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Q：
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What is financial assistance?
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A：
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Financial assistance is any form of monetary support provided by a company to an individual or another company to help them acquire the company’s own shares or the shares of its parent company.
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Q：
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Is financial assistance generally allowed in Malaysia?
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A：
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Pursuant to Section 123 of the Companies Act 2016 (“the Act”), a company is prohibited from providing financial assistance for the purpose of acquisition of shares in itself or its holding company except under specific permitted circumstances.
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Q：
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What are the permitted circumstances where financial assistance is allowed?
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A：
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Permitted circumstances include (but are not limited to):
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Assistance given in the ordinary course of business (e.g. lending by a licensed financial institution).
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Assistance made pursuant to an employee share scheme.
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Assistance approved through the whitewash procedure for non-listed companies with directors’ solvency statement and shareholder approval.
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Q：
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What is the “whitewash procedure”?
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A：
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The whitewash procedure is a statutory process that allows a private company to provide financial assistance if:
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All directors make a solvency statement, confirming the company can meet its debts.
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The shareholders approve the transaction by passing a special resolution.
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The assistance given does not exceed 10% of the issued shares and reserves of the company.
This procedure helps ensure that the company remains financially sound despite giving assistance.
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Q：
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What must directors declare before giving the financial assistance?
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A：
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The company can still pay its debts immediately after the assistance.
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The company can pay debts for at least 12 months after the assistance.
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The terms and condition of the financial assistance are fair and reasonable to the company.
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FAQ
