Limited company shareholder dividends

Jackie26

Hi, If anyone could help with a query about Limited Company dividends to shareholder I would be really grateful.  I was with my husband 16 years during this time my husband started a business, he and his partner both became directors. In 2016 they parted company and my husband became the sole director, I am a shareholder in the company and was employed so received a wage plus a monthly dividend, My husband left me in Sept 2018, in Oct 2018 he stopped paying us both a dividend saying the company was failing he increased his wages from £655 to £4000.  In Nov 2018 I filed for divorce and he ended my employment the day he received the paperwork. I consequently won an unfair dismissal claim. We went to court for spousal maintenance which was in my favour as the only employment I could get was zero hours in a care home.  
My question is that it has come to light that he has decreased his wages and is paying himself a dividend, can he just pay himself or should he be paying all shareholders?  The shareholder fund according to the last accounts is £1.2 million.  Any help would be greatly appreciated. Thank you.

Jeremy535897

It depends on whether there is one class of shares with the same rights, or different share classes with different rights. I am surprised that the ownership of the shares has not been addressed as part of the divorce proceedings. Is it not finalised?

In addition, if the maintenance is based on your lack of other income, if you started receiving dividends, the maintenance would fall?

Jackie26

Hi, Jeremy my husband and I both have A shares and his son has B shares and does not receive a dividend.
I received £1300 in dividend and he was ordered to pay this amount, in August I took a voluntary decrease to £900 as once again he had stopped paying due to saying he has no money, but he is still receiving a £1300 dividend. 
The divorce is now going to a final hearing due to my husband still not disclosing documents and being obstructive.  
 

Jeremy535897

If you have the same class of shares as he does, then a dividend paid on his shares should be paid on yours, unless you waived it, which would require a formal letter. If you are represented by a solicitor, draw it to their attention.

DoctorStrange

Is it possible that as the sole director he has created a new class of shares,  which only he has, and is receiving dividends that way?

I think given the sums involved you should definitely get full legal advice. 

Jeremy535897

DoctorStrange said:

Is it possible that as the sole director he has created a new class of shares,  which only he has, and is receiving dividends that way?

I think given the sums involved you should definitely get full legal advice. 

It is possible. Companies with more than one class of share (as this company already has) require shareholder approval to issue more shares, but that approval may be in the articles of association. I doubt it would be acceptable in these circumstances, but legal advice will confirm the position.

p00hsticks

Jackie26 said:

in August I took a voluntary decrease to £900 as once again he had stopped paying due to saying he has no money, but he is still receiving a £1300 dividend. 

If the company has no money then it shouldn't be paying dividends at all.

Jackie26

Morning, thank you for all your advise.  The shares are the same as they were according to the documentation.  I first received twenty shares than when the other director parted company it went to one share, I questioned this at the time with the accountant and he said: "not to worry your the wife you will get half the business". I never signed anything when my shares changed can he do that?  I have brought this to my solicitor's attention numerous times but they don't seem interested.
There is money in the company but he has purchased assets, and taken out HP so there is no liquidity or cash flow.  We had a forensic accountant do a valuation of the business which was completed July 2020, which my settlement offer was based on his barrister is now saying that they do not agree with it, so we are having to go back to that.  

Jeremy535897

It may well be that you will receive half of the value of the business as part of the settlement, whatever your shareholding, but if your husband is reducing the value of the business by taking dividends or salary from it, that is something to raise with the solicitor. As I explained earlier, whilst issuing or changing shares may require shareholder approval, that approval may already be contained in the company's articles of association.

How do you know he's receiving a £1,300 dividend? Would you be able to ask the person who told you about the dividend the questions you have about why you haven't got a dividend as well?

Jackie26

I have looked for the articles of association and all the shares Ordinary, A Ordinary and B shares say the same thing "Full voting rights, full rights to dividends, Rank equally with all other shares in respect of a distribution or windup, not sure if this is what I need.
It has been highlighted numerous times during court hearings that he increases and decreases his salary, I know he has been taking a dividend as it is shown on his recent bank statements that he disclosed for our FDR, sometimes he has taken a dividend twice in one month, he did not disclose any dividend vouchers or full bank statements.  
Thank you for your help, it's a mind field 

Jeremy535897

That sounds as if you and his son should be receiving dividends, but you may not have all the paperwork. Have you done a search on the company at Companies House? You should be able to access what you want without cost. See if there are new issues of shares, amendments to the articles etc.

The problem is that if your solicitor is not showing any interest, it's hard to see what you can do about it.