Financial assistance : time for change?

Abstract

In line with the goals of the Capital Maintenance doctrine, financial assistance law aims at protecting shareholders and creditors by imposing restrictions on the company, disallowing such companies to provide financial assistance to third parties with the aim of such third parties acquiring shares in the same company or in its parent. This study aims at tackling the question of the validity and effectiveness of such prohibition. Being heavily influenced by UK law, the study finds it basis in the analysis of UK law however; it is then given a European and Maltese dimension. The first chapter consists of a brief outline of the history of the ban from its introduction in the UK in the 1920's up to the latest amended Second Company Law Directive. The Second Chapter consists of a detailed analysis of the legal provisions. Chapter two further includes a comparative study of the ban in the UK, in Malta and on a European level. This includes a textual comparison with case law. The study then moves on to a detailed discussion regarding the rationale of the ban. The UK and European view are discussed in detail and Chapter 3 also includes general observations in terms of modem company law. The final chapter concludes the study, by analysing the current situation in Malta. Chapter 4 included interviews with various practitioners and Maltese lawyers, who give their respective views and recommendations regarding current and prospective financial assistance law in Malta.