Buying a business? Download this free guide to help you negotiate key terms like price, stock, and employee entitlements.<\/p>\n <\/div>\n \n\nDownload Now<\/a> <\/section>\n <\/div>\n\n\n\n\n A substantial property transaction (SPT) is any transaction where your company either buys or sells a substantial non-cash asset from:<\/p>\n\n\n\n In other words, an SPT is where the:<\/p>\n\n\n\n The law adopts a detailed definition of each of these three conditions. Therefore, you should ensure you can adequately identify the full scope of these definitions.<\/p>\n<\/div>\n\n\n\n If your company will enter into an SPT, the best option is almost always to obtain prior shareholder approval<\/a>. The shareholders must vote on a resolution proposing the transaction to obtain shareholder approval. <\/p>\n\n\n\n As a director, you should ensure that the resolution is sufficiently detailed, which should include:<\/p>\n\n\n\n In most cases, shareholders need only pass the resolution as an ordinary resolution. This requires more than 50% of those voting to approve the resolution. If a show of hands passes the resolution, this requires a majority of those voting to approve it. For resolutions passed via written resolution or a poll vote, voting rights are tied to the number of shares held.<\/p>\n<\/div>\n\n\n\n However, as with all shareholder matters, you should review your company\u2019s articles of association<\/a>. Importantly, you will want to determine if SPTs require a special resolution rather than a mere ordinary resolution. Likewise, the articles may specify particular administrative or procedural requirements for SPTs. <\/p>\n\n\n\n The law takes a different approach for SPTs involving subsidiary companies. A subsidiary company is any company with a shareholder owning most of its holding shares. For instance, suppose HoldCo Ltd owns all of the voting shares in SubCo Ltd. SubCo Ltd is a subsidiary of HoldCo Ltd. With this in mind, consider the following scenario involving HoldCo Ltd and SubCo Ltd.<\/p>\n\n\n\n SubCo Ltd buys a \u00a3150,000 building from the wife of a director of HoldCo Ltd. Because the wife of one of HoldCo Ltd\u2019s directors is connected and the non-cash asset is of substantial value, this is an SPT.\u00a0<\/strong><\/p>\n \n But in this case, the law does not require HoldCo Ltd (as SubCo Ltd\u2019s sole shareholder) to approve the transaction. Instead, HoldCo Ltd\u2019s shareholders must approve the transaction. The reason is that HoldCo Ltd\u2019s shareholders effectively own the subsidiary. It would therefore be unfair to deprive them of the power to approve or refuse the transaction.<\/p>\n <\/p>\n<\/div>\n\n\n\n However, where a subsidiary is not wholly owned, the shareholders of the subsidiary vote on it as if it were not a subsidiary. That is, if XYZ Ltd owns 51% of voting shares in SubCo2 Ltd and ABC Ltd owns 49%, SubCo2 Ltd\u2019s directors must put the resolution to both companies. <\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\nWhat Are Substantial Property Transactions?<\/h2>\n\n\n\n
\n
\n
Before You Enter Into an SPT <\/h2>\n\n\n\n
\n
Substantial Property Transactions Involving Subsidiary Companies <\/h3>\n\n\n\n
\n ![\"Front](\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/4\/2023\/01\/13013547\/buying-a-business-560x792-1.jpg\")
\n \n
\n Buying a Business: Guide to Negotiating Terms<\/div>\n
\n
\n
\n
\n \n