Understanding the Importance of Whitewash Procedure in Financial Transactions

The Financial Assistance provisions in Section 260 of the Corporations Act 2001 (Cth), (the Act), are often overlooked and can cause significant delays in settlement for a purchase of shares.

These provisions of the Act prohibit companies from providing financial assistance to an existing or proposed shareholder for acquiring shares in itself or its holding entities, unless:

  1. The assistance does not materially prejudice the interests of the company or its shareholders, or the company’s ability to pay its creditors;
  2. The assistance is approved under Section 260B;
  3. Or the assistance is exempted under the provisions of Section 260C.

What is the Whitewash Procedure?

Providing financial assistance, with approval pursuant to Section 260B of the Act, is known as the Whitewash Procedure.  It requires obtaining shareholder approval through a special resolution at a general meeting.

We outline the procedure that must be followed below:

Process of Completing Whitewash

Step 1: Directors’ Approval

The process begins with the directors of the company considering and approving the proposed transaction.  The directors should consider relevant documents that the company will be entering into in relation to the transaction (including securities and financial documents).  The directors should consider factors such as corporate benefit, solvency and any requirements pursuant to Part 2J.3 of the Act.

Step 2: Notice to ASIC

The following documents must be lodged with ASIC:

  • Notification of Financial Assistance Details (Form 2602);
  • a notice of a shareholders’ meeting (or a notice of a request to pass written resolutions); and
  • the information statement required pursuant to Section 260B(4).
Step 3: Shareholder Communication

The information statement and notice of the meeting must be sent to shareholders.

Step 4: Shareholder Meeting

The shareholder meeting or passing of written resolutions is to then be conducted in accordance with the company’s constitution and the Corporations Act, which includes a minimum notice period requirement (normally 21 days, unless the shareholders otherwise consent to a shorter period).

Step 5: Lodge with ASIC

You must then notify ASIC that the resolutions have passed, and that the company intends on providing financial assistance, by lodging Form 2601. This must be lodged at least 14 days before the financial assistance is provided.

Step 6: Further Lodgement with ASIC

Lodge details of the resolutions with ASIC within 14 days after the shareholder meeting using Form 2205.

Step 7: Providing Evidence to the Bank

Provide the bank with satisfactory evidence that the requirements of Section 260B and other applicable laws have been satisfied, including appropriate calling of the shareholder meeting, provision of the statement required by Section 260B(4) and passing of shareholder resolution and lodgement of required ASIC forms.

Step 8: Funding

Once 14 days have elapsed since lodging the Form 2601 with ASIC and subsequent to the bank being provided with documents pursuant to Step 7, the funding documents can be executed, and the bank can provide funding.



It is important to consider timing of the whitewash procedure especially noting that the giving of the financial assistance cannot occur and therefore settlement cannot occur until after the passing of resolutions and lodging the relevant forms with ASIC. Should you require assistance please do not hesitate to contact us.


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