fbpx

The Loan Restrictions from a Company to a Director or Connected Person

S. 239 of the Companies Act 2014 governs the prohibition on loans from Irish companies to directors and connected persons.

This Section sets out that a company shall not;-

  • Make a loan or a quasi-loan to a director of the company or its holding company or to a person connected with such a director;
  • Enter into a credit transaction as a creditor for such a director or a person so connected;
  • Enter into a guarantee or provide any security in connection with a loan, quasi loan or credit transaction made by any other person for such a director or person so connected.

Companies are also prohibited from arranging for other persons to take part in such transactions in particular where there would be a breach of S.239 if the company had entered into the transaction.

A quasi loan from a company to a director or connected person could easily occur. An example would be a company paying a directors credit card bill, with the understanding that the director will repay the company at a later date.

A credit transaction could arise if a company leased property to its director or connected person.

There are ways to “bless the transaction” so that it does not fall foul of S.239. The Summary Approval Procedure can be used to validate such a prohibited transaction.

  1. For this procedure to be effective a Special Resolution must be passed not more than 12 months prior to the commencement of the activity. This will then have to be filed in the CRO within 15 days of passing.
  1. A Declaration of Solvency made by the directors of the company setting out that the company will be able to meet its debts as they fall due for 12 months will also need to be prepared. This will then have to be filed in the CRO within 21 days of the activity.

There are a number of exemptions to S.239 and one should carefully consider any activities that might be contrary to the section.

For further information on the above please contact Thomas Norris at tom@mwkeller.ie or on 051 877029.

Follow us on LinkedIn to keep up with industry updates and if you have any queries please contact us here.

Client Testimonial

I am pleased with your firm’s service and everything has been answered in a timely manner. I appreciate having your firm handle my case; they have put my mind at ease. I would absolutely recommend your firm to family and friends.”

Client Testimonial

‘For the last 5 years I have regularly engaged the services of MW Keller. They are wonderful service providers. Their attention to detail, responsiveness and business acumen is exceptional. I know if I engage them to work on a legal issue they will represent my interests fully and take the burden off me. It’s also good to get questions answered in a timely manner. I would highly recommend them.’ 

Client Testimonial

MW Keller’s came highly recommended from a friend, and they didn’t disappoint. From the time we engaged them, to the close of our house sale, their advice was clear and concise. Once we appointed them we received a detailed email outlining all the various things we needed to do in order to be fully compliant with all the various bodies and authorities, including helpful links to websites to guide us through the process. Nothing appeared to phase them. They’d seen it all before and had almost immediate answers, no matter how complicated we thought an issue was. We would have no hesitation in recommending MW Keller & Son.