Fact pattern

Sue Charles has recently become a director of Morrat Limited (“Morrat”). Since becoming a director, she has been devoting increasingly more time to the business of Morrat, with the consequence that she is selling a number of other business interests. One of Sue’s other businesses was run from premises owned by Sue’s husband, Martin Charles. Morrat is interested in purchasing these premises from Martin Charles to provide an additional warehousing facility.

Section 190 CA 2006 controls arrangements where directors or persons connected with a director either acquire from or sell to the company a substantial non-cash asset. Connected persons include (amongst others) a director’s spouse, in this case, Martin.

A substantial non-cash asset is one which has a value which either, at the time of the transaction exceeds 10% of the company’s asset value and is more than £5,000, or exceeds £100,000. Here, the value of the asset falls within the first category.

Having provided this advice, you are informed that negotiations are in hand to reduce the price of the premises to £69,500, to take account of not having to pay any agents’ fees on the sale.

If the price for the premises was to be reduced in this way, the transaction would still fall within s190, as it is market value which should be attributed to the asset in question for the purpose of the section.