What is the rule regarding the calculation of distributable profits within a group entity?

The calculation of distributable profits within a group entity must be performed for each entity in the group separately. This is crucial because distributable profits are determined based on the individual financial statements of each company within the group according to the relevant legal framework, such as the Companies Act.

Distributable profits are those that can be legally paid out to shareholders as dividends, and each entity has its own retained earnings and legal requirements that must be taken into account. Therefore, one cannot simply aggregate profits at the consolidated level for dividend distribution purposes. Any distribution decisions must adhere to statutory regulations and the specific financial condition of each entity.

This approach ensures that the protection of creditors and compliance with legal obligations is maintained. Thus, it is essential that each company’s accounts reflect its ability to support dividend payments based on its profits and reserves, rather than a collective assessment for the entire group.