Introduction of Solvency statements in the new CA
Directors must sign on the equivalent of a statutory declaration to verify that the company is solvent when the company undertakes the following:
(i) Declaration of dividends;
(ii) Capital reduction without a court order;
(iii) Redemption of preference shares;
(iv) Financial assistance; and
(v) Share buyback.
A company is regarded as solvent if the company is able to pay its debts as and when the debts become due within twelve months immediately after the distribution is made.
Where there is a breach of this solvency test, the directors then face personal liability and may face criminal sanctions.