Ireland · Shares, company capital and dividends
Profits available for distribution, declaring a dividend and making a bonus issue
the Companies Act 2014 · sections 117, 118, 120, 121 and 124 to 126
Where the problem is
The question is never whether the company has cash. It is whether it has profits available for distribution, tested in the way section 121 requires. Whether a distribution may be made without contravening section 117, and how much may be distributed, is determined by reference to the relevant items as stated in the relevant financial statements (section 121(1)). Where the last financial statements are the only relevant statements, they must have been properly prepared, or have been so prepared subject only to matters that are not material (section 121(3)).
Development costs are the trap most often missed. Where development costs are shown as an asset in the financial statements, the amount shown for those costs is treated as a realised loss for the purposes of section 117 (section 120(1)). A company that carries capitalised development costs and pays out to the full accumulated profit figure has almost certainly paid too much.
What the Companies Act 2014 requires
Section 117 sets the rule that a company may make a distribution only out of profits available for that purpose, and section 118 governs the treatment of certain items in arriving at that figure. Section 120 deals with development costs, and section 121 sets the relevant financial statements against which the calculation is made, including the use of interim and initial financial statements where the last statutory financial statements will not support the distribution.
Declaration is a separate step from calculation. A company may declare dividends by ordinary resolution, but a dividend may not exceed the amount recommended by the directors (section 124(2)). Subject to the rights of any class entitled to a special dividend right, dividends are declared and paid according to the amounts paid or credited as paid on the shares (section 124(4)). Sections 125 and 126 govern the further mechanics, including capitalisation of profits for a bonus issue.
The tool that solves it
Files 16 and 17 of the IE-COMPANY package cover this situation. File 16 works through the profits available for distribution: which financial statements are the relevant ones, whether they were properly prepared, how development costs and revaluations were treated, and what the resulting distributable figure is. File 17 works through the declaration and payment itself, the directors' recommendation, the resolution, the class rights applied and any bonus issue.
This situation is covered by these files from the pack IE-COMPANY
- File 16 · Profits available for distribution and the relevant financial statements
- File 17 · Declaration and payment of dividends and bonus issues
Files for this situation
Free · this situation only
The working files named above cover this situation. You take them from your free ComplianceSME account when this situation arises, and you come back to the site for the next situation.
You take the starter pack first: PRINT_ME_FIRST.pdf, the training file T_TRAIN, the four volumes of the reference file T_HELP, and File 1, which builds the ENTITY_PASSPORT.md that the other files require. The situations open in your account once you have taken the starter pack.
Take the files for this situationThe free system
Free · with a free account
The ComplianceSME system for the Companies Act 2014 is free. It needs a free ComplianceSME account. It is engineered for Claude and runs in a dedicated Claude account. It holds 215 working files. You take the starter pack first, and after that the files for one situation at a time, as each situation arises.
The starter pack holds PRINT_ME_FIRST.pdf, the training file T_TRAIN, the four volumes of the reference file T_HELP, and File 1, which builds the ENTITY_PASSPORT.md that every other working file requires. Print PRINT_ME_FIRST.pdf and read it before any other file.
The system is engineered for Claude and runs in a dedicated Claude account. Upload the files, type START, and the system asks you one question at a time until it has built your documentation, citing the section at every point.
Take the starter packComplianceSME tracks the Companies Act 2014 and issues update files through the membership, so that you are never working from a superseded version. Membership
- Company registers, the register of members and rights of inspection
- Holding a general meeting: notice, quorum, proxies and voting
- Written resolutions of members and registering resolutions
- Using the Summary Approval Procedure
- Appointing directors and the secretary, and the EEA-resident director rule
- Removing a director, electing a director and paying directors
- Board meetings, written resolutions of directors and the audit committee
- Directors' duties, shadow directors and the compliance statement
- Declaring an interest, loans to directors and substantial transactions
- Notifying interests in shares and debentures and keeping the register
- Company size, the financial year and accounting records
- Preparing entity and group financial statements
- Disclosing directors' remuneration, loans and other transactions
- Notes on related undertakings, staff numbers, capital and financial assistance
- Approving and signing the financial statements and the directors' report
- The audit requirement, the audit exemption and the dormant company exemption
- Circulating the financial statements and delivering the annual return
- Revising defective financial statements and reports
- Appointing, removing and replacing the statutory auditor
- Registering a charge and keeping the register of charges
- A receiver is appointed over the company's property
- Schemes of arrangement and buying out dissenting shareholders
- A merger of private companies
- A division of a private company