Dividends ― payment procedures and practical issues

Produced by a Tolley Owner-Managed Businesses expert

Owner-Managed Businesses

Guidance

This guidance note is intended to give an overview of the procedures and some practical issues involved in making dividend payments from a limited company.

For an analysis of dividend planning and the extraction of profit, see the Dividends ― planning issues guidance note.

Procedure for valid dividend payments

Before undertaking work on preparing dividend documentation for a client, it is vital to ensure that any actions are in accordance with the requirements of any necessary professional body and that the services are covered within the terms of engagement as well as by professional indemnity insurance.

The payment of a dividend is governed by a company’s Articles of Association. Unless otherwise stated, this will be in accordance with Companies (Tables A to F) Regulations, SI 1985/805, Sch, paras 102–108.

There are essentially two types of dividend:

•
final dividends
•
interim dividends

There are slightly different procedures for the payment of each type, but the underlying principle is the same. The dividends must be authorised by the directors after suitable consideration

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