Payments to companies’ shareholders may be made on the following legal grounds:
- dividend, including an advance payment towards a dividend in the course of a financial year;
- fee for the shares redeemed;
- liquidation amount;
- reimbursement of additional payments;
- reimbursement of loans granted by shareholders.
All the above-mentioned payments may be made only and exclusively in accordance with the terms and conditions specified in the Commercial Companies Code and the Accounting Act. Liable for the correctness of settlements in that respect are members of the management board that, along with the shareholders, guarantee it with their personal property. Claims against management board members may be made by the company or – in the event of insolvency – also creditors or an official receiver.
In practice, there occur situations, when the dividend paying capacity must be established and confirmed by an independent entity. Such a need arises when:
- there is a difference of opinions within the management board, or between the management board and the shareholders, concerning the dividend-paying capacity, its legal admissibility, amount and influence on the working capital required;
- stakeholders (shareholders or creditors) require an independent entity’s confirmation of existence of the dividend-paying capacity and indication when a dividend is claimable from a company;
- there exist doubts whether historically established capitals may serve as payment sources;
- the management board needs a formal confirmation of its operation in accordance with the company’s articles of association / bylaws and observance of due diligence within the scope of confirmation.
KPMG employs experts that specialize in the fields of law, corporate finance and accounting, and that – within the agreed scope – carry out analytical works and draw up a report confirming the company’s dividend-paying capacity within the above-mentioned scope.
The report records analyses of the balance sheet and the historical documents that constitute the grounds for creating the company’s capitals with a view to determining admissibility of payments and their amount.
The scope of analytical works may cover an assessment of justifiability of payments to shareholders, determination of the company’s need for cash means and assessment of the payment’s influence on the company’s working capital.
The works are concluded with an issuance of a report on the analysis carried out, wherein the dividend-paying capacity (i.e., capacity of distributing funds to shareholders) is determined.