Dividend Resolution

A divided resolution is a directors' resolution which authorizes the corporation to pay a dividend. A dividend is a share of profits and can be paid in cash (a cash dividend) or another form of property (a dividend-in-kind), such as shares.

When declared, a dividend is paid proportionally to the shareholders of a particular class of shares. So if a corporation has (a) one class of common shares; (b) two shareholders, each with 50% of the common shares, and (c) a dividend of $100 is declared on the common shares → a dividend of $50 would be paid to each shareholder.

A shareholder's right to dividends will depend on the rights which attach to the class of shares. These are described in the corporation’s article of incorporation and may be further modified by an agreement, such as a shareholders agreement.

Dividends also have different types for tax purposes, such as eligible dividends, non-eligible dividends and capital dividends. A corporation should obtain its accountant’s advice prior to declaring any dividends and the accountant's instructions can be incorporated into the text of the resolution.