Managing and declaring dividends is one of the most common and important functions of a company secretary. It can be a complex and technical area and here we set out a high level guide to the more common considerations relating to dividends. We also provide template written resolutions, which you can use to help document any dividends declared.
The following looks at a simple cash dividend and does not cover scrip dividends, dividends in specie or any other forms of distribution.
In order to properly declare and pay a dividend, certain conditions need to be met including, inter alia:
Any director who is party to a decision to pay an unlawful dividend would potentially be personally liable for breach of his director’s duties.
There are two standard types of dividends, being interim and final dividends, as follows:
As well as the method of declaring the dividends, interim and final dividends are also treated in different way as follows:
We have drafted the following precedent documents for the declaration of dividends that you are welcome to download and use as you see fit. Please note that every company is different and these documents should be treated as a starting point. They will not be suitable for all companies. We would always recommend that you obtain professional legal and accountancy advice and we do not accept any liability for your use of these documents.
Dividend Vouchers: From 6 April 2016, it is not expected that Dividend Tax Vouchers will be required and therefore we have not included any precedent for these.
This has been drafted as a written resolution of the directors and the information in square brackets should be completed. Every director of the company should then sign the resolutions.
This pack has also been drafted as written resolutions and it assumes that the shareholders are permitted to pass written resolutions (rather than having to call a General Meeting). The directors should all sign the board resolutions first and then the shareholder written resolution should be circulated to the shareholders for signature. Upon passing of the shareholder resolution, a print of the shareholder resolution should be signed by a director of the company.
Please note that this article has intentionally not commented on the tax implications of dividends and we recommend that you obtain professional tax advice if you are in any doubt as to your situation.
The information on this page is provided for general guidance only and no liability is accepted in respect of its use. It is not intended to be comprehensive and it does not cover all matters applicable to the subject. If you use the provided documents without engaging Elemental CoSec then you are responsible for completing the documents and Elemental CoSec accepts no responsibility or liability for your use of the documents.
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