Outline the exceptions to the general prohibition on financial assistance a company for the purchase of its own shares
ANSWER
The rule in Trevor v Whitworth prohibits the company from purchasing its shares. This rules is now embodied in the Companies Act. However, there are several exceptions to this rule.
• If the lending of money is part of the ordinary business of the company and the same is lent in the ordinary course of such business.
• If the company has in force a scheme to advance loans to trustees to enable them purchase its fully paid up shares for the benefit of all employees including salaried directors.
• If the company has in force a scheme to advance loans to all its bona fide employees other than directors to enable them purchase its fully paid up shares way of beneficial ownership.