Paying a dividend involves more than transferring money from your company account. You need sufficient distributable profits, a valid approval and a record of the payment.

Here’s the paperwork to prepare, with simple templates for an interim dividend.

What must you check before paying a dividend?

Before approving payment:

• Check available profits. Use appropriate accounts, allowing for tax, accumulated losses and dividends already paid. Cash in the bank alone is not enough.

• Check your articles. Follow the company’s rules for directors’ decisions and dividend approval.

• Check shareholder rights. Dividends must follow the rights attached to the shares.

You can use our guide on director pay and use our calculator to help guide your approach.

Tax-Efficient Director Pay: A How-To Guide

Who approves the dividend?

Under the standard model articles, directors can decide to pay an interim dividend. A final dividend normally requires shareholder approval by ordinary resolution, following a directors’ recommendation.

For example, if you’re the sole director and shareholder, you can normally approve an interim dividend yourself, record the decision and issue yourself a dividend voucher, provided your articles allow it and sufficient profits are available.

If two co-founders each own 50 ordinary shares with equal dividend rights, a £5,000 dividend means £2,500 each. The directors approve the interim dividend, record their decision and issue a voucher to each shareholder.

For a final dividend, the directors recommend the amount and the shareholders approve it. Even if you’re the same people in both roles, record both steps.

Record the decision even if you’re the only director. Check that your articles permit the approval procedure you use. You can copy the information below to create your own version of an interim dividend approval at a valid directors’ meeting. Adapt it to your company’s circumstances.

You also need a dividend voucher

Give each recipient a voucher and keep a copy. It must show the date, company name, shareholder’s name and dividend amount. Things that it should include are below and you can download a template below

• Company: (registered company name and number)

• Shareholder: (name)

• Payment date: (date)

• Shares: (number and class)

• Dividend per share: £(amount)

• Total dividend: £(amount)

Keep the records together

Keep board minutes for at least 10 years, alongside the supporting accounts, vouchers and payment records - these can be saved in your documents within the FOUNDRS app.

Use the actual decision and payment dates. Don’t backdate paperwork or assume that labelling a transfer “dividend” makes it valid.

If profits or share rights are unclear, check with your accountant before paying. Our guide to when founders need an accountant explains where professional support can help.

Interim dividend board minute template

Use this template to record an interim dividend approved at a valid directors’ meeting. Replace the bracketed fields and check the company’s articles, share rights and available profits before use. A final dividend normally requires separate shareholder approval under the model articles.

Company [Registered company name]

Company registration number [Number]

Meeting date and time [Date and time]

Meeting location or method [Location or remote meeting details]

Directors present [Names]

Chair [Name]

Meeting and available profits

The meeting was confirmed to be duly convened and quorate in accordance with the company’s articles.

The directors reviewed [identify the relevant accounts and their date]. They confirmed that £[amount] of profits was available for distribution after allowing for tax, accumulated losses and previous distributions, and considered the company’s ability to meet its liabilities following payment.

Resolution

It was resolved to pay an interim dividend of £[amount] per [share class] share, totalling £[total], to shareholders entitled under the company’s articles and share rights, by reference to their holdings on [date].

Payment would be made on [date]. Dividend vouchers would be issued to the recipients and the payment recorded in the company’s accounts.

Chair signature ________________________________

Name and date signed [Name]   [Date]

Keep the minute for at least 10 years, with the supporting accounts and payment records. Use the actual decision date. For a sole director decision or a written board resolution, adapt the format to the procedure permitted by your articles rather than recording a meeting that did not occur.

Dividend voucher template

Prepare a separate voucher for each recipient. Give the shareholder a copy and retain a copy with the company’s records.

Company [Registered company name]

Company registration number [Number]

Shareholder [Full name]

Shareholder address [Address]

Dividend payment date [Date]

Share class [Class]

Number of qualifying shares [Number]

Dividend per share £[Amount]

Total dividend paid £[Amount]

An interim dividend of the amount shown above was paid by the company to the named shareholder in respect of the qualifying shares.

Authorised signature ________________________________

Name and role [Name and role]

Date signed [Date]

Before completing these templates

Cash in the bank alone does not establish available distributable profits. Ask your accountant to confirm the position if the accounts, tax provision or share rights are unclear. These templates are for a straightforward cash interim dividend and must be adapted to the company’s actual approval procedure.