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Wednesday, 13 May 1981
Page: 2345

Mr JACOBI(9.26) —I will not delay the House but I wish to say something on the matter of no dividends except out of profits. I suggest that we replace this provision with sections 39 and 40 of the United Kingdom Companies Act. I will read from these sections so that they will be recorded in Hansard. The preceding Australian Companies Acts as well as this Bill, regrettably, do not define the word profits. That is precisely the argument and is the sort of argument which the Minister used when talking on the last provision of the Bill. It is ironic, as I said last night, that the United Kingdom has adopted a more stringent definition than we have done. I will briefly read from the two United Kingdom sections. Section 39 states:

(1) A company shall not make a distribution . . . except out of profits available for the purpose . . .

(2) For the purpose of this part . . . a company's profit available for distribution, are its accumulated realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulative or realised losses, so far as not previously written off in a reduction or re-organisation of capital duly made.

Section 40 states:

A public company may only make a distribution at any time:

(a) if at that time the amount of its net assets is not less than the aggregate of the companies called up share capital and its undistributable reserves; and

(b) if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.

I suggest that until we include those sorts of provisions in the Bill we will not get the coverage that we want.