Section 487 of The Companies Act No. 17 of 2015: Net asset restriction on distributions by public companies
(1) A public company may make a distribution only—
(a) if the amount of its net assets is not less than the aggregate of its called-up share capital and 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.
(2) For the purpose of subsection (1), a company's net assets are the aggregate of the company's assets less the aggregate of its liabilities.
(3) For the purpose of subsection (1), a company's undistributable reserves
are—
(a) its share premium account;
(b) its capital redemption reserve;
(c) the amount by which its accumulated, unrealised profits (so far as not previously utilised by capitalisation) exceed its accumulated, unrealised losses (so far as not previously written off in a reduction or reorganisation of capital duly made);
(d) any other reserve that the company is prohibited from distributing—
(i) by any enactment (other than one contained in this Part); or (ii) by its articles.
(4) The reference in subsection (3)(c) to capitalisation does not include a transfer of profits of the company to its capital redemption reserve.
(5) A public company may not include any uncalled share capital as an asset in a financial statement that is relevant for purposes of this section.
(6) If a company contravenes subsection (1) or (5), the company, and each officer of the company who is in default, commit an offence and on conviction are each liable to a fine not exceeding one million shillings.
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