Payments to be made only if company is solvent
76F.—(1)  A payment made by a company in consideration of —
(a)acquiring any right with respect to the purchase or acquisition of its own shares in accordance with section 76C, 76D, 76DA or 76E;
(b)the variation of an agreement approved under section 76D or 76DA; or
(c)the release of any of the company’s obligations with respect to the purchase or acquisition of any of its own shares under an agreement approved under section 76D or 76DA,
may be made out of the company’s capital or profits so long as the company is solvent.
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(2)  If the requirements in subsection (1) are not satisfied in relation to an agreement —
(a)in a case within subsection (1)(a), no purchase or acquisition by the company of its own shares in pursuance of that agreement is lawful;
(b)in a case within subsection (1)(b), no such purchase or acquisition following the variation is lawful; and
(c)in a case within subsection (1)(c), the purported release is void.
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(3)  Every director or manager of a company who approves or authorises, the purchase or acquisition of the company’s own shares or the release of obligations, knowing that the company is not solvent shall, without prejudice to any other liability, be guilty of an offence and shall be liable on conviction to a fine not exceeding $100,000 or to imprisonment for a term not exceeding 3 years.
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(4)  For the purposes of this section, a company is solvent if —
(a)the company is able to pay its debts in full at the time of the payment referred to in subsection (1) and will be able to pay its debts as they fall due in the normal course of business during the period of 12 months immediately following the date of the payment; and
(b)the value of the company’s assets is not less than the value of its liabilities (including contingent liabilities) and will not after the proposed purchase, acquisition or release, become less than the value of its liabilities (including contingent liabilities).
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(5)  In determining, for the purposes of subsection (4), whether the value of a company’s assets is less than the value of its liabilities (including contingent liabilities), the directors or managers of a company —
(a)must have regard to —
(i)the most recent financial statements of the company that comply with section 201(1A), (3) and (3A), as the case may be; and
(ii)all other circumstances that the directors or managers know or ought to know affect, or may affect, the value of the company’s assets and the value of the company’s liabilities (including contingent liabilities); and
(b)may rely on valuations of assets or estimates of liabilities that are reasonable in the circumstances.
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(6)  In determining, for the purposes of subsection (5), the value of a contingent liability, the directors or managers of a company may take into account —
(a)the likelihood of the contingency occurring; and
(b)any claim the company is entitled to make and can reasonably expect to be met to reduce or extinguish the contingent liability.
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[Companies, s. 76F (modified)]