Illegal dividends

Illegal dividends

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Im seeing a prospective client this morning who has provided a set of accounts with the following:

P&L reserves b/wd (50,000)

Profit                       55,000

Dividends               (20,000)

Negative reserves    (15,000)

Called up share capital 10,000

Shareholders funds   (5,000)

Surely you cant do this?  If there aren't reserves then surely no dividend?  What am I missing?  These accounts were prepared by a big firm so I must be mistaken...

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By User deleted
17th Mar 2015 10:10

Perhaps what you're missing ...

... are interim accounts.

What if, for instance, management accounts had been drawn up at the time of paying the dividend and which showed profits of £70k for the year to date?

You may also be missing the point that size is no guarantee of quality.

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By johngroganjga
17th Mar 2015 10:29

Or perhaps the client was just reckless or careless in deciding to pay a dividend when they should not have done. Sadly that happens sometimes. But that is nothing to do with the accounts and is not an adverse reflection on the skill and care with which they have been prepared.

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