Exceptions of merger accounting, Business Law and Ethics

Exceptions of Merger accounting:

S.56 (1) permits a company to give financial assistance for a purchase of, or subscription for, its shares in the following circumstances:

a)      Where the lending of money is part of the ordinary business of the company and the money is lent by the company in the ordinary course of its business. In Steen v Law (52) the Privy Council explained that this provision does not validate a loan given for the express purpose of enabling the loanee to purchase the lending company's shares. This is so because no company can be constituted for the sole purpose of lending money to persons who would be buying its shares so that a loan it gives for any other purpose would be regarded as an "unusual" or "extraordinary", loan. To be valid, therefore, the loan must have been given for one of the purpose for which the company ordinarily or usually lends money but was diverted (wholly or partly) to a purchase of the lending company's shares.

b)      Where the loan is to trustees to enable them to purchase fully paid shares in the company to be held under an employees' share scheme.

c)       Where the loan is to employees' (other than directors) to enable them to purchase or subscribe for fully-paid shares in the company or its holding company to be held by themselves by way of beneficial ownership. If a company gives a loan to an employee to purchase shares in the company the employee must have the shares registered in his own name and not the name of a spouse or child. This is intended to induce the employee to be more motivated and productive by ensuring that he personally and directly reaps the fruits of his increased productivity.

Posted Date: 1/12/2013 4:23:53 AM | Location : United States







Related Discussions:- Exceptions of merger accounting, Assignment Help, Ask Question on Exceptions of merger accounting, Get Answer, Expert's Help, Exceptions of merger accounting Discussions

Write discussion on Exceptions of merger accounting
Your posts are moderated
Related Questions
The concept of separate legal personality is fundamental to company law. With close reference to leading cases, explain this concept and its relationship to the doctrine of limit

Warranties - Terms of a Contract However there is no precise legal definition of such "warranty" that in legal nomenclature, where is susceptible for a variety of interpretati

Question 1: What are the procedures that an employer should follow before he will dismiss a worker for misconduct? Question 2: Section 39 of the Labour Act provides fo

Lifting the veil under Case Law:                  Numerous English cases have been variously classified by English writers as instances of "lifting the veil of  incorporation"

WINDING UP ON: "THE JUST AND EQUITABLE GROUND": Unlike the other five grounds this one is widely interpreted and it is no objection that the petition is based on facts u

Q. What is phoenix-like activities? Phoenix activity and phoenix-like activities Many activities are referred to as "phoenixing" which do display phoenix-like characteristic

INTERNATIONAL TRADE LAWS The laws controlling and regulating International trade have become one of the fastest growing areas of international law. International trade laws conce

Hi Dear, Could you please help me in online exam in ( Bus Law for Accounts).!! the exam will be open within one hour and half. Thank you

Country Strategy in harmonising national It is proposed that the OMC should enhance the role of such Country Strategy in harmonising national and EC aid programmes. The OMC wi

Civil Case - African Customary Law Moreover customary law is applicable only in civil cases.  Thus the District Magistrate's Court's Act 1967, S.2 restricts the civil case