Power of company to pay interest out of capital in certain cases

(1) Where any shares of a company are issued for the purpose of raising money to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be made profitable for a lengthened period, 82 the company may pay interest on so much of that share capital as is for the time being paid up for the period and, subject to the conditions and restrictions mentioned in this section, and may charge it to capital as part of the cost of construction of the work or building, or the provision of plant, provided that– (a) no such payment shall be made unless it is authorised by the articles or by special (b) no such payment, whether authorised by the articles or by special resolution, shall be made without the previous sanction of the court; (c) before sanctioning any such payment, the court may, at the expense of the company, appoint a person to inquire and report to it as to the circumstances of the case, and may, before making the appointment, require the company to give security for the payment of the costs of the inquiry; (d) the payment shall be made only for such period as may be determined by the court, and such period shall in no case extend beyond the close of the half-year next after the half year during which the works or buildings have been actually completed or the plant provided; (e) the rate of interest shall in no case exceed six per centum per annum or such lower rate as may for the time being be prescribed by the (f) the payment of the interest shall not operate as a reduction of the amount paid-up on the shares in respect of which it is paid; 83 (g) the accounts of the company shall show the share capital on which, and the rate at which, interest has been paid out of capital during the period to which the accounts relate. (2) Sub-section (1) shall not apply to a company established by a City Council for the purpose of raising funds for capital projects.