Practical tips for annual financial statements - Part 3

Interim dividend

Since the introduction of the new company law on 1 January 2023, the often-discussed interim dividend has been clearly regulated by law. Since then, dividends from the profit of the current financial year are possible under the following conditions:

• Preparation of interim financial statements

• This must be prepared in accordance with the provisions for the annual financial statements and has the following components
  • Balance sheet
  • Income statement
  • Appendix
  • Proposal regarding the utilisation of the interim profit

• The interim financial statements are approved by the highest governance body

• Audit of the interim financial statements - except:
  • The company has dispensed with an auditor (opting out).
  • All shareholders approve the payment of the interim dividend.
  • The creditors' claims are not jeopardised by the dividend.

• The allocation to the statutory retained earnings must also be made for the interim dividend.

Extraordinary dividend

In contrast to the interim dividend, the extraordinary dividend is paid from the retained earnings of the previous year in the same way as the ordinary dividend. However, it is not approved at the Annual General Meeting, but at a later date. In addition, the reserve allocation does not have to be taken into account in the case of an extraordinary dividend, as this was already made at the Annual General Meeting (5% of the annual profit). A further allocation is no longer necessary when a dividend is distributed.

There are many reasons for an extraordinary dividend

• The necessary liquidity was only available after the Annual General Meeting
• Restructuring
• Succession process

The extraordinary dividend must be audited by the auditors. The law does not provide for exceptions whereby the audit can be waived. However, companies with opting-out are not affected by this. 

The auditor assesses whether sufficient retained earnings and cash and cash equivalents are available close to the time of the dividend resolution. For this purpose, the auditor will request interim financial statements.

Caution: It is not advisable to dispense with the audit by the auditors. Dividend resolutions passed without an audit report are null and void (Art. 731 CO).

Conclusion:

The new share law has made the distribution of dividends more flexible. In contrast to extraordinary dividends, interim dividends can be approved without scrutiny, provided an opting-out has been agreed or all shareholders approve the interim dividend.

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