Powered by Lexis+® UK
Jurisdiction(s):
United Kingdom
United Kingdom
View all Glossary Terms 
CASE STUDY
“LexisPSL and the other Lexis solutions support our business in exactly the way we want. They enable us to quickly turn around work and deliver the best possible service to our clients.”
SBP LawAccess all documents on Cumulative dividend
Cumulative dividend meaning
Published by a LexisNexis Corporate expert
What does Cumulative dividend mean?
A cumulative dividend is a dividend entitlement—typically on preference shares—that accrues when a company lacks sufficient distributable profits to pay the fixed dividend for a period. Unpaid amounts roll up as arrears and must be cleared in full before any dividend is paid on junior classes (for example, ordinary shares).
This is not a statutory term in the Companies Act 2006 (UK) or the Companies Act 2014 (Ireland). It arises only where expressly provided in the company’s articles of association or the terms of issue. The right is contractual: cumulative amounts accrue as a priority entitlement rather than as an immediate debt, and payment remains subject to the availability of distributable profits and any applicable solvency tests. Arrears generally do not carry interest unless the share terms state otherwise. Whether arrears are payable on a winding up depends on those terms.
The concept and its practical effect are broadly consistent across England and Wales, Scotland, Northern Ireland and Ireland. Cumulative dividends are most commonly seen with cumulative preference shares and are significant for dividend priority, investor protection and restrictions on paying ordinary dividends until arrears are satisfied.
Speed up all aspects of your legal work with tools that help you to work faster and smarter. Win cases, close deals and grow your business–all whilst saving time and reducing risk.
View the related News about Cumulative dividend
NEWS
Share incentives weekly: CIOT ordinary share capital query, Games Workshop pay revolt, CSOP exit-only options, PGMOL employment status ruling, Uber GDPR fine - 19 September 2024
In this issue: Tax treatment Corporate governance Q&As Useful information Weekly highlights from other practice areas Tax treatment CIOT submission to HMRC on definition of ordinary share capital and fixed rate shares The Chartered Institute of Taxation (CIOT) has lodged a submission with HMRC seeking clarity on the meaning of ordinary share capital in relation to fixed rate shares, notably whether non‑cumulative shares carrying a fixed dividend should still count as ordinary share capital for the purposes of section 989 of the Income Tax Act 2007. HMRC’s manual at CTM00514 had previously indicated that non‑cumulative fixed‑rate dividend shares fell within the definition, yet the apparent current stance is that any fixed‑rate share does not. The CIOT also queries the extent to which HMRC v Stephen Warshaw [2020] UKUT 0366 (TCC) influenced HMRC’s revised guidance. For more on why the definition of ordinary share capital matters, see Practice Note: Ordinary share capital—what it means and why it matters for...
19 September
Read More 
View the related Precedents about Cumulative dividend
PRECEDENTS
Articles of association for private company limited by shares (England and Wales): preferred shares, cumulative dividend, investor consent, multi-investor, leaver, drag-along and tag-along provisions (Companies Act 2006)
Articles of Association for [ insert name of company ] Limited (Incorporated in England and Wales under registration number [ insert number ]) (Adopted by a Special Resolution passed on [ insert date ] 20[ insert year ]) 1 Model Articles 1.1 The Model Articles apply to the Company except to the extent that these Articles alter, disapply or conflict with them; subject to any such amendments, exclusions or inconsistencies, the Model Articles shall, together with these Articles, comprise the Company’s articles of association, replacing any other articles or regulations contained in any statute, statutory instrument or other subordinate legislation. 1.2 The whole of Model Articles 11(2) (quorum for directors’ meetings), 12 (chairing of directors’ meetings), 13 (casting vote), 14(1)-(5) (conflicts of interest), 21 (all shares to be fully paid up), 26(5) (share transfers), 30(5)-(7) (procedure for declaring dividends), 39 (chairing general meetings), 42 (voting: general), 44(2) (poll votes), 50 (no right to inspect accounts and other records), 51 (provision for employees on...
27 May
Read More
PRECEDENTS
Single-investor buyout articles for a private company limited by shares: preference shares (cumulative dividend/redemption), drag/tag, leaver provisions, investor consent and transfer restrictions (England and Wales)
Companies Act 2006 — Private Company Limited by Shares — Articles of Association for [ insert name of company ] Limited (Incorporated in England and Wales under registered no. [ insert number ]) (Adopted by special resolution passed on [ insert date ] 20[ insert year ]) 1 Model Articles 1.1 The Model Articles will govern the Company save where these Articles alter, disapply or conflict with them; subject to any such variations, exclusions or inconsistencies, the Model Articles together with these Articles form the Company’s articles of association, to the exclusion of any other articles or regulations contained in any statute, statutory instrument or other subordinate legislation... 1.2 The following provisions of the Model Articles shall not apply to the Company: 11(2) (quorum for directors’ meetings), 12 (chairing of directors’ meetings), 13 (casting vote), 14(1)–(5) (conflicts of interest), 21 (all shares to be fully paid up), 26(5) (share transfers), 30(5)–(7) (procedure for declaring dividends), 39 (chairing general meetings), 42 (voting: general), 44(2) (poll votes), 50 (no...
10 June
Read More 
