The Timing of Dividends
20/01/2010
Current legislation requires a dividend to be voted and paid within the year to which it applies. Any dividend voted after the year end will therefore only be recognised in the period in which they are proposed. There is always the option to include a post balance sheet event note if required.
The directors must ensure that sufficient distributable reserves are available for the purposes of the distribution, or the distribution may be deemed illegal. Further, dividends must be paid pro rata over the shareholdings, unless certain measures and documents are in place.
From a tax perspective, dividends are deemed to have been paid when they are voted unless the board minute specifically stipulates another date.
In the past it has been common practice for companies to propose a dividend after the year end, based upon the results of the year that has just ended.