Companies Act 2014 section 240

Arrangements of certain value

Section 240 provides a de minimis exemption from the prohibition on loans and similar arrangements between a company and its directors (or persons connected with directors), where the value involved is small relative to the company's assets.

• A company may enter into a loan, quasi-loan, credit transaction, guarantee or security arrangement with a director or connected person without breaching the Section 239 prohibition, provided the value is below the 10% threshold
• The arrangement's value — or, if the company has other such arrangements with any director or connected person, the combined total of the new arrangement and all amounts outstanding under those other arrangements — must be less than 10% of the company's relevant assets
• The company's relevant assets are determined using the method set out in Section 238(2), which looks at the most recent statutory financial statements or, if none exist, the company's called-up share capital
• Any arrangements that have already been approved through the Summary Approval Procedure (sometimes called "whitewashed" arrangements) are excluded from the aggregation calculation when testing against the 10% threshold