Plain language law

New Zealand law explained for everyone

Companies Act 1993

Shares and debentures - Assistance by a company in the purchase of its own shares

78: Special financial assistance

You could also call this:

“Rules for companies providing financial assistance to purchase their own shares”

When a company wants to give special financial help to buy its own shares, it needs to follow these rules:

The board of directors must agree that this help is good for the shareholders who aren’t getting the help. They also need to make sure the terms are fair for those not getting help.

The directors have to write down why they think this is a good idea. The directors who agree must sign a paper saying they believe it’s fair and beneficial.

If the board changes its mind and doesn’t think it’s fair or helpful anymore, they can’t give the financial help.

Before giving the help, the company must send a special document to all shareholders. This document explains everything about the financial help.

The company can give the help no sooner than 10 working days after sending the document, and no later than 12 months after.

If a shareholder or the company thinks the help isn’t good for the company or isn’t fair, they can ask a court to stop it.

Directors who don’t follow these rules can get in trouble. The company can also get in trouble if it doesn’t send the right documents to shareholders.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320432.

Topics:
Business > Industry rules
Business > Fair trading
Money and consumer rights > Banking and loans
Previous

77: Company must satisfy solvency test, or

“A company must ensure it can pay its bills before helping someone buy its shares”

Next

79: Disclosure document, or

“A report explaining how a company is helping someone buy its shares”

Part 6 Shares and debentures
Assistance by a company in the purchase of its own shares

78Special financial assistance

  1. Financial assistance may be given under section 76(1)(b) only if the board has previously resolved—

  2. that giving the assistance in question is of benefit to those shareholders not receiving the assistance; and
    1. that the terms and conditions under which the assistance is given are fair and reasonable to those shareholders not receiving the assistance.

      1. The resolution must set out in full the reasons for the directors' conclusions.

      2. The directors who vote in favour of a resolution required by subsection (1) must sign a certificate as to the matters set out in that subsection.

      3. A company must not give financial assistance under section 76(1)(b) if, after the passing of a resolution under subsection (1) and before the financial assistance is given, the board ceases to be satisfied that—

      4. the giving of the financial assistance is of benefit to those shareholders not receiving the assistance; or
        1. the terms and conditions under which the assistance is given are fair and reasonable to those shareholders not receiving it.

          1. Before the financial assistance is given under section 76(1)(b), the company must send to each shareholder a disclosure document that complies with section 79.

          2. The assistance may be given not less than 10 working days and not more than 12 months after the disclosure document has been sent to each shareholder.

          3. A shareholder or the company may apply to the court for an order restraining the proposed assistance being given on the ground that—

          4. it is not in the best interests of the company and of benefit to those shareholders not receiving the assistance; or
            1. the terms and conditions under which the assistance is to be given are not fair and reasonable to the company and to those shareholders not receiving the assistance.

              1. Every director who fails to comply with subsection (3) commits an offence and is liable on conviction to the penalty set out in section 373(1).

              2. If a company fails to comply with subsection (5),—

              3. the company commits an offence and is liable on conviction to the penalty set out in section 373(1); and
                1. every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(1).