Companies (Amendment) Act, 1983

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Other distributions of investment companies.

47.—(1) Subject to the following provisions of this section, an investment company may also make a distribution at any time out of its accumulated, realised revenue profits, so far as not previously utilised by distribution or capitalisation, less its accumulated revenue losses (whether realised or unrealised), so far as not previously written off in a reduction or reorganisation of capital duly made—

(a) if at that time the amount of its assets is at least equal to one and a half times the aggregate of its liabilities; and

(b) if, and to the extent that, the distribution does not reduce that amount to less than one and a half times that aggregate.

(2) In subsection (1) “liabilities” includes any provision (within the meaning of the Sixth Schedule to the Principal Act) except to the extent that that provision is taken into account for the purposes of that subsection in calculating the value of any asset of the company in question, and subsection (4) of section 46 shall apply for those purposes as it applies for the purposes of that section.

(3) In this Part “investment company” means a public limited company which has given notice in writing (which has not been revoked) to the registrar of its intention to carry on business as an investment company (the “requisite notice”) and has since the date of that notice complied with the requirements set out in subsection (4).

(4) The requirements referred to in subsection (3) are—

(a) that the business of the company consists of investing its funds mainly in securities, with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds;

(b) that none of the company's holdings in companies other than companies which are for the time being investment companies represents more than 15 per cent. by value of the investing company's investment;

(c) that distribution of the company's capital profits is prohibited by its memorandum or articles of association;

(d) that the company has not retained, otherwise than in compliance with this Part in respect of any financial year more than 15 per cent. of the income it derives from securities.

(5) An investment company may not make a distribution by virtue of subsection (1) unless its shares are listed on a recognised stockexchange and, during the period beginning with the first day of the financial year immediately preceding the financial year in which the proposed distribution is to be made or, where the distribution is proposed to be made during the company's first financial year, the first day of that financial year and ending with the date of the distribution (whether or not any part of those financial years falls before the appointed day), it has not—

(a) distributed any of its capital profits; or

(b) applied any unrealised profits or any capital profits (realised or unrealised) in paying up debentures or any amounts unpaid on any of its issued shares.

(6) An investment company may not make a distribution by virtue of subsection (1) unless the company gave the requisite notice—

(a) before the beginning of the appropriate period referred to in subsection (5); or

(b) where that period began before the appointed day, as soon as may be reasonably practicable after the appointed day; or

(c) where the company was incorporated on or after the appointed day, as soon as may be reasonably practicable after the date of its incorporation.

(7) A notice by a company to the registrar under subsection (3) may be revoked at any time by the company on giving notice to the registrar that it no longer wishes to be an investment company within the meaning of this section and, on giving such notice, the company shall cease to be such an investment company.

(8) In determining capital and revenue profits and losses for the purposes of this section an asset which is not a fixed asset or a current asset shall be treated as a fixed asset.

(9) An investment company shall include the expression “investment company” on its letters and order forms.

(10) Where a company fails to comply with subsection (9), the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding £250.

(11) Proceedings in relation to an offence under this section may be brought and prosecuted by the registrar of companies.

(12) For the purposes of paragraph (b) of subsection (4)—

(a) “holding” means the shares or securities (whether of one class or more than one class) held in any one company;

(b) holdings in companies which are members of a group (whether or not including the investing company) and are not excluded from the said paragraph (b) shall be treated as holdings in a single company;

(c) where the investing company is a member of a group, money owed to it by another member of the group shall be treated as a security of the latter held by the investing company and accordingly as, or as part of, the holding of the investing company in the company owing the money,and for the purposes of this subsection “group” means a company and all companies which are its subsidiaries within the meaning of section 155 of the Principal Act.