Week 13 - Financial Assistance

Question 1

what are the two cases of financial assistance

Answer 1

• loan, guarantee, providing security for purpose of security subscription
• loans to directors for any purpose

Question 2

what is excluded from general financial assistance?

Answer 2

lending money in the ordinary course of business

Question 3

what is excluded from FA to directors?

Answer 3

• lending in ordinary business
• amount to defray a person’s expenses for removal at company’s request
• accountable advance to meet legal expenses relating to the company

Question 4

what are the requirements for granting FA?

Answer 4

• special resolution not older than 2yrs, OR
• employee share scheme
• company must comply with MOI too

Question 5

what are the safeguards used for FA?

Answer 5

• company must pass the S&L test, AND

- terms of FA must be fair and reasonable to the company

Question 6

what will happens if there is non-compliance with the FA requirements?

Answer 6

• transaction will be void

- director liability as usual…

Question 7

what is a fundamental transaction?

Answer 7

transaction which will have a significant impact on the company

Question 8

what are some examples of fundamental transactions?

Answer 8

• disposing of a great part of company assets
• entering into scheme of arrangement
• entering into merger

Question 9

what can be used to regulate fundamental transactions?

Answer 9

• procedural requirements
• minority protection
• takeover regulation panel

Question 10

what are some procedural requirements?

Answer 10

quorum, notice requirements for SH meeting

Question 11

what is meant by disposals of a greater part/all of a company’s assets?

Answer 11

more than 50% of:

• gross assets at FV
• business measured as going concern

Question 12

what procedural requirements are needed for disposal?

Answer 12

• quorum, notice requirements for SH meeting

- written summary of disposal terms

Question 13

what is needed for a merger?

Answer 13

• a written agreement

- an S&L test to all companies merging

Question 14

what must included in the written agreement for a merger?

Answer 14

• terms and means of effecting the merger

- proposed MOI of the company to be formed

Question 15

what is a scheme of arrangement?

Answer 15

any arrangement between the company its SH

Question 16

when can scheme of arrangement NOT be used?

Answer 16

• if company is subject to business rescue proceedings

- if company is in process of liquidation

Question 17

what are some examples of schemes of arrangement?

Answer 17

• consolidating shares of diff classes
• reacquiring >5% of a class of shares
• dividing securities into diff classes
• exchanging securities for others

Question 18

what must be done for the SH during the scheme of arrangement?

Answer 18

they must get a report from an independent expert to give them more info about this complex transaction

Question 19

what are the general requirements for the approval of a fundamental transaction?

Answer 19

• notice of the transaction
• special resolution
• possibly court approval

Question 20

what must be included in the notice of a FT?

Answer 20

• prescribed info detailing nature of FT (MOI, expert report)
• alert SH of their right to approach if they dissent and appraisal rights

Question 21

whose voting rights will NOT be considered in the vote in favour of the resolution?

Answer 21

the voting rights of the party acquiring the assets

Question 22

when is court approval required for a FT?

Answer 22

• holders of at least 15% voting rights oppose, OR
• single SH approaches court to allege that the res is unfair or materially tainted by conflict of interest and would make the court set the transaction aside

Question 23

what requirements must the single SH who approaches the court meet?

Answer 23

• good faith

- can sustain the costs of proceedings

Question 24

which transactions are monitored by the Takeover Regulation Panel?

Answer 24

affected transactions involving regulated companies

Question 25

what is a regulated company?

Answer 25

• public
• SOC
• private company who sold more than 10% of its shares in the last 2yrs

Question 26

what is an affected transaction?

Answer 26

a fundamental transaction