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Illegal dividend question

Is it or isnt it and, what to do

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a new company is in its first year.

6 months in directors pay a reasonable size dividend which is legal.

almost immediately, lose a contract and run at a loss.

directors provide loans to keep the company going and the interim dividend is bigger than the profit for the year.


Q. Is the dividend legal ? and, 

If  the comapny is would up after the first year, would the dividends need to be repaid ? (assuming the shareholders are not just the directors)? 

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By Ruddles
06th Mar 2018 16:15

"Q. Is the dividend legal ?"

"[A.] directors pay a reasonable size dividend which is legal"

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By Portia Nina Levin
06th Mar 2018 16:16

There is no law that makes it illegal to pay dividends, whatever the circumstances might be.

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By floggy
06th Mar 2018 16:29

i have just come accross this article, which seems to answer my question.

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By atleastisoundknowledgable...
06th Mar 2018 18:40

If there were available distributable reserves at the time then it’s legal, as long as the directors didn’t know they were about to lose the contract and make losses ...

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