Companies Act 2014 section 121

The relevant financial statements

Section 121 sets out which financial statements a company must use when determining whether it may lawfully make a distribution of profits, and the conditions those statements must satisfy.

• A distribution must be justified by reference to the company's entity financial statements — normally the last statutory financial statements that have been laid before members
• Where the last statutory accounts do not support a distribution, the company may rely on interim or initial financial statements, but these must still enable a reasonable judgement on the relevant financial items
• If the auditors' report on the relevant financial statements is qualified, the auditors must state whether the qualification is material to the question of whether the distribution complies with the law
• All distributions already made on the basis of the same set of financial statements must be aggregated with any proposed distribution when testing compliance