The situation where a (public or proprietary) company (target company) provides assistance to a person (buyer) to acquire the target company's own shares (or the shares of the target company's holding company). Part 2J.3 of the Corporations Act 2001 (Cth) (CA 2001) prohibits financial assistance unless certain conditions are met (for example, where the company's shareholders approve the financial assistance in accordance with section 260B of the CA 2001).

Financial assistance issues most commonly arise where:

Directors are subject to a range of statutory, contractual and common law duties that are relevant to financial assistance situations. For example, the board of directors may only approve financial assistance if in the board's opinion the financial assistance would be in the best interests of the company and its shareholders as a whole.

When advising the buyer, seller or target company in relation to a share purchase, potential financial assistance issues should be identified as early as possible to ensure they are addressed in a timely manner. Asset purchase transactions will not usually give rise to any financial assistance issues.

For more information, see Toolkit, Financial assistance.