Dividends and distributions

Distributions made, and dividends paid, by a company are governed by Part 23 of the Companies Act 2006 (CA 2006).

For detailed consideration of the law on distributions and dividends, see Practice Notes: Distributions and Dividends—the legal framework.

What is a distribution?

Distribution is given a very wide definition for the purpose of CA 2006, Pt 23 (CA 2006, ss 829–853).

A distribution is every description of distribution of a company’s assets to its members, whether in cash or otherwise, except:

•
an issue of bonus shares (whether fully paid or partly paid), and
•
certain:
1. ◦
  reductions of share capital
2. ◦
  redemptions of shares
3. ◦
  share buybacks, and
4. ◦
  distributions of assets to members on the winding up of a company

A distribution of non-cash assets is often known as a distribution in kind or distribution in specie.

What is a dividend?

A dividend is a type of distribution made by a company to its shareholders.

The ordinary meaning of 'dividend' is a share of profits, whether at a fixed rate

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