Q&As

Can a company limited by guarantee pay dividends? If so, in what proportion should they be paid to members?

read titleRead full title
Copyright © 2025 LexisNexis
Published by a LexisNexis Corporate expert
Published on: 24 May 2016
imgtext

For the purposes of this Q&A, we have assumed that the company is a company limited by guarantee without a share capital (although a company limited by guarantee and with a share capital may exist, it has not been possible to form such a company or re-register as such a company since 22 December 1980 in Great Britain and since 1 July 1983 in Northern Ireland, see section 5 of the Companies Act 2006 (CA 2006)). We have further assumed that the company is not a charity and not regulated by any regulatory body.

The ordinary meaning of 'dividend' is a share of profits, whether at a fixed rate or otherwise, allocated to the holders of shares in a company (see Henry v Great Northern Rly Co). Therefore, a company limited by guarantee without a share capital is unable to pay dividends in that sense.

However, a dividend is just one category of distribution that may be made by a company.

Powered by Lexis+®
Jurisdiction(s):
United Kingdom
Related legal acts:
Key definition:
Company limited by guarantee definition
What does Company limited by guarantee mean?

A company limited by guarantee is a company whereby the liability of the members is limited to such amount as the members undertake to contribute to the assets of the company in the event of its being wound up.

Read more readmore

Popular documents

What is a capital contribution reserve?

What is a capital contribution reserve? A capital contribution reserve typically arises when an irrevocable gift has been made to a company by a shareholder (ie new shares are not issued in consideration). Such a payment often arises in the context of overseas companies, where a parent company makes

Scotland—the process for applying for sequestration

Scotland—the process for applying for sequestrationSequestration in Scotland is the legal process by which an insolvent debtor’s estate is gathered in, realised and then distributed among their creditors by a trustee appointed for that purpose. The process requires that a formal award of

What is the difference between an appeal and a review?

What is the difference between an appeal and a review?What is an appeal?An appeal in insolvency proceedings is no different to an appeal in normal litigation. An appeal will be allowed only if the appeal court is satisfied that the decision of the lower court was 'wrong' or 'unjust because of a

Late payment penalties—inheritance tax

Late payment penalties—inheritance taxWhile interest often accrues on overdue tax, the late payment of certain taxes may also attract a penalty. For information on the interest accruing on overdue tax, see Practice Notes: IHT—payment deadlines on death—Interest on IHT and Interest on late paid