Companies Act 1985

264 Restriction on distribution of assets. E+W+S

(1) A public 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 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.

This is subject to the provision made by sections 265 and 266 for investment and other companies.

(2) In subsection (1), “net assets” means the aggregate of the company’s assets less the aggregate of its liabilities (“liabilities” to include any [F1 provision for liabilities] within paragraph 89 of Schedule 4 [F2 that is made in Companies Act accounts and any provision that is made in IAS accounts] ).

(3) A company’s undistributable reserves are—

(a) the share premium account,

(b) the capital redemption reserve,

(c) the amount by which the company’s accumulated, unrealised profits, so far as not previously utilised by capitalisation of a description to which this paragraph applies, exceed its accumulated, unrealised losses (so far as not 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;

and paragraph (c) applies to every description of capitalisation except a transfer of profits of the company to its capital redemption reserve on or after 22nd December 1980.

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

Textual Amendments

F1 Words in s. 264(2) substituted (12.11.2004 with effect as mentioned in reg. 1(2) of the amending S.I.) by The Companies Act 1985 (International Accounting Standards and Other Accounting Amendments) Regulations 2004 (S.I. 2004/2947), reg. 15, Sch. 7 para. 8

F2 Words in s. 264(2) inserted (12.11.2004 with effect as mentioned in reg. 1(2) of the amending S.I.) by The Companies Act 1985 (International Accounting Standards and Other Accounting Amendments) Regulations 2004 (S.I. 2004/2947), reg. 3, Sch. 1 para. 22

Modifications etc. (not altering text)

C1 S. 264 applied (with modifications) (6.11.2000) by 2000 c. 26, s. 72(3)-(5); S.I. 2000/2957, art. 2(1), Sch. 1

C2 S. 264 modified (6. 1. 1992) by British Technology Group Act 1991 (c. 66, SIF 64), s. 8(4); S.I. 1991/2721, art.2

C3 S. 264 modified (31.10.1994) by 1994 c. 21, s. 15, Sch. 3 para. 6(2); S.I. 1994/2552, art. 2, Sch. 1

S. 264 modified (8.11.1995) by 1995 c. 37, s. 6, Sch. 2 para. 6(2)

S. 264 modified (24.7.1996) by 1996 c. 55, ss. 134, 149(1)(f), Sch. 6 para. 3(2)

C4 S. 264 modified (5.10.2004) by Energy Act 2004 c. 20), ss. 39, 198(2), {Sch. 6 para. 6(3)} (with s. 38(2), Sch. 6 para. 8); S.I. 2004/2575, art. 2(1), Sch. 1

C5 S. 264(2) extended (21.8.2002) by S.I. 2001/1060, art. 5A(2) (as inserted by S.I. 2002/2157, art. 8(2))

S. 264(2) extended (21.8.2002) by S.I. 2001/1335, art. 8A(2) (as inserted by S.I. 2002/2157, art. 3(2))

C6 S. 264(2) modified (1.7.2005) by The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S.I. 2005/1529), art. 8A(2) (with art. 10)

C7 S. 264(3)(c) modified by British Steel Act 1988 (c. 35, SIF 70), s. 7(4)

C8 S. 264(3)(c) modified by Electricity Act 1989 (c. 29, SIF 44:1), ss. 75(3), 112(3), Sch. 17 para. 35(1)

C9 S. 264(3)(c) modified by Broadcasting Act 1990 (c. 42, SIF 96), ss. 4(6), 87(6), 138(3)

C10 S. 264(3)(d) modified by Airports Act 1986 (c. 31, SIF 9) s. 8(3) and British Steel Act 1988 (c.35, SIF 70), s. 7(4)

C11 S. 264(3)(d) excluded by Electricity Act 1989 (c. 29, SIF 44:1), ss. 75(3), 112(3), Sch. 17 para. 35(1)

C12 S. 264(3)(d) excluded by Broadcasting Act 1990 (c. 42, SIF 96), ss. 4(6), 87(6), 138(3)

C13 S. 264(3)(d) modified (6. 1. 1992) by British Technology Group Act 1991 (c. 66, SIF 64), s. 8(4); S.I. 1991/2721, art.2