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13 1983

COMPANIES (AMENDMENT) ACT, 1983

PART IV

Restrictions on distribution of profits and assets.

Profits available for distribution.

45. —(1) A company shall not make a distribution (as defined by section 51 ) except out of profits available for the purpose.

(2) For the purposes of this Part, but subject to section 47 (1), a company's profits available for distribution are its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made.

(3) A company shall not apply an unrealised profit in paying up debentures or any amounts unpaid on any of its issued shares.

(4) For the purposes of subsections (2) and (3) any provision (within the meaning of the Sixth Schedule to the Principal Act) other than one in respect of any diminution in value of a fixed asset appearing ona revaluation of all the fixed assets or of all the fixed assets other than goodwill of the company, shall be treated as a realised loss.

(5) Subject to section 49 (8), any consideration by the directors of a company of the value at any particular time of any fixed asset of the company shall be treated as a revaluation of that asset for the purposes of determining whether any such revaluation of the company's fixed assets as is required for the purposes of the exception from subsection (4) has taken place at that time; but where any such assets which have not actually been revalued are treated as revalued for those purposes by virtue of this subsection that exception shall only apply if the directors are satisfied that their aggregate value at the time in question is not less than the aggregate amount at which they are for the time being stated in the company's accounts.

(6) If, on the revaluation of a fixed asset, an unrealised profit is shown to have been made and, on or after the revaluation, a sum is written off or retained for depreciation of that asset over a period, then, an amount equal to the amount by which that sum exceeds the sum which would have been so written off or retained for depreciation of that asset over that period, if that profit had not been made, shall be treated for the purposes of subsections (2) and (3) as a realised profit made over that period.

(7) Where there is no record of the original cost of an asset of a company (whether acquired before, on or after the appointed day) or any such record cannot be obtained without unreasonable expense or delay, then, for the purposes of determining whether the company has made a profit or loss in respect of that asset, the cost of the asset shall be taken to be the value ascribed to it in the earliest available record of its value made on or after its acquisition by the company.

(8) Where the directors of a company are, after making all reasonable enquiries, unable to determine whether a particular profit made before the appointed day is realised or unrealised they may treat the profit as realised, and where after making such enquiries they are unable to determine whether a particular loss so made is realised or unrealised, they may treat the loss as unrealised.

(9) In this section “fixed asset” includes any other asset which is not a current asset.

Restriction on distribution of assets.

46. —(1) Subject to section 47 , a public limited company may only make a distribution at any time—

(a) if at that time the amount of its net assets is not less than the aggregate of the company's called-up share capital and its 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 the purposes of this section the undistributable reserves of a public limited company are—

(a) the share premium account;

(b) the capital redemption reserve fund;

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

(d) any other reserve which the company is prohibited from distributing by any enactment, other than one contained in this Part, or by its memorandum or articles.

(3) Subsections (4) to (8) of section 45 shall apply for the purposes of this section as they apply for the purposes of that section.

(4) A public limited company shall not include any uncalled share capital as an asset in any account relevant for the purposes of this section.

Other distributions of investment companies.

47. —(1) Subject to the following provisions of this section, an investment company may also make a distribution at any time out of its accumulated, realised revenue profits, so far as not previously utilised by distribution or capitalisation, less its accumulated revenue losses (whether realised or unrealised), so far as not previously written off in a reduction or reorganisation of capital duly made—

(a) if at that time the amount of its assets is at least equal to one and a half times the aggregate of its liabilities; and

(b) if, and to the extent that, the distribution does not reduce that amount to less than one and a half times that aggregate.

(2) In subsection (1)liabilities” includes any provision (within the meaning of the Sixth Schedule to the Principal Act) except to the extent that that provision is taken into account for the purposes of that subsection in calculating the value of any asset of the company in question, and subsection (4) of section 46 shall apply for those purposes as it applies for the purposes of that section.

(3) In this Part “investment company” means a public limited company which has given notice in writing (which has not been revoked) to the registrar of its intention to carry on business as an investment company (the “requisite notice”) and has since the date of that notice complied with the requirements set out in subsection (4).

