A reasonable time period for paying a dividend is 1 to 2 days.
No, in general there are no timing restrictions on paying dividends. If a certain amount of time passed by or if financial circumstances of the Company changed since the approval granted by the board of managing directors as required by law, a new approval should be obtained.
Although not required by law, it is advisable to use interim accounts during the decision-making process, so that the board of managing directors can substantiate its decision that the Company’s financial situation enables the distribution to be made. The interims do not need to be audited and do not need to be signed.
Yes, there are restrictions on the amount of dividends that can be paid.
The board of directors must confirm that (i) the company's net equity exceeds the [capital and] reserves which must be maintained pursuant to Dutch law and the Company’s articles of association, and is sufficient to make the distribution; (iii) following the distribution, the company will remain capable to pay its due and payable debts.
In addition and to the extent applicable to the Company if the Company has applied for the second or third Temporary Emergency Scheme for Work Retention (in Dutch: Tijdelijke noodmaatregel overbrugging voor behoud van werkgelegenheid or "NOW”), which scheme provides for compensation of wage costs in case a Company is faced with a loss of turnover of 20% or more due to the COVID-19 pandemic. In that case, a Company must - among other things - declare that it will not pay out dividends to its shareholders. This requirement, however, will only apply if the NOW prescribes that an auditor's report will be required. The NOW requires an auditor's report for Companies that have received an advance (80% of the subsidy amount) of EUR 100,000 or more and/or if the final subsidy amount is determined at EUR 125,000 or more.
If a Company that is part of a group makes use of the possibility to apply for the NOW for one specific operating Company only instead of for the entire Dutch group within the meaning of the NOW because the threshold of 20% or more loss of turnover is only met at an operating company level and not at the group's level, a more extensive obligation applies. In that case, the restriction on paying dividends also applies to the group, group head and/or parent company. Therefore, the applying Company must declare that the group, group head and/or the parent company also meets this obligation and must ensure that the group actually commits to this obligation prior to the application. It is irrelevant whether it concerns a Dutch Company or group or an international company or group.
Under the first Temporary Emergency Scheme for Work Retention (NOW 1.0) - which applied until July 1st, 2020 - the restriction on paying dividends only applied if a Company applied for compensation on an operating company level.
Yes, it is possible to increase certain reserves. This can be achieved by one of the following methods:
- Firstly, when adopting the Company’s annual accounts, the Company’s general meeting can resolve to add any profit made that financial year to the profit reserves.
- Secondly, the Company’s shareholder(s) can contribute capital to the Company without the issuance of shares, pursuant to which the share premium reserve increases.
- Thirdly, reserves can be increased by reducing the nominal value of the Company’s shares without repayment.
A reasonable timeframe for increasing reserves is a few days up to two weeks.
No regulatory approvals are required in connection with payment of a dividend.
No, there are no foreign exchange requirements on paying dividends to foreign parent companies.
Yes, there are no restrictions from a corporate law perspective on borrowing cash to settle a dividend.
Yes, dividends in kind are possible, no special requirements from a corporate law or tax perspective. Depending on the form of the distribution, further steps may be required, such as share transfer formalities.