Can it be unfairly prejudicial to one or more shareholders if a company does not pay dividends? This article looks at various court rulings in this area.
In the case of Corran and Butters ([2017] EWHC 2294), the Judge surveyed the rules relating to the non-payment of dividends in section 994 actions:
The third bullet point above identifies a significant theme: if directors have rewarded themselves excessive remuneration and benefits, they cannot maintain that payment of dividends would have adversely affected the business of the company. Almost by definition such excess sums represent distributions made on an unfairly prejudicial basis.
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