12
financial assistance were much more complicated and strict than those
recommended by the Jenkins Committee. The prohibition of provision of
financial assistance by a public company was necessitated by Article 23
of the Second EEC Directive on Company Law. The new legislation did,
however, define what constituted provision of financial assistance
more clearly and in a more realistic way.
1.19
The Standing Committee's views on the effect of, and special
points about, the new provisions in the 1981 Act are set out in detail
in paragraphs 2.10 and 2.11 of the Report for 1985, as follows:
"2.10
With regard to the new provisions in the 1981 Act, it seems
to the Committee that, very briefly, their net effect is:
(1)
they introduce clearer and more sensible criteria
(2)
as to what constitutes the provision by a company
of financial assistance for the purchase of its own
shares;
subject to certain exemptions of a technical nature,
they prohibit a public company and its subsidiaries
from giving anyone financial assistance, direct or
indirect, for the purpose of acquiring shares in that
company; but
(3) they do, however, allow a private company to give
financial assistance for acquisition of shares in
the company or its holding company (unless the holding
company is itself a public company or there is an intermediary holding company which is a public company)
provided:
(a) it has net assets which are not reduced by the
giving of the assistance, or
/13..