IMPORTANT - THIS GUIDANCE HAS BEEN RETAINED FOR HISTORICAL REASONS ONLY - SECTION 324 REFERRED TO BELOW WAS REPEALED AS FROM 6 APRIL 2007 BY THE COMPANIES ACT 2006

Notifications under section 324 (Companies Act 1985) - directors' shareholdings in own company

The law endeavours to ensure that company directors do not take improper advantage of their position by secretly holding (or having an interest in) shares or debentures in the company of which they are a director.

To this end. subsections (1) and (2) of section 324 of the Companies Act 1985 [before being repealed as mentioned above] provided as follows:

Duty of director to disclose shareholdings in own company


(1)
A person who becomes a director of a company and at the time when he does so is interested in shares in, or debentures of, the company or any other body corporate, being the company's subsidiary or holding company or a subsidiary of the company's holding company, is under obligation to notify the company in writing -


(a)
of the subsistence of his interests at the time; and


(b)
of the number of shares of each class in, and the amount of debentures of each class of, the company or other such body corporate in which each interest of his subsists at the time.


(2)
A director of a company is under obligation to notify the company in writing of the occurrence, while he is a director, of any of the following events -


(a)
any event in consequence of whose occurrence he becomes, or ceases to be, interested in shares in, or debentures of, the company or any other body corporate, being the company's subsidiary or holding company or a subsidiary of the company's holding company;


(b)
the entering into by him of a contract to sell any such shares or debentures;


(c)
the assignment by him of a right granted to him by the company to subscribe for shares in, or debentures of, the company; and


(d)
the grant to him by another body corporate, being the company's subsidiary or holding company or a subsidiary of the company's holding company, of a right to subscribe for shares in, or debentures of, that other body corporate, the exercise of such a right granted to him and the assignment by him of such a right so granted;
and notification to the company must state the number or amount, and class, of shares or debentures involved.

Subsection (3) refers to Schedule 13 of the Act, which contains certain provisions clarifying and assisting in the interpretation of subsections (1) and (2) of section 324. Also subsection (3) allows for the Secretary of State to make exceptions to the operation of subsections (2) and (3) by regulations in the form of a statutory instrument. Subsection (4) provides that subsection (2) does not require the notification by a person of the occurrence of an event whose occurrence comes to his knowledge after he has ceased to be a director. Subsection (5) provides in effect that when giving notice under the section the director is required to refer specifically to the section itself. Subsection (6) makes the section applicable to shadow directors and contains an exception in the case of wholly-owned subsidiaries. Subsection (7) makes it an offence to fail to comply with subsections (1) or (2) or to give a knowingly false statement in purported discharge of those subsections. The penalty is imprisonment or a fine or both.
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