Whitewash Resolution: Definition, Process, and Application in Finance

A whitewash resolution is a condition imposed by a target firm before its acquisition, wherein the company pledges financial assistance to the acquirer while ensuring its own solvency for at least 12 months. This resolution aims to prevent the misuse of acquisitions for capital raising and asset draining. Shareholder approval and auditor confirmation are prerequisites for the resolution. Whitewash resolutions are crucial for financially distressed companies seeking to avoid insolvency through acquisition.