Company Distributions and Dividends in Ireland: Distributable Profits Under the Companies Act 2014

A dividend is the most familiar way for an Irish company to pay money to its shareholders, but it is not a free choice. Under the Companies Act 2014, a dividend is a type of distribution, and a company can only make distributions out of profits available for the purpose. This guide explains the basic framework for company distributions, dividends and distributable profits in Ireland, based on the sections of the Act and the ODCE and CRO guidance we opened. It is general information, not legal or tax advice. Directors should take professional advice before declaring a dividend, and the accounts the company relies on are governed by the financial statements rules summarised in our guide to Companies Act 2014 financial reporting obligations.

What counts as a distribution

Section 123 of the Companies Act 2014, which defines the key terms for the distributions provisions, describes a distribution as every description of distribution of a company's assets to its members, whether in cash or otherwise. It carves out certain transfers, including bonus share issues, some redemptions or purchases of shares funded by a fresh share issue, and distributions on a winding up. So the term is wider than the cash dividend: handing a non-cash asset to a shareholder can also be a distribution.

The same section confirms two further points. References to profits and losses cover both revenue and capital profits and losses, and the distributions provisions do not override other laws, other legal rules or restrictions in the company's constitution that limit how distributions can be made. A company's constitution can therefore be stricter than the Act.

The general rule: only out of profits available

The Office of the Director of Corporate Enforcement (ODCE) published Information Book 4, "The Principal Duties and Powers of Members and Shareholders" (dated May 2015, reflecting the law when the Act was passed). It states that a dividend "can only be paid out of the company's profits which are available for distribution", citing section 117(1), and that those profits are a company's net accumulated realised profits. It adds that other profits and reserves, such as unrealised profits or share premium, cannot be used to declare a dividend.

Check the text of section 117 in the Act before applying the rule. Under section 117(2), the relevant figure is accumulated realised profits not previously distributed or capitalised, less accumulated realised losses, so in practice "net accumulated realised profits" means looking at accumulated figures across the company's history, not just this year's result. Our suggestion: have the finance team reconcile the retained earnings line to realised and unrealised components before any dividend is proposed.

Adjustments that affect distributable profits

Several sections we opened show how items in the accounts can change what is distributable.

• Development costs (section 120): if a company shows development costs as an asset, that amount is treated as a realised loss for the purposes of section 117, with two exceptions: any part representing an unrealised profit on revaluation, and cases where the directors decide special circumstances justify not treating it as a realised loss and say so in the financial statements, with an explanatory note.
• Unrealised profit on non-cash distributions (section 123): if a company distributes a non-cash asset whose stated value includes an unrealised profit, that profit is treated as realised, both when checking lawfulness and for certain related accounting rules.
• Distributions in kind (section 119): where a company distributes a non-cash asset, the distribution amount is zero if the consideration received is at least the asset's book value; otherwise it is the shortfall between book value and consideration. Book value is the amount at which the asset appears in the relevant financial statements under section 121, or zero if it is not stated at any amount.

Section 118 prohibits pre-acquisition profits or losses of a subsidiary from being treated as profits available for distribution in a holding company's financial statements, subject to its other subsections.

Which accounts are relevant

Section 119 refers to the "relevant financial statements" under section 121 for book value. Section 121 provides that, generally, the company's last statutory entity financial statements laid for the previous financial year are the relevant financial statements, with interim statements where those would show a breach of section 117 and initial statements where the distribution is declared in the first financial year or before statements for that year are laid. We do not set out section 122 here. Check the Act directly for the detail, because the answer determines whether interim accounts are needed. Our suggestion: before any dividend, ask the company's accountant to confirm in writing which accounts the board is relying on and that they show sufficient profits.

Declaring and paying the dividend

The CRO's Information Leaflet 37, "Share Capital and Resolutions" (page last modified 4 June 2025), lists sections 124 and 125 on the procedure for declaration and payment of dividends among the provisions that apply to an LTD company unless the constitution provides otherwise. It also says the AGM may declare a dividend, unless the constitution provides otherwise, but not one exceeding the amount the directors recommend. The ODCE's Information Book 4 makes the same point about a declared dividend not exceeding the directors' recommendation. The CRO leaflet adds that while a company holds treasury shares, no dividend is payable on them.

On whether a company must pay a dividend, an ODCE "List of Powers" page (no date shown; the page says the site is no longer active) states that a company is not legally obliged to pay a dividend, citing section 117. The Information Book says the same, unless the constitution provides otherwise. Both ODCE sources are archival, so confirm against the current Act and the company's constitution.

Public limited companies and other restrictions

The ODCE Information Book states that a PLC can only make a distribution if its net assets are not less than the called-up share capital plus undistributable reserves, and that the distribution must not reduce net assets below that total. The test for a public limited company is in section 1082 of the Act, which allows a PLC to make a distribution only if its net assets are not less than the aggregate of its called-up share capital and undistributable reserves, and only to the extent that the distribution does not reduce net assets below that total. Check the current Act if the company is a PLC.

Distributions, buybacks and bonus issues

Distributions overlap with other capital transactions. The CRO leaflet says a company buying back its own shares must pay "out of profits available for distribution" or from a fresh share issue where the shares are cancelled. Our guide to company share buybacks under the Companies Act 2014 covers that route. Section 126 deals with bonus issues: the relevant sums that can be capitalised are the company's undenominated capital, its distributable profits and any unrealised revaluation reserves, and a general meeting can resolve to capitalise them on the directors' recommendation.

Tax is a separate question

Company law decides whether a distribution is lawful; tax law decides what follows for the company and shareholders. We have not covered tax treatment here. For withholding tax on dividends, see our dividend withholding tax guide for Irish companies and shareholders, and check Revenue's current guidance.

A practical pre-dividend checklist

Our suggestion, not a statutory requirement:

• Read the constitution for any dividend-specific provisions.
• Confirm the figure for net accumulated realised profits from the accounts, adjusting for items such as capitalised development costs.
• Check whether the distribution is in cash or in kind, and value any non-cash asset by reference to book value.
• Minute the board recommendation and the shareholder resolution, and keep the supporting accounts on file.
• Take advice from your accountant or solicitor, especially if profits are thin or the company is a PLC.

Learnsignal's offices are off Baggot Street in Dublin, and we offer in-person training from there. For current details, see our CPD pages.

Frequently asked questions

Can an Irish company pay a dividend from unrealised profits?

According to the ODCE Information Book 4 (May 2015), no: unrealised profits and share premium cannot be used to declare a dividend. The general rule refers to net accumulated realised profits. Check section 117 in the current Act.

Does a company have to pay a dividend when it has profits?

An ODCE page states a company is not legally obliged to pay a dividend, citing section 117, and the ODCE book says the same unless the constitution provides otherwise.

Who decides the amount of a dividend?

The CRO leaflet says that, unless the constitution provides otherwise, the AGM may declare a dividend but not one exceeding the amount the directors recommend, and the ODCE book makes the same point about the amount recommended by the directors.

Is a transfer of a non-cash asset to a shareholder a distribution?

It can be. Section 123 refers to distributions of assets to members in cash or otherwise, and section 119 sets out how the amount is calculated for distributions in kind.

Does this guide cover tax on dividends?

No. It covers company law only. Tax treatment is separate and changes, so check Revenue's current guidance and take advice.

Company law is amended from time to time, so always check the Act as currently in force and take professional advice before making a distribution.