Paying a dividend in a private limited company (bv) requires careful consideration and compliance with specific procedures and tests. In this article, we discuss the two main types of dividend distributions, the required balance sheet test and liquidity test, and how to carefully go through these steps to ensure that your dividend distribution is lawful and financially sound. Antaxius, your specialist in corporate law, provides you with the necessary expertise to carry out these processes correctly.

Types of dividend distributions - corporate law in practice

Interim dividend

An interim dividend is paid based on the profits of the current financial year or a previous financial year whose financial statements have not yet been approved. The governing body of the company decides on this distribution, which is only possible if explicitly provided for in the articles of association. Statutory or unavailable reserves may not be used for an interim dividend. It is important to stress that company law imposes strict rules on these distributions to ensure the financial stability of the PLC.

Interim dividend

An interim dividend is decided by a special general meeting and arises from the profit or reserves as shown in the most recently approved annual accounts. This may include reserves and the result of the current financial year, if based on a more recent statement of assets and liabilities. Company law requires such decisions to be thoroughly documented and supported by up-to-date financial data.

The double test - seek advice from your corporate law specialist

The balance sheet test

Before any dividend distribution, two important tests must be carried out to ensure the financial health of the BV: the balance sheet test and the liquidity test. The balance sheet test ensures that the company's net assets remain positive after the distribution.

Net assets are calculated as follows:
Net assets = total assets - provisions - liabilities - unamortised formation and expansion costs - research and development costs

This test must ensure that unavailable equity assets, such as statutorily unavailable reserves, are not affected. The law also specifies that, for example, the unamortised portion of revaluation surpluses should be considered an unavailable equity account.

The test may be based on the latest approved financial statements or a more recent statement of assets and liabilities. If an auditor has been appointed, he should assess the more recent statement. Antaxius, your corporate law specialist, can guide you through this complex assessment.

The liquidity test

The liquidity test assesses whether the company will be able to meet its debts after the distribution, taking into account reasonably foreseeable future developments. This requires a concrete assessment of the liquidity position with a time horizon of at least 12 months. The managing body must ensure that the company can meet its obligations, even if the distribution is financed through debt or booked in current account.

At Antaxius, corporate lawyers, we understand the importance of an accurate liquidity test. As corporate law specialists, we are ready to help you carry out this assessment and prepare the required documentation.

Special report - corporate lawyers help you

After successfully conducting the balance sheet test and liquidity test, the governing body must prepare a special report. This report contains an analysis and summary of the tests and the reasoning behind the dividend payment. If there is an auditor, the report should be submitted to him for review. This report need not be published but is essential for accountability to shareholders.

At Antaxius, our corporate lawyers will ensure that your special report meets all legal requirements and is transparent to all parties involved. By closely following these steps and performing the required tests, you as a director of a private limited company can responsibly decide on a dividend distribution. This ensures not only the financial health of the company, but also shareholders' confidence in the governing body.

Questions? Contact Antaxius

Do you have questions about dividend distributions or need legal guidance? Then contact a corporate law specialist at Antaxius. Marian Vanden Broeck (This email address is being protected from spambots. You need JavaScript enabled to view it.) and Stefan Geluyckens (This email address is being protected from spambots. You need JavaScript enabled to view it.) are ready to help you.