Financial Assistance Regime in the UK Repealed for Private Companies

On 1 October 2008, the Companies Act prohibition under English law on the giving of financial assistance by a private company for the acquisition of its shares will be repealed.

Section 151 of the Companies Act 1985 prohibits a company from giving financial assistance for the acquisition of its shares without going through what is known as the “whitewash procedure”, a costly and timely procedure involving a sworn declaration of solvency (backed up by an auditor’s report) by the directors and a members’ special resolution (requiring the consent of the holders of at least 75% of the voting share capital of the company) approving the giving of financial assistance.

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