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Capital and financing

Distributions

Introduction

A company can only make a distribution (e.g. pay a dividend) out of
profits available for that purpose i.e. distributable profits.

The model articles that dividends should be made as follows:

 The directors recommend the payment of a dividend

 The general meeting declares it by passing an ordinary resolution.

 The amount paid cannot exceed the amount recommended by
directors.

Distributable profits

Distributable profits are:

 Accumulated realised profits (which have not previously been distributed or
capitalised), less

 Accumulated realised losses (which have not previously been written off in a
reduction of capital): s830 CA 2006.

 Profit/loss – trading or capital.

 Accumulated – overall profit/loss, not just one year in isolation.

 Realised – not revaluation reserve. However, provisions (e.g. depreciation) are
deemed realised.

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