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3
1.4
capital reduction or reorganisation; and
(a) Any other reserve which the company is prohibited
from distributing by any other Ordinance or by its
own memorandum or articles.
In other words, an unlisted company can make a distribution
provided that it has profits available for the purpose.
However before it can make a distribution, a listed
company must not only have profits available for the
purpose, it must also provide for any existing
unrealised losses.
Before reaching any decisions on the recommendations in the
Sub-Committee's Report, the Standing Committee decided that they should
obtain the comments of the professional and other organisations usually
consulted on these matters. These organisations were duly written to
at the end of June and the last of their comments were received on
1st December. Having carefully considered all the comments, we decided
to accept the Sub-Committee's Report and the recommendations therein
subject to deletion of a comparatively minor provision, Clause XIV(3),
in the recommended draft legislation.
1.5
We therefore recommend the introduction of new legislation
on the subject of distributable profits as recommended in the Sub-
Committee's Report, subject to deletion of the proposed Clause XIV(3)
in Appendices D & E to the Report. We would like to stress that the
recommended legislation will only make law what is already good
accounting practice.
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