A dividend policy is an agreement between the shareholders of a company which regulates the payment of dividends. These agreements have effect to change the default position under the relevant company’s articles of association and the Companies Act 2006.
This type of agreement is often drafted to procure that minority shareholders receive a dividend from a company (if it is profitable). If no such agreement is in place, shareholders holding the majority of the shares (and the board) control whether or not a dividend is paid.
Our Dividend Policy drafting service regulates the payment of dividends in UK companies.
If you are a minority shareholder, a dividend policy can provide comfort that there will be a direct relationship between the profitability of the company in which you hold shares and the dividends you receive.
You may also want to consider incorporating a dividend policy into a Shareholders Agreement, which will set out the rights and obligations of the shareholders and how important decisions are to be made.
