Getting dividends with unpaid shares?

[denis179]

Hello all,

I'm a contractor with a small limited (sole owner),
I gave myself 5k of dividends in the previous tax year, with the following Statement of Capital submitted in the Confirmation Statement (didn't change from incorporation):

Statement of Capital (Share Capital)
- Class of Shares: Ordinary
- Number allotted: 1
- Aggregate nomial value: 1

Statement of Capital (Totals)
- Total number of shares: 1
- Total aggregate nominal value: 1
- Total aggregate amount unpaid: 1

I just learned I actually needed to issue a dividend voucher, but that seem to indicate I needed to have that share paid in order to be able to receive dividends.
The question is simple: Was the dividend incorrectly distributed? If so, how can I correct this?

I've looked at 15+ threads trying to find an answer with no luck, so apologies if the answer is somehow obvious :/

[TheFaQQer]

What does the next page after the one you quote from say?

The section you have quoted is the Statement of Capital (Share Capital) page, but the next page should be headed "Initial Shareholdings" which details who actually owns the shares that have been issued.

If you aren't listed as a share holder then you cannot be a recipient of dividends - you'll either need to fudge the books or correct this as income rather than dividend.

Speak to your accountant on what to do if the dividend has been declared incorrectly.

[northernladuk]

Speak to your accountant on what to do if you don't understand any point about how to run your finances.

FTFY

[denis179]

What does the next page after the one you quote from say?
The section you have quoted is the Statement of Capital (Share Capital) page, but the next page should be headed "Initial Shareholdings" which details who actually owns the shares that have been issued.

Thank you for answering!
I am indeed listed (in the Certificate of Incorporation) as shareholder in the Initial Shareholdings, with the following data:

Number of shares: 1
Nominal value of each share: 1
Amount unpaid: 1
Amount paid: 0

Does that mean that the dividend was valid?
If so, I may be missing the point of paying for the shares at all.

And yes, I'm in the process of getting an accountant, the one I've been contacting just seem to be taking a while to answer for some reason, and I felt it was an important and relatively pressing issue.

[TheFaQQer]

And yes, I'm in the process of getting an accountant, the one I've been contacting just seem to be taking a while to answer for some reason, and I felt it was an important and relatively pressing issue.

If they aren't interested in your (potential) business then move on and find one who is. Life is too short to deal with poor customer service.

[Jessica@WhiteFieldTax]

I'm not aware of any general restriction on a dividend being paid on an unpaid share. If there were any it would be in the companies articles of association, and 99% of companies adopt a standard form of these.

Equally in 31 years, I've never seen a problem with unpaid shares and dividends.

Normal way of "paying" for the shares is a journal cr unpaid shares dr directors account, or pay £1 into the bank.

[WordIsBond]

WJS.

I paid dividends for a year without the shares being paid. My accountant told me we really needed to pay them, so we did. He didn't say anything about the dividends being illegal or a problem in any way.

[TheFaQQer]

Mentioned on AccountingWeb last year - Unpaid share capital and Dividends | AccountingWEB

In the example on there, the Articles for the company aren't the model Articles from Companies House, and appear to prevent a dividend being paid on an unpaid share, so the OP needs to review their AoA and see whether there is anything to prevent it. If model Articles were adopted, then there is nothing in there to prevent the dividend being paid on an unpaid share.

[Chart Accountancy]

Mentioned on AccountingWeb last year - Unpaid share capital and Dividends | AccountingWEB

In the example on there, the Articles for the company aren't the model Articles from Companies House, and appear to prevent a dividend being paid on an unpaid share, so the OP needs to review their AoA and see whether there is anything to prevent it. If model Articles were adopted, then there is nothing in there to prevent the dividend being paid on an unpaid share.

If there was any balance on the director's loan account, for example out of pocket expenses owed to the director (shareholder), the share capital can be offset and paid that way. If not, it should not be an issue for £1 to be just paid to the company. The biggest problem is where i have seen companies incorporated with £1000 and more shares, sole shareholder and director, who was not aware that share capital needs to be paid. If not paid, this becomes director's loan and taxed under s455 @ 32.5% being the recently increased tax rate (was 25%).