Section 190 at Nineteen: The £100,000 Substantial Property Transaction Cap That Hasn't Moved Since 2006 — and the Connected-Persons Net Britain's OMBs Still Miss

When Parliament drafted the Companies Act 2006, it inherited a fragment of director-conduct law that had been on the statute book since the Companies Act 1980: the requirement that directors obtain member approval before buying or selling substantial non-cash assets with their own company. Section 190 codifies it. The mechanics are unchanged. The £100,000 cap is unchanged. And nineteen years after Part 10 Chapter 4 was commenced on 1 October 2007 by SI 2007/2194, the rule still catches owner-managed businesses with a regularity that suggests most never knew it applied to them.

The Companies House register holds approximately 5.5 million live entities at the start of 2026. Around four million are private companies limited by shares with one or two directors — the typical owner-managed business (OMB) shape. Substantial property transactions (SPTs) are not separately disclosed on the public register. There is no SH-prefix form for them, no confirmation-statement field, no Companies House notification. They surface, if at all, in the related-party note to the accounts and, occasionally, in the recital of a court judgment when a transaction is being unwound.

What triggers a substantial property transaction

Section 190(1) bites where a company enters into an arrangement under which:

• a director of the company, or of its holding company, or a person connected with such a director,
• acquires or is to acquire from the company (or vice versa),
• a substantial non-cash asset.

The arrangement requires the prior approval of the company's members by ordinary resolution — unless the contract is made conditional on that approval being obtained. The word doing the work is substantial. Section 191 fixes the boundary:

The denominator for the percentage test is the company's net asset value as shown in its most recent statutory accounts. Where no accounts have yet been filed — the typical position for a newly incorporated company in its first reporting cycle — called-up share capital is substituted. The £100,000 figure operates as a hard ceiling: once an asset value crosses it, the percentage test is redundant.

A cap quietly hollowed out by inflation

When the 1980 Act first wrote the rule, a £50,000 ceiling represented a meaningful filter on director-company dealing. The 2006 Act doubled the cap to £100,000 and left it there. Nineteen years of UK inflation have eroded what substantial means in practice:

By 2026 measure, the Companies Act's substantial threshold is worth £174,000 in 2007 money. Government has periodically uprated other static figures: the audit thresholds (most recently in April 2025), the small-company turnover ceiling, and the payment practices reporting threshold. The s.191 cap has been left undisturbed in every consultation since 2008. The Department for Business and Trade's 2024 Smarter Regulation programme touched the directors-loans cousin in Chapter 4 of Part 10 — but the SPT regime was not on the order paper.

Connected persons in 2026

Section 252 defines connected with a director across four broad categories. The list is wider than most directors appreciate, and ECCTA's identity-verification regime now makes mapping it materially easier for the Registrar:

The 20% threshold for connected bodies corporate is notable. The PSC regime sits at more than 25%. A company can be a connected person for s.190 purposes while not registering its director as a PSC of the related entity. The two regimes overlap but do not align — a fact that has frustrated due-diligence teams since 2016 and remains unaddressed by ECCTA.

ECCTA's October 2024 amendments to the PSC regime, combined with the November 2025 commencement of mandatory identity verification for directors and PSCs, mean Companies House now holds verified identity records for approximately seven million people. Cross-referencing PSCs, directors and shareholders to surface s.252-connected persons in another company's transaction has, for the first time, become a tractable data problem. Whether the Registrar or the Insolvency Service will actually use that capability against historic SPT breaches is a separate question — the answer in 2026 is rarely.

What happens when the procedure is skipped

Section 195 is the consequence section. An SPT entered into without the required member approval is:

• Voidable at the company's option — unless restitution is no longer possible, the company has been indemnified, or rights acquired in good faith by a third party for value without notice would be prejudiced.
• The counter-party director, the connected person who is the counter-party, any director of the company who authorised the arrangement, and any director of the holding company connected to that director, are each liable to account to the company for any gain made and to indemnify the company for any loss or damage suffered.

The s.195 liabilities are joint and several. Section 196 provides a curative route: subsequent affirmation by ordinary resolution within a reasonable period extinguishes the right to void — but does not extinguish accrued liability under s.195(2).

