Is the dividend record date the same as the dividend payment date?

Shareholders of many limited liability companies make decisions regarding the approval of financial statements and the distribution of profits. But how should dividend entitlements be correctly determined, and when should dividends be paid?

As a general rule, shareholders entitled to a dividend for a given financial year are those who hold shares on the day the resolution on profit distribution is adopted. However, the company’s articles of association may grant the shareholders’ meeting the right to designate a different date for determining who is entitled to receive the dividend — this is referred to as the dividend record date. Such a resolution should be adopted during the same meeting at which the decision to allocate the profit is made. The record date itself must fall within two months of that resolution.

It is important to note that the dividend record date is not the same as the dividend payment date — the day shareholders must actually receive the funds. When adopting a resolution on profit distribution, the shareholders’ meeting should also set the dividend payment date. In the case of a limited liability company, the law does not specify a maximum time frame for dividend payments. However, the date should be set reasonably, taking into account both the company’s financial capabilities and the legitimate expectations of the shareholders.

Gazeta Prawna, August 8, 2023 – by Legal Counsel Agata Okorowska