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A Chief Executive of a commercial company wants the company…

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A Chief Executive of...

A Chief Executive of a commercial company wants the company to take this opportunity to dispose of its stock of office furniture, worth approximately £400,000 at market value, to our Party, of which the Chief Executive is a devoted supporter. He wants to sell it to the party at £200,000. What are the likely legal implications and consequences of this disposal for the company and for CE. I am concerned with the principle of whether the Chief Executive can pursue this course of action unilaterally as opposed to issues of a transaction at an under value. I am aware of the director general duties.

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Awaiting Board meeting

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Answer to my question

Submitted: 2 months ago.Category: UK Law
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Answered in 11 hours by:
4/1/2018
Solicitor: JimLawyer, Senior Associate & Consultant replied 2 months ago
JimLawyer
JimLawyer, Senior Associate & Consultant
Category: UK Law
Satisfied Customers: 370
Experience: Senior Associate Solicitor and Litigator
Verified
Hello, if the CE is acting in the best interests of their company and the Board of Directors are also in agreement with the sale at the next Board meeting, the transaction is legal and it would not matter that the items were sold at under value. As long as the Board are in agreement then it would be fine. The disposal would also affect the company balance sheet as their fixed assets would have reduced by 50% insofar as furniture is concerned - but again - if the Board agree then fine - if the Board does not agree then the CE can be overruled
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Solicitor: JimLawyer, Senior Associate & Consultant replied 2 months ago
Hello is there anything else I can clarify or assist with?
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Customer reply replied 2 months ago
Are you saying this transaction will not be construed as a political donation?
The furnitures are company stock that they usually sell, however, the CE has the brief to turn the company around. She wants the company to stop selling furniture and start clothing concern. This is why the furniture is being disposed. But I am confused that it is being sold to a party she is a devoted supporter
Solicitor: JimLawyer, Senior Associate & Consultant replied 2 months ago
The law states that any UK-incorporated company must not make a political donation to a political organisation or incur any political expenditure without shareholder approval or, if the company is a subsidiary, the approval of its UK holding company. Directors could incur personal liability if authorisation is not obtained. By selling assets to a party, it could be construed as a donation as the items are being sold off at an under value.A “political donation” includes any gift of money, but the definition is very broad and could include, for example, allowing a political organisation to use a business’s facilities on favourable commercial terms or selling assets for a lower amount.Further, the company must record any political donations made and political expenditure incurred over £2,000 during the financial year in its report. This includes selling off assets at undervalue to a political party.The other directors need to be in agreement with her selling to the party - if it’s not in the best interests of the company (eg making a loss by selling to the party as opposed to someone else), she cannot be said to be acting in the best interests of the company
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