Dividends—the legal framework
Dividends—the legal framework

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Dividends—the legal framework
  • Declaration and payment of dividends
  • Power to pay dividends
  • Final and interim dividends
  • Common dividend provisions in articles
  • Dividends in specie
  • Waiver of dividends
  • Unclaimed dividends
  • Tax treatment of a dividend

Coronavirus (COVID-19): Following the coronavirus (COVID-19) outbreak, an increasing number of UK companies are expected to seek to preserve their cash by suspending and/or cancelling dividends over the coming weeks and months. For an examination of the relevant law, guidance and practice, see Q&A: Can a company suspend or cancel a dividend in the light of the coronavirus (COVID-19) pandemic? For further details of the impact of COVID-19 more generally, see Practice Note: Coronavirus (COVID-19)—key issues for Corporate lawyers.

The law and practice relating to dividends is set out in this Practice Note. For details of the additional rules and guidance that specifically apply to dividends paid by listed companies and AIM companies, see Practice Note: Dividends—listed and AIM companies.

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. It is used in relation to payments made to members as members and not, eg by way of remuneration for services.

A dividend is typically satisfied by a direct payment of cash or by a distribution of non-cash assets (being any property or interest in property other than cash; in CA 2006, 'cash' is expressed to include foreign currency). A dividend satisfied by a distribution of non-cash assets is also known as a dividend in kind or a dividend in specie.

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