Section 488 of The Companies Act No. 17 of 2015: Justification of distribution by reference to relevant financial statements
(1) Whether a distribution may be made by a company without contravening this Part is determined by reference to the following items as stated in the relevant financial statements—
(a) profits, losses, assets and liabilities;
(b) provisions of a kind specified for the purposes of this section by the regulations;
(c) share capital and reserves (including undistributable reserves).
(2) The relevant financial statements are the company's last annual financial statements, except that—
(a) if the distribution would be found to contravene this Part by reference to the company’s last annual financial statements, it may be justified by reference to interim financial statements; and
(b) if the distribution is proposed to be declared during the company's first accounting reference period, or before any financial statements have been circulated in respect of that period, it may be justified by reference to initial financial statements.
(3) The company shall ensure that the requirements of the Fifth Schedule are complied with as and if applicable.
(4) If the company fails to comply with any applicable requirement of the Fifth Schedule, the relevant financial statements may not be relied on for the purposes of this Part and the distribution is accordingly treated as contravening this Part.
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