Publication date: 28.02.2024
I am studying in the third year of the State University of Economics and Technology.I specialize in contractual, economic and corporate law, in particular, I provide consultations and write articles.
Equity participation in the authorized capital of a joint-stock company is expressed in a security (share). Ownership of a certain block of shares, both common and preferred, allows their owner to receive dividends as a certain payment made by the company, that is, the issuer of shares when distributing part of the profit. As already noted, shares are divided into two types: common and preferred. Common shares should be understood as those that assign a non-fixed amount to a company participant, which he will receive as dividends, but at the same time he will have the right to participate in the management of the affairs of the legal entity. In turn, preferred shares establish predominant rights to receive part of the profit, and their owners participate in the management of the company in cases established by the charter. Based on the above, it can be argued, however, that the right to receive dividends is one of the key elements of the scope of rights granted to participants, and therefore the legislation regulates in detail the procedure for their payment and other features.
Dividends: payment procedure, size, restrictions
The dividend payment procedure is characterized by the principle of proportionality, that is, dividend payments are made in proportion to the number of securities owned by the participant. Determining the amount of dividends on common shares and making a decision on their payment falls within the competence of the general meeting. As for privileged ones, their size is fixed by the company’s charter. Within 6 months from the date of the decision to pay dividends on common shares, company participants must receive their payments. The sources from which they will be paid are net or retained earnings, and in some cases reserve capital or a special fund (if there is insufficient profit to pay dividends). If we are talking about dividends on preferred shares, they are paid within 6 months after the end of the reporting year. Next, a list of persons entitled to receive dividends and the procedure according to which they will be paid is compiled. When implementing the procedure for paying dividends, one should take into account the restrictions established by law, namely:
• The decision on payment of common shares is not made if the report on the results of the issue of shares is not properly registered, the capital of the legal entity is less, or may become less than the authorized reserve capital after payment, or if the deadline for fulfilling the requirements of creditors has come, and the company will have property not enough after the payment of dividends to satisfy the claims of creditors.
• Payment on common shares cannot be made if the company has an obligation to repurchase shares, as well as if dividends for preferred shares have not yet been paid in full.
• Participants in preferred shares of a certain class are given priority in the order of their payment, so the company must pay dividends for this type of shares, and then current dividends.
Consequences of non-payment of dividends, methods of collecting them:
The Supreme Court in its decisions determined that failure to pay dividends on time is a monetary obligation, therefore the issue of liability and collection of dividends will be resolved in accordance with Art. 625 of the Civil Code of Ukraine, which states that the debtor is obliged to pay the amount of the debt, taking into account the inflation index, as well as 3% per annum of the amount of the debt. Also, the shareholder has the opportunity to contact a notary in order to obtain a writ of execution on documents according to which the debt will be collected in an indisputable manner, but a more reliable method of collection is the judicial procedure, which involves filing a claim. The dispute will be considered in economic proceedings. The limitation period in this case is general (3 years). If a decision has been made to defend the violated rights in court, procedural documents should be properly prepared, the necessary evidence must be collected and a legal position must be formed.
Legal services for business in protecting the rights of shareholders:
Delay in payment of dividends is only part of the possible violations of the rights of shareholders established by law, and therefore legal protection of business is important. A lawyer for business will provide reliable protection of corporate rights by implementing various methods of protection. A business lawyer will conduct a legal analysis of the situation, provide advice, choose a method of defense, and collect the necessary evidence.
