Companies Act 2006, section 838

Requirements where interim accounts used

Part 23 Distributions

(1)Interim accounts must be accounts that enable a reasonable judgment to be made as to the amounts of the items mentioned in section 836(1).

(2)Where interim accounts are prepared for a proposed distribution by a public company, the following requirements apply.

(3)The accounts must have been properly prepared, or have been so prepared subject to matters that are not material for determining (by reference to the items mentioned in section 836(1)) whether the distribution would contravene this Part.

(4) “Properly prepared” means prepared in accordance with sections 395 to 397 (requirements for company individual accounts), applying those requirements with such modifications as are necessary because the accounts are prepared otherwise than in respect of an accounting reference period.

(5)The balance sheet comprised in the accounts must have been signed in accordance with section 414.

(6)A copy of the accounts must have been delivered to the registrar.

Any requirement of Part 35 of this Act as to the delivery of a certified translation into English of any document forming part of the accounts must also have been met.

Read section 838 in the full Act → Definitions (3) Cases (7)

Definitions used in section 838

distribution

(1) In this Part “distribution” means every description of distribution of a company's assets to its members, whether in cash or otherwise, subject to the following exceptions.

Defined in s.829(1) · see it in the full Act
company

“company” means a company formed and registered under this Act, that is—

(a)

a company so formed and registered after the commencement of this Part, or

(b)

a company that immediately before the commencement of this Part—

(i)

was formed and registered under the Companies Act 1985 (c. 6) or the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)), or

(ii)

was an existing company for the purposes of that Act or that Order,

(which is to be treated on commencement as if formed and registered under this Act).

Defined in s.1(1) · see it in the full Act

(4) In this section and that Schedule “company” includes any body corporate.

Defined in s.1159(4) · see it in the full Act
the registrar

(3) In the Companies Acts“the registrar of companies” and “the registrar” mean the registrar of companies for England and Wales, Scotland or Northern Ireland, as the case may require.

Defined in s.1060(3) · see it in the full Act

Cases considering section 838 (7)

MANOLETE PARTNERS PLC v PAUL ANTHONY RUTTER & Anor

[2022] EWHC 2552 (Ch) · 7 October 2022

Applies the test for interim accounts: they must enable a reasonable judgment about the relevant distributable amounts. The draft 2014–15 accounts satisfied that test. (see paras [80]-[81], [111])

SSF Realisations Ltd v Loch Fyne Oysters Ltd & Ors

[2020] EWHC 3521 (Ch) · 21 December 2020

The court held that interim accounts must enable a reasonable judgment to be made about the relevant figures. The October management accounts failed that test because they materially understated liabilities and overstated distributable profits. (see paras [88], [91]-[95])

BTI 2014 LLC v Pricewaterhousecoopers LLP & Anor

[2019] EWHC 3034 (Ch) · 15 November 2019Interprets

Applies the interim-accounts requirement that the accounts enable a reasonable judgment to be made about the statutory items relevant to the distribution. (see paras [21]-[24]) Applies the requirement that interim accounts enable a reasonable judgment to be made as to the relevant profits, losses, assets and liabilities. (see paras [21]-[24])

What each judgment says about section 838 is in the case-law panel in the full Act.

Amendments and notes

1 notes from legislation.gov.uk

Commencement

  1. I297S. 838 wholly in force at 6.4.2008; s. 838 not in force at Royal Assent see s. 1300; s. 838 in force at 6.4.2008 by S.I. 2007/3495, art. 3(1)(k) (with savings in arts. 7, 12 and subject to transitional adaptations in Sch. 1 paras. 14-20 and with savings in Sch. 4 paras. 33-35) this amendment is subject to savings and/or transitional provisions, see the commentary.