Financial Assistance

Question 1

What is rule on financial assistance?

Answer 1

Companies (mainly public) involved in acquisition are prohibited from giving financial assistance for the purposes of acquisition

Question 2

To which transactions are the rules on financial assistance applicable?

Answer 2

1. Acquisition or sale of shares
2. Issue of shares

Question 3

What is the target company in financial assistance?

Answer 3

The companies whose shares are being acquired

Question 4

Which companies are prohibited from giving financial assistance?

Answer 4

1) If public company – prohibition applies to the target company and subsidiary of it whether private or public
2) If private company – prohibition applies to any public company subsidiary of it

Question 5

What does giving financial assistance mean?

Answer 5

• By way of gift
• By way of guarantee, security or indemnity, release or waiver
• By way of loan or similar agreement
• Any other financial assistance where net assets are reduced by the assistance

Question 6

What are the two items that must be satisfied to satisfy financial assistance?

Answer 6

1) Assistance must be given
2) The assistance must be financial in nature

Question 7

Are there any exceptions to the prohibition of financial assistance?

Answer 7

• If the purpose of the assistance is not for the purpose of the acquisition
• Money lending in the ordinary course of business
• Assistance in respect of employee share schemes

Question 8

What are the consequences of carrying out prohibited financial assistance?

Answer 8

• Company pays a fine
• Officers pay fine / imprisonment
• Shares may be void