(4) The requirements referred to in subsection (3) are—

(a) that the business of the company consists of investing its funds mainly in securities, with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds;

(b) that none of the company's holdings in companies other than companies which are for the time being investment companies represents more than 15 per cent. by value of the investing company's investment;

(c) that distribution of the company's capital profits is prohibited by its memorandum or articles of association;

(d) that the company has not retained, otherwise than in compliance with this Part in respect of any financial year more than 15 per cent. of the income it derives from securities.

(5) An investment company may not make a distribution by virtue of subsection (1) unless its shares are listed on a recognised stockexchange and, during the period beginning with the first day of the financial year immediately preceding the financial year in which the proposed distribution is to be made or, where the distribution is proposed to be made during the company's first financial year, the first day of that financial year and ending with the date of the distribution (whether or not any part of those financial years falls before the appointed day), it has not—

(a) distributed any of its capital profits; or

(b) applied any unrealised profits or any capital profits (realised or unrealised) in paying up debentures or any amounts unpaid on any of its issued shares.

(6) An investment company may not make a distribution by virtue of subsection (1) unless the company gave the requisite notice—

(a) before the beginning of the appropriate period referred to in subsection (5); or

(b) where that period began before the appointed day, as soon as may be reasonably practicable after the appointed day; or

(c) where the company was incorporated on or after the appointed day, as soon as may be reasonably practicable after the date of its incorporation.

(7) A notice by a company to the registrar under subsection (3) may be revoked at any time by the company on giving notice to the registrar that it no longer wishes to be an investment company within the meaning of this section and, on giving such notice, the company shall cease to be such an investment company.

(8) In determining capital and revenue profits and losses for the purposes of this section an asset which is not a fixed asset or a current asset shall be treated as a fixed asset.

(9) An investment company shall include the expression “investment company” on its letters and order forms.

(10) Where a company fails to comply with subsection (9), the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding £250.

(11) Proceedings in relation to an offence under this section may be brought and prosecuted by the registrar of companies.

(12) For the purposes of paragraph (b) of subsection (4)

(a) “holding” means the shares or securities (whether of one class or more than one class) held in any one company;

(b) holdings in companies which are members of a group (whether or not including the investing company) and are not excluded from the said paragraph (b) shall be treated as holdings in a single company;

(c) where the investing company is a member of a group, money owed to it by another member of the group shall be treated as a security of the latter held by the investing company and accordingly as, or as part of, the holding of the investing company in the company owing the money,and for the purposes of this subsection “group” means a company and all companies which are its subsidiaries within the meaning of section 155 of the Principal Act.

Realised profits of assurance companies.

48. —(1) In the case of an assurance company carrying on life assurance business, or industrial assurance business or both, any amount properly transferred to the profit and loss account of the company from a surplus in the fund or funds maintained by it in respect of that business and any deficit in that fund or those funds shall be respectively treated for the purposes of this Part as a realised profit and a realised loss, and, subject to the foregoing, any profit or loss arising on the fund or funds maintained by it in respect of that business shall be left out of account for those purposes.

(2) In subsection (1)

(a) the reference to a surplus in any fund or funds of an assurance company is a reference to an excess of the assets representing that fund or those funds over the liabilities of the company attributable to its life assurance or industrial assurance business, as shown by an actuarial investigation; and

(b) the reference to a deficit in any such fund or funds is a reference to the excess of those liabilities over those assets, as so shown.

(3) In this section—

actuarial investigation” means an investigation to which section 5 of the Assurance Companies Act, 1909 applies;

life assurance business” and “industrial assurance business” have the same meanings as in section 3 of the Insurance Act, 1936 .

The relevant accounts.

49. —(1) Subject to the following provisions of this section, the question whether a distribution may be made by a company without contravening section 45 , 46 or 47 (the relevant section) and the amount of any distribution which may be so made shall be determined by reference to the relevant items as stated in the relevant accounts, and the relevant section shall be treated as contravened in the case of a distribution unless the requirements of this section about those accounts are complied with in the case of that distribution.

