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