Companies Act 2014 section 119

Distributions in kind: determination of amount

Section 119 sets out how to calculate the amount of a distribution when a company disposes of a non-cash asset, such as property or equipment, rather than paying cash to its shareholders.

• A distribution in kind arises when a company sells, transfers, or otherwise disposes of a non-cash asset, and the rules only apply where the company has sufficient distributable profits and can lawfully make the distribution
• If the consideration received for the asset equals or exceeds its book value, the distribution amount is zero; if the consideration is less than book value, the distribution amount is the shortfall
• Where the consideration exceeds the book value of the asset, the surplus is added to the company's distributable profits, increasing the headroom available for distributions
• Book value means the amount at which the asset appears in the relevant financial statements under section 121, or zero if the asset does not appear in those statements at any amount