The situation where a company (target company) provides assistance to a person (buyer) to purchase the target company's own shares (or the shares of the target company's holding company). Sections 76 to 81 of the Companies Act 1993 (CA 1993) prohibit financial assistance unless certain conditions are met (for example, where all the company's shareholders approve the financial assistance in accordance with section 76 of the CA 1993).

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 company should provide the financial assistance, giving the financial assistance is in the best interests of the company and the terms and conditions under which the financial assistance is given are fair and reasonable to the company.

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.