Company law affecting leveraged buy-outs (LBOs) is about to change in the UK. The law prohibits a company or its subsidiary from giving financial assistance to acquire the company's shares or to reduce or discharge a liability incurred for that purpose. The changes, which the Companies Act 2006 brings in, will make LBOs with UK target companies easier to complete. The new law differs from the German and French position on the acquisition of a target company incorporated in either of those jurisdictions.
Whitewashing
In October 2008 the Companies Act's rules on financial assistance will take effect. The law on financial assistance prohibits assistance being given for the proscribed purposes for both public and private companies, subject to a variety of exceptions (some of which are broadly considered unreliable in practice). It grants an exemption for private companies in certain circumstances. This is called the whitewash procedure. Public to private deals...