Dividend Waiver Help Please

DebbieM

Hello

Can anyone tell me:

Our company is going to make two dividend offers during the current financial year, one of which will be declined by one of the shareholders.

When the first dividend offer is made it is declined by one shareholder. There is enough profit to cover the whole offer.

When the second dividend offer is made both shareholders will accept. The available profit at this point in time is enough to cover this offer, but I am assuming that the available profit does not have to still cover the declined offer made earlier in the year. Is this assumption correct?

Thanks.

Debbie

claudialowe

Hi Debbie

As far as I am aware (and I am sure that other will correct me if I am wrong) that once a divi has been waivered, you can't then change your mind - otherwise you would have to, to infinity and beyond, retain enough profits in case some dipstick later decided that they wished that they hadn't waived the dividend.

Claudia

peugeot

I can see why the shareholder has waived their right to the dividend and technically it could be argued that the company has 'declared' an illegal dividend but the shareholder has waived their right in light of this.

However even if the shareholder changed their mind and decided to take the dividend, there would be insufficient profits to distribute the dividend. If they did then this dividend would contravene the Companies Act and the shareholder would have to repay the amounts back to the company as the distribution would be an illegal one.

Care should be taken when declaring dividends at any point during the year, to ensure there are sufficient profits available - not just at the year end, but also throughout the year to avoid contentious issues by our target driven friends at HMRC and any potential s419 tax issues.

Kind regards
Steve