Dividends are payments made to shareholders from the profits of the company. Dividends are portions of company profit after tax and expenses. Shareholders are paid dividends on a pro-rata basis in accordance with how many shares they hold. If the company has not made a profit over a given period then it cannot pay a dividend. Effectively a dividend is a reward to shareholders for investing in the company.
Generally, dividends are paid either once or twice a year, however they can be paid at any time provided the company has sufficient funds to make the payment. It is up to the directors of the company to decide if and when a dividend can be paid to the company’s shareholders and the Articles of Association of the company determine the formal procedures to be followed in respect of declaring company dividends.
Procedures for issuing a dividend:
- ensure there are sufficient profits in the company to allow for the dividend;
- call a meeting of the directors and declare the dividends in the Minutes of the Board Meeting;
- provide a tax voucher for each shareholder. A tax voucher also called "dividend counterfoil", is simply a written record stating the name of the shareholder who has received the dividend, the amount of dividend paid (as net of tax credit), the number of shares the shareholders owns and the amount of associated tax credit;
- issue the dividend payments along with the tax vouchers and file the board minutes and accounts at the registered office of the company.
This template contains a Board Minutes template and a Dividend Voucher template, ready to be used by a company when it distributes dividends to shareholders.
This Declare Dividends - Board Minutes and Tax Voucher template is in Microsoft Word format, written in plain English, easy to use and edit.
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