This article is for company directors and business owners in Ireland who need to understand when shareholder approval is required for property transactions.
If you're wondering whether you need approval to buy or sell assets involving directors, how to calculate the 10% threshold, or what happens if you get it wrong, this guide covers the approval requirements, exemptions, and consequences of non-compliance.
Key Takeaways
• Shareholder approval is required when a company transacts non-cash assets worth over 10% of net assets with directors. • Calculate the threshold using net assets from your most recent balance sheet and the asset's market value. • Transactions in the ordinary course of business are exempt from approval requirements if on arm's length terms. • Unapproved transactions are voidable by the company, and directors may be liable for gains and losses incurred. • Keep comprehensive records including shareholder resolutions, valuations, and board minutes to prove compliance if challenged.
Laura Ryan is a practising Barrister at the Bar of Ireland. She graduated from the Honourable Society of King’s Inns in 2024, having previously qualified and practised as a Chartered Accountant in a big four accounting firm.
What counts as a substantial property transaction that needs shareholder approval?
A substantial property transaction occurs when your company buys or sells non-cash assets (like property, equipment, or intellectual property) worth more than 10% of the company's net assets to or from a director or connected person. The 10% is calculated using the net asset figure from your most recently filed balance sheet, and you must use the asset's current market value, not its book value.
How do I calculate if my transaction exceeds the 10% threshold?
Take the net assets figure from your company's most recent balance sheet (total assets minus total liabilities), multiply it by 0.1, and compare that to the market value of the asset being bought or sold. For example, if your company has net assets of €100,000, any non-cash asset transaction over €10,000 with a director or connected person triggers the approval requirement.
Who is considered a "connected person" under these rules?
Connected persons include the director's immediate family (spouse, civil partner, parents, children, siblings), business partners in partnerships where the director is a partner, companies the director controls, and trusts where the director or family members are beneficiaries. Transactions with any of these connected persons receive the same scrutiny as direct transactions with the director.
Do I need approval if the transaction is part of our normal business?
No, transactions entered into in the ordinary course of your company's business on arm's length terms are exempt from approval requirements. For example, a software company buying computers for employees wouldn't need approval, but the same company buying commercial property would unless property transactions are part of their normal business activities.
What happens if we complete a transaction without getting shareholder approval?
The transaction becomes voidable, meaning the company can choose to set it aside and seek return of the asset or its value. The director involved may be liable to account for any gain made and must indemnify the company for any losses, and connected persons who benefited may also face liability in certain circumstances.
Can shareholders approve a transaction after it's already been completed?
Yes, shareholders can ratify unapproved transactions retrospectively through an ordinary resolution with full disclosure of all transaction details. However, ratification doesn't automatically remove the director's liability for breach of duty, and the director and connected persons cannot vote on the ratification resolution.
Are the rules different for private companies versus PLCs?
No, the 10% net assets threshold and approval requirements apply equally to all company types, including both private companies and public limited companies. However, PLCs may face greater scrutiny due to their broader shareholder base and higher governance expectations.
What records should I keep to prove we followed the proper approval process?
You should maintain copies of the shareholder approval resolution with voting results, all transaction documents and contracts, independent valuation reports, board minutes proposing the transaction for approval, and all disclosure documents provided to shareholders. This comprehensive audit trail is essential if the transaction is later questioned by shareholders or regulatory authorities.
