288 18: Company directors Part F Management, administration and regulation of companies
9.5 Consequences of breach of duty
Breach of duty comes under the civil law rather than criminal law and, as mentioned earlier, the company
itself must take up the action. This usually means the other directors starting proceedings. Consequences
for breach include:
Damages payable to the company where it has suffered loss
Restoration of company property
Repayment of any profits made by the director
Rescission of contract (where the director did not disclose an interest)9.6 Declaration of an interest in an existing transaction or arrangement
(s 182)Directors have a statutory obligation to declare any direct or indirect interest in an existing transaction
entered into by the company. This obligation is almost identical to the duty to disclose an interest in a
proposed transaction or arrangement under s 177. However, this section is relevant to transactions or
arrangements that have already occurred. A declaration under s 182 is not required if:
It has already been disclosed as a proposed transaction under s 177
The director is not aware of either- The interest they have in the transaction, or
- The transaction itself
The director's interest in the transaction cannot reasonably be regarded as likely to give rise to a
conflict of interest
The other directors are aware (or reasonably should be aware) of the situation
It concerns the director's service contract and it has been considered by a board meeting or
special board committee
Where a declaration is required it should be made as soon as reasonably practicable either by written
notice, by general notice or verbally at a board meeting. If the declaration becomes void or inaccurate, a
further declaration should be made.
9.7 Other controls over directors
The table below summarises other statutory controls over directors included in the Companies Act 2006.CA06 Ref Control
188 Directors' service contracts lasting more than two years must be approved by the members.
190 Directors or any person connected to them may not acquire a non-cash asset from the
company without approval of the members. This does not apply where the asset's value is
less than £5,000, or less than 10% of the company's asset value. All sales of assets with a
value exceeding £100,000 must be approved.
197 Any loans given to directors, or guarantees provided as security for loans provided to
directors, must be approved by members if over £10,000 in value.
198 Expands section 197 to prevent unapproved quasi-loans to directors of over £10,000 in
value (PLCs only).
201 Expands section 197 to prevent unapproved credit transactions by the company for the
benefit of a director of over £15,000 in value (PLCs only).
204 Directors must seek approval of the members where the company loans them over £50,000
to meet expenditure required in the course of business.
217 Non-contractual payments to directors for loss of office must be approved by the members.