Did your company earn profit based on the results of last year? Then it’s time to correctly dispose of it. How the dividends amount of LLC and JSC should be determined?
General information
It should be recalled that dividends – a part of net profit, distributed among the participants (owners) in accordance with the share of their participation in the equity of the company.
The dividends amount of each participant depends not only on the amount of net profit, but also on the share of his/her participation in the equity of the company. This is explicitly specified by para. 4of the Accounting Standards 15 “Revenue”, which contains the definition of “dividends”.
LLC
The dividends amount of LLC participants should be determined in proportion to the size of their shares in the authorized capital of LLC. At the same time, if a person is no longer a participant of LLC on the day of the decision to pay dividends, he/she will not receive a dividend. Similarly, a participant who has not, in whole or in part, contributed to the authorized capital of LLC (Art. 26, 27 of the Law of Ukraine “On Limited Liability Companies” of 22.06.2018 No. 2275-VIII (hereinafter – Law on LLC).
JSC
Distribution of net profit of JSC is somewhat different. Each shareholder is paid dividends per one share of a certain type and/or class owned by him/her. The same dividends amount is accrued by shares of the same type and class.
Payment of dividends to the owners of shares of the same type and class should take place in proportion to the number of securities belonging to them, and the conditions for payment of dividends (in particular as for terms, method and dividends amount) must be the same for all owners of shares of the same type and class (Art. 30 of the Law of Ukraine “On Joint Stock Companies” of 17.09.2008 No. 514-VI (hereinafter – Law on JSC).
There are two types of shares – simple and privileged.
The dividends amount for privileged shares of all classes is determined in the statute of JSC. If the statute provides for a fixed minimum amount of dividends in the absence of profits, then dividends of preferred shares are paid to the owners in any case at the expense of reserve capital or from a special fund. If there is profit, privileged shareholders will receive dividends as a matter of priority.
