An end to the Whitewash? The Company Law Reform White Paper March 2005.

United Kingdom

Depending upon legislative priorities after May 5, the Company Law Reform Bill could be enacted by the Autumn. One of the most striking proposals for corporate and banking lawyers is the reform of the financial assistance provisions in sections 151 to 158 of the Companies Act 1985. The proposals are contained in draft clauses set out in chapter 7 of the White Paper and their effect can be summarised as follows:

  • A private company will be able to give financial assistance for the purpose of the acquisition of its shares.
  • A private company will be able to give financial assistance for the purchase of shares in its parent company provided the parent is also a private company.
  • A private company will no longer have to go through the whitewash procedure to enable it to give financial assistance.
  • A public company may not give financial assistance for the purchase of its own shares.

A public company (and its subsidiaries) may not give financial assistance for the purchase of shares in a parent company, whether the parent is a public or a private company.

The prohibitions remain subject to section 153, which summarises transactions that are not prohibited.

For more information please contact John Naccarato on +44(0) 207 367 3414 or at john.naccarato@cmck.com or John Evans on +44(0) 207 367 3361 or at john.evans@cmck.com