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Using Profit: Waiving Dividends

Waiving Dividends

Where the company's profits justify the directors in declaring a dividend but the company wishes to retain the money within the business, it is possible to declare a dividend and invite the shareholders who do not need the additional cash to waive the dividend while allowing shareholders who need income to receive it.

If this is seen as too much to ask of the shareholders concerned, an alternative is to pay the dividend to all the shareholders but to invite those not needing income to loan the cash back to the company, perhaps after deduction of any tax bill payable by the share holder.

As to future issues of shares, you may wish to consider the possibility of issuing shares with different dividend rights to meet the varied requirements of the shareholders, i.e. their needs for income or capital growth.

Consider the different requirements of your shareholders for income and bear in mind that waiving dividends or loaning dividend payments back to the company can provide shareholders with flexibility and enable the company to benefit.

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