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Introduction to this document

Distributable profits board minute

A company can only pay dividends where it has “distributable profits”. Broadly this means post-tax profit for the current or previous years which has not been paid to the shareholders. The directors must keep records to show they have considered this.

A legal dividend

Company law says that once you’ve established the availability of distributable profits you can pay a dividend. These come in two types, interim and final.

The directors have the power to pay an interim dividend if the company’s interim accounts show sufficient distributable (retained) profits at that time. A final dividend must be proposed by the directors and approved by the shareholders. HMRC can challenge payments described as dividends if they have not been declared and paid in accordance with company law. Indeed, if the directors allow a dividend to be paid when there are not enough retained profits it will be treated as unlawful. To record the directors’ proper consideration, use our Distributable Profits Board Minute.