Financial assistance for purchase of own shares, Business Law and Ethics

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Financial Assistance For Purchase Of Own Shares:

i) Financial Assistance For Purchase Of Own Shares

S.56 (1) of the Act renders it unlawful for a company to give there where directly or indirectly and whether by means of a loan plus guarantee plus the provision of security or else or may any financial assistance used for the purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in the company, or whether the company is a subsidiary company then in its holding company. The consequences of a contravention of the section are:

a) The contract for the financial assistance is void and illegal, and cannot be enforced against a party thereto: Standard Bank v Mehotoro Farm (50);

b) The company and every officer of the company who is in default shall be liable to a fine not exceeding twenty thousand shillings;

c) Every director who is a party to the contravention is guilty of a breach of trust and is liable to recoup any losses which the company suffers as a result: Wallersteiner v Moir (51).


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