Section 108 — Companies Act 1993: Company to satisfy solvency test

108 Company to satisfy solvency test (1) A power referred to in subsection (1) of section 107 of this Act must not be exercised unless the board of the company is satisfied on reasonable grounds that the company will, immediately after the exercise of the power, satisfy the solvency test. (2) The directors who vote in favour of the exercise of the power must sign a certificate stating that, in their opinion, the company will, after the exercise of the power, satisfy the solvency test. (3) If, after a resolution is passed under subsection (1) of this section and before the power is exercised, the board ceases to be satisfied on reasonable grounds that the company will, immediately after the power is exercised, satisfy the solvency test, any exercise of the power is deemed not to have been authorised. (4) The provisions of section 56 of this Act apply in relation to the exercise of a power referred to in subsection (1) of section 107 of this Act, with such modifications as may be necessary. (5) In applying the solvency test for the purposes of section 107(1)(e) of this Act,— (a) Assets excludes all amounts of financial assistance given by the company at any time under section 76 or section 107(1)(e) in the form of loans; and (b) Liabilities includes the face value of all outstanding liabilities, whether contingent or otherwise, incurred by the company at any time in connection with the giving of financial assistance under section 76 or section 107(1)(e) . (5A) Nothing in subsection (5) limits or affects the application of section 4(4) . (6) Every director who fails to comply with subsection (2) of this section commits an offence and is liable on conviction to the penalty set out in section 373(1) of this Act. Subsection (5)(a) was amended, as from 15 April 2004, by section 6(1) Companies Amendment Act (No 2) 2004 (2004 No 24) by inserting the words “ under section 76 or section 107(1)(e) ” after the words “ at any time ” . Subsection (5)(b) was amended, as from 15 April 2004, by section 6(2) Companies Amendment Act (No 2) 2004 (2004 No 24) by substituting the words “ financial assistance under section 76 or section 107(1)(e) ” for the words “ the financial assistance ” . Subsection (5A) was inserted, as from 30 June 1997, by section 7 Companies Act 1993 Amendment Act 1997 (1997 No 27).