How does a company declare a dividend?

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Published on LexisPSL on 20/10/2014

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • How does a company declare a dividend?

How does a company declare a dividend?

Dividends are the most common type of distribution made by a company.

A distribution made by a company will be unlawful if it does not comply with the requirements of Part 23 of the Companies Act 2006 (CA 2006) (CA 2006, ss 829–853) and the common law rules as modified by those provisions. This Q&A assumes that the requirements of CA 2006, Pt 23 have been complied with in relation to the dividend to be declared, in particular, that the company has sufficient distributable profits to pay the dividend.

A dividend is typically satisfied by a direct payment of cash or by a distribution of non-cash assets, which is also known as a distribution in kind or distribution in specie. A company may also capitalise its profits and use them to pay up (in whole or part) a new issue of shares to its members, known as a scrip dividend. A scrip dividend is

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