Loans to Directors

The Act introduces a major change in that it permits a company to make a loan to a director. A loan or guarantee must be approved by a resolution of the members of the company. A resolution giving the necessary approval can only be passed when a memorandum setting out required matters about the loan is made available to the members.

Information to be included in the memorandum:

• The nature of the transaction
• The amount of the loan and its purpose
• The extent of the company's liability under any transaction connected with the loan

There are some exceptions to the requirement to gain member approval including loans where the aggregate value does not exceed £10,000, or where this relates to a credit transaction, if applicable, does not exceed £15,000 or is entered into in the ordinary course of the company's business.