19.2 DEFINITION OF A DISTRIBUTION
In terms of the definition of distribution the following items would be included as part of a distribution;
· Money or property
· The occurrence of an obligation
· The forgiveness or waiver of any obligation.
Where there is a distribution which is part and parcel of a liquidation dividend this would not be included in the definition of a distribution.
The inclusions in a distribution would be;
· A payment of dividends
· Payment in lieu of capitalising of shares
· Buy back of shares
· Buy back of another company’s shares in the group.
· Inter group share transfer. I.e. this is a share transaction between companies that belong to the same group.
It is interesting to note that there is no definition of dividend in the companies Act and we need to look at the meaning in terms of accounting principles.
If the MOI allows the board the company may pay out shareholders a cash payment as an alternative to a capitalization issue of shares. In this case the payment will qualify as a distribution.
Companies in terms of the Act may issue redeemable shares and the redemption thereof requires compliance with the distribution and acquisition provisions of Sections 46 and 48. The redemption of preference shares falls outside the buyback provisions of the act, however the provisions in regard to solvency and liquidity must be applied.