Companies Act 2006 s.217 – Payment by company: requirement of members' approval

(1)A company may not make a payment for loss of office to a director of the company unless the payment has been approved by a resolution of the members of the company.

(2)A company may not make a payment for loss of office to a director of its holding company unless the payment has been approved by a resolution of the members of each of those companies.

(3)A resolution approving a payment to which this section applies must not be passed unless a memorandum setting out particulars of the proposed payment (including its amount) is made available to the members of the company whose approval is sought—

(a)in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;

(b)in the case of a resolution at a meeting, by being made available for inspection by the members both—

(i)at the company's registered office for not less than 15 days ending with the date of the meeting, and

(ii)at the meeting itself.

(4)No approval is required under this section on the part of the members of a body corporate that—

(a)is not a UK-registered company, or

(b)is a wholly-owned subsidiary of another body corporate.

Read section 217 in the full Act → Definitions (9) Cases (4)

Definitions used in section 217

company

“company” means a company formed and registered under this Act, that is—

(a)

a company so formed and registered after the commencement of this Part, or

(b)

a company that immediately before the commencement of this Part—

(i)

was formed and registered under the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), or

(ii)

was an existing company for the purposes of that Act or that Order,

(which is to be treated on commencement as if formed and registered under this Act).

Defined in s.1(1) · see it in the full Act

(4) In this section and that Schedule “company” includes any body corporate.

Defined in s.1159(4) · see it in the full Act

payment for loss of office

(1) In this Chapter a “payment for loss of office” means a payment made to a director or past director of a company—

(a)by way of compensation for loss of office as director of the company,

(b)by way of compensation for loss, while director of the company or in connection with his ceasing to be a director of it, of—

(i)any other office or employment in connection with the management of the affairs of the company, or

(ii)any office (as director or otherwise) or employment in connection with the management of the affairs of any subsidiary undertaking of the company,

(c)as consideration for or in connection with his retirement from his office as director of the company, or

(d)as consideration for or in connection with his retirement, while director of the company or in connection with his ceasing to be a director of it, from—

(i)any other office or employment in connection with the management of the affairs of the company, or

(ii)any office (as director or otherwise) or employment in connection with the management of the affairs of any subsidiary undertaking of the company.

Defined in s.215(1) · see it in the full Act

director

In the Companies Acts “director” includes any person occupying the position of director, by whatever name called.

Defined in s.250 · see it in the full Act

member

(2) In sub-paragraph (1) “member” has the same meaning as it has by virtue of section 7(1) of that Act .

Defined in Sch.2 Pt.1 · see it in the full Act

holding company

(1) The Secretary of State may by regulations amend the provisions of section 1159 (meaning of “subsidiary” etc) and Schedule 6 (meaning of “subsidiary” etc: supplementary provisions) so as to alter the meaning of the expressions “subsidiary”, “holding company” or “wholly-owned subsidiary”.

Defined in s.1160(1) · see it in the full Act

written resolution

(1) In the Companies Acts a “written resolution” means a resolution of a private company proposed and passed in accordance with this Chapter.

Defined in s.288(1) · see it in the full Act

body corporate

“body corporate” and “corporation” include a body incorporated outside the United Kingdom, but do not include—

(a)

a corporation sole, or

(b)

a partnership that, whether or not a legal person, is not regarded as a body corporate under the law by which it is governed;

Defined in s.1173(1) · see it in the full Act

UK-registered company

In the Companies Acts“UK-registered company” means a company registered under this Act. The expression does not include an overseas company that has registered particulars under section 1046.

Defined in s.1158 · see it in the full Act

wholly-owned subsidiary

Defined in s.1160(1) · see it in the full Act

Cases considering section 217 (4)

Lehtimäki and others v Cooper

[2020] UKSC 33 · 29 July 2020Limits

The provision requires member approval of a payment for loss of office and applies to charitable companies. It did not prevent the court from directing a fiduciary member how to vote, but the resolution itself remained necessary. (see paras [10]; [159]–[168]; [202]) The provision entitled a member to particulars of the proposed transaction, but did not give a fiduciary member a broader right to compel information from the directors. (see para [92])

Lehtimäki v The Children's Investment Fund Foundation (UK) & Ors

[2018] EWCA Civ 1605 · 6 July 2018

The section requires a payment for loss of office to be approved by a resolution of the company’s members. The court held that members’ statutory role could not be displaced by a voting direction absent impropriety. (see paras [19], [64]) The subsection is recorded as requiring member approval before a company makes a payment for loss of office. The appeal’s issue was whether the court could compel the member’s approval. (see paras [18], [64])

Stubbins Marketing Ltd v Stubbins Food Partnerships Ltd & Ors

[2020] EWHC 1266 (Ch) · 19 May 2020

Applies the loss-of-office payment provisions to the £45,000 payment made after Mr Smith’s removal. The payment required member approval unless an exception applied, but no exception was available because the obligation was created in consequence of the impending removal. (see paras [572]-[581])

The Children's Investment Fund Foundation (UK) v Attorney General & Ors[2017] EWHC 1379 (Ch) · 9 June 2017

What each judgment says about section 217 is in the case-law panel in the full Act.

Amendments and notes

7 notes from legislation.gov.uk

Modifications

C392Ss. 215-222 modified (1.3.2016) by The NRAM plc (formerly Northern Rock plc) Consequential and Supplementary Provisions Order 2016 (S.I. 2016/114), arts. 1(1), 7(1), (3), Sch. para. 1(j)
C393Ss. 215-222 modified (16.7.2026) by The Modification of the Law (British Steel Limited Property Transfer) Regulations 2026 (S.I. 2026/833), regs. 1(2), 6(2), Sch. para. 1
C398Ss. 215-222 modified (22.2.2008) by The Northern Rock plc Transfer Order 2008 (S.I. 2008/432), art. 17(1), Sch. para. 2(j)
C399Ss. 215-222 modified (8.00 a.m. on 29.9.2008) by the The Bradford & Bingley plc Transfer of Securities and Property etc. Order 2008 (S.I. 2008/2546), art. 13(1)(3), Sch. 1 para. 2(j)
C400Ss. 215-222 modified (9.30 a.m. on 7.10.2008) by The Heritable Bank plc Transfer of Certain Rights and Liabilities Order 2008 (S.I. 2008/2644), art. 26, Sch. 2 para. 2(j)
C401Ss. 215-222 modified (retrospective to 30.3.2009 at 8.00 a.m.) by The Amendments to Law (Resolution of Dunfermline Building Society) Order 2009 (S.I. 2009/814), arts. 1(2), 7, Sch. para. 2(j)

Commencement

I76S. 217 wholly in force at 1.10.2007; s. 217 not in force at Royal Assent see s. 1300; s. 217 in force at 1.10.2007 by S.I. 2007/2194, art. 2(1)(d) (with saving in art. 12 and subject to transitional adaptations specified in Sch. 1 and with transitional provisions and savings in Sch. 3) this amendment is subject to savings and/or transitional provisions, see the commentary.