Companies (Investment Companies) (Distribution of Profits) Regulations (Northern Ireland) 2004

Explanatory Note

(This note is not part of the Regulations.)

These Regulations amend Articles 273 and 274 in Part IX of the Companies (Northern Ireland) Order 1986 (“the 1986 Order”) concerning the distribution of profits of an investment company. The amendments are in further implementation of Article 15.4 of the Second Council Directive 77/91/EEC (O.J. No. L26, 31.1.77, p. 1), on the co-ordination of safeguards in respect of the formation of public limited liability companies and the maintenance and alteration of their capital.

The Regulations alter the requirements that a public limited company must satisfy in order to qualify as an investment company under Article 274 of the 1986 Order, and in order to take advantage of the special rules on distributions by investment companies contained in Article 273 of the 1986 Order. Under Article 274(2)(c) as amended a company must, to qualify as an investment company, continue to be prohibited by its memorandum or articles of association from distributing capital profits, but that prohibition need no longer extend to distributions of capital profits by redemption or purchase of a company’s own shares under Article 170 or 172 of the 1986 Order. Similarly, an investment company will, under Article 273(4)(b)(i) as amended continue to be prohibited from making a distribution in a relevant accounting period if it has already made a distribution of capital profits in that period, but that requirement has been relaxed to provide that distributions by redemption or purchase of a company’s own shares pursuant to Articles 170 or 172 will not prevent an Article 273 distribution (subject to the transitional provision in regulation 4).