Ask an expert: Dividend waivers

Question

My client is the major shareholder of a small company and his wife is the other minority shareholder. My client wishes to waive his entitlement to a dividend in favour of his wife as he has heard that this will result in a tax saving. I understand that there are issues relating to settlements which may be relevant. What are these?

Answer

A shareholder can execute a dividend waiver and leave a dividend in a company so that larger sums are available for other shareholders. The waiving shareholder will receive no consideration; therefore the dividend waiver should be minuted and agreed by the shareholder under deed if it is to constitute a binding undertaking. A waiver may cover a single dividend a series of dividends or...