Financial Assistance–What is it and when does it apply?
Type
E-journal
Date
18 Apr 2016
Jurisdiction
United Arab Emirates
Taxonomy
Companies & Corporate Bodies, Lending & Security, Financial Services & Activities
Copyright
LexisNexis
Relevant company
Hadef & Partners
Legal reference
Federal Law No. 2/2015
Analysis
Article 222 of the new Commercial Companies Law (Federal Law No. 2/2015) (New CCL) makes it unlawful for a joint stock company (or any subsidiary company of that company) whose shares are being acquired to give financial assistance for the purpose of that acquisition.
The principle also extends to the acquisition of any bonds, sukuk or other financial instruments capable of being issued by a joint stock company (JSC).
As in other legal jurisdictions, the prohibition on financial assistance is concerned primarily with the maintenance of a company’s capital base. The principle is that a company may not return assets to its shareholders except in certain circumstances, such as a dividend payment or a distribution in a (solvent) liquidation of a company.