Proposals are being debated by the Czech Parliament to allow companies to provide financial assistance for the acquisition of their own shares in certain circumstances.
Although the final version is likely to change, the key elements of the current proposals are:
- a joint stock or limited liability company would be able to make payments (including advances, loans and credit) or provide security for the acquisition of its shares as long as, in general terms, it is done in normal market conditions and does not directly result in the company's insolvency
- any financial assistance provided must not decrease the company's equity below the sum of its registered capital and undistributable funds
- financial assistance would not be allowed for loss-making companies or companies bringing forward losses from past operations
- the executive directors must prepare a report explaining the reasons for providing financial assistance (including any resulting benefits and risks for the company), the basis on which it is to be provided and why it is beneficial for the company
- the financial assistance must be approved by the company in general meeting
- the financial capability of the recipient of the financial assistance must be investigated by the board of a joint-stock company
If the proposals are approved, they will increase the flexibility of acquisition structures and improve both the speed and cost of acquisition.
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The original publication date for this article was 20/03/2009.