Dividends in Specie – Shareholders’ Ordinary Resolution
Ordinary Resolution - Dividend in Specie
An alternative to a distribution of cash dividend is a distribution of a particular asset (or assets) to shareholders. This transfer is called a “dividend in kind” or a “dividend in specie”. It usually involves the transfer of an asset such as property, an investment or equipment.
There is no requirement for cash dividends to be declared by shareholders at a general meeting. However a company must have the relevant authority to pay a dividend in specie. In the absence of any express authority, the dividend must be paid in case.
Article 34 of the Model Articles for private companies limited by shares allows non-cash dividends to be declared, subject to shareholder approval by ordinary resolution on the recommendation of the directors. This shareholders’ ordinary resolution contains the wording that may be used to approve the type of distribution where a company declares a specified cash amount to be satisfied by the transfer of non-cash assets of equivalent value. This resolution assumes companies have Article 34 (or equivalent wording) in their Articles of Association.
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