Ailing company will not pay out
WA writes: I own 20% of a company that declared a dividend last year. Since then profits have slumped and the company is to be refinanced. The dividend has not been paid. Can I force the company to pay a dividend before it gets into worse difficulties?
It depends whether the dividend was an interim or final one. A final dividend is proposed by directors and approved by the shareholders at an annual meeting. Only then does it become payable. The dividend then becomes owed by the company. Interim dividends are different. They can be declared any time and then become payable. The company is unlikely to pay a proposed interim dividend until its financial position is secure. Indeed, if the company´s financial situation is so bad as to have eliminated its reserves, it will not be able to pay a dividend at all. If it was an approved final dividend, you would rank with the company´s other creditors. If the company paid a final dividend and soon after became insolvent, the payment would probably be challenged by a liquidator. If the company´s position is as critical as you suggest, you should seek advice from an insolvency practitioner.