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Part 23Distributions

Chapter 3Supplementary provisions

Distributions in kind

845Distributions in kind: determination of amount

(1)This section applies for determining the amount of a distribution consisting of or including, or treated as arising in consequence of, the sale, transfer or other disposition by a company of a non-cash asset where—

(a)at the time of the distribution the company has profits available for distribution, and

(b)if the amount of the distribution were to be determined in accordance with this section, the company could make the distribution without contravening this Part.

(2)The amount of the distribution (or the relevant part of it) is taken to be—

(a)in a case where the amount or value of the consideration for the disposition is not less than the book value of the asset, zero;

(b)in any other case, the amount by which the book value of the asset exceeds the amount or value of any consideration for the disposition.

(3)For the purposes of subsection (1)(a) the company’s profits available for distribution are treated as increased by the amount (if any) by which the amount or value of any consideration for the disposition exceeds the book value of the asset.

(4)In this section “book value”, in relation to an asset, means—

(a)the amount at which the asset is stated in the relevant accounts, or

(b)where the asset is not stated in those accounts at any amount, zero.

(5)The provisions of Chapter 2 (justification of distribution by reference to accounts) have effect subject to this section.

846Distributions in kind: treatment of unrealised profits

(1)This section applies where—

(a)a company makes a distribution consisting of or including, or treated as arising in consequence of, the sale, transfer or other disposition by the company of a non-cash asset, and

(b)any part of the amount at which that asset is stated in the relevant accounts represents an unrealised profit.

(2)That profit is treated as a realised profit—

(a)for the purpose of determining the lawfulness of the distribution in accordance with this Part (whether before or after the distribution takes place), and

(b)for the purpose of the application, in relation to anything done with a view to or in connection with the making of the distribution, of any provision of regulations under section 396 under which only realised profits are to be included in or transferred to the profit and loss account.