Distributions
Companies Act
Profits available for distribution
117. (1) A company shall not make a distribution except out of profits available for the purpose.
(2) For the purposes of this Part, 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)—
(a) where the company prepares Companies Act entity financial statements, any provision (within the meaning of Schedule 3 ) shall be treated as a realised loss other than such a provision in respect of any diminution in value of a fixed asset appearing on a revaluation of all the fixed assets or of all the fixed assets other than goodwill (and this qualification is referred to in subsections (5) and (6) as “the exception to subsection (4)(a)”); and
(b) where the company prepares IFRS entity financial statements, a provision of any kind shall be treated as a realised loss.
(5) Subject to section 121 (6) and the next subsection, 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 to subsection (4)(a), has taken place at that time.
(6) However where any such assets which have not actually been revalued are treated as revalued for those purposes by virtue of the preceding subsection, the exception to subsection (4)(a) shall only apply if the directors are satisfied that the aggregate value of those assets 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 Companies Act entity financial statements.
(7) 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.
(8) Where there is no record of the original cost of an asset of a company 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.
(9) Notwithstanding anything in the preceding subsections of this section, but without prejudice to any contrary provision of—
(a) an order of, or undertaking given to, the court;
(b) the resolution for, or any other resolution relevant to, the reduction of company capital; or
(c) the company’s constitution,
a reserve arising from the reduction of a company’s company capital is to be treated, both for the purposes of this section and for purposes otherwise, as a realised profit.
(10) In this section “fixed asset” includes any other asset which is not a current asset.
Prohibition on pre-acquisition profits or losses being treated as profits available for distribution
118. (1) Subject to subsections (3) and (4), any amount of the accumulated profits or losses attributable to any shares in a subsidiary for the time being held by a holding company or any other of its subsidiaries shall not, for any purpose, be treated in the holding company’s financial statements as profits available for distribution so far as that amount relates to accumulated profits or losses for the period before the date on or as from which the shares were acquired by the company or any of its subsidiaries (which period is referred to in subsection (2) as the “pre-acquisition period”).
(2) For the purpose of determining whether any profits or losses are to be treated as profits or losses for the pre-acquisition period, the profit or loss for any financial year of the subsidiary may, if it is not practicable to apportion it with reasonable accuracy by reference to the facts, be treated as accruing from day to day during that year and be apportioned accordingly.
(3) If the Summary Approval Procedure is followed in respect of such treatment, subsection (1) does not prohibit—
(a) the whole of the amount referred to in that subsection; or
(b) such proportion of that amount as is specified in the declaration referred to in section 205 ,
being treated as profits available for distribution by the holding company for the period, and the period only, referred to in section 202 (1)(a) (as that provision applies by virtue of section 202 (2) and (3)).
(4) Subsection (1) does not apply to the profits or losses attributable to shares in a subsidiary held by a holding company where those shares were acquired in a transaction to which section 72 , 73 or 75 applies.
Distributions in kind: determination of amount
119. (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 financial statements referred to in section 121 ; or
(b) where the asset is not stated in those financial statements at any amount, zero.
(5) The provisions of section 121 shall have effect subject to this section.
Development costs shown as asset of company to be set off against company’s distribution profits
120. (1) Subject to the following provisions of this section, where development costs are shown as an asset in a company’s financial statements, any amount shown in respect of those costs shall be treated for the purposes of section 117 as a realised loss.
(2) Subsection (1) shall not apply to any part of the amount referred to in that subsection representing an unrealised profit made on revaluation of the costs so referred to.
(3) Subsection (1) shall not apply if—
(a) there are special circumstances justifying the directors of the company concerned in deciding that the amount mentioned in respect of development costs in the company’s financial statements shall not be treated as required by that subsection; and
(b) it is stated—
(i) where the company prepares Companies Act entity financial statements, in the note to the statements required by paragraph 23(2) of Schedule 3 ; or
(ii) where the company prepares IFRS entity financial statements, in any note to those statements,
that that amount is not to be so treated, and the note explains the circumstances relied upon to justify the decision of the directors to that effect.
The relevant financial statements
121. (1) Subject to the following provisions of this section, the question whether a distribution may be made by a company without contravening section 117 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 entity financial statements, and section 117 shall be treated as contravened in the case of a distribution unless the requirements of this section in relation to those statements are complied with in the case of that distribution.
(2) The relevant entity financial statements for any company in the case of any particular distribution are—
(a) except in a case falling within paragraph (b) or (c), the last entity financial statements, that is to say, the statutory financial statements, respecting the company alone, prepared in accordance with the requirements of Part 6 (and, where applicable, in accordance with the requirements of Article 4 of the IAS Regulation (within the meaning of that Part)) which were laid in respect of the last preceding financial year in respect of which statutory financial statements so prepared were laid;
(b) if that distribution would be found to contravene section 117 if reference were made only to the last statutory financial statements, such financial statements (“interim financial statements”), respecting the company alone, as are necessary to enable a reasonable judgement 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 statutory financial statements are laid in respect of that financial year, such financial statements (“initial financial statements”), respecting the company alone, as are necessary as mentioned in paragraph (b).
