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

80: Financial assistance not exceeding 5% of shareholders' funds

You could also call this:

“Company can give small financial help for share purchases if conditions met”

A company can give financial help to someone buying its shares if the amount of help is not too big. The total amount of help, including any other help that hasn’t been paid back yet, must not be more than 5% of the money the company got from selling shares and its savings. The company must also get something fair in return for this help.

When a company gives this kind of help, it needs to tell people about it quickly. Within 10 working days, the company must send a notice with details about the help. If the company’s shares are sold on a stock market, they tell the people who run that market. If not, they tell all the shareholders directly.

The notice must say what kind of shares and how many were involved, how much was paid for them, who got the help, who really owns the shares, and what kind of help was given and how much it was worth.

If the company’s shares are on a stock market, the market must let everyone know about this notice.

If a company doesn’t send this notice when it should, it’s breaking the law. The company can get in trouble, and so can all the people in charge of running the company.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320434.

Topics:
Business > Industry rules
Business > Fair trading
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Part 6 Shares and debentures
Assistance by a company in the purchase of its own shares

80Financial assistance not exceeding 5% of shareholders' funds

  1. Financial assistance may be given under section 76(1)(c), only if—

  2. the amount of the financial assistance, together with any other financial assistance given by the company pursuant to this paragraph, repayment of which remains outstanding, would not exceed 5% of the aggregate of amounts received by the company in respect of the issue of shares and reserves as disclosed in the relevant statements or records, and the company receives fair value in connection with the assistance; and
    1. within 10 working days of providing the financial assistance, the company sends a notice containing the particulars set out in subsection (1B) to—
      1. the licensed market operator of each licensed market on which the shares of the company are quoted; or
        1. each shareholder of the company, if the shares of the company are not quoted on any licensed market.

        2. In subsection (1), relevant statements or records means—

        3. financial statements of the company prepared for the most recently completed accounting period in accordance with generally accepted accounting practice; or
          1. if those financial statements have not been prepared, the accounting records of the company.

            1. The particulars referred to in subsection (1)(b) are as follows:

            2. the class and number of shares in respect of which the financial assistance has been provided:
              1. the consideration paid or payable for the shares in respect of which the financial assistance has been provided:
                1. the identity of the person receiving the financial assistance and, if that person is not the beneficial owner of the shares in respect of which the financial assistance has been provided, the identity of that beneficial owner:
                  1. the nature and, if quantifiable, the amount of the financial assistance.

                    1. The licensed market operator must ensure that the notice under subsection (1)(b)(i) is notified in accordance with its arrangements for notifying disclosures made to it (see section 314 of the Financial Markets Conduct Act 2013).

                    2. If a company fails to comply with subsection (1)(b),—

                    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).

                        Notes
                        • Section 80(1)(a): amended, on , by section 26(1) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).
                        • Section 80(1)(b): replaced, on , by section 17(1) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).
                        • Section 80(1A): inserted, on , by section 26(2) of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).
                        • Section 80(1B): inserted, on , by section 17(2) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).
                        • Section 80(1C): inserted, on , by section 17(2) of the Regulatory Systems (Commercial Matters) Amendment Act 2017 (2017 No 12).