Whitewash resolutions might sound like something from a bygone era of corporate law, but in 2025, they’re still a powerful mechanism for Australian companies—especially those looking to balance shareholder interests, capital returns, and regulatory requirements. Whether you’re an investor, company director, or legal advisor, understanding the nuances of whitewash resolutions is critical as financial rules continue to evolve.
What is a Whitewash Resolution and Why Does It Matter?
In Australia, a whitewash resolution is a special shareholder approval that allows a company to engage in transactions that might otherwise breach laws prohibiting financial assistance for share acquisitions. The term originally emerged from the UK, but it has deep roots in Australian corporate practice, particularly for private companies.
- Typical scenario: A company wants to provide financial assistance—such as a loan or guarantee—to help someone buy its own shares. Without shareholder approval, this could breach the Corporations Act 2001 (Cth), specifically section 260A.
- Why “whitewash”? The process effectively “cleanses” the transaction, ensuring transparency and shareholder consent, and protecting directors from liability.
For 2025, the Australian Securities and Investments Commission (ASIC) continues to scrutinise such transactions to ensure they’re in the best interests of all shareholders. With private capital deals and management buyouts on the rise, whitewash resolutions are more relevant than ever.
The 2025 Legal Landscape: Policy Updates and Compliance Risks
Recent policy updates have clarified and, in some cases, tightened the conditions around financial assistance. While the broad framework under the Corporations Act remains, ASIC’s 2025 guidance has underscored several key points:
- Full Disclosure: Companies must provide all material information about the proposed assistance to shareholders before the vote. This includes the nature of the assistance, its impact on company solvency, and potential conflicts of interest.
- Special Resolution Threshold: A whitewash resolution typically requires approval by at least 75% of votes cast by eligible shareholders.
- Solvency Declarations: Directors are expected to provide a solvency statement confirming the company can meet its debts after the transaction. This is especially scrutinised in the post-pandemic economic environment.
- Timing and Notice: Shareholders must receive clear notice and sufficient time to consider the proposal. Recent ASIC reviews flagged several instances where rushed or poorly documented whitewash processes led to enforcement action.
In 2025, failure to follow these rules can result in penalties, transaction unwinding, or director liability. Notably, the increase in private equity activity and family business succession planning has led to a spike in whitewash resolutions—so compliance is under the microscope.
Practical Examples: How Whitewash Resolutions Work in the Real World
Let’s look at how whitewash resolutions are being used by Australian companies today:
- Management Buyouts (MBOs): In a 2024-2025 trend, several mid-sized tech firms have used whitewash resolutions to facilitate buyouts led by internal management teams. The company provides a loan or guarantee, but only after shareholders approve a detailed whitewash resolution package.
- Family Business Succession: As generational change accelerates, family businesses are relying on whitewash resolutions to help younger family members acquire shares using company-backed finance—ensuring continuity without breaching the law.
- Private Equity Exits: PE firms are using whitewash resolutions as part of exit strategies, enabling new investors to secure funding arrangements backed by the company itself, all under the watchful eye of the shareholders.
Case Study: In early 2025, an Australian manufacturing company successfully used a whitewash resolution to enable a senior executive to acquire a significant stake. The process was closely scrutinised by ASIC, but full disclosure and robust documentation ensured a smooth transaction and protected all parties.
Best Practices for Shareholders and Directors in 2025
If you’re involved in a company considering a whitewash resolution this year, here’s what you should keep in mind:
- Prepare comprehensive documentation, including a clear explanatory statement, solvency declaration, and risk assessment.
- Engage early with stakeholders, ensuring all shareholders understand the purpose and impact of the proposed assistance.
- Monitor ASIC guidance, as enforcement trends are shifting—especially for complex or high-value transactions.
- Document conflicts of interest and have independent directors review the proposal where possible.
With the regulatory environment tightening in 2025, transparency and process discipline are paramount. Getting a whitewash resolution wrong can have serious financial and legal repercussions.
