Czech Republic
Languages

Financial assistance

Financial assistance is a special type of relationship within a holding company. The basic regulation is provided in Sections 200 and 311–315 of the Business Corporations Act.

In essence, financial assistance concerns situations where a corporate buyer wishes to purchase a property interest in another company (the target company) and the target company provides the corporate buyer with a guarantee, pledge or other security for the benefit of the bank which grants a loan for the transaction.

A less common alternative to financial assistance is that the target company grants the buyer a loan to cover some of the price for the target company’s shares.

The essence of financial assistance is the emerging risk of the erosion of the target company’s equity, which poses a threat to the target company’s creditors or minority shareholders. That is the reason for the strict requirement that financial assistance should be provided at arm’s length, including consideration as interest or fees for the guarantee.

Financial assistance must be provided at arm’s length, particularly in terms of interest on financial assistance or a guarantee for the benefit of the company. Some cases (Section 313 of the Business Corporations Act) require that the written report of the board of directors must be reviewed by a generally recognised independent expert.

What you can expect from us

The RSM CZ expert institute will prepare for you:

  • an expert letter or opinion determining the amount of the consideration for financial assistance and the ensuing opinion as to whether or not the financial assistance is provided at arm’s length;
  • an opinion of a generally recognised independent expert reviewing the board of directors’ written report on financial assistance

Contact persons

Rudolf Hájek

Senior Manager

+420 226 219 000

rudolf.hajek@rsm.cz

References

Get in touch

Company:
Phone or Email: