Brian Jackson
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Paying dividends from share premium

Paying dividends from share premium

My client is a solvent company with both distributable profits and a substantial share premium account.  There is a cash balance, of rather more than the profits, which the directors would like to extract.   Once the profits have been distributed as dividends, can the share premium be distributed?  One possibility would appear to be to turn the share premium into shares which the company would then purchase, but is there a more straightforward procedure?

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By johnt27
28th Jan 2013 16:05

You can't distribute share premium as dividends as this is a non-distributable reserve.

In order to distribute such a reserve the company would need to go through a capital reduction. This would reduce the number of shares in issue and convert a proportion of the share premium relating to those shares to P&L reserve.

If the directors wish to do this there is a set procedure in place including making a statement of solvency to the company creditors.

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