(2) The relevant accounts for any company in the case of any particular distribution are—

(a) except in a case falling within paragraph (b) or (c), the last annual accounts that is to say, the accounts prepared in accordance with the requirements of the Principal Act which were laid in respect of the last preceding financial year in respect of which accounts so prepared were laid;

(b) if that distribution would be found to contravene the relevant section if reference were made only to the last annual accounts, such accounts (interim accounts) as are necessary to enable a reasonable judgment to be made as to the amounts of any of the relevant items;

(c) if that distribution is proposed to be declared during the company's first financial year or before any accounts are laid in respect of that financial year, such accounts (initial accounts) as are necessary as aforesaid.

(3) The following requirements apply where the last annual accounts of a company constitute the only relevant accounts in the case of any distribution, that is to say—

(a) those accounts must have been properly prepared or have been so prepared subject only to matters which are not material for the purpose of determining, by reference to the relevant items as stated in those accounts, whether that distribution would be in contravention of the relevant section;

(b) the auditors of the company must have made a report under section 163 of the Principal Act in respect of those accounts;

(c) if, by virtue of anything referred to in that report, the report is not an unqualified report, the auditors must also have stated in writing (either at the time the report was made or subsequently) whether, in their opinion, that thing is material for the purpose of determining, by reference to the relevant items as stated in those accounts, whether that distribution would be in contravention of the relevant section; and

(d) a copy of any such statement must have been laid before the company in general meeting.

(4) A statement under subsection (3) (c) suffices for the purposes of a particular distribution not only if it relates to a distribution which has been proposed but also if it relates to distributions of any description which include that particular distribution, notwithstanding that at the time of the statement it has not been proposed.

(5) The following requirements apply to interim accounts prepared for a proposed distribution by a public limited company, that is to say—

(a) the accounts must have been properly prepared or have been so prepared subject only to matters which are not material for the purpose of determining, by reference to the relevant items as stated in those accounts, whether that distribution would be in contravention of the relevant section;

(b) a copy of those accounts must have been delivered to the registrar of companies;

(c) if the accounts are in a language other than the English or Irish language, a translation into English or Irish of the accounts which has been certified in the prescribed manner to be a correct translation must also have been delivered to the registrar.

(6) The following requirements apply to initial accounts prepared for a proposed distribution by a public limited company, that is to say—

(a) those accounts must have been properly prepared or have been so prepared subject only to matters which are not material for the purpose of determining, by reference tothe relevant items as stated in those accounts, whether that distribution would be in contravention of the relevant section;

(b) the auditors of the company must have made a report stating whether in their opinion the accounts have been properly prepared;

(c) if, by virtue of anything referred to in that report, the report is not an unqualified report, the auditors must also have stated in writing whether, in their opinion, that thing is material for the purpose of determining, by reference to the relevant items as stated in those accounts, whether that distribution would be in contravention of the relevant section;

(d) a copy of those accounts, of the report made under paragraph (b) and of any such statement must have been delivered to the registrar of companies; and

(e) if the accounts are, or that report or statement is, in a language other than the English or Irish language, a translation into English or Irish of the accounts, the report or statement, as the case may be, which has been certified in the prescribed manner to be a correct translation, must also have been delivered to the registrar.

(7) For the purpose of determining by reference to particular accounts whether a proposed distribution may be made by a company, this section shall have effect, in any case where one or more distributions have already been made in pursuance of determinations made by reference to those same accounts, as if the amount of the proposed distribution was increased by the amount of the distributions so made.

(8) Where subsection (3) (a), (5) (a) or (6) (a) applies to the relevant accounts, section 45 (5) shall not apply for the purposes of determining whether any revaluation of the company's fixed assets affecting the amount of the relevant items as stated in those accounts has taken place, unless it is stated in a note to those accounts—

(a) that the directors have considered the value at any time of any fixed assets of the company without actually revaluing those assets;

(b) that they are satisfied that the aggregate value of those assets at the time in question is or was not less than the aggregate amount at which they are or were for the time being stated in the company's accounts; and

(c) that the relevant items affected are accordingly stated in the relevant accounts on the basis that a revaluation of the company's fixed assets which by virtue of section 45 (5) included the assets in question took place at that time.

(9) In this section—

properly prepared” means, in relation to any accounts of a company, that the following conditions are satisfied in relation to those accounts, that is to say—

(a) in the case of annual accounts, that they have been properly prepared in accordance with the provisions of the Principal Act;

(b) in the case of interim or initial accounts, that theycomply with the requirements of section 149 of the Principal Act and any balance sheet comprised in those accounts has been signed in accordance with section 156 of the Principal Act; and

(c) in either case, without prejudice to the foregoing, that, except where the company is entitled to avail itself, and has availed itself, of any of the provisions of Part III of the Sixth Schedule to the Principal Act—

(i) so much of the accounts as consists of a balance sheet gives a true and fair view of the state of the company's affairs as at the balance sheet date; and

(ii) so much of those accounts as consists of a profit and loss account gives a true and fair view of the company's profit or loss for the period in respect of which the accounts were prepared;

relevant item” means any of the following, that is to say profits, losses, assets, liabilities, provisions (within the meaning of the Sixth Schedule to the Principal Act), share capital and reserves;

reserves” includes undistributable reserves within the meaning of section 46 (2);

unqualified report” in relation to any accounts of a company, means a report, without qualification, to the effect that in the opinion of the person making the report the accounts have been properly prepared;

and for the purposes of this section, accounts are laid if section 148 of the Principal Act has been complied with in relation to those accounts.

(10) For the purpose of paragraph (b) of the definition of “properly prepared” in subsection (9), section 149 of, and the Sixth Schedule to, the Principal Act shall be deemed to have effect in relation to interim and initial accounts with such modifications as are necessary by reason of the fact that the accounts are prepared otherwise than in respect of a financial year.

Consequences of making unlawful distribution.

50. —(1) Where a distribution, or part of one, made by a company to one of its members is made in contravention of the provisions of this Part and, at the time of the distribution, he knows or has reasonable grounds for believing that it is so made, he shall be liable to repay it or that part, as the case may be, to the company or (in the case of a distribution made otherwise than in cash) to pay the company a sum equal to the value of the distribution or part at that time.

(2) The provisions of this section are without prejudice to any obligation imposed apart from this section on a member of a company to repay a distribution unlawfully made to him.

Ancillary provisions.

51. —(1) Where immediately before the appointed day a company is authorised by any provision of its articles to apply its unrealised profits in paying up in full or in part unissued shares to be allotted to members of the company as fully or partly paid bonus shares, that provision shall, subject to any subsequent alteration of the articles, continue to be construed as authorising those profits to be so applied after the appointed day.

(2) In this Part “distribution” means every description of distribution of a company's assets to members of the company, whether in cash or otherwise, except distributions made by way of—

(a) an issue of shares as fully or partly paid bonus shares;

(b) the redemption of preference shares out of the proceeds of a fresh issue of shares made for the purposes of the redemption and the payment of any premium on their redemption out of the company's share premium account;

(c) the reduction of share capital by extinguishing or reducing the liability of any of the members on any of its shares in respect of share capital not paid up or by paying off paid up share capital; and

(d) a distribution of assets to members of the company on its winding up.

(3) In this Part “capitalisation”, in relation to any profits of a company, means any of the following operations, whether carried out before, on or after the appointed day, that is to say, applying the profits in wholly or partly paying up unissued shares in the company to be allotted to members of the company as fully or partly paid bonus shares or transferring the profits to the capital redemption reserve fund.

(4) In this Part reference to profits and losses of any description are references respectively to profits and losses of that description made at any time, whether before, on, or after the appointed day and, except where the context otherwise requires, are references respectively to revenue and capital profits and revenue and capital losses.

(5) The provisions of this Part are without prejudice to any enactment or rule of law or any provision of a company's memorandum or articles restricting the sums out of which, or the cases in which, a distribution may be made.

(6) The provisions of this Part shall not apply to any distribution made by a company, other than a public limited company registered as such on its original incorporation, before the date on which the earlier of the following events occurs, that is to say, the re-registration or registration of the company as a public limited company and the end of the general transitional period.