(3) The following requirements apply where the last financial statements of a company constitute the only relevant entity financial statements in the case of any distribution, that is to say—
(a) those financial statements shall 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 statements, whether that distribution would be in contravention of section 117 ;
(b) unless the company is entitled to and has availed itself of the audit exemption under section 360 or 365 , the statutory auditors of the company shall have made a report under section 391 in respect of those financial statements;
(c) if, by virtue of anything referred to in that report, the report is not an unqualified report, the statutory auditors shall 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 financial statements, whether that distribution would be in contravention of section 117 ; and
(d) a copy of any such statement shall 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) For the purpose of determining by reference to particular financial statements 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 financial statements, as if the amount of the proposed distribution was increased by the amount of the distributions so made.
(6) Where subsection (3)(a) applies to the relevant entity financial statements, section 117 (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 statements has taken place, unless it is stated in a note to those statements—
(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 statutory financial statements; and
(c) that the relevant items affected are accordingly stated in the relevant financial statements on the basis that a revaluation of the company’s fixed assets that, by virtue of section 117 (5), is deemed to have included a revaluation of the assets in question, took place at that time.
(7) In this section—
“properly prepared” means, in relation to any financial statements of a company, that they have been properly prepared in accordance with the provisions of Part 6 ;
“relevant item” means any of the following, that is to say profits, losses, assets, liabilities, provisions (within the meaning of Schedule 3 ), share capital and reserves;
“reserves” includes undistributable reserves, that is to say—
(a) the company’s undenominated capital;
(b) 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 as not previously written off in a reduction or reorganisation of capital duly made; and
(c) any other reserve which the company is prohibited from distributing by any enactment, other than one contained in this Part, or by its constitution.
“unqualified report”, in relation to any financial statements of a company, means a report without qualification, to the effect that, in the opinion of the person making the report, the financial statements have been properly prepared, and for the purposes of this section, financial statements are laid if section 290 has been complied with in relation to those statements.
Consequences of making unlawful distribution
122. (1) Where a distribution or part of one, made by a company to one of its members, is made in contravention of any provision of this Part and, at the time of the distribution, he or she knows or has reasonable grounds for believing that it is so made, he or she 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) This section is without prejudice to any obligation imposed apart from this section on a member of a company to repay a distribution unlawfully made to him or her.
Meaning of “distribution”, “capitalisation”, etc., and supplemental provisions
123. (1) 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 pursuant to section 108 out of the proceeds of a fresh issue of shares made for the purposes of redemption;
(c) the redemption or purchase of shares pursuant to section 105 and the other relevant provisions of this Part out of the proceeds of a fresh issue of shares made for the purposes of the redemption or purchase;
(d) the payment pursuant to section 106 (5) of any premium out of the company’s undenominated capital on a redemption referred to in that provision; and
(e) a distribution of assets to members of the company on its winding up.
“(f) the reduction of share capital—
(i) by paying off paid up share capital (effected in accordance with section 84 in the case of a company limited by shares), or
(ii) by extinguishing or reducing all or part of a member’s liability on shares not fully paid up (effected in accordance with section 84 in the case of a company limited by shares
(2) In this Part “capitalisation”, in relation to any profits of a company, means any of the following operations, 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 undenominated capital.
(3) In this Part references to profits and losses of any description are references respectively to profits and losses of that description made at any time and, except where the context otherwise requires, are references respectively to revenue and capital profits and revenue and capital losses.
(4) The provisions of this Part are without prejudice to any enactment or rule of law or any provision of a company’s constitution restricting the sums out of which, or the cases in which, a distribution may be made.
(5) Where a company makes a distribution of or including a non-cash asset and any part of the amount at which that asset is stated in the financial statements relevant for the purposes of the distribution in accordance with this Chapter represents an unrealised profit, that profit is to be treated as a realised profit—
(a) for the purpose of determining the lawfulness of the distribution in accordance with this Chapter (whether before or after the distribution takes place); and
(b) for the purpose of the application of paragraphs 14(a) and 37(3) of Schedule 3 (only realised profits to be included in or transferred to the profit and loss account) in relation to anything done with a view to or in connection with the making of that distribution.
Procedures for declarations, payments, etc., of dividends and other things
124. (1) Each provision of this section and section 125 applies save to the extent that the company’s constitution provides otherwise.
(2) A company may, by ordinary resolution, declare dividends but no dividend shall exceed the amount recommended by the directors of the company.
(3) The directors of a company may from time to time—
(a) pay to the members such interim dividends as appear to the directors to be justified by the profits of the company, subject to section 117 ;
(b) before recommending any dividend, set aside out of the profits of the company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for any purpose to which the profits of the company may be properly applied, and pending such application may, at the like discretion either be employed in the business of the company or be invested in such investments as the directors may lawfully determine;
(c) without placing the profits of the company to reserve, carry forward any profits which they may think prudent not to distribute.
(4) Subject to the rights of persons, if any, entitled to shares with special rights as to dividend, all dividends shall be declared and paid according to the amounts paid or credited as paid on the shares in respect of which the dividend is paid.
(5) However no amount paid or credited as paid on a share in advance of calls shall be treated for the purposes of this section as paid on the share.
