If there is no equity imbalance and reserves and preferential payments are covered, dividends can be distributed.
When a company makes a profit at the end of the financial year, it is logical that the shareholders will want to distribute these profits as dividends. In this respect, it is important to comply with the rules on dividend distribution, otherwise unduly distributed dividends must be repaid with interest at the statutory rate.
The legal requirements for the distribution of dividends are as follows:
Equity balance: The net assets (the capital contributed at incorporation – or at a later date – plus the accumulated results – profits or losses) cannot be less than the share capital (as stated in the articles of association) after the distribution. The law prohibits the distribution of dividends in this case.
Reserves: The legal reserve, which must reach 20% of the share capital, must be covered. Therefore, until this figure is reached, 10% of the profit must be applied to this reserve. And if there are other obligatory reserves set by the articles of association, these should also be covered.
Other: In addition, minimum dividends and outstanding directors’ remuneration have priority.
Apart from these cases, it is possible to distribute dividends and, in the event that the shareholders’ meeting decides not to do so, dissenting shareholders who have voted against have the right to withdraw from the company, provided that the company has been registered for more than five years and has not distributed dividends (despite being able to do so) in the last five years.
Our advisors will analyse your case and inform you of your rights in the event that the company in which you are a shareholder does not distribute dividends.