Jersey: Distributions By Jersey Companies - April 2015

Last Updated: 5 May 2015
Article by Raulin Amy, Christopher Byrne, Sara Johns, Matthew Swan, Nathan Powell and Simon Dinning

Most Read Contributor in Jersey, September 2016

What is a distribution?

Article 114(1) of the Companies (Jersey) Law 1991, as amended, (the Law) defines a distribution, in relation to a company, as "every description of distribution of the company's assets to its members as members, whether in cash or otherwise."

Article 114(2) of the Law states that a distribution does not include:

  • an issue of shares as fully or partly paid bonus shares
  • the redemption or purchase of any of the company's own shares
  • any reduction of share capital by extinguishing or reducing the liability of any of the members on any of the company's shares in respect of capital not paid up
  • a distribution of assets to members of the company on its winding up.

Article 115(2) of the Law makes it clear that the Law only restricts or seeks to control distributions which reduce the net assets of a company and in respect of which provision would have to be made in the accounts of the company under the GAAP adopted by the company (Article 115(2A)). Therefore, this would not catch guarantees given to support parent entities unless the directors believed that the guarantee would be called upon and this was reflected in the accounts.

Funding a distribution

A Jersey company may make a distribution from any source (other than nominal capital account and capital redemption reserve). In particular, a distribution can be made from a share premium account (for a par value company) or a stated capital account (for a no par value company) and in either case from a profit and loss account, even where a company has accumulated losses.

Distribution Procedure

A Jersey company can make a distribution at any time, but:

  • where the company is an open-ended investment company, the directors who are to authorise the distribution must reasonably believe that immediately after the distribution has been made the company will be able to discharge its liabilities as they fall due; and
  • where the company is not an open-ended investment company, the directors who are to authorise the distribution must make a statement (Solvency Statement) that they have formed the opinion:
  1. that, immediately following the date on which the distribution is proposed to be made, the company will be able to discharge its liabilities as they fall due; and
  2. that, having regard to (i) the prospects of the company and to the intentions of the directors with respect to the management of the company's business; and (ii) the amount and character of the financial resources that will in their view be available to the company, the company will be able to continue to carry on its business and discharge its liabilities as they fall due until the expiry of the period of 12 months immediately following the date on which the distribution is proposed to be made or until the company is dissolved under article 150 of the Law (that is, on the basis of a solvent winding up).

The above is referred to in this briefing as the Distribution Procedure.

A Solvency Statement is required even where the Jersey company has distributable reserves.

The Solvency Statement could be made orally by a director at a board meeting, and evidenced in board minutes, but we recommend that a separate written statement is made and signed by the relevant directors.

Articles of Association

In some instances, the articles of association of the Company will impose restrictions, preferences or procedural requirements on the making of distributions and they should therefore be reviewed in all cases. In particular, the articles of association of most companies incorporated prior to the recent changes to the distribution regime will permit directors to pay interim dividends only if it appears to them that they are justified by the profits of the company available for distribution.

Ratification of an unlawful distribution

The statutory requirement that the solvency statement under the Distribution Procedure is to be given by directors "who are to authorise" the distribution, suggests that the statement must be given prior to the distribution. However, a distribution made without complying with the Distribution Procedure can subsequently be ratified by means of an ex parte application to the Royal Court of Jersey so that it can make an order that the distribution was lawful. The Court would need to be satisfied that (a) the relevant solvency tests could have been passed immediately after the distribution and on the determination of the application and (b) it would not be contrary to the interests of justice to do so. No shareholder approval is required.

It is still possible just to treat the payment to the shareholders as a loan and convert this by way of set off into a distribution in the event that the affairs of the company do not require the payment to be treated as a distribution from the time it was made.

Consequences of breach of Distribution Procedure

A director who makes a Solvency Statement without having reasonable grounds for the opinion expressed in the statement is guilty of an offence punishable by up to 2 years imprisonment or a fine, or both (Article 115(5) of the Law). Further, under common law the directors who authorise an unlawful dividend may be held personally liable to reimburse the company for any distribution unlawfully made.

If a distribution is made without complying with the Distribution Procedure, then the member who received the distribution is liable to pay it or part of it (or, if the distribution was made otherwise than in cash, to pay a sum of equivalent value) if at the time of the distribution the member knows or has reasonable grounds for believing that the distribution is made in contravention of the statutory requirements (Article 115A of the Law).


The ability to make a distribution out of any source (other than nominal share account and capital redemption reserve for a par value company) provides flexibility, while the Distribution Procedure and sanctions provide sufficient safeguards for creditors.

However, although the Law only seeks to control distributions which reduce the net assets of a company, care should still be taken as certain transactions might, unintentionally or unwittingly, constitute distributions so that if the Distribution Procedure is not complied with, they might be unlawful. At the more obvious end of the scale might be transactions that involve a transfer of assets to a member at less than fair market value or a loan on less than commercial terms that almost certainly cannot be repaid. As regards the giving of a guarantee by a Jersey subsidiary in respect of its parent's obligations, if the guarantee is to be entered in the accounts as a note only because of the contingent nature of the obligation then it will not be a distribution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.