The Companies Acts have strict rules regarding the maintenance of capital within a company and one of the main ways in which a company can breach these rules is by giving unlawful financial assistance for the purchase of its own shares or shares in its holding company. However it may at times be advantageous for a company to give this assistance and with this in mind a procedure known as a “whitewash” can be utilised to make sure the financial assistance given comes under the terms laid out in the Companies Acts.

Financial assistance in the context of Section 60 might include loans, guarantees and security for loans for the purchase of shares in itself or its holding company. This is prohibited under the companies act unless it comes under the terms of one of the statutory exemptions or it has been given subject to a Section 60 whitewash procedure.

The board should hold a meeting to swear a statutory declaration stating the type of financial assistance to be give and to whom along with the purpose for which the company intends the assistance to be used for. The declaration must state the company will be able to pay its debts as they fall due if the financial assistance is given. The members must pass a special resolution approving the financial assistance and it must be filed at the CRO along with the relevant statutory forms.

There are significant penalties for breaching this section of the Companies Acts, from voiding of the transaction, fines and imprisonment.