Dividends are paid out of distributable profits; although shareholders are not obliged to receive a dividend from the company a company cannot waive a dividend on behalf of a shareholder, only a shareholder can waive his entitlement to a dividend. Sometimes shareholders may wish to waive their rights to any dividend in order to retain money in the business.
This Deed of Waiver – Dividends shall be used where a shareholder wants to waive his rights to a dividend to enable the company to retain the funds.
Even though dividend waivers are not very common, they can provide a shareholder with an effective method of reducing taxable income for a given year.
In order to be valid dividend waivers must be made by deed. As no consideration is given for the waiver, execution of the waiver as a deed avoids any argument that the waiver is unenforceable due to a lack of consideration.
Please note that for a dividend waiver to be effective, all persons entitled to a share must waive their right to any dividend, for example in case of joint holders all persons entitled to a share should sign the deed of waiver.
A waiver may cover a single dividend, a series of dividends or dividends declared during a specific time period. To be effective a deed of waiver in respect of a dividend must be received by the company before the right to the dividend arises, thus an interim dividend must be waived before it is paid and a final dividend must be waived before it has been declared.
Where a shareholder has waived his rights to a dividend, the company may retain the amount that he would otherwise have received or divide it between the remaining shareholders in proportion to their holdings.
This Deed of Waiver – Dividends is in Microsoft Word format, written in plain English, easy to use and edit.