Dividends Package

The owners of the company are its shareholders, each shareholder owns a piece of the company, and this piece of the company is called shares in the company. As an owner who has invested money in the company, you should get a return on your investment, this return on your investment is call a dividend. A shareholder is any person or company who owns one or more shares in a company. However, not all shareholders are equal, while some get to vote on key company decisions and receive dividends when the company is profitable, others are passive investors who receive a fixed return for their investment every year.

You may only have one class of shareholder in your company and this class is generally called ordinary shares, alternatively you may have other classes of shareholders, allowing different investors different rights and privileges in your company. The Memorandum and Articles of Association/ or constitution of your company determines the rights of shareholders and how you pay a dividend.

Please note the following in respect of dividend payments:

• A dividend must be recommended by the directors;
• Dividends can be paid only if the company has enough profits available for distribution;
• The directors may declare a dividend as appears to them to be justified by the profits of the company in the case of an interim dividend, or subject to the approval of the members by ordinary resolution in the case of the final dividend;
• The declaration of any dividend should be made by reference to the relevant financial statements, these would normally be the most recent annual financial statements properly prepared, except where those financial statements show that there is insufficient profit available or the dividend is proposed to be paid in the first accounting period. In such cases interim or initial financial statements, as appropriate, will be required.
• If the annual financial statements have a qualified auditors’ report, the auditor must have stated in writing whether the qualification is material for the purpose of determining if that distribution would be in contravention of section 117 of the Act.

For a private company, the interim or initial financial statements must enable a reasonable judgement to be made as to the amount of distributable reserves. For a public company, the interim or initial financial statements must be properly prepared, and a copy filed with the CRO. In the case of initial financial statements these must contain a report from the company’s auditor stating whether, in their opinion, the financial statements have been properly prepared and, if the audit report is qualified, a statement from the auditor as to whether the qualification is material for the purpose of determining if that distribution would be in contravention of section 117 of the Act. A copy of the signed financial statements, audit report and any auditors’ statement, if required, must be delivered to the CRO. A public company may only make a distribution if at that time the amount of its net