20.4 Financial Assistance 561that the company must take into account the credit standing of the third party,
interest rate, and security provided to the company.- The general meeting will have a veto right. The transactions must be submitted
by the administrative or management body to the general meeting for prior ap-
proval. The administrative or management body must present a written report
to the general meeting. In addition, there are special requirements as to quorum
and majority.^45 - There is a maximum limit for the aggregate financial assistance. The aggregate
financial assistance granted to third parties shall at no time result in the reduc-
tion of the net assets below the amount of the subscribed capital plus those re-
serves which may not be distributed under the law or the statutes. The acquisi-
tion by the company of its own shares will reduce net assets. - Where a third party by means of financial assistance from a company acquires
that company’s own shares or subscribes for shares issued in the course of an
increase in the subscribed capital, such acquisition or subscription shall be
made at a fair price.
It is thus voluntary for Member States to adopt the exceptions. Neither Germany
nor the UK have adopted them.
In Germany, the MoMiG relaxed the rules on the distribution of assets for both company
forms in 2008. However, the AktG has not yet made use of the new right of Member States
to permit financial assistance on certain conditions.^46 The MoMiG made it easier for group
companies to grant collateral.^47 In England, the Companies Act 2006 provides for “uncon-
ditional exceptions”. However, the exceptions cover permitted forms of distributions (see
below).^48
Eighth, there is a narrow exception that applies to normal transactions concluded
by banks and to employee share ownership.^49
Circular and chain transactions. Circular and chain transactions can cause par-
ticular problems of interpretation.^50 For example, should the same prohibitions ap-
ply to the purchase of shares in the company’s parent company by a third party?
Should the recipient of funds be the party that acquires the shares?
(^45) Article 40 of Directive 77/91/EEC (Second Company Law Directive).
(^46) See, for example, Habersack M, Kapitalerhaltung. Brüssel rüttelt an Finanzverfassung
der Unternehmen, FAZ, 21 November 2007 p 25.
(^47) Wiehe H, Jordans R, Cash Pooling and Granting Up-stream Security in Acquisition Fi-
nance under German Law-Current Situation and Intended Changes, JIBLR 23(7) (2008)
pp 351–353.
(^48) Section 681 of the Companies Act 2006.
(^49) Article 23(2) of Directive 77/91/EEC (Second Company Law Directive).
(^50) For circular transactions under Swedish law, see Skog R, Ömsesidigt aktieägande och
aktiebolagslagens regler om förvärv och innehav av egna aktier. SOU 1998:38, Ägande
och inflytande i svenskt näringsliv. En expertrapport från ägarutredningen. Industride-
partementet. Bilaga 1.