Distributing profits to shareholders.
WHAT A DIVIDEND IS
A distribution of profits to shareholders.
WHAT IT REQUIRES
Sufficient distributable profits A proper decision Documentation
WHY DISTRIBUTABLE PROFITS MATTER
Dividends paid without them are unlawful and may be recoverable.
WHAT DISTRIBUTABLE PROFITS MEANS
Accumulated realised profits, less accumulated realised losses.
WHAT THAT IS NOT
Cash in the bank.
WHY THAT DISTINCTION MATTERS
A company can have cash and no distributable profits.
WHAT TO ESTABLISH BEFORE DECLARING
That profits exist, by reference to accounts.
WHAT TO PREPARE
Accounts supporting the decision, where the position is not obvious.
WHAT THE PROCESS TYPICALLY INVOLVES
Directors recommending, and members approving, or directors declaring interim dividends per the constitution.
WHAT TO DOCUMENT
The decision, the amount, the date and the shareholders entitled.
WHAT TO ISSUE
A dividend voucher to each shareholder.
WHY
It evidences the payment and its nature, for tax purposes.
WHAT TO ESTABLISH ABOUT TAX
Withholding obligations, where they apply.
WHY
Failure to withhold and remit creates liability.
WHAT TO AVOID
Taking money regularly and calling it dividends without any process.
WHY
It is not a dividend, and it is treated otherwise.
WHAT TO ESTABLISH
A proper process, applied each time.
WHAT TO CONSIDER
The balance between salary and dividends.
WHAT TO TAKE ADVICE ON
That balance, because it affects tax substantially.
