Companies Act 1985

270 Distribution to be justified by reference to company’s accounts. E+W+S

(1) This section and sections 271 to 276 below are for determining the question whether a distribution may be made by a company without contravening sections 263, 264 or 265.

(2) The amount of a distribution which may be made is determined by reference to the following items as stated in the company’s accounts—

(a) profits, losses, assets and liabilities,

(b) [F1 the following provisions—

(i) in the case of Companies Act individual accounts,] provisions of any of the kinds mentioned in paragraphs 88 and 89 of Schedule 4 (depreciation, diminution in value of assets, retentions to meet liabilities, etc.) [F2 , and

(ii) in the case of IAS individual accounts, provisions of any kind], and

(c) share capital and reserves (including undistributable reserves).

(3) Except in a case falling within the next subsection, the company’s accounts which are relevant for this purpose are its last annual accounts, that is to say those prepared under Part VII which were laid in respect of the last preceding accounting reference period in respect of which accounts so prepared were laid; and for this purpose accounts are laid if section 241(1) has been complied with in relation to them.

(4) In the following two cases—

(a) where the distribution would be found to contravene the relevant section if reference were made only to the company’s last annual accounts, or

(b) where the distribution is proposed to be declared during the company’s first accounting reference period, or before any accounts are laid in respect of that period,

the accounts relevant under this section (called “interim accounts” in the first case, and “initial accounts” in the second) are those necessary to enable a reasonable judgment to be made as to the amounts of the items mentioned in subsection (2) above.

(5) The relevant section is treated as contravened in the case of a distribution unless the statutory requirements about the relevant accounts (that is, the requirements of this and the following three sections, as and where applicable) are complied with in relation to that distribution.

Textual Amendments

F1 S. 270(2)(b)(i) and preceding words 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. 26(a)

F2 S. 270(2)(b)(ii) and preceding word 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. 26(b)

Modifications etc. (not altering text)

C1 Ss. 270-276 modified (5.10.2004) by Energy Act 2004 (c. 20), ss. 39, 198(2), Sch. 6 para. 7 (with s. 38(2), Sch. 6 para. 8); S.I. 2004/2575, art. 2(1), Sch. 1

C2 S. 270 modified by Airports Act 1986 (c. 31, SIF 9), s. 83(4), Sch. 5 para. 9(1) and Gas Act 1986 (c. 44, SIF 44:2), s. 67(3), Sch. 8 Pt. II para. 41(1)(a)

C3 S. 270 modified by Electricity Act 1989 (c. 29, SIF 44:1), s. 112(3), Sch. 17 paras. 35(1), 39(1)

C4 Ss. 270 - 276 applied (with modifications) (27. 12. 1991) by S.I. 1991/2908, art. 2, Sch. para. 7(1)

Ss. 270-276 applied (with modifications) (24.11.1995) by S.I. 1995/3023, art. 7(1)(2)

C5 Ss. 270 - 276 modified (6.1.1992) by British Technology Group Act 1991 (c. 66, SIF 64), s. 17(3), Sch. 3 para. 7(1); S.I. 1991/2721, art.2

Ss. 270-276 modified (8.11.1995) by 1995 c. 37, s. 6, Sch. 2 para.7(1)

Ss. 270-276 modified (24.7.1996) by 1996 c. 55, ss. 134, 149(1)(f), Sch. 6 para. 4(1)

C6 Ss. 270-276 applied (prosp.) by Horserace Betting and Olympic Lottery Act 2004 (c. 25), ss. 6(6), 40