Whitewash Resolution

AAA

DEFINITION of 'Whitewash Resolution'

A European term used in conjunction with the Companies Act Of 1985, which refers to a resolution that must be passed before a target company in a buyout situation can give financial assistance, forgive debts or provide other financial dealings to the buyer of the acquiring entity. A whitewash resolution occurs when directors of the target company must swear that the company will be able to pay its debts for a period of at least 12 months. Oftentimes, an auditor must then confirm the company's solvency. Only after this takes place may a target company give the purchasing company any type of financial assistance.

INVESTOPEDIA EXPLAINS 'Whitewash Resolution'

Some companies have used acquisitions as a means of obtaining financing and draining the assets of the target companies only to leave those companies debt ridden and unable to pay their bills. The Companies Act Of 1985 and the whitewash resolution is meant to ensure that the target company will remain solvent and will not seek to discharge its liabilities once the acquisition is complete.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Target Firm

    A company which is the subject of a merger or acquisition attempt. ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  3. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  4. Stock Analysis

    Will Kraft-Heinz Be a Winner?

    Kraft and Heinz are now one. This should present a profitable long-term investment opportunity, but isn't likely to be smooth sailing at first.
  5. Investing

    WhatsApp: The Best Facebook Purchase Ever?

    WhatsApp is Facebook's largest acquisition to date. What makes it worth the major price tag?
  6. Fundamental Analysis

    Private vs Public Equity: What's Best?

    What is the better way for a company to attract investors; by making its stock available for sale to whoever wants some, or by petitioning rich people?
  7. Investing News

    Sun Pharma And Ranbaxy: An Ideal Pharma Marriage?

    The Sun Pharma merger with Ranbaxy will blend the complementary market strengths and areas of expertise of each company and create a powerful pharma force.
  8. Investing

    Facebook's Most Important Acquisitions

    Strategic acquisitions have been key to Facebook's growth and success, and the company has acquired more than 50 companies or properties since it's formation in 2004.
  9. Investing Basics

    Poison Pill

    A poison pill is a corporate maneuver put in place to try and prevent a hostile takeover. The target corporation uses this strategy to make its stock less attractive to the acquirer. This is ...
  10. Stock Analysis

    Breaking Down the Halliburton Baker Hughes Deal

    Halliburton is using a downturn to get bigger and stronger in the long term, and the company is getting Baker Hughes at a reasonable price as a result.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center