Companies Act 2014 section 246

Transaction or arrangement in breach of section 239 voidable at instance of company

Section 246 deals with the remedies available to a company where a transaction or arrangement has been entered into in breach of the prohibition on loans and similar transactions involving directors and connected persons.

• Where a company enters into a transaction or arrangement that breaches the prohibitions in section 239 (loans, quasi-loans, credit transactions, etc. involving directors and connected persons), that transaction is voidable — meaning the company can choose to have it set aside.
• The company cannot void the transaction if it is no longer possible to restore the money or assets involved, or if the company has already been fully compensated (indemnified) for its loss or damage under section 232.
• The company also cannot void the transaction where an innocent third party — someone other than the director or connected person who benefited — has acquired rights in good faith, for value, and without actual knowledge of the breach, and those rights would be adversely affected by setting the transaction aside.
• This provision originated in section 38 of the Companies Act 1990 and is designed to balance the company's right to undo improper transactions against the need to protect innocent third parties who dealt in good faith.

---