C3C1C2Part 23Distributions
Pts. 1-39 (except for Pt. 7 and ss. 662-669), 45-47 extended (12.5.2011) by The Companies Act 2006 (Consequential Amendments and Transitional Provisions) Order 2011 (S.I. 2011/1265), art. 5(1), Sch. 1 para. 2
Pt. 23 excluded (1.10.2011) by Postal Services Act 2011 (c. 5), ss. 8, 93, Sch. 1 para. 18(a); S.I. 2011/2329, art. 3
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).
Pts. 1-39 modified (31.12.2020) by Regulation (EC) No. 2157/2001, Art. AAA1(3) (as inserted by The European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2018 (S.I. 2018/1298), regs. 1, 97 (with regs. 140-145) (as amended by S.I. 2020/523, regs. 1(2), 5(a)-(f)); 2020 c. 1, Sch. 5 para. 1(1))