Example

Worked example

Retained profits brought forward: £12,000; Profit after tax: £18,000; Dividends already paid: £5,000; Proposed dividend: £20,000. Enter your own details to replace this example.

Yes. On the figures entered, the company has £25,000.00 of estimated distributable profits before the proposed dividend, enough to pay £20,000.00. That would leave £5,000.00 available. The directors must still use relevant accounts showing sufficient realised profits when they decide and record the dividend.

Estimated distributable profits before proposal

£25,000.00

Proposed dividend

£20,000.00

Can the company pay it on these figures?

Yes

Shortfall

£0.00

Estimated reserves left after payment

£5,000.00

• This is a simple reserves check. It assumes every profit entered is realised and distributable and every earlier dividend is included; it does not test revaluation reserves, capital reductions, group issues or other restrictions.
• Directors should consider up-to-date annual or interim accounts and the company’s financial position before declaring a dividend, then keep the board record and dividend voucher.

Sources: Companies Act 2006, section 830: distributions only from profits available · Companies Act 2006, section 836: relevant accounts