Companies Act 2014 section 117

Profits available for distribution

Section 117 establishes the rules governing what profits a company may use to make distributions, and how those distributable profits are calculated.

• A company may only make distributions from accumulated realised profits, less accumulated realised losses — unrealised profits cannot be used for distributions or to pay up debentures or unpaid share amounts
• Provisions and value adjustments are generally treated as realised losses, with a limited exception for fixed asset revaluations in Companies Act entity financial statements
• When a fixed asset is revalued upwards, any additional depreciation charge arising from the higher value is treated as a realised profit over the depreciation period
• A reserve created from a reduction of company capital is treated as a realised profit, unless a court order, relevant resolution, or the company's constitution provides otherwise

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