Valid dividends

Valid dividends

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Small company, (typical family business). During the year the company has paid dividends. When we come to audit the accounts, we check the minutes of directors meetings and cannot find any relating to the declaration of the minutes (or any of the other day-to-day management matters!). The directors confirm they held a meeting declaring the dividends but "just didnt do the paperwork. Are the dividends valid? The company certainly have enough reserves, and also the directors confirm the meeting was carried out and the dividends are actually paid.

Would the answer be any different if we acted as the registered office of the company including maintaining the statutory records etc and we hadn't been told about the dividend payments when they happened?

What are the auditors responsilities if it appears that the minute records are not properly maintained?

M T Thorts

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By NeilW
16th Nov 2006 11:08

Patch up
Interim dividends are declared at the behest of the directors and can be declared and revoked throughout the year. It is possible to document a meeting now confirming those interim dividends if you wish along with the usual end of year stuff the directors have to confirm.

NeilW

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By frauke
15th Nov 2006 18:56

Dividends
There is nothing that states that declarations of dividends must be minuted etc... BUT that will not stop the HMRC questioning it and causing problems, and using it for an excuse to look into other things..

The minute book is the responsibility of the Company Secretary/Directors not auditors - you may ask to see them, but not your problem if not maintained.

However it would be a good idea for you to put into writing your recommendations that dividends are minuted and dividend certificates are provided etc.... Its just good practice and good advice for your client. Especially if you end up having to charge more fees to head off the HMRC at a later date becuase your client did not follow your advice and suggestions. You could also point out it could save them additional fees in the long run if they ensured they dealt with the dividends properly!

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