With apologies for the lack of post last week (for reasons that I won’t bore you with), this week’s post looks at one area where financiers seem to have had a continued focus on recently. In particular, with the continuing economic uncertainty, we are seeing a number of clients being asked to comply with the financial assistance rules.
Financial assistance can be a relatively complex area of the Corporations Act, however essentially it centres around situations where a company provides some form of help to shareholders (or associates of shareholders) in relation to the provision of finance.
What amounts to ‘financial assistance’ can be an issue of some debate in many transactions, however ultimately the 'golden rule' invariably applies. That is a financier will normally have the last word as to whether they believe there is a financial assistance issue.
There is a specific process set out under the Corporations Act that allows a transaction to proceed despite the existence of financial assistance, however there are a number of strict timelines that must be satisfied in order to comply with these provisions. Therefore, unless all parties are aware of the possibility that financial assistance approval may be required, significant difficulties can arise.
Until next week.
