Key Initial Planning Considerations
Jump to
Key Initial Planning Considerations
Generally speaking, assuming a straightforward process how long does it take to pay a dividend?

No timing restrictions are set by law for limited liability companies (LLC) and interim dividends are allowed and commonly paid by LLCs. For JSCs, interim dividends are not prohibited by law but JSCs normally pay dividends annually. A JSC may pay interim dividends if its constituent documents provide for payment of interim dividends. EGM can be held (on the above proviso). JSCs required to hold AGMs by 30th April. JSCs and LLCs are required to pay dividends to holders of common shares/participants within 6 months of the date of the resolution, unless other terms in not established by the meeting of the shareholders/participants, and to holders of preference shares in JSCs within 6 months after the reporting year end.

Any timing restrictions on paying dividends?

Yes

What accounts will be required to support payment of dividend and will these need to be audited?

Interim balance sheet required.  A shareholder must be on the list of shareholders entitled to a dividend (which JSCs are required by law to compile) as of the date of that list. JSCs required to notify shareholders of date and amount of dividends to be paid. 

Dividends may be distributed from the balance sheet profit.

Are there restrictions on the amount of dividends that can be paid?

No, there are no restrictions on the amount of dividends that can be paid, except that the dividends shall be paid from the net profit.

Are there any ways to increase reserves, and if so, how long do these generally take?

Yes

The timing depends on the way by which the reserves were increased.

Are foreign investment or other regulatory approvals required on payment of a dividend?

No regulatory approvals are required in connection with payment of a dividend.

Are there any foreign exchange requirements on paying dividends to foreign parent companies?

No, there are no foreign exchange requirements on paying dividends to foreign parent companies.

Can cash be borrowed to settle a dividend?

Yes, so long as dividends are paid out of accounting profit after-tax.

Are dividends in kind possible?

Possible for LLCs but prohibited by law for JSCs.

Are there any other general considerations with a significant timing impact on payment of dividends?

No.

Are there any restrictions on lending funds intra-group but cross border?

Interest paid or accrued with respect to any "debt obligation" is generally deductible, subject to the following restrictions, as applicable:

(i) the earning stripping restriction;

(ii) the transfer pricing restriction;

(iii) the low tax deductibility restriction.