Dividends distribution

[Herandu]

My partner is entitled to 20% of the dividends but wishes not to accept them the next time dividends are issued. I am however badly in need of some extra cash that the dividends would provide.

My question is whether it is legal to get dividends issued just to myself, or does my partner have to accept her 20% share as well? I am in total darkness on this and any help would be very much appreciated.

 

[Anna Chandley]

Your partner could sign a dividend waiver and not receive the dividends.

The dividend you pay yourself can only be a maximun of 80% of the profits available for distribution as the company needs to have sufficient reserves to have paid them the dividend if no waiver is in place.

For example you have £1000 of profits to distribute. In normal circumstances you would pay £800 to yourself and £200 to your partner. With a dividend waiver in place you would still only be able to pay £800 to yourself.

Anna

 

[Anna Chandley]

An example of a dividend waiver can be found here

 

[Truemanbrown]

The other possibility is to have two types of shares (i.e. Ordinary 'A' and Ordinary 'B'). Both types would have the same rights, but now have the option of declaring a dividend for one type of share which you could hold entirely.

 

[waveneygnome]

I'm not an accountant but similar thing happened to me a couple of years back.

I think our accountant suggested:

a) all shareholders get dividends distributed
b) only those who needed the cash actually got 'dividends paid'
c) the shareholders who didn't get paid got the money allocated to their Directors Loan Account

Please correct me if I'm, wrong.

Why did some of the shareholders not want to draw the cash?

1) some shareholders took longer term view/want to preserve cash in the business to re-invest in new machinery (without having to go cap in hand to banks)
2) 2 yrs ago felt economiy was slowing and wanted to keep some rainy day money in the company
3) Some shareholders had more personal money magament skills and didn't actually 'need' the cash for personal use.......but by having the divi credited to the DLA all shareholders were treated equally.

Hope this helps.