Goodbye to TECH 02/17BL: a new solvency based regime for dividends?

On 7 September 2026, the government published a Consultation on modernising corporate reporting to support long-term economic growth. The proposed reforms are described as being “wide-ranging and ambitious”: there is a lot to work through, but two of the proposed reforms immediately stood out. The first proposal involves replacing the complex rules on distributable profits with a solvency-based regime which would be used to determine the legality of dividends. The second relates to fully virtual annual general meetings. This update covers the proposals for dividends.

What's being proposed? The consultation paper notes that: “The government is considering moving from the current dividend regime to a solvency based regime. Such a shift would be a fundamental change to the Companies Act 2006.” (see paragraph 113)

What would this mean in practice? In the government's view: “A solvency-based regime would remove the requirement for extensive and complex calculations and guidance. The proposal would be to require companies to state that the payment of the dividend will not affect the company’s ability to continue as a going concern.” (see paragraph 114)

This should be good news for corporate clients.

What happens to TECH 02/17BL (Guidance on realised and distributable profits under the Companies Act 2006)? If these proposals come into effect, then that guidance will likely be replaced by detailed guidance on the solvency regime and relevant criteria for establishing whether a dividend is lawful or unlawful by reference to the new test. So, while it may be a case of goodbye to TECH 02/17BL, equivalent guidance will likely take its place. 

Will special rules continue to apply to banks and insurers? Yes.

Is any more detail available at this stage? No. 

What should I do now? If you are interested in this area / are responsible for advising boards on whether a proposed dividend is lawful or not, then you should probably respond to consultation question 16: “Do you support moving to a solvency model for determining the legality of dividends? Please explain your answer. If you do support the proposal, what key features should be included in that solvency regime?”

I remember that previous governments suggested some changes to the dividend regime? What were they? See this previous update (from 2021) for the detail Audit and corporate governance white paper: A new approach to dividend payments. 

The 2021 government white paper contained the following proposals in relation to dividends and capital maintenance: 

• disclosure of the distributable reserves in the financial statements: companies (the parent company in the case of a group) should disclose the total amount of reserves that are distributable, or – if this is not possible – disclose the “known” distributable reserve;
• disclosure of estimates of a group’s dividend-paying capacity: in the case of a group, the parent company should provide an estimate of distributable reserves across the group - the government envisaged this requirement applying to listed and AIM companies only; and
• directors’ statement about the legality of proposed dividends and the effects on the future solvency of the company: directors should state that any proposed dividend is within known distributable reserves and that payment of the dividend will not, in the directors’ reasonable expectation, threaten the solvency of the company over the next two years. The consultation asked for views on which companies should be covered by this requirement.

How long have I got to reply to the consultation? The consultation will close at 11:59pm on 30 November 2026.

Further Information

Further short updates on other key reform proposals will follow. If you would like to discuss this update, please speak to your usual Burges Salmon contact, AJ Venter (Partner, Corporate and M&A), Guy Francis (Director, Corporate and M&A) or Nick Graves (Head of the Corporate Department).