Ireland · Shares, company capital and dividends
Profits available for distribution, declaring a dividend and making a bonus issue
the Companies Act 2014 · sections 117, 118, 120, 121 and 124 to 126
Profits available for distribution under section 121 decide whether a dividend can be paid
The question is never whether the company has cash. It is whether it has profits available for distribution, tested in the way section 121 requires. Whether a distribution may be made without contravening section 117, and how much may be distributed, is determined by reference to the relevant items as stated in the relevant financial statements (section 121(1)). Where the last financial statements are the only relevant statements, they must have been properly prepared, or have been so prepared subject only to matters that are not material (section 121(3)).
Development costs are the trap most often missed. Where development costs are shown as an asset in the financial statements, the amount shown for those costs is treated as a realised loss for the purposes of section 117 (section 120(1)). A company that carries capitalised development costs and pays out to the full accumulated profit figure has almost certainly paid too much.
Section 117 limits distributions to available profits and section 124 caps dividends at the directors' recommendation
Section 117 sets the rule that a company may make a distribution only out of profits available for that purpose, and section 118 governs the treatment of certain items in arriving at that figure. Section 120 deals with development costs, and section 121 sets the relevant financial statements against which the calculation is made, including the use of interim and initial financial statements where the last statutory financial statements will not support the distribution.
Declaration is a separate step from calculation. A company may declare dividends by ordinary resolution, but a dividend may not exceed the amount recommended by the directors (section 124(2)). Subject to the rights of any class entitled to a special dividend right, dividends are declared and paid according to the amounts paid or credited as paid on the shares (section 124(4)). Sections 125 and 126 govern the further mechanics, including capitalisation of profits for a bonus issue.
The system generates your ComplianceSME company passport and then walks you through the working files
Working files 16 and 17 of the IE-COMPANY agent toolkit cover this situation. Working file 16 works through the profits available for distribution: which financial statements are the relevant ones, whether they were properly prepared, how development costs and revaluations were treated, and what the resulting distributable figure is. Working file 17 works through the declaration and payment itself, the directors' recommendation, the resolution, the class rights applied and any bonus issue.
- Working file 16 · Profits available for distribution and the relevant financial statements
- Working file 17 · Declaration and payment of dividends and bonus issues
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The working files above open from your ComplianceSME account at no charge, and so does the rest of the Companies Act 2014 toolkit: 215 working files across the 75 situations a company registered in Ireland can be in. Working file 1 runs first and builds the company passport; after that you open each working file as its situation arises.
A working file runs in Claude. You ask the ComplianceSME connector for it in a dedicated premium seat on the Claude Team plan. It asks one question at a time, then returns the document the Companies Act 2014 names, citing the Act's section at every step. Nothing is downloaded and nothing is installed.
The report stays yours, ready for a bank, an insurer, a customer or an inspector. Your dashboard shows every working file and its state.
Open this working fileComplianceSME tracks the Companies Act 2014 and updates the toolkit on your account through the Compliance Complete account, so that you are never working from a superseded version. Compliance Complete