were not proprietary rights, provided that they could still be properly described as rights in or over property. An “interest in property” for the purposes of section 739(1) meant a proprietary interest ... An “interest” in property under section 739 was one that could be defined by reference to proprietary concepts, or at least by concepts that were legally recognisable and enforceable".

UK: England and Wales: substantial property transactions and shareholder approval

Judgment was given last week in Granada Group Ltd v The Law Debenture Pension Trust Corporation Plc [2015] EWHC 1499 (Ch). At issue was whether certain arrangements made by Granada in August 2000, to secure the payment of supplementary retirement and death benefits to several of its executive directors, were voidable under section 320 ("Substantial property transactions involving directors, etc") of the Companies Act 1985 (now section 190 of the Companies Act 2006) because the prior approval of the shareholders was not obtained.

The trial judge, Mrs Justice Andrews, held that the arrangements were not voidable under section 320, observing that "[it] seems to me ... that s.320(1)(a) was not intended by Parliament to apply to the rights or interests of the director himself, whatever they may be, when the non-cash asset is held in trust for him by someone other than the company itself, save possibly where the trust arrangement is a "bare trust" or the so-called trustee is really a nominee" (para. [47]).

UK: England and Wales: de facto directorships and substantial property transactions

The Court of Appeal gave judgment earlier today in Smithton Ltd v Naggar [2014] EWCA Civ 939. At first instance the trial judge held that an individual was not a de facto director or shadow director and that certain transactions were not substantial property transactions for the purposes of section 190 of the Companies Act 2006: see [2013] EWHC 1961 (Ch). The Court of Appeal held that there was no basis for setting aside these findings. Arden LJ (with whom Elias and Tomlinson LJJ agreed) delivered the leading judgment and, with regard to section 190, observed that it:

"... requires an arrangement (which can be a non-contractual arrangement) under which a director or connected person acquires "or is to acquire" an interest in shares. There is no basis for interpreting the words 'is to acquire' as 'may acquire'. The fact that conditional arrangements are permitted does not require this interpretation since even a conditional arrangement must still satisfy the words quoted even if it is conditional" (para. [110]).