Financial Assistance Flashcards
What is financial assistance?
Companies (mainly public) involved in acquisition are prohibited from giving financial assistance for the purposes of acquisition
To which transactions are the rules on financial assistance applicable?
- Acquisition or sale of shares
- Issue of shares
What is the target company in financial assistance?
The companies whose shares are being acquired
Which companies are prohibited from giving financial assistance?
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
What does giving financial assistance mean?
- 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
What are the two items that must be satisfied to satisfy financial assistance?
1) Assistance must be given
2) The assistance must be financial in nature
Are there any exceptions to the prohibition of financial assistance?
- 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
What are the consequences of carrying out prohibited financial assistance?
- Company pays a fine
- Officers pay fine / imprisonment
- Shares may be void
