(1) This section applies where a payment out of capital is made in accordance with Chapter 5 or section 692(1ZA) (redemption or purchase of own shares by private company out of capital).

(1A) In relation to a payment under section 692(1ZA) references to the permissible capital payment are to the purchase price of the shares or (if less) the part of it met out of the payment under section 692(1ZA) and any proceeds of a fresh issue used to make the purchase.

(2) If the permissible capital payment is less than the nominal amount of the shares redeemed or purchased, the amount of the difference must be transferred to the company's capital redemption reserve.

(3) If the permissible capital payment is greater than the nominal amount of the shares redeemed or purchased -

(a) the amount of any capital redemption reserve, share premium account or fully paid share capital of the company, and

(b) any amount representing unrealised profits of the company for the time being standing to the credit of any revaluation reserve maintained by the company,