(6) All dividends shall be apportioned and paid proportionally to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid, but if any share is issued on terms providing that it shall rank for a dividend as from a particular date, such share shall rank for dividend accordingly.
(7) The directors may deduct from any dividend payable to any member, all sums of money (if any) immediately payable by him or her to the company on account of calls or otherwise in relation to the shares of the company.
Supplemental provisions in relation to section 124
125. (1) A general meeting of a company declaring a dividend or bonus may direct payment of such dividend or bonus wholly or partly by the distribution of specific assets and, in particular, paid up shares, debentures or debenture stock of any other company or in any one or more of such ways.
(2) The directors of the company shall give effect to such resolution, and where any difficulty arises in regard to such distribution, the directors may settle the matter as they think expedient and, in particular, may—
(a) issue fractional certificates and fix the value for distribution of such specific assets or any part of them;
(b) determine that cash payments shall be made to any members upon the footing of the value so fixed, in order to adjust the rights of all the parties; and
(c) vest any such specific assets in trustees as may seem expedient to the directors.
(3) Any dividend, interest or other moneys payable in cash in respect of any shares may be paid—
(a) by cheque or negotiable instrument sent by post directed to or otherwise delivered to the registered address of the holder, or where there are joint holders, to the registered address of that one of the joint holders who is first named on the register or to such person and to such address as the holder or the joint holders may in writing direct; or
(b) by agreement with the payee (which may either be a general agreement or one confined to specific payments), by direct transfer to a bank account nominated by the payee.
(4) Any such cheque or negotiable instrument shall be made payable to the order of the person to whom it is sent.
(5) Any one of two or more joint holders may give valid receipts for any dividends, bonuses or other moneys payable in respect of the shares held by them as joint holders, whether paid by cheque or negotiable instrument or direct transfer.
(6) No dividend shall bear interest against the company.
Bonus issues
126. (1) Each provision of this section applies save where the company’s constitution provides otherwise.
(2) In subsections (3) and (4) “relevant sum” means—
(a) any sum for the time being standing to the credit of the company’s undenominated capital;
(b) any of the company’s profits available for distribution; or
(c) any sum representing unrealised revaluation reserves.
(3) The company in general meeting may, on the recommendation of the directors, resolve that any relevant sum be capitalised and applied on behalf of the members who would have been entitled to receive that sum if it had been distributed by way of dividend and in the same proportions in or towards paying up in full unissued shares of the company of a nominal value equal to the relevant sum capitalised (such shares to be allotted and distributed credited as fully paid up to and amongst such holders and in the proportions as aforementioned).
(4) The company in general meeting may, on the recommendation of the directors, resolve that it is desirable to capitalise any part of a relevant sum which is not available for distribution, by applying such sum in paying up in full unissued shares to be allotted as fully paid bonus shares, to those members of the company who would have been entitled to that sum if it were distributed by way of dividend (and in the same proportions).
(5) The directors of the company shall give effect to any resolution under subsection (3) or (4).
(6) For that purpose the directors shall make—
(a) all appropriations and applications of the undivided profits resolved to be capitalised by the resolution; and
(b) all allotments and issues of fully paid shares, if any, and generally shall do all acts and things required to give effect to the resolution.
(7) Without limiting the foregoing, the directors may—
(a) make such provision as they think fit for the case of shares becoming distributable in fractions (and, again, without limiting the foregoing, may sell the shares represented by such fractions and distribute the net proceeds of such sale amongst the members otherwise entitled to such fractions in due proportions); and
(b) authorise any person to enter, on behalf of all the members concerned, into an agreement with the company providing for the allotment to them, respectively credited as fully paid up, of any further shares to which they may become entitled on the capitalisation concerned or, as the case may require, for the payment by the application thereto of their respective proportions of the profits resolved to be capitalised of the amounts remaining unpaid on their existing shares.
(8) Any agreement made under such authority shall be effective and binding on all the members concerned.
(9) Where the directors of a company have resolved to approve a bona fide revaluation of all the fixed assets of the company, the net capital surplus in excess of the previous book value of the assets arising from such revaluation may be—
(a) credited by the directors to undenominated capital, other than the share premium account; or
(b) used in paying up unissued shares of the company to be issued to members as fully paid bonus shares.
Access to documents during business hours
127. (1) A reference in this Part to a document kept by a company being open to the inspection of a person, or a specified class of person, during business hours shall be read as a requirement that the document be open to such inspection subject to such reasonable restrictions as the company may in general meeting impose, but so that not less than 2 hours in each day be allowed for such inspection.
(2) Subsection (1) applies to the provisions of other Parts of this Act that are referred to in Chapter 10 (which deals with, amongst other things, inspection of registers) as it applies to the provisions of this Part so referred to.
The text in italics on this page is sourced from the Irish Statute Book and is re-published under the Licence for Re-Use of Public Sector Information made pursuant to Directive 2003/98/EC Directive 2013/37/EU of the European Parliament and of the Council on the re-use of public sector information transposed into Irish law by the European Communities (Re-Use of Public Sector Information) Regulations 2005 to 2015.