Guidance Notes – Dividends

A dividend is a payment a company may make to its shareholders if it has made enough profit. This guidance note is a practical guide to dividends, including what a dividend is, the procedure for recommending, declaring and paying dividends, the paperwork involved (including dividend vouchers) and how a shareholder can waive their entitlement to a dividend.

What does this guidance note cover?

A company must not pay out more in dividends than it has available in profits from current and previous financial years. This guidance explains key procedural points and the records that should be kept.

• The distinction between final and interim dividends.
• Board meeting(s) typically used to recommend and declare a dividend.
• Whether shareholder consent is required.
• Dividend vouchers and how they work in practice.
• Why a shareholder may wish to waive their right to a dividend.

Dividends in specie

Although this guidance focuses on cash dividends, it also includes a short discussion of dividends in specie (dividends in kind). This is intended to complement templates relating to the declaration of a dividend in specie.

Dividends in specie can be a specialist area and independent legal and tax advice may be required.

Tax and accounting

This guidance note does not consider the general tax and accounting rules that apply to dividends. Further information can be found on HMRC's website. It may also be necessary to seek independent tax and accounting advice.

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