263 Certain distributions prohibited.E+W+S
(1)A company shall not make a distribution except out of profits available for the purpose.
(2)In this Part, “distribution” means every description of distribution of a company’s assets to its members, whether in cash or otherwise, except distribution by way of—
(a)an issue of shares as fully or partly paid bonus shares,
(b)the redemption or purchase of any of the company’s own shares out of capital (including the proceeds of any fresh issue of shares) or out of unrealised profits in accordance with Chapter VII of Part V,
(c)the reduction of share capital by extinguishing or reducing the liability of any of the members on any of the company’s shares in respect of share capital not paid up, or by paying off paid up share capital, and
(d)a distribution of assets to members of the company on its winding up.
(3)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 make.
This is subject to the provision made by sections 265 and 266 for investment and other companies.
(4)A company shall not apply an unrealised profit in paying up debentures, or any amounts unpaid on its issued shares.
(5)Where the directors of a company are, after making all reasonable enquiries, unable to determine whether a particular profit made before 22nd December 1980 is realised or unrealised, they may treat the profit as realised; and where after making such enquiries they are unable to determine whether a particular loss so made is realised or unrealised, they may treat the loss as unrealised.
Modifications etc. (not altering text)
C1S. 263 modified (31.10.1994) by 1994 c. 21, s. 15, Sch. 3 para.6(1); S.I. 1994/2552, art. 2, Sch. 1
S. 263 modified (8.11.1995) by 1995 c. 37, s. 6, Sch. 2 para. 6(1)
C2S. 263 modified (5.10.2004) by Energy Act 2004 (c. 20), ss. 39, 198(2), Sch. 6 para. 2(a) (with s. 38(2), Sch. 6 para. 8); S.I. 2004/2575, art. 2(1), Sch. 1
C3S. 263(1) applied (with modifications) (6.11.2000) by 2000 c. 26, s. 72(3)-(5); S.I. 2000/2957, art. 2(1), Sch. 1