Reduction of capital

Companies may need to reduce their capital, for example to: repay excess cash to shareholders create distributable reserves to be able to pay dividends help with a demerger or spin out of a subsidiary In this article we consider the following key issues: legal process accounting treatment tax treatment (this article is a summary only,… Continue reading Reduction of capital

Capital reductions to pay out dividends

Sometimes a company has cash but no distributable reserves, so it can’t pay dividends.¬†Capital reductions can be used in certain circumstances to create distributable reserves which can then be paid in dividends. For example, a company may have issued shares at a premium but initially made losses.¬†Once it becomes profitable and cash generative it may… Continue reading Capital reductions to pay out dividends