72. Restrictions on Distributions

(1) A Company must not make a Distribution unless the Distribution is made out of profits available for Distribution. The profits available for Distribution are the Company’s accumulated, realised profits (so far as not previously utilised by Distribution or capitalisation) less its accumulated, realised losses (so far as not previously written off in a reduction or reorganisation of capital duly made).

(2) A Public Company must not make a Distribution:

• (a) unless the amount of its net assets is not less than the aggregate of its share capital and undistributable reserves; and
• (b) unless, and only to the extent that, the Distribution does not reduce the amount of those net assets to less than that aggregate.

(3) Whether a Distribution may be made by a Company without Contravening this section is determined by reference to the following items as stated in the relevant accounts:

• (a) profits, losses, assets and Liabilities;
• (b) provisions of any kind;
• (c) share capital and reserves (including undistributable reserves).

(4) The relevant accounts are the Company’s last annual accounts, except that:

• (a) if the Distribution would be found to Contravene this section by reference to the Company’s last annual accounts—it may be justified by reference to interim accounts; and
• (b) if the Distribution is proposed to be declared during the Company’s first accounting reference period or before any accounts have been prepared in respect of that period—may be justified by reference to initial accounts.

(5) If the relevant accounts are:

• (a) the Company’s last annual accounts—the accounts must be the accounts that were sent to Shareholders under section 131(4) (Accounts); and
• (b) interim accounts—the accounts must be properly prepared so as to enable a reasonable judgement to be made about the amounts of the items mentioned in subsection (3); and
• (c) initial accounts—the accounts must be properly prepared so as to enable a reasonable judgement to be made about the amounts of the items mentioned in subsection (3) and, if the Company is a Public Company, accompanied by a report from the Company’s auditor stating whether, in the auditor’s opinion, the accounts have been properly prepared.

(6) If any applicable requirement in subsection (5) is not complied with in relation to any accounts, the accounts may not be relied on for this section and the Distribution is accordingly treated as a Contravention of this section.

(7) In this section: auditor means a Person who is registered by the Registrar as an auditor under these Regulations.

Distribution, in relation to a Company, means every description of distribution of the Company’s assets to its Shareholders, whether in cash or otherwise, except a distribution by way of:

• (a) an issue of bonus Shares; or
• (b) the redemption or purchase of any of the Company’s own Shares out of share capital (including the proceeds of any fresh issue of Shares), or out of unrealised profits, in accordance with these Regulations and the Rules; or
• (c) the reduction of share capital either by:

(i) extinguishing or reducing the Liability of any of the Shareholders in respect of share capital not Paid-up or by repaying any Paid-up share capital; and

(ii) a distribution of assets to Shareholders on the winding up of the Company.

undistributable reserves, of a Company, means any of the following:

• (a) its share premium account;
• (b) any capital redemption reserve;
• (c) the amount by which its accumulated, unrealised profits (so far as not previously utilised by Distribution or capitalisation) exceeds its accumulated, unrealised losses (so far as not previously written off in a reduction or reorganisation of capital duly made);
• (d) any other reserve that the Company is prohibited from distributing by its Articles of Association or under any applicable AIFC Regulations or AIFC Rules.

(8) Contravention of this section is punishable by a fine.

73. Consequences of unlawful Distribution

If a Distribution, or part of a Distribution, made by a Company to any of its Shareholders is made in Contravention of section 72 (Restrictions on Distributions) and, at the time of the Distribution, the Shareholder knows or has reasonable grounds for believing that it is made in Contravention of that section, the Shareholder is liable to repay the Distribution, or that part of it, to the Company or, for a Distribution made otherwise than in cash, to pay to the Company an amount equal to the value of the Distribution, or that part, at that time.