Companies Act, 1963

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Giving of financial assistance by a company for the purchase of its shares.

60.—(1) Subject to subsections (2), (12) and (13), it shall not be lawful for a company to give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the company, or, where the company is a subsidiary company, in its holding company.

(2) Subsection (1) shall not apply to the giving of financial assistance by a company if—

(a) such financial assistance is given under the authority of a special resolution of the company passed not more than 12 months previously; and

(b) the company has forwarded with each notice of the meeting at which the special resolution is to be considered a copy of a statutory declaration which complies with subsections (3) and (4) and also delivers, on the same day as such notices are issued, a copy of the declaration to the registrar of companies for registration.

(3) The statutory declaration shall be made at a meeting of the directors held not more than 24 days before the said meeting and shall be made by the directors or, in the case of a company having more than two directors, by a majority of the directors.

(4) The statutory declaration shall state—

(a) the form which such assistance is to take;

(b) the persons to whom such assistance is to be given;

(c) the purpose for which the company intends those persons to use such assistance;

(d) that the declarants have made a full inquiry into the affairs of the company and that, having done so, they have formed the opinion that the company, having carried out the transaction whereby such assistance is to be given, will be able to pay its debts in full as they become due.

(5) Any director of a company making the statutory declaration without having reasonable grounds for the opinion that the company having carried out the transaction whereby such assistance is to be given will be able to pay its debts in full as they become due, shall be liable to imprisonment for a period not exceeding 6 months or to a fine not exceeding £100 or to both; and if the company is wound up within the period of 12 months after the making of the statutory declaration and its debts are not paid or provided for in full within the period of 12 months after the commencement of the winding up, it shall be presumed until the contrary is shown that the director did not have reasonable grounds for his opinion.

(6) Notwithstanding anything in the articles of association of the company, every member of the company shall have the right to receive notice of and to attend the meeting at which the special resolution is to be proposed.

(7) Unless all of the members of the company entitled to vote at general meetings of the company vote in favour of the special resolution, the transaction whereby such assistance is to be given shall not be carried out before the expiry of 30 days after such special resolution has been passed or, if an application under subsection (8) is made, until such application has been disposed of by the court.

(8) If application is made to the court in accordance with this section for the cancellation of the special resolution, such special resolution shall not have effect except to the extent to which it is confirmed by the court.

(9) Subject to subsection (10), an application under subsection (8) may be made by the holders of not less in the aggregate than 10 per cent. in nominal value of the company's issued share capital or any class thereof.

(10) An application shall not be made under subsection (8) by any person who has consented to or voted in favour of the special resolution.

(11) An application under subsection (8) must be made within 28 days after the date on which the special resolution was passed and may be made on behalf of the persons entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

(12) Nothing in this section shall be taken to prohibit the payment of a dividend properly declared by a company or the discharge of a liability lawfully incurred by it.

(13) Nothing in this section shall be taken to prohibit—

(a) where the lending of money is part of the ordinary business of the company, the lending of money by the company in the ordinary course of its business;

(b) the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase of, or subscription for, fully paid shares in the company or its holding company, being a purchase or subscription of or for shares to be held by or for the benefit of employees or former employees of the company or of any subsidiary of the company including any person who is or was a director holding a salaried employment or office in the company or any subsidiary of the company;

(c) the making by a company of loans to persons, other than directors, bona fide in the employment of the company or any subsidiary of the company with a view to enabling those persons to purchase or subscribe for fully paid shares in the company or its holding company to be held by themselves as beneficial owners thereof.

(14) Any transaction in breach of this section shall be voidable at the instance of the company against any person (whether a party to the transaction or not) who had notice of the facts which constitute such breach.

(15) If a company acts in contravention of this section every officer of the company who is in default shall be liable:

(a) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine not exceeding £500 or to both, or

(b) on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding £100 or to both.

(16) Nothing in this section shall prejudice the provisions of section 72.

Construction of references to offering Shares or Debentures to the Public.