C1C2Part 23Distributions

Annotations:
Modifications etc. (not altering text)

Chapter 1Restrictions on when distributions may be made

General rules

I1831Net 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).