Breach of distribution rules

In this lesson

1. 0:00 Directors' liability for unlawful dividends
2. 0:50 Members and shareholders liability explained
3. 1:26 Auditors' role in dividend oversight
4. 2:01 Exam question: dividend approval rules
5. 3:02 Common mistakes in dividend legislation

About this lesson

responsibility in dividend disputes. The video covers who can be held liable when unlawful dividends are paid. Directors face liability if they knowingly declare dividends from capital or fail to exercise reasonable care when preparing accounts—for example, not checking interim figures before approving payments. Shareholders and members can be liable if they knew or had reasonable grounds to believe a dividend was unlawful. Auditors can also be held liable if errors in their account verification led to an illegal dividend payment. When multiple parties are responsible, they become jointly and severally liable, meaning each can be pursued for the full amount owed to the company. The lesson walks through a practical multiple-choice question to reinforce key distinctions. You'll learn that shareholders approve dividends by ordinary resolution (not special), dividends must be paid from realised profits (not unrealised), and there's no minimum profit percentage required—only that some realised profit exists. The video emphasises how examiners test attention to detail through subtle wording differences, preparing you to spot these distinctions under exam pressure.

Duration: 4m