Successive distributions etc by reference to the same accounts
‘(1) In determining whether a proposed distribution may be made by a company in a case where—
(a) one or more previous distributions have been made in pursuance of a determination made by reference to the same relevant accounts, or
(b) relevant financial assistance has been given, or other relevant payments have been made, since those accounts were prepared,
the provisions of this Part apply as if the amount of the proposed distribution was increased by the amount of the previous distributions, financial assistance and other payments.
(2) The financial assistance and other payments that are relevant for this purpose are—
(a) financial assistance lawfully given by the company out of its distributable profits;
(b) financial assistance given by the company in contravention of section (Assistance for acquisition of shares in public company) or (Assistance by public company for acquisition of shares in its private holding company) (prohibited financial assistance) in a case where the giving of that assistance reduces the company’s net assets or increases its net liabilities;
(c) payments made by the company in respect of the purchase by it of shares in the company, except a payment lawfully made otherwise than out of distributable profits;
(d) payments of any description specified in section (Payments apart from purchase price to be made out of distributable profits) (payments apart from purchase price of shares to be made out of distributable profits).
(3) In this section “financial assistance” has the same meaning as in Chapter (Financial assistance for purchase of own shares) of Part (Acquisition by limited company of own shares) (see section (Definitions for this Chapter)).
(4) For the purpose of applying subsection (2)(b) in relation to any financial assistance—
(a) “net assets” means the amount by which the aggregate amount of the company’s assets exceeds the aggregate amount of its liabilities, and
(b) “net liabilities” means the amount by which the aggregate amount of the company’s liabilities exceeds the aggregate amount of its assets,
taking the amount of the assets and liabilities to be as stated in the company’s accounting records immediately before the financial assistance is given.
(5) For this purpose a company’s liabilities include any amount retained as reasonably necessary for the purposes of providing for any liability—
(a) the nature of which is clearly defined, and
(b) which is either likely to be incurred or certain to be incurred but uncertain as to amount or as to the date on which it will arise.—[Margaret Hodge.]