In terms of the new Companies Act the transactions that will require that “the solvency and liquidity test” be satisfied include:

–the provision of financial assistance to third parties for the acquisition of the company’s own shares;

–loans or other “financial assistance” to related parties;

–dividends or other “distributions” to shareholders;

–the issuing of capitalisation shares on terms whereby the recipient can choose whether to take the shares or to take cash;

 

–share buy-backs;

–an amalgamation or merger with another company.

 

 THE TEST

The assets of the Company fairly valued must exceed its liabilities, and

the Company must be able to pay its debts for the following 12 months.