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. Merger

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

    A company which is the subject of a merger or acquisition attempt. ...
  5. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
  6. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
Related Articles
  1. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  2. What Are Corporate Actions?
    Bonds & Fixed Income

    What Are Corporate Actions?

  3. The Basics Of Mergers And Acquisitions
    Options & Futures

    The Basics Of Mergers And Acquisitions

  4. How Mergers and Acquisitions Can Affect ...
    Investing Basics

    How Mergers and Acquisitions Can Affect ...

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center