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Dividends and other distributions

It is likely that in return for investing in your A private company limited by shares incorporated and registered in England and Wales. , your In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company. will want to A share in the capital of a company (sometimes also referred to as stock, for example in relation to US companies). Shares in a company give to the holders, known as shareholders, rights in relation to that company such as to vote, to receive dividends and to a return of capital. Holders of shares in a company own that company and the company, not its shareholders, owns the company's assets. in its profits. This section explains the strict legal rules you must follow in order to pay a A payment in cash by a company to its shareholders by way of a distribution of a share of the company's profits. or other distribution to your In relation to a company limited by shares, means persons whose names have been entered in the register of members of that company as shareholders in that company., and the potentially severe consequences of getting things wrong. This section also explains the importance of obtaining separate expert advice from a tax adviser and accountant before declaring and paying a A payment in cash by a company to its shareholders by way of a distribution of a share of the company's profits. .

company-secretarial-shares-and-admin

Dividends, distributions and the differences between them

  1. 1.What is a dividend?
  2. 2.What is an interim dividend?
  3. 3.What is a final dividend?
  4. 4.What is a distribution?
  5. 5.What is the difference between a dividend and a distribution?

Legal rules which must be followed before a dividend can be paid

  1. 6.Are there any restrictions on my company paying dividends?
  2. 7.What legal rules do I need to follow before my company can pay a dividend?

Process to pay a dividend

  1. 8.What process do I need to go through to pay a dividend?

Distributable reserves

  1. 9.What are my company's distributable reserves?
  2. 10. How can I tell if my company has enough distributable reserves to pay a dividend?
  3. 11. What accounts can I rely on to show that my company is permitted to pay a dividend?
  4. 12. Do I need to produce a new set of accounts each time my company pays a dividend?
  5. 13. Can I always rely on a set of annual accounts which show sufficient distributable reserves?

Approvals needed to pay a dividend

  1. 14. What approvals do I need before my company can pay a dividend?
  2. 15.Do I need board approval to pay a dividend?
  3. 16. What factors do your directors need to take into account in deciding whether or not to approve a dividend?
  4. 17. What form should board approval for a dividend take?
  5. 18. Do I need shareholder approval for a dividend?
  6. 19. What form should shareholder approval for a dividend take?

To whom and how dividends are paid

  1. 20. To whom does my company pay a dividend?
  2. 21. What is a record date for the purpose of dividends?
  3. 22. How is a dividend paid?
  4. 23. Can my company be forced to pay a dividend?

Unlawful dividends

  1. 24. When is a dividend unlawful?
  2. 25. What happens if my company pays an unlawful dividend?
  3. 26. Does a shareholder who receives an unlawful dividend have to pay it back?
  4. 27. Can my directors be personally liable if an unlawful dividend is paid?

Distributions of assets other than cash

  1. 28. Can my company distribute an asset other than cash to my shareholders?
  2. 29. What is a distribution in kind?
  3. 30. What legal rules do I need to follow before my company can make a distribution of a non-cash asset?
  4. 31. What approvals do I need before my company can make a non-cash distribution?
  5. 32.What happens if a distribution of assets other than cash is unlawful?

Filing and record keeping requirements

  1. 33.Do I need to make any filings at Companies House or keep any records after my company has paid a dividend or made a non-cash distribution?

Shareholder written resolution declaring a final dividend

Use this template shareholders’ resolution if you wish to pay a final dividend to your company’s shareholders and the amount and payment of the dividend has been approved by your directors. You usually need the approval of shareholders to declare a final dividend, and you can use this template to arrange such approval. Before you use this template, make sure you have separately obtained board approval for the final dividend. By using this template shareholder resolution, you ensure that you follow the appropriate approval process, minimising the risk of any disputes about the final dividend in future. This saves you time and money.
£20 + VAT

Shareholder written resolution authorising directors who hold shares to vote on a dividend

Use this template shareholder resolution to authorise directors who hold shares to vote on a dividend. By passing this shareholder resolution, any directors of your company who also hold shares will be authorised to vote at board meetings on the payment of a dividend. You should only use this template if your company has the model articles of association. Without the correct approval from shareholders, directors who hold shares in your company will not count in any board quorum or be able to vote on any board resolution to approve the dividend. This will stop you being able to pay the dividend if you cannot form a quorum without them.
£20 + VAT
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