Payment of Dividends by AIM Companies during the COVID-19 crisis

9 April, 2020

There are two factors which may mean a company wants or needs not to pay a dividend.   The first is because its financial position means its currently unwise or not possible to legally pay out a dividend. Persimmon, Belway and SSP for example have cancelled or deferred their planned dividends due to the effect of the virus on their financial position.  The second is because of the potential for adverse publicity – companies doing well at the moment risk being seen as profiting from the misfortune of others (particularly true of the banks but also supermarkets like Tesco).

Obligation to pay a dividend

The law does not oblige a company to pay out its profits to shareholders.  It is possible however for shares to have rights attaching to them in relation to dividends.  If so, this will be set out in the company’s articles of association.  The articles also usually set out how dividends should be declared and paid.

Requirements for the payment of a dividend

In order for a company to be able to lawfully pay a dividend, it must have sufficient distributable profits, justified by reference to relevant accounts. Directors must also consider the company’s:

  • current financial position (in case anything has changed since the date of the accounts); and
  • future financial position should the dividend be paid.

Directors must be satisfied that, even if there remain sufficient distributable profits to pay the dividend, the company will still be able to meet its ongoing debts and liabilities.

Clearly this is a major concern for a number of businesses in the current climate. FRC guidance recommends that “The assessment of whether a dividend is appropriate should include consideration of current and likely operational and capital needs, contingency planning and the directors’ legal duties, both in statute and common law.”

AIM companies must also comply with:

  • the AIM Rules for Companies; and


  • the LSE Dividend Procedure Timetable (as amended, see below)


They may also choose to comply with institutional investor guidance.

Interim and final dividends

Interim dividends are paid during the course of the financial year.  Final dividends are paid after the end of the financial year.  The rules relating to interim and final dividends differ – with interim dividends being much more flexible. 

  • interim dividends: the directors may recommend payment of an interim dividend at any point during the year. It is effectively declared at that point because it doesn’t need further approval;


  • final dividends: the directors may recommend a final dividend, but this will need to be declared by the approval of the shareholders, usually at the annual general meeting (AGM).

Cancel or Waive?

Whether or not a company can cancel a dividend will depend on whether the dividend is an interim dividend or a final dividend.

  • interim dividends: there is no legal liability to pay interim dividends, even when they have been declared (approved) by the directors. Unless the shareholders declared the dividend, the board can rescind its resolution to pay an interim dividend at any time up to the time of actual payment


  • final dividends: here the options depend on what stage the process is at:


  • if the company has not yet posted its AGM notice, the directors can withdraw the recommendation to pay a final dividend, and this should be announced to the market as soon as possible.


  • if a company has posted its AGM notice, the directors should make an announcement that they no longer recommend the dividend and that they propose to withdraw the resolution from the meeting.


  • for companies that have held their 2020 AGM and approved the payment of a final dividend the issue is more problematic as payment of the final dividend will become a debt payable to shareholders which cannot be cancelled.


  • waiver of dividends: a shareholder can choose to waive their right to receive dividends, which will be a permanent loss of the money, but a company cannot do this on behalf of a shareholder.

Defer? – temporary changes to the LSE Dividend Procedure Timetable.

Companies set a “record date” in their articles of association, and dividends are paid out by reference to those shareholders listed on the register of members as of the record date. Usually, the LSE requires listed companies to pay cash dividends within 30 business days of the record date and dividends with options within 20 business days of the election date.

On 25 March 2020, the LSE announced with immediate effect (and until further notice) that it will allow companies listed on its market to defer the payment of dividends by up to 30 business days (but no more than 60 days). Read the LSE Market Notice here.

All deferrals must be notified to the Stock Situations Team (  Following expiry of the deferral period, the dividend must be paid or cancelled (where this is permissible). The issuer should notify any cancellation without delay.

Any relaxation of the LSE rules does not affect the statutory and common law rules around payment of final dividends and so legal advice should always be sought.

For further information, please contact Helen Garner on 01892 506 270 or at