What is the test for obtaining financial assistance for the purchase of a private company's shares?
Alberta, Canada
The following excerpt is from Mt. View Charolais Ranch Ltd. v. Haverland, 1973 ALTASCAD 64 (CanLII):
In view of the omission from section 14 (1) of The Companies Act of reference to “private companies” the first question that arises is whether the granting of financial assistance for the purchase of its shares is ultra vires the company under the principle set out in Travor v. Whitworth (1887) 12 A.C. 409 or any extension thereof.
The answer to the first question does not resolve the issue as to the validity of the chattel mortgage, for even if the principle enunciated in Trevor v. Whitworth does not apply a second question must be resolved and that is whether the granting of the chattel mortgage for such purpose is within the objects of the appellant Company or the powers reasonably incidental to its objects.
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