Rules of profit distribution in a Simple Stock Company

Rules of profit distribution in a Simple Stock Company The issue of payment and distribution of profits in a Simple Joint Stock Company is very similar to the model functioning in its original form – an ordinary joint stock company. However, how does the payment and distribution of money to shareholders in a Simple Share Company work in concrete terms?  

Who is entitled to a profit distribution in a Simple Joint Stock Company and when? In the Commercial Companies Code, in article 30015 there is the following provision relating to who is entitled to the payment of dividends: 1. which results from the annual financial statements, 2. which has been designated for payment by a resolution of the shareholders, 3. unless the articles of association provide otherwise. The persons entitled to dividends for a given financial year are the shareholders who were entitled to shares on the day the resolution on dividend payment was adopted. Dividends are distributed in proportion to the number of shares, unless the articles of association provide otherwise.

Profit distribution in a Simple Shareholding Company – limits and restrictions
It is worth remembering that the amount to be distributed to shareholders in a company may not exceed the following criteria:

• the sum of profits for the last financial year;
• Undistributed profits from previous years;
• reserve capitals created from the profit which may be allocated to the payment of dividends;
• the amount of the share capital allocated to the payment of dividends.
  The amount of dividends to be paid must also be further reduced by unabsorbed losses, treasury shares and amounts which, in accordance with the law or the company’s articles of association, are to be allocated from the profit of the last financial year to reserves which cannot be allocated to the payment of dividends.
  In addition, shareholders wishing to obtain a distribution from the share capital must remember that they cannot cause it to fall below PLN 1. They must also not cause the company to lose its ability to meet its maturing cash obligations within 6 months of the distribution.

Is it possible to make an advance payment in a Simple Joint Stock Company? In the articles of association of a Simple Joint Stock Company, it is possible to include a provision on the possibility of the board of directors’ entitlement to pay an advance on the expected dividend at the end of the financial year to the shareholders. However, it cannot be paid out of the share capital. If the company recorded a loss in the same financial year and the shareholders received an advance payment, they are obliged to hand over the entire amount. If the profit for the year was less than the amount of the advances paid, the shareholders shall return the part of the advance corresponding to the amount exceeding this profit.