Does the law lay down any rules which must be complied with before a corporate entity can give valid security over its real estate assets, for example 'financial assistance' rules and 'corporate benefit' rules?
As a general rule, any transaction in which a public limited liability company provides another party with an advance payment, a loan or security for the purpose of acquiring shares in that company is null and void.
The one exception to this rule is that a financial institution may, in certain specified circumstances, make advance payments or loans or provide security to its employees or an affiliated company if it is deemed to be in the best interests of that company. However, such transactions will be null and void even in relation to financial institutions if, in the acquisition of its own shares, the company is not able to create the required reserves for these shares without reducing its share capital or the reserves dictated by the company's articles of association.
No such rules apply to limited liability companies. However, a limited liability company must not effect payments or benefits to its shareholders (including “providing security for liabilities of shareholders") which affect its share capital, unless there is a corporate benefit for the company.
