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Freddie Lombard
Freddie Lombard, Attorney
Category: South Africa Law
Satisfied Customers: 2461
Experience:  Practicing attorney and conveyancer with 16 years post article experience.
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I am a partner in a small company (33% ) .I no longer work

Customer Question

I am a partner in a small company (33% ) .I no longer work but the other two partners
still do. They are also 33% shareholders in the company. They recently informed me that
as I no longer work , they will not pay me my 'full' dividend but only about 16%.
Is this permissible by law. Upto now we have each been taking a third of the amount
allocated to dividends.
Submitted: 10 months ago.
Category: South Africa Law
Expert:  Freddie Lombard replied 10 months ago.

Hi there

Thank you for your question. I will try to assist you in answering it today but please feel free to ask as many follow up questions as you like until you are 100% satisfied.

A dividend is the portion of the profit of a company that the directors decide to pay out to the shareholders and they cannot decide to pay one shareholder more than another. It is paid in accordance to the shareholding. In other words pro rata per share.

Employees of the company is not paid in dividends but they are paid a salary, therefore the partners who are still working and contributing towards the company should be paid a salary which is decided by the directors of the company.

The profit that is to be paid out as dividends is then only calculated once the expenses including the salaries have been deducted.

I hope this answered your question.

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Regards