Re Idessa (UK) Ltd [2011] EWHC 804 (Ch) remains the working illustration. Directors transferred vehicles from the company to themselves and to connected entities without member resolution. Lewison J held the arrangements voidable and ordered the directors to account for the value of the assets transferred. The judgment is short, the procedural failure is unambiguous, and the absence of any formal valuation made the substantial test trivially easy to meet.

The exceptions that swallow most listed transactions

Sections 192 to 194 carve out four categories:

1. Intra-group arrangements between a wholly-owned subsidiary and any company in its group (s.192(a)). This is why SPTs almost never trip group restructurings or asset sweeps within consolidated families.
2. Companies in winding up other than members' voluntary, and certain rescue arrangements (s.193).
3. Transactions on a recognised investment exchange effected through an independent broker (s.192(b)). Ordinary market dealings on the LSE Main Market or AIM fall outside the regime.
4. Employees' share scheme arrangements to acquire shares or debentures in the company, subject to conditions (s.194).

The intra-group carve-out is the single biggest reason SPTs rarely feature in large-group transaction documentation. The OMB world, by contrast, sees the rule bite — because the typical OMB pattern (director-owned property let to the trading company; director-financed asset transfers on incorporation; loan-account settlements in kind) places director and company on opposite sides of arrangements that comfortably exceed £5,000.

How it surfaces at Companies House

There is no dedicated SPT filing. Where the regime appears on the public register is in the related-party transactions note required by:

• FRS 102 Section 33 — for small, medium and large entities not applying the micro-entity regime, disclosure of the nature, amount and outstanding balances of transactions with related parties, including key management personnel and their close family members.
• FRS 101 / IAS 24 — for entities applying the reduced disclosure framework within a parent's IFRS group.
• FRS 105 — micro-entities are exempt from related-party disclosure for ordinary transactions, though loans, quasi-loans, credit transactions and guarantees to directors must still be disclosed under the Small Companies (Micro-Entities' Accounts) Regulations 2013.

The result is that the SPT regime is enforced almost entirely by liquidators after insolvency. Misfeasance proceedings under s.212 Insolvency Act 1986 are the usual vehicle, with the SPT breach pleaded as the underlying duty failure. The Insolvency Service's Director Conduct Reports for the year to March 2025 logged 1,213 disqualification orders and undertakings; SPT-related conduct features in a meaningful minority of director-extraction cases, almost all clustered in the pre-insolvency window.

The four recurring OMB blind spots

A pattern review of owner-managed company year-end files surfaces the same procedural gaps with depressing consistency:

1. Director buys company car at trade-in value. Where book value exceeds £5,000 and net assets are modest, the 10% test catches the transfer. A member resolution is almost never minuted.
2. Incorporation transfers without formal valuation. A sole trader incorporates and transfers goodwill, intellectual property and equipment to NewCo at self-determined values. The transferor is the sole shareholder, but the arrangement is still an acquisition from a director at the point NewCo is formed.
3. Property let to the company at above-market rent. The lease is itself an arrangement under s.190, and the rental stream over the term can comfortably exceed £100,000 — triggering approval at inception, not at each rental period.
4. Settlement of director's loan account in fixed assets. Where a loan is repaid by transferring company-owned assets, the asset value is the figure tested under s.191, not the loan balance discharged.

The fix is procedural and inexpensive: a written resolution of the members circulated and passed before the transaction completes, signed and entered in the company's books. Most OMBs have one or two shareholders. The cost of getting it wrong is the rest of this article.

The verdict

Nineteen years on, s.190 is the working part of the Companies Act 2006 that has aged least gracefully. The cap that once bound a meaningful filter has been quietly halved in real terms by inflation. The connected-persons surface area has widened with each round of corporate transparency reform — without the cap moving to compensate. And the disclosure regime that would surface breaches at the filing layer ends precisely where the OMB sector begins, at FRS 105.

The likeliest reform path runs through the next consolidating Companies Bill, not through ECCTA. Until then, Britain's owner-managed companies will keep crossing a procedural line that most of them have never been told exists.