Companies Act 2014 section 205

Declaration to be made in the case of treatment of pre-acquisition profits or losses in a manner otherwise prohibited by section 118(1)

Section 205 sets out the specific contents required in a directors' declaration when a company wishes to treat pre-acquisition profits or losses of a subsidiary in its financial statements in a way that would otherwise be prohibited.

• The declaration must state the amount of pre-acquisition profits or losses to be given the alternative treatment (termed the "proposed distribution"), along with total assets and liabilities from the company's most recent financial statements, dated no more than three months before the declaration
• The directors must confirm they have fully investigated the company's affairs and believe it could pay its debts and liabilities as they fall due for twelve months after the proposed distribution, assuming that distribution is made within two months of the declaration
• When assessing the company's ability to pay its debts, the directors must also consider the likelihood of guarantees being called upon or security being realised
• A copy of the declaration must be filed with the Registrar within 21 days of the restricted activity commencing; if this deadline is missed, the court has power to declare the activity valid if it considers it just and equitable to do so