Commentary

108.1 The desirability of a distribution policy

BUSINESSES vol 4(2) start-up, sale and purchase
| Commentary

108.1 The desirability of a distribution policy

| Commentary

108 Distribution of profits

108.1 The desirability of a distribution policy

One of the major causes of conflict between the shareholders in a new business is the issue of distribution of profits. Prompted by their own financial position at the time, some participants may wish to see the majority of any profits being returned to the shareholders in the form of dividends whilst others, perhaps with regular income from other sources, may advocate a more cautious approach, recommending smaller dividends and more substantial reinvestment of profits1.

Much of this potential conflict may be avoided, or at least minimised, by the parties agreeing

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