Dividends and capital maintenance
Determining a company’s distributable reserves in order to be able to pay a lawful dividend is often challenging because of the need to comply with complex legal requirements and technical guidance; this is particularly the case where the company (or companies within a group) undertake complicated transactions.
With the ever-increasing expectation for companies to be more transparent about their capital maintenance, capital allocation and dividend policies, it is vital for directors and those charged with governance to ensure that they fully understand the company’s reserves position in order to make appropriate decisions that support the long-term success of the organisation.
The Department for Business, Energy and Industrial Strategy has published its proposals Restoring trust in audit and corporate governance, which sets out significant proposals surrounding dividends and capital maintenance. The proposals include mandating new disclosures surrounding organisations’ distributable reserves and making directors more accountable when declaring dividends by requiring them to provide a statement about the legality of the proposed dividends and the effects on the future solvency of the business.
How we can support you
Some of the ways in which we can support you include:
- Determining reserves and profits available for distribution, analysed between realised and unrealised profits, whether on a company individual basis or across a group;
- Understanding the net asset restriction requirements for public companies under the Companies Act;
- Drafting, or reviewing for compliance (including best practice), the Section 172 reporting requirements that include capital allocation and dividend policy disclosures; and
- Providing bespoke training workshops that focus on the applicable requirements for your organisation.
Our support will be tailored depending upon your needs and can range from providing a technical accounting paper setting out the areas of consideration for your company to full project management support for determining and reporting the company’s distributable reserve position.
Contact us
If you would like to contact us, please use the link below and a member of the Accounting Advisory Services team will be in contact.
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