Unlock Cash
OCTOBER 2009
Did you know that there are now new simplified procedures which may allow companies and groups of companies to pay dividends and make other distributions even when there is a deficit on the profit and loss account?
Until very recently companies which had a deficit on profit and loss account could not make any distribution even if they had substantial cash resources, unless they made an application to the Court to approve a reduction in share capital.
This was often a costly and sometimes difficult procedure and was therefore a serious barrier for a company seeking to make distributions to its shareholders.
If a company’s balance sheet shows that it has substantial issued share capital, or share premium account, then under the new simplified procedures it may be possible to convert these into distributable profits and eliminate a deficit on profit and loss account.
Even if there is a small positive balance on profit and loss account a company, with substantial cash resources, may wish to distribute to its shareholders more than the small balance. It now may be achievable by reducing the company’s permanent share capital.
These procedures may also be used to allow a company to purchase its own shares, when previously such a purchase would have to be made out of capital. Under these procedures it could mean that such a purchase could be effected without the need for an Auditor’s report which can often be a costly exercise.
If you would like any further information about the issues raised in this article, please contact Philip Langford or any other member of Goodman Derrick LLPs Corporate Department on 0207 404 0606.
This is a guide for general information and interest only. It should not be relied upon as providing specific legal advice.
|
