Can equal shareholders receive unequal dividends?

gofigure8

Some advice needed on dividends please.

My 3 siblings and I are equal class B shareholders in a company my father is director of. Dad intends to give dividends this year 2025-2026 to 2 of my siblings (to repay loans they’ve previously had from each other or the company)- and my 3rd sibling was told the money is there if they want it. When I asked if I could have my dividends this year he has said no. So I do know the dividend money is or at least will be there and it’s not a case of it not being available.

Is he actually able to distribute dividends unevenly amongst shareholders? Me and my dad don’t speak to each other so I am assuming this is why I’m being singled out, but how can the company give to some and not the others?

DullGreyGuy

gofigure8 said:

Some advice needed on dividends please.

My 3 siblings and I are equal class B shareholders in a company my father is director of. Dad intends to give dividends this year 2025-2026 to 2 of my siblings (to repay loans they’ve previously had from each other or the company)- and my 3rd sibling was told the money is there if they want it. When I asked if I could have my dividends this year he has said no. So I do know the dividend money is or at least will be there and it’s not a case of it not being available.

Is he actually able to distribute dividends unevenly amongst shareholders? Me and my dad don’t speak to each other so I am assuming this is why I’m being singled out, but how can the company give to some and not the others?

If they have lent the company money then repayment of those debts isnt dividends. 

The company cannot repay your fathers debts for him but the can receive funds which then uses to personally repay his debts. 

Presumably your father has a different class of shares?

Different classes of shareholders may be entitled to different voting, dividends etc rights from each other but those in the same class should be the same. It sounds however like there is a lax use of language, which is often the case, and it may not actually be dividends. It's also possible that a new class of shares are created which your siblings hold and you dont. 

mebu60

Contact the accountant?

Only loans to the company can be repaid from the company. Check any interest rate is appropriate. 

A dividend is declared per share. Are your sure your holding is still the same as the other siblings? 

gofigure8

Thanks both; I will just clarify what I meant about loans/repayments- 2 of of my siblings borrowed from the dad’s company a couple of years ago for home improvements and a new car respectively. They have (we all have) been given dividends for a few years on the trot and they gave back some or all of what they owed to the company (after tax), so again this year they will be given dividend payments so that they can continue to repay. 

Yes I think my dad is the majority A class shareholder. 

Yes my siblings and I have 1 share each.

gofigure8

Sorry just checked we siblings are equal with 25 B shares each and dad has 1 A share.

Grumpy_chap

gofigure8 said:

Sorry just checked we siblings are equal with 25 B shares each and dad has 1 A share.

The dividend for all "B" shares must be the same.
The dividend for the "A" share can be different from the "B" shares.

gofigure8

Thanks @Grumpy_chap. I assume I have until April 2026 to see if he changes his mind (since the dividends he’s about to pay my siblings are for the current financial year)? At the moment I only know he doesn’t intend to give me any  more dividends, what action can I take if he actually does give dividends to them and not me?

Grumpy_chap

Dividends should be assessed and recorded at a General Meeting of the Board of Directors, which should be minuted as such, something along the following lines:

"It was resolved that an interim / final dividend of £XX per Class "B" Share in respect of the year ended XXX be paid to those shareholders registered at the close of business on XXX"

As a Shareholder, you can exercise your voting rights to hold the Directors to account and there are legal processes for forcing action.
What voting rights do the "B" shares hold?

From a practical perspective, given this is your Father, and you will need a majority vote including your Siblings, you may have little you can do.

kimwp

So he's basically writing off loans to his family that have come from the company. No idea if legal, sounds dodgy to me.

gofigure8

Thankyou again @grumpychap
Um, I’m not sure about anything like that @kimwp

Bookworm225

kimwp said:

So he's basically writing off loans to his family that have come from the company. No idea if legal, sounds dodgy to me.

not dodgy, actually quite a common way to repay (especially director) loans.
What would be "illegal" would be if only they received a dividend but they held the same CLASS of share as OP who did not receive a dividend on that class. (However, as others have said, taking effective action against non payment in such circumstances would be difficult)


OP believed that siblings received dividends, what they choose to do with that money is then up to them.
Perfectly possible for it to be a "paper exercise" whereby £x is declared as dividend and £x is then allocated as (full/part) payment of their respective debt..
Does not remove the fact each sibling is exposed to personal tax on £x of dividend, even if they never received that as hard cash since it was a paper exercise to match dividend against debt. 

Personal tax of course not impacting the company at all, but will need to be paid with real cash by siblings