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ACCA Applied Skills · Corporate and Business Law (Global) · Capital maintenance and dividend law

Nadia, a director of Hale Ltd, causes the company to pay the legal fees of a purchaser acquiring Hale Ltd's shares, in breach of a financial assistance prohibition. What is a likely consequence?

The directors are likely to be in breach of duty and exposed to liability or sanctions, and the company may seek to recover its loss. The share purchase is not automatically cancelled, and liability does not rest only on the purchaser.

  1. AThe directors may be in breach of duty and exposed to liability and possible sanctions, and the company may seek to recover its lossCorrect
  2. BThe share purchase is automatically cancelled and the shares return to the seller
  3. COnly the purchaser is liable, because the company acted passively

Explanation

Directors who authorise unlawful assistance breach their duties and may face liability, penalties and recovery claims by the company. The sale is not automatically unwound, and the company's officers are not shielded because the purchaser benefited.

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