• Exceptions From Prohibitions

    • 620. Unconditional exceptions

      (1) Neither section 617 nor section 618 prohibits a transaction to which this section applies.
      (2) Those transactions are-
      (a) a distribution of the company’s assets by way of-
      (i) dividend lawfully made, or
      (ii) distribution in the course of a company’s winding up,
      (b) an allotment of bonus shares,
      (c) a reduction of capital under Chapter 10 of Part 16,
      (d) a redemption of shares under Chapter 3 or a purchase of shares under Chapter 4 of this Part,
      (e) anything done in pursuance of an order of the Court under Part 25 (order sanctioning compromise or arrangement with members or creditors),
      (f) anything done under an arrangement made in pursuance of a duly appointed liquidator accepting shares as consideration for sale of company’s property,
      (g) anything done under an arrangement made between a company and its creditors that is binding on the creditors.

    • 621. Conditional exceptions

      (1) Neither section 617 nor section 618 prohibits a transaction to which this section applies-
      (a) if the company giving the financial assistance is a private company, or
      (b) if the company giving the financial assistance is a public company and-
      (i) the company has net assets that are not reduced by the giving of the assistance, or
      (ii) to the extent that those assets are so reduced, the assistance is provided out of distributable profits.
      (2) The transactions to which this section applies are-
      (a) where the lending of money is part of the ordinary business of the company, the lending of money in the ordinary course of the company’s business,
      (b) the provision by the company, in good faith in the interests of the company or its holding company, of financial assistance for the purposes of an employees’ share scheme,
      (c) the provision of financial assistance by the company for the purposes of or in connection with anything done by the company (or another company in the same group) for the purpose of enabling or facilitating transactions in shares in the first-mentioned company or its holding company between, and involving the acquisition of beneficial ownership of those shares by-
      (i) bona fide employees or former employees of that company (or another company in the same group), or
      (ii) spouses, widows, widowers, or minor children or step-children of any such employees or former employees;
      (d) the making by the company of loans to persons (other than directors) employed in good faith by the company with a view to enabling those persons to acquire fully paid shares in the company or its holding company to be held by them by way of beneficial ownership.
      (3) The references in this section to “net assets” are to the amount by which the aggregate of the company’s assets exceeds the aggregate of its liabilities.
      (4) For this purpose-
      (a) the amount of both assets and liabilities shall be taken to be as stated in the company’s accounting records immediately before the financial assistance is given, and
      (b) “liabilities” includes any amount retained as reasonably necessary for the purpose of providing for a liability the nature of which is clearly defined and that is either likely to be incurred or certain to be incurred but uncertain as to amount or as to the date on which it will arise.
      (5) For the purposes of subsection (2)(c) a company is in the same group as another company if it is a holding company or subsidiary of that company or a subsidiary of a holding company of that company.

    • 622. Definitions for this Chapter

      (1) In this Chapter-
      “distributable profits”, in relation to the giving of any financial assistance-
      (a) means those profits out of which the company could lawfully make a distribution equal in value to that assistance, and
      (b) includes, in a case where the financial assistance consists of or includes, or is treated as arising in consequence of, the sale, transfer or other disposition of a non-cash asset, any profit that, if the company were to make a distribution of that character would be available for that purpose (see section 772 (distributions in kind: treatment of unrealised profits)), and
      “distribution” has the same meaning as in Part 22 (distributions) (see section 760 (meaning of “distribution”)).
      (2) In this Chapter-
      (a) a reference to a person incurring a liability includes his changing his financial position by making an agreement or arrangement (whether enforceable or unenforceable, and whether made on his own account or with any other person) or by any other means, and
      (b) a reference to a company giving financial assistance for the purposes of reducing or discharging a liability incurred by a person for the purpose of the acquisition of shares includes its giving such assistance for the purpose of wholly or partly restoring his financial position to what it was before the acquisition took place.