Whitewash Resolution


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.

BREAKING DOWN '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.

  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. Target Firm

    A company which is the subject of a merger or acquisition attempt. ...
  5. Merger

    The combining of two or more companies, generally by offering ...
  6. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. ...
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

    How UPS Plans to Benefit from Its Coyote Acquisition

    Understand the business models of UPS and Coyote Logistics. Learn about the top four ways in which UPS will benefit from the acquisition of Coyote Logistics.
  5. Stock Analysis

    This Is What Carl Icahn's Portfolio Looks Like

    Read about some of the holdings in Carl Icahn's portfolio. Learn about his activist campaigns against companies that he believes are performing poorly.
  6. Investing News

    Office Depot and Staples Merger: What You Need to Know

    A major office-supply company merger is now in the works between Office Depot and Staples. First attempted 18 years ago, will this time be the charm?
  7. Forex Fundamentals

    How Foreign Exchange Affects Mergers and Acquisitions Deals

    Learn how foreign exchange rates can impact the flows of international merger and acquisition (M&A) transactions, and understand how deals can impact exchange rates.
  8. Stock Analysis

    4 Trends Driving M&A in the Healthcare Industry in 2015

    Learn why there has been a lot of mergers and acquisition activity among health insurers and drug companies in the health care industry in 2015.
  9. Investing News

    Anheuser (BUD) and Miller: A Beer Merger Brews

    Anheuser-Busch is attempting to acquire SABMiller. Here's a look at what a merger means for investors.
  10. Economics

    Explaining Synergy

    Synergy is the concept of combining two or more entities to create something greater than either entity on its own.
  1. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  2. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>
  3. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  4. Are companies with high Book Value Of Equity Per Share (BVPS) takeover targets?

    Companies with high book value of equity per share (BVPS) can be good takeover targets if those companies are public and ... Read Full Answer >>
  5. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  6. If a company offers a buyback of its shares, how do I decide whether to accept the ...

    Tender offers for share buybacks are often made at a premium to the current market price; it may be in an investor’s best ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!