The law amending the Commercial Companies Code amends, inter alia, the provisions on the date of dividend payment, but also introduces some novum – the normative basis for the obligation to reimburse advance payments to the expected dividend for the financial year in the event of a loss or less than expected profit.
According to Article 54(1)) Act dated 9 November 2018 amending certain laws to introduce simplifications for entrepreneurs in tax and economic law (Journal of Laws of 2018, item 2244) date 1 March 2019 the amendment of the provisions enters into force Act dated 15 September 2000 – Commercial Companies Code (i.e. Journal of Laws of 2017, item 1577, hereinafter referred to as ‘KSH’) concerning the rules for the payment of dividends in limited liability companies.
Rules on dividend payment
According to Article 193(1) KSH is entitled to a dividend for the financial year in question are the partners of a limited liability company whose shares were eligible in the company on the date of the resolution on the distribution of profits.
However, based on Article 193(2) KSH, the articles of association may authorise the meeting of shareholders to determine the date on which the list of shareholders entitled to dividend for the financial year in question is established.
In the current state of the law, such a dividend date is set within two months from the date of adoption of the resolution on the distribution of profit (Article 193(3) KSH). In addition, according to Article 193(4) The dividend was paid to KSH on the date specified in the resolution of the shareholders and, if the resolution of the shareholders of such a day did not specify, the dividend was paid on the date specified by the Management Board.
The legal position thus shaped, in the opinion of the legislator, gave rise to doubts as to the date on which the profit to be distributed should be paid to the shareholders, favoured the passive attitude of the shareholders and the board of directors on the decisions relating to the determination of the dividend date and the final date for the dividend payment. In order to remove these deficiencies, the legislator amended the Articles 193(3) and 193(4) KSH.
In the first of the articles cited, i.e. Article 193(3) KSH added sentence second, according to which if the shareholders' resolution does not specify the dividend date, the dividend date is the date of adoption of the profit-sharing resolution.
Consequently, where the text of the resolution fails to specify the date of the dividend and the two-month deadline for setting the date of the dividend, the list of shareholders entitled to pay the dividend shall be set at the date of adoption of the resolution on the distribution of profits.
second of the amended provisions, i.e. Under Article 193(4) KSH received a new sound In the second a sentence. Therefore, Article 193(4) KSH in fine if the meeting of shareholders does not set a dividend payment deadline, its payment should take place immediately after the dividend date.
As a result of the amendment, the board was stripped of its competence to determine the date of payment of the dividend, where the resolution of shareholders does not contain a provision in this respect.
The purpose of this amendment is to prevent the occurrence of facts in which the management of the company by passive attitude (not adopting resolutions) in practice prevents the payment of dividends, which would be in the interests of shareholders.
Obligation to reimburse advance payments
As has already been mentioned, the novum is to regulate directly in the law the conditions and scope of the obligation to reimburse advances paid to shareholders in a given financial year in respect of the anticipated dividend.
According to the new Article 195(11ksh), where in a given financial year an advance on the envisaged dividend has been paid to the shareholders and the company has either lost or achieved a profit of less than the advance paid, the partners shall reimburse the advances as follows:
- •
- in full - in the event of a loss being recorded by the company;
- • in the part corresponding to the amount exceeding the profit attributable to the shareholder for the financial year in question, in the event of a profit of less than the advance paid for the dividend envisaged.
The legislative intervention of the legislator seems to cut the dispute over the existence of an obligation to reimburse advances paid to shareholders in a given financial year in respect of the anticipated dividend, which has so far sparked considerable controversy.
It also aims at equipping the company with an instrument enabling it to recover the advance payments for the expected dividend for the financial year in the event of loss or less than expected profit, i.e. the deterioration of the economic situation of the company.
Author:
Michał Skwarek – a solicitor in the Legal Department. Graduate of the Faculty of Law and Administration of the University of Warsaw