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Capital maintenance – Tackling the difficult questions

Capital maintenance – Tackling the difficult questions

Company distributions can be a controversial subject. How can the concerns be addressed?

Michelle Hinchliffe

Partner, UK Chair of Audit

KPMG in the UK


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Company distributions have become a controversial subject. The reviews by the BEIS Select Committee, Sir John Kingman and Sir Donald Brydon have all referred to this.

A number of questions have been raised:

  • Are accounting standards and the current ICAEW guidance alone satisfactory for regulatory distributable reserves?
  • Does the realisation regime need to change to meet creditors’ and shareholders’ needs?
  • Should distributable reserves be calculated at a group level?
  • Should ARGA take responsibility for oversight of distributable reserves?
  • Should further disclosures be made on distributable reserves?

We believe that all those concerns can be addressed. The question is how to do so.

The aims of this Capital Maintenance paper are to examine the issues and sketch out, for debate, possible ways forward.

Resolution of these key issues is a core element of the programme of work required to restore trust in the profession.

© 2020 KPMG LLP, a UK limited liability partnership, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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