Financial Assistance - the Case for Re-Examining Section 76 of the Companies Act

• Main Author: WAN, Wai Yee
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2007
• Subjects: Banking and Finance Law; Business Organizations Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/792; https://ink.library.smu.edu.sg/context/sol_research/article/1791/viewcontent/2007_19_SAcLJ_80_Wan.pdf
• Institution: Singapore Management University

Section 76 of the Companies Act prohibits the giving by a company of financial assistance for the purpose of or in connection with the acquisition of its own shares. This penal provision is highly controversial in view of its breadth and uncertainty in its application. In the recent criminal prosecution of PP v Lew Syn Pau and in the recent civil litigation of Wu Yang Construction Group v Zhejiang Jinyi Group Co, Ltd, the Singapore High Court had to determine the scope of the prohibition under s 76 of the Companies Act. This case comment examines the two Singapore decisions and suggests that there appears to be a divergence in the views on the underlying rationale behind the prohibition. The article also seeks to evaluate the possible impact of these decisions on certain issues that often arise in mergers and acquisitions transactions in Singapore.