Dividend (Insolvency) Definition

GLOSSARY

What does Dividend (Insolvency) mean?

Type of distribution made by a company to its shareholders: a company can only make a cash distribution out of available profits (Companies Act 2006, s 830) and if it's a public company, if the net asset test is satisfied (Companies Act 2006, s 831). In all cases, this is subject to any restrictions in the company's articles of association and in any other enactment, which restricts the distributions that can be made.

View the related practice notes about Dividend (Insolvency)

Scrip dividends

A company has an implied power to distribute its profits to its members, unless its articles of association provide otherwise.A dividend is one type of distribution that may be made by a company to its members. In fact, dividends are the most common type of distribution made by a company.The provisions of Part 23 of the Companies Act 2006 (CA 2006) and the common law rules relating to distributions (as modified by those provisions) must be complied with if a company is to make a lawful distribution. For consideration of the law and practice relating to distributions made by a company, see Practice Note: Distributions. For information on the consequences of non-compliance with the law on distributions, see Practice Note: Unlawful distributions.The ordinary meaning of 'dividend' is a share of profits, whether at a fixed rate or otherwise, allocated to the holders of shares in a company. It is used in relation to payments made to shareholders as shareholders and not, eg, by way of remuneration for services.A dividend is...

Waiver of dividends

A company has an implied power to distribute its profits to its members, unless its articles of association provide otherwise.A dividend is one type of distribution made by a company to its members. In fact, dividends are the most common type of distribution made by a company.The provisions of Part 23 of the Companies Act 2006 (CA 2006) and the common law rules relating to distributions (as modified by those provisions) must be complied with if a company is to make a lawful distribution. For consideration of the law and practice relating to distributions made by a company, see Practice Note: Distributions. For information on the consequences of non-compliance with the law on distributions, see Practice Note: Unlawful distributions.The ordinary meaning of 'dividend' is a share of profits, whether at a fixed rate or otherwise, allocated to the holders of shares in a company. It is used in relation to payments made to shareholders as shareholders and not, eg by way of remuneration for services.A dividend is typically satisfied by...

Discover our 2 Practice Notes on Dividend (Insolvency)

830 Distributions to be made only out of profits available for the purpose

(1) A company may only make a distribution out of profits available for the purpose.(2) A company's profits available for distribution are its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made.(3) Subsection (2) has effect subject to sections 832[, 833A] and 835 (investment companies [and Solvency 2 insurance companies].

831 Net asset restriction on distributions by public companies

(1) A public company may only make a distribution—(a) if the amount of its net assets is not less than the aggregate of its called-up share capital and undistributable reserves, and(b) if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.(2) For this purpose a company's “net assets” means the aggregate of the company's assets less the aggregate of its liabilities.(3) “Liabilities” here includes—(a) where the relevant accounts are Companies Act accounts, provisions of a kind specified

Dividend (Insolvency) is referenced 2 in UK Parliament Acts

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