Companies Act 2006

831 Net asset restriction on distributions by public companies

(1) A public company may only make a distribution—

(a) if the amount of its net assets is not less than the aggregate of its called-up share capital and undistributable reserves, and

(b) if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.

(2) For this purpose a company’s “net assets” means the aggregate of the company’s assets less the aggregate of its liabilities.

(3) “Liabilities” here includes—

(a) where the relevant accounts are Companies Act accounts, provisions of a kind specified for the purposes of this subsection by regulations under section 396;

(b) where the relevant accounts are IAS accounts, provisions of any kind.

(4) A company’s undistributable reserves are—

(a) its share premium account;

(b) its capital redemption reserve;

(c) the amount by which its accumulated, unrealised profits (so far as not previously utilised by capitalisation) exceed its accumulated, unrealised losses (so far as not previously written off in a reduction or reorganisation of capital duly made);

(d) any other reserve that the company is prohibited from distributing—

(i) by any enactment (other than one contained in this Part), or

(ii) by its articles.

The reference in paragraph (c) to capitalisation does not include a transfer of profits of the company to its capital redemption reserve.

(5) A public company must not include any uncalled share capital as an asset in any accounts relevant for purposes of this section.

(6) Subsection (1) has effect subject to sections 832 and 835 (investment companies etc: distributions out of accumulated revenue profits).