Companies Act 2014 section 122

Consequences of making unlawful distribution

Section 122 deals with what happens when a company makes a distribution to a shareholder that breaches the rules set out in this Part of the Act, and specifically the obligation on the shareholder to repay that distribution.

• A shareholder who receives a distribution (or part of one) that contravenes the Act must repay it to the company if they knew or had reasonable grounds to believe it was unlawful.
• Where the unlawful distribution was made in a form other than cash, the shareholder must pay the company a sum equal to the value of the distribution (or the unlawful part) at the time it was made.
• The repayment obligation applies whether the entire distribution or only part of it contravenes the rules.
• This section does not override or limit any other existing obligations a shareholder may have to repay an unlawful distribution, for example one made in breach of the company's constitution.