Companies Act 2006, section 254

Director “connected with” a body corporate

Part 10 A company's directors

(1) This section defines what is meant by references in this Part to a director being “connected with” a body corporate.

(2)A director is connected with a body corporate if, but only if, he and the persons connected with him together—

(a)are interested in shares comprised in the equity share capital of that body corporate of a nominal value equal to at least 20% of that share capital, or

(b)are entitled to exercise or control the exercise of more than 20% of the voting power at any general meeting of that body.

(3)The rules set out in Schedule 1 (references to interest in shares or debentures) apply for the purposes of this section.

(4)References in this section to voting power the exercise of which is controlled by a director include voting power whose exercise is controlled by a body corporate controlled by him.

(5)Shares in a company held as treasury shares, and any voting rights attached to such shares, are disregarded for the purposes of this section.

(6) For the avoidance of circularity in the application of section 252 (meaning of “connected person”) —

(a)a body corporate with which a director is connected is not treated for the purposes of this section as connected with him unless it is also connected with him by virtue of subsection (2)(c) or (d) of that section (connection as trustee or partner); and

(b)a trustee of a trust the beneficiaries of which include (or may include) a body corporate with which a director is connected is not treated for the purposes of this section as connected with a director by reason only of that fact.

Read section 254 in the full Act → Definitions (7) Cases (5)

Definitions used in section 254

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
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
share

(1) In the Companies Acts “share”, in relation to a company, means share in the company's share capital.

Defined in s.540(1) · see it in the full Act
equity share capital

In the Companies Acts“equity share capital”, in relation to a company, means its issued share capital excluding any part of that capital that, neither as respects dividends nor as respects capital, carries any right to participate beyond a specified amount in a distribution.

Defined in s.548 · see it in the full Act
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
treasury shares

(5)In the Companies Acts references to a company holding shares as treasury shares are to the company holding shares that—

(a)were (or are treated as having been) purchased by it in circumstances in which this section applies, and

(b)have been held by the company continuously since they were so purchased (or treated as purchased).

Defined in s.724(5) · see it in the full Act
connected

(1) This section defines what is meant by references in this Part to a person being “connected” with a director of a company (or a director being “connected” with a person).

Defined in s.252(1) · see it in the full Act

(1) This section defines what is meant by references in this Part to a person being “connected” with a director of a company (or a director being “connected” with a person).

Defined in s.252(1) · see it in the full Act

Cases considering section 254 (5)

Neil Leslie Humphrey & Anor v Paul Craig Bennett & Ors

[2025] EWHC 448 (Ch) · 28 February 2025Defines

The court applied the definition of a person connected with a director and found that Esprit Homes Construction Limited was connected with Mr Bennett because he was its sole shareholder. (see para [70])

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

[2017] EWHC 1379 (Ch) · 9 June 2017

A director is connected with a body corporate where the director and connected persons control more than 20 per cent of its voting power. Ms Cooper controlled 100 per cent of BWP’s voting power, so BWP was connected with her (see paras [94]; [98]-[101]).

Franbar Holdings Ltd. v Patel & Ors

[2008] EWHC 1534 (Ch) · 2 July 2008Defines

Confirms that section 254 defines when a director is connected with a body corporate for the purposes of section 252 (see para [41]). States one shareholding test for connection with a body corporate. The court found no evidence that Casualty Plus was connected with the directors under this provision (see paras [41]-[42]). States the voting-power test for connection with a body corporate. The court found no evidence that Casualty Plus was connected with the directors under this provision (see paras [41]-[42]).

What each judgment says about section 254 is in the case-law panel in the full Act.

Explanatory note

473.This section determines whether a company or other body corporate is a person connected with a director. Broadly speaking, the director, together with any other person connected with him, must be interested in 20% of the equity share capital, or control (directly or indirectly through another body corporate controlled by them) more than 20% of the voting power exercisable at any general meeting.

474.Schedule 1 contains the rules for determining whether a person is “interested in shares” for this purpose.

All the explanatory notes for the Act

Amendments and notes

1 notes from legislation.gov.uk

Modifications

  1. C460Ss. 252-255 applied (with modifications) (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), ss. 49(5), 154 (with Sch. 5)