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ARTICLE · 18 APRIL 2018

How to avoid penalties for M&A financial assistance

McCullough Robertson
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Financial assistance provisions often catch many acts that may not immediately appear as obvious financial assistance - beware.

AustraliaCorporate/Commercial Law
Stewart Ebbott
Stewart Ebbott
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One issue we have seen which frequently goes unnoticed until it becomes a problem is the provision of financial assistance as found within section 260A of the Corporations Act 2001 (Cth).

Created to prevent a company from financing the purchase of shares in itself, these provisions often catch many acts that may not immediately appear as obvious financial assistance. For example, cases have shown that the following can all be considered financial assistance:

  • the company (or a subsidiary of) providing a security or guarantee for an acquirers finance
  • the company forgiving any debts owed by an acquirer to the company or a subsidiary
  • the company releasing the acquirer from an obligation

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