Intra-Group Loans and Distributions

This note (and its sister note on guarantees and distributions) have been prompted by a paper produced by the Institute of Chartered Accounts in England and Wales and the Institute of Chartered Accountants of Scotland containing Guidance on Realised and Distributed Profits under the Companies Act 2006 (Tech 02/17 BL).

They are concerned with the following questions: 1. If an English company, which is a member of a group of companies, gives a guarantee to a creditor of its parent company or of a fellow subsidiary, can that guarantee constitute a distribution of assets to its members? 2. If an English company, which is a member of a group of companies, makes an on-demand loan to its parent company or to a fellow subsidiary, can that loan constitute a distribution of assets to its members?