Distributions

Once declared, a dividend becomes a binding debt and cannot be rescinded. Dividends may be paid in cash or, in certain cases, through non-cash distributions, such as specific assets or bonus shares. They are typically distributed proportionally based on the shares held. Directors may deduct unpaid amounts or calls on shares from dividends. Scrip dividends allow shareholders to receive new shares in place of cash payments.

Distributable profits are determined by reference to financial statements, which must comply with statutory requirements. Public limited companies face additional restrictions, such as maintaining net assets above called-up share capital and reserves. Disguised distributions, such as transfers at undervalue to shareholders, are treated as dividends and must be covered by profits. Relieving provisions under the 2014 Act facilitate legitimate reorganisations involving asset distributions. Bonus shares may be issued using capitalised reserves or profits under specific conditions, enhancing shareholder equity.

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