- Published on
Legal Terms – Financial Assistance
The allocation of financial resources by a corporation to facilitate an individual's acquisition of shares in that corporation. This help is illegal if it violates sections 678(1) and 679(1) of the Companies Act 2006. Section 678(1) stipulates that it is unlawful for a public business to provide financial assistance, either directly or indirectly, for the purpose of purchasing shares before, during, or after the purchase. Section 679(1) imposes a comparable limitation concerning a public business that is a subsidiary of a private holding company. Nonetheless, there are exceptions. This include situations where the firm extends credit as part of its regular operations, such as when a bank client borrows funds to purchase shares in the bank, or when the financial support is sanctioned by another stipulation of corporate law, for instance, for an employees' share plan. The primary exemption is found in section 678(2) of the Act, which stipulates that a public corporation may provide such assistance where it is a subsidiary component of a broader objective of the company and is rendered in good faith for the firm's benefit.
The allocation of financial resources by a corporation to facilitate an individual's acquisition of shares in that corporation. This help is illegal if it violates sections 678(1) and 679(1) of the Companies Act 2006. Section 678(1) stipulates that it is unlawful for a public business to provide financial assistance, either directly or indirectly, for the purpose of purchasing shares before, during, or after the purchase. Section 679(1) imposes a comparable limitation concerning a public business that is a subsidiary of a private holding company. Nonetheless, there are exceptions. This include situations where the firm extends credit as part of its regular operations, such as when a bank client borrows funds to purchase shares in the bank, or when the financial support is sanctioned by another stipulation of corporate law, for instance, for an employees' share plan. The primary exemption is found in section 678(2) of the Act, which stipulates that a public corporation may provide such assistance where it is a subsidiary component of a broader objective of the company and is rendered in good faith for the firm's benefit.
0 Comments