Dividend Resolution

Helpful tips when creating a Dividend Resolution on Ownr

Derek Hopfner avatar
Written by Derek Hopfner
Updated over a week ago

A Dividend Resolution authorizes a payment of dividends from the company to certain shareholders. It is always prudent to ensure that any withdrawals from the company are fully documented, and the Dividend Resolution ensures that these payments are not mischaracterized as salaries, loan repayments, operating expenses, or any other costs incurred by the company.

Share Classes & Dividends

Dividends must be paid on a class of shares. So every person who holds shares of that class will receive a dividend payment. The amount of the dividend is based on the proportion of shares each shareholder holds in that class. If more than one share class is to receive dividends, you can use Ownr to create multiple Dividend Resolutions.

Here is a simple example: 

Company X has 1 shareholder and that shareholder holds 10,000 Class A Common Voting Shares. If the shareholder wants to pay a dividend to herself, she will receive 100% of the dividends declared on Class A Common Voting Shares. 

Here is a more complicated example:

Company X has 3 shareholders (Lui, Raph, and Miko). Their share structure is as follows:

There are 10,000 total issued shares.

Lui and Raph each own 4,000 Class A Common Voting Shares. Miko owns 2,000 Class A Common Voting Shares and 2,000 Class B Common Non-Voting Shares. 

Company X wants to pay each shareholder a dividend of $1,000. To do so, dividends must be paid as follows: 

Class A Common Voting Shares: $2,500
Class B Common Non-Voting Shares: $500

The Class A dividend is paid as follows:
Lui: $1,000
Raph: $1,000
Miko: $500

Then the corporation declares a second dividend on Class B Common Non-Voting Shares of $500. This amount is paid only to Miko because he holds 100% of the Class B Common Non-Voting Shares. 

Dating the Dividend Resolution

You can set the date of the Dividend Resolution for either today's date or a date in the past, if the dividend has already been paid. It is generally prohibited to change the characterization of a payment from the company to a shareholder after it has been paid (for example, changing a salary payment to a dividend). So it is prudent to create the Dividend Resolution at the same time as the dividend payment is being made to the shareholder.

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