Brady v Brady [1988] BCLC 579 is a UK company law case concerning the prohibition on financial assistance

Financial assistance

Financial assistance in law refers to assistance given by a company for the purchase of its own shares or the shares of its holding companies. In many jurisdictions such assistance is prohibited or restricted by law...

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Facts

T. Brady & Sons Ltd and its subsidiaries went through restructuring after the two brothers that owned the majority of shares fell out and wished to divide the company’s assets. One part of the process involved paying financial assistance to reduce liability on the company buying some of the shares. The fact that it was financial assistance was accepted, but it was argued that this was not the main purpose, relying on what is now the CA 2006 section 678(4) exception.

Judgment

Lord Oliver held the requirement is the assistance is given in good faith and in the best interests of the company, a subjective standard. He rejected that a ‘larger’ purpose of freeing deadlock would suffice for almost anything, and so on this ground the exemption was not fulfilled.