254T

Circumstances in which a dividend may be paid

In force

(1)

A company must not pay a dividend unless:

(a)

the company’s assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend; and

(b)

the payment of the dividend is fair and reasonable to the company’s shareholders as a whole; and

(c)

the payment of the dividend does not materially prejudice the company’s ability to pay its creditors.

Note 1:

As an example, the payment of a dividend would materially prejudice the company’s ability to pay its creditors if the company would become insolvent as a result of the payment.

Note 2:

For a director’s duty to prevent insolvent trading on payment of dividends, see section 588G.

Note 3:

Section 1230M applies to a CCIV instead of this section.

(2)

Assets and liabilities are to be calculated for the purposes of this section in accordance with accounting standards in force at the relevant time (even if the standard does not otherwise apply to the financial year of some or all of the companies concerned).

This Act’s bill:Explanatory memorandum Second reading speech

Research tools for this sectionSubscription

Cited by Analyse Interrogate History Equivalents

The statute text is free to read above. View subscription options to unlock the case-law research tools for each provision.