Whitewash Resolution
Categories: Regulations, International
The whitewash resolution is a European Legal System term that goes hand-in-hand with the Companies Act Of 1985. The whitewash resolution was made to protect acquired companies from getting financially drained by their acquire-ees.
It’s not uncommon that one business would acquire another just for the purposes of using it as a piggy bank and a place to transfer unattractive liabilities, leaving it in bad shape down the road.
The whitewash resolution means that the acquiring (or buying) company must promise via a resolution that the target (or acquired) company will still be solvent for at least a year. An auditor then makes sure that this is financially possible before the target company can pass the buck to the acquiring company. Shareholders of the target company must also approve of any transactions going in that direction.