Financial Assistance and the Companies Act 2006
By Keith Wilson and Alper Deniz
With effect from 1 October 2008, the prohibition on financial assistance by English private companies will be repealed pursuant to the Companies Act 2006. The new provisions do not remove the prohibition on financial assistance by public companies.
What is Financial Assistance?
Under the Companies Act 1985, it is unlawful for an English company or any of its subsidiaries to give financial assistance for the purpose of purchasing shares in itself (section 151 of the Companies Act 1985). The financial assistance is unlawful whether given at the time of the acquisition or following the acquisition.