30th Jul 2002
27576
Dividend declarations and Company House...
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If a 'one-man' company were to declare a final dividend shortly after the accounts year end, then presumably any 'payments on account of dividend' made during the year will not be covered at the year end by that dividend, thereby creating a debit to the director's loan account at the year end.
Presumably, the declaration of interim dividends, quarterly, say, during the year, will redress this situation at the accounts year end, provided that interim dividends declared fully cover actual dividend payments/payments on account of dividends made throughout the year.
The company has passed written shareholder's resolutions to dispense with the laying of accounts in General Meeting and with the holding of AGMs. The company director and his Company Secretary wife have trawled through the pages of accountingweb and the web in general for answers to some very basic questions, without success. I wonder if any regulars on these pages could oblige:
1. Is the reasoning in the first two paragraphs correct?
2. Does each dividend (interim and/or final) require a resolution to be passed at a meeting?
3. Does a copy of each resolution have to be lodged at Companies House?
4. Are these meetings 'Board Meetings' or 'Extraordinary General Meetings', and what notice need be given for such a meeting (ie simply to declare a dividend)?
5. Alternatively, can the meeting (and notice of meeting) be dispensed with and substituted by 'Written Resolutions'. Would they be described as 'Written Shareholders' Resolutions' or 'Written Board Resolutions' or whatever?
6. Any further guidance on the wording of the dividend resolution for Co House filing (and Statutory Book purposes) would be more than welcome.
John S
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Replies (5)
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By cjdavies
02nd Aug 2002 21:46
Interim dividends
John
Reading between the lines is the real problem that you have an overdrawn directors loan at the year end that you need to deal with?
This advice might help for future years:
You use the term "payments on accounts of dividends".
Bearing in mind that this is a one man company I would suggest that in the directors mind each payment is in fact an interim dividend.
Interim dividends do not require voting by the shareholders, notices of meetings etc.
Directors cannot propose dividends but can pay interim dividends and these are evidenced by the actual payments.
The paperwork should reflect the events eg board minutes drawn up each time a payment is made. In addition the cheque stubs etc should say "dividend" rather than cash or private etc.
Since the payents do not go through the directors loan this would not cause the overdrawn loan problem.
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By User deleted
01st Aug 2002 09:10
Dividends - corporate procedures
John, the procedures required depend, to a large extent, on the precise wording of the individual company's articles of association. Assuming the present version of Table A applies without amendment and that there is only one class of ordinary shares, the position will be:-
1. An interim dividend can be declared by resolution of the board, it does not require a shareholders' resolution.
2. However a full dividend must be recommended by the board (ie a board resolution to recommend the amount must be passed at a directors' meeting) but then declared by a resolution of the shareholders at either the Annual General Meeting or an Extraordinary General Meeting. The latter need only be an ordinary resolution so it does not need to be filed at Companies House. The public recording of the dividend is dealt with through the annual accounts.
Written resolutions can be used instead of meetings (in the case of the board, provided the articles allow use of directors' written resolutions, shareholders' written resolutions can be passed under the Companies Act procedure or by using a power in the articles, but NOT as a substitute for the AGM).
Cecile Gillard
Senior Legal Adviser
Jordans Ltd
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By songb1rd
30th Jul 2002 14:58
Thanks Phil
Thank you Phil for replying to my query. Can you please clarify about the dividends being ratified at a general meeting? In your example, it is resolved at the 30 July board meeting to pay a dividend on 31 July. Does there also have to be a separate general meeting (EGM?) to ratify the dividends, do the dividends have to be ratified before they’re paid to shareholders, and can you suggest the format of such a general meeting to ratify the dividends? Finally, please pardon my ignorance in these affairs…..
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By AnonymousUser
30th Jul 2002 16:22
Personal view
Call me old-fashioned (and I have been called worse on this board), but my personal view is that it is best to have an AGM to approve the accounts and to approve the dividends paid.
The minutes are set out as for a directors' meeting and simply say "It was resolved that..." followed by notes accepting the accounts for the year ended ...02 and the dividends paid on dates x, y and z.
The directors are perfectly entitled to pay dividends before they are ratified in general meeting.
If not ratified then you would have a problem, but this is a one man company so the director would be the controlling shareholder and it's all a big paper chase really. You are not going to get a shareholders' revolt and a boardroom battle in this situation, fun though these things can be.
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By AnonymousUser
30th Jul 2002 10:05
close
1. The first two paragraphs are basically correct but then you go off the rails a bit.
2. Yes but dividends are proposed by the directors and only need to be ratified by a general meeting.
3. No; that is what the minute book is for. (But don't let it slip - the Revenue could ask to see it at any time).
4. Directors' meeting; no notice required.
5. No; do it properly.
6. Head the page eg, "Minutes of a meeting of the directors of Pongo Ltd held on 30 July 2002 at 1600 hrs"; list who is present (director and secretary only in this case probably); note approval of the minutes of the previous board meeting (not forgetting the signature of the chairman to the minutes thereof); note eg, "It was resolved that a dividend of £500 per share be paid on the 'B' shares on 31 July 2002"; then put "There being no further business the meeting closed at 1605 hrs".
7. Get a good accountant.
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