Scrip dividend meaning

What is a scrip dividend and why do companies make them? A scrip dividend—also known as a scrip or stock issue, a share dividend, or a scrip alternative—arises when a company gives its shareholders the choice to choose between receiving either: a cash dividend; or new shares (usually) of a value broadly equivalent to the cash dividend Such distributions are more prevalent in challenging economic conditions, when companies ordinarily seek to lessen the amount of any cash dividend they need to pay out. Shareholders may often favour the scrip option because it enables them to obtain new shares without having to pay: broker’s fees; or stamp taxes In addition, certain companies put forward ‘enhanced scrip dividends’ to encourage take-up by shareholders. Under an enhanced scrip dividend, the value of the shares issued exceeds the value of the corresponding cash dividend. There are particular tax rules that apply to scrip dividends, and these are described...

A company is generally understood to possess an implied authority to share its profits with its members, save where its articles of association state otherwise. A dividend constitutes one category of distribution that a company may make to its members; in practice, dividends are the distribution most frequently paid by companies. Any distribution must satisfy the requirements of Part 23 of the Companies Act 2006 (CA 2006), together with the applicable common law principles on distributions as adapted by that Part, if it is to be lawful. For an exploration of the legal framework and practical aspects of company distributions, see Practice Note: Distributions. For guidance on the ramifications of breaching the law on distributions, see Practice Note: Unlawful distributions. In ordinary usage, a ‘dividend’ means a portion of profits, whether at a fixed percentage or otherwise, apportioned to the holders of a company’s shares. The term is used for payments made to shareholders in their capacity as shareholders and not, for example, as remuneration for services...

What is a dividend reinvestment plan and why do companies offer them? A dividend reinvestment plan (DRIP) is an arrangement through which a company—almost always a listed one—provides a service letting shareholders direct their dividends towards purchasing more of its shares. This service is usually operated by an independent administrator. DRIPs are often mentioned alongside scrip dividends (covered in depth in: Tax issues on a scrip or stock dividend) because the end result is very similar: the investor ends up with additional shares rather than a cash payout. Legally, however, they are distinct. Under a DRIP, the shareholder first receives the dividend and elects to deploy the cash to acquire extra shares. Of course, investors could choose to do this themselves without any company-run service. A DRIP merely simplifies the mechanics by ensuring the dividend proceeds flow straight to the administrator, who then uses the funds to purchase further shares on the shareholder’s behalf. In effect, the cash does not pass through the shareholder’s hands; it is directed immediately...

1 Definitions and interpretation 1.1 The terms below shall be interpreted as follows: Accumulation Period — with respect to Partnership Shares, the span during which the Trustee holds a Qualifying Employee’s Partnership Share Money before buying Partnership Shares or returning it to the employee; Acquisition Date — (a) for Partnership Shares where an Accumulation Period is in place, has the meaning given in paragraph 52(5) of Schedule 2; (b) for Partnership Shares where no Accumulation Period is in place, has the meaning given in paragraph 50(4) of Schedule 2; (c) for Dividend Shares, has the same meaning given by paragraph 66(4) of Schedule 2; Associated Company — has the same meaning as in paragraph 94 of Schedule 2; Award Date — in respect of Free Shares or Matching Shares, the date on which those Shares are granted; Award — (a) in respect of Free...