Companies Act (Cap. 386), article 197

197. (1) The provisions of this article and of articles 198 to 203 shall apply for determining the question whether a distribu tion may be made by a company without contravening articles 192, 193 , or 194. (2) The amount of a distribution which may be made shall be determined by reference to the following items as stated in the company’s accounts - (a) profits, losses, assets and liabilities; (b) provisions; and (c) share capital and reserves, including undistributable reserves. (3) The company’s accounts which are relevant for the purposes of this article shall be its last annual accounts, tha t is to say those which were laid in respect of the last preceding accounting period in respect of which accounts so prepared were laid: Provided that in the following two cases - (a) where the distribution would be found to contravene the relevant article in this Chapter if reference were made only to the company’s last annual accounts; or (b) where the distribution is proposed to be declared during the company’s first accounting period, or before any annual accounts are laid in respect of that period, the accounts relevant under this article, called "interim accou nts" in the first case, and "initial acco unts" in the second, shall be those necessary to enable a reasonable judgment to be made as to the amounts of the items menti oned in sub-article (2). 136 CAP. 386.] COMP ANIES (4) The relevant article of this Chapter is treated as contravened in the case of a dis tribution unless the requiremen ts laid down in this article and in the following three articles, as and where applicable, in respect of the relevant accounts are compl ied with in relation to that distribution. Requirements for last annual accounts.