If dividend is paid out of capital Directors can be escaped from the liability if they make the loss good after future profits. Please explain what is the logic behind this provision.
lets that simple example, fake profits were shown and the dividend was distributed out of it, that means dividend is paid out of capital and not profits
this was detected, fake profits were reversed and the deficiency was shown, but then company earned profits and this deficiency is reversed, that means future profits compensated for payment out of capital
then directors will not be responsible.