Dividends exceed profits
- From: "Martin" <ngng@xxxxxxxxxxxxxxxxxxxxxxxxxx>
- Date: Wed, 23 May 2007 18:24:19 GMT
Can anyone advise, please? This is a new one on me....
A (close) Ltd Coy authorises and pays a number of interim dividends, all
adequately covered by profits. It then makes a big (and unexpected) loss in
the final qtr. Thus, at year-end, the divs already paid are no longer
covered by accrued profits.
Does this render the dividends illegal, or is it sufficient that the profits
were there at the time of the distribution?
If illegal, what are the consequences and how should the matter be handled
in terms of annual accounts, Coy House, HMRC?
The company is expected to return to profit, but not for a year or more.
And it has sufficient borrowing capacity to meet its cash needs until then.
Thanks for any advice / thoughts....
--
